In recent times we have seen a huge drive, especially in Africa as regards Mobile Banking. But the Mobile is being used for many other services as well. This video explains many of these services and the growing significance of mobile technology across sub-Saharan Africa and the developing world.
Thursday, 29 October 2009
Tuesday, 27 October 2009
Hacking an ATM
There is no end to people’s ingenuity when there is a fast buck to be made. In this story from Australia a pizza shop employee cum computer wizz was able to make huge withdrawals of cash based on information he found on the internet and in an ATM manual. His plan however had a major flaw - to make the withdrawals he used his own card and those of his mother, girlfriend and two friends.
Although Prosecutors had called for a two year jail term the judge decided a conviction should not be entered after Sommer agreed to pay the money back and applied to become an avionics technician in the Australian Defence Force.
You can read the whole story at
http://www.frasercoastchronicle.com.au/story/2009/10/23/free-money-too-good-to-be-true-no-conviction-recor/
Although Prosecutors had called for a two year jail term the judge decided a conviction should not be entered after Sommer agreed to pay the money back and applied to become an avionics technician in the Australian Defence Force.
You can read the whole story at
http://www.frasercoastchronicle.com.au/story/2009/10/23/free-money-too-good-to-be-true-no-conviction-recor/
Monday, 26 October 2009
Systemic Risk
The financial crisis has taken us down paths we have never dreamed of. Much research and discussion is taking place (and will for years to come) on many aspects of what we have been experiencing over these past two years.
In a paper published in the September edition of the “International Journal of Central Banking” Piergiorgio Alessandria, Prasanna Gaib, Sujit Kapadiaa, Nada Moraa, and Claus Puhrc describe a prototype quantitative framework for gauging systemic risk which explicitly characterizes banks’ balance sheets and allows for macro credit risk, interest income risk, market risk, network interactions, and asset-side feedback effects. In presenting their results, the authors focus on projections for system wide banking assets in the United Kingdom, considering both unconditional distributions and stress scenarios. The paper “Towards a Framework for Quantifying Systemic Stability” is available at http://www.ijcb.org/journal/ijcb09q3a2.htm
Sunday, 25 October 2009
Risk & Payments Training Course Schedule - 2009 - 2010
Browse or Download this handy schedule of our Risk & Payments Training Courses for the remainder of 2009 and early 2010.
Saturday, 24 October 2009
Liquidity & Capital Reform
The UK’s Financial Services Authority (FSA) has issued a discussion paper which focuses on policy measures aimed at addressing the problem of systemically important ‘too-big-to-fail’ banks.
There are huge dangers posed by those financial firms that are seen as too-big or too-interconnected-to-fail, or too-big-to-rescue. In the discussion paper the FSA describes the full range of policy options that are available in order to provide the basis for an informed debate, but also outlines the position which the FSA is currently proposing in various bodies. Key positions are:
• There is a strong case for applying some form of capital (and perhaps liquidity) surcharge internationally for systemically important banks; surcharges could be proportional to continuous and increasing measures of systemic importance, avoiding the dangers created by specific thresholds of systemic importance.
• A capital surcharge could be combined with an approach to global banking groups which places greater emphasis on the standalone sustainability of national subsidiaries, with overt understanding that home country authorities will not be responsible for the rescue of entire groups. The more that groups are organised on this basis, the less the required surcharge at group level might need to be.
• Action should be taken to reduce inter-connectedness in wholesale trading markets, with much over-the-counter (OTC) derivative trading moved to central counterparties (CCPs), and with effective collateral and margin call arrangements for bilateral trades which reduce the dangers of strongly pro-cyclical margin call effects.
• Reform to trading book capital should significantly increase capital requirements and differentiate more strongly between basic market making functions which support customer service and riskier trading activities, with a bias for conservatism in relation to the latter.
• Systemically important banks should be required to produce recovery and resolution plans (‘living wills’) which set out how operations would be resolved in an orderly fashion. If supervision examination of these plans reveals serious obstacles to resolution, then steps will need to be taken to reduce or remove them – this could require restructuring certain parts of the group. Restructuring could include clear separation between retail deposit taking business and businesses involved in proprietary trading activities, with the latter able to fail even if the former were supported in crisis conditions.
The discussion paper also stresses the need to assess the possible cumulative impact of multiple reforms to capital and liquidity regimes now being considered by international standard-setting bodies. It describes the case for significant increases in capital and liquidity requirements to reduce financial instability risks, while recognizing the potential implications for lending volumes and the cost of credit intermediation. It considers methodologies which can help inform judgments on the trade-offs involved.
The FSA’s plan of action includes:
• Living wills: The FSA intends to press ahead with resolution and recovery plans in the UK and work is underway to produce guidance for systemically important firms to use in developing living wills. The plans will build on requirements the FSA has already put in place that contribute to a firm’s preparedness for recovery. By the end of 2009, according to the FSA, a small number of major UK banking groups will have begun to produce living wills as part of a pilot exercise intended to help the FSA develop policy in this area.
• Cumulative impact of capital and liquidity reforms: The FSA acknowledges that given the inherent uncertainties involved in assessing optimal capital and liquidity levels, it means that models such as those described in the DP can never provide ‘the answer’. However, the FSA believes that the conceptual approach described can help inform an effective global debate on optimal capital levels. It will, therefore, encourage global regulatory bodies, industry groups and academics to conduct similar analysis.
•Conference: The issues discussed in the discussion paper will set the agenda for the second Turner Review conference which is being held on 2 November 2009.
The FSA regulates the UK’s financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
There are huge dangers posed by those financial firms that are seen as too-big or too-interconnected-to-fail, or too-big-to-rescue. In the discussion paper the FSA describes the full range of policy options that are available in order to provide the basis for an informed debate, but also outlines the position which the FSA is currently proposing in various bodies. Key positions are:
• There is a strong case for applying some form of capital (and perhaps liquidity) surcharge internationally for systemically important banks; surcharges could be proportional to continuous and increasing measures of systemic importance, avoiding the dangers created by specific thresholds of systemic importance.
• A capital surcharge could be combined with an approach to global banking groups which places greater emphasis on the standalone sustainability of national subsidiaries, with overt understanding that home country authorities will not be responsible for the rescue of entire groups. The more that groups are organised on this basis, the less the required surcharge at group level might need to be.
• Action should be taken to reduce inter-connectedness in wholesale trading markets, with much over-the-counter (OTC) derivative trading moved to central counterparties (CCPs), and with effective collateral and margin call arrangements for bilateral trades which reduce the dangers of strongly pro-cyclical margin call effects.
• Reform to trading book capital should significantly increase capital requirements and differentiate more strongly between basic market making functions which support customer service and riskier trading activities, with a bias for conservatism in relation to the latter.
• Systemically important banks should be required to produce recovery and resolution plans (‘living wills’) which set out how operations would be resolved in an orderly fashion. If supervision examination of these plans reveals serious obstacles to resolution, then steps will need to be taken to reduce or remove them – this could require restructuring certain parts of the group. Restructuring could include clear separation between retail deposit taking business and businesses involved in proprietary trading activities, with the latter able to fail even if the former were supported in crisis conditions.
The discussion paper also stresses the need to assess the possible cumulative impact of multiple reforms to capital and liquidity regimes now being considered by international standard-setting bodies. It describes the case for significant increases in capital and liquidity requirements to reduce financial instability risks, while recognizing the potential implications for lending volumes and the cost of credit intermediation. It considers methodologies which can help inform judgments on the trade-offs involved.
The FSA’s plan of action includes:
• Living wills: The FSA intends to press ahead with resolution and recovery plans in the UK and work is underway to produce guidance for systemically important firms to use in developing living wills. The plans will build on requirements the FSA has already put in place that contribute to a firm’s preparedness for recovery. By the end of 2009, according to the FSA, a small number of major UK banking groups will have begun to produce living wills as part of a pilot exercise intended to help the FSA develop policy in this area.
• Cumulative impact of capital and liquidity reforms: The FSA acknowledges that given the inherent uncertainties involved in assessing optimal capital and liquidity levels, it means that models such as those described in the DP can never provide ‘the answer’. However, the FSA believes that the conceptual approach described can help inform an effective global debate on optimal capital levels. It will, therefore, encourage global regulatory bodies, industry groups and academics to conduct similar analysis.
•Conference: The issues discussed in the discussion paper will set the agenda for the second Turner Review conference which is being held on 2 November 2009.
The FSA regulates the UK’s financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
Thursday, 22 October 2009
Risk Management Lessons from the Global Banking Crisis of 2008
Senior financial supervisors from seven countries (collectively the “Senior Supervisors Group”) have issued a report that evaluates how weaknesses in risk management and internal controls contributed to industry distress during the financial crisis.
The report—Risk Management Lessons from the Global Banking Crisis of 2008—reviews in detail the funding and liquidity issues central to the recent crisis and explores critical areas of risk management practice in need of improvement across the financial services industry.
The report concludes that despite firms’ recent progress in improving risk management practices, underlying weaknesses in governance, incentive structures, information technology infrastructure and internal controls require substantial work to address.
The observations and conclusions in the report reflect the results of two initiatives undertaken by the SSG. These initiatives involved a series of interviews with firms about funding and liquidity challenges and a self-assessment exercise in which firms were asked to benchmark their risk management practices against a series of recommendations and observations taken from industry and supervisory studies published in 2008.
The report may be downloaded at http://www.newyorkfed.org/newsevents/news/banking/2009/SSG_report.pdf
The report—Risk Management Lessons from the Global Banking Crisis of 2008—reviews in detail the funding and liquidity issues central to the recent crisis and explores critical areas of risk management practice in need of improvement across the financial services industry.
The report concludes that despite firms’ recent progress in improving risk management practices, underlying weaknesses in governance, incentive structures, information technology infrastructure and internal controls require substantial work to address.
The observations and conclusions in the report reflect the results of two initiatives undertaken by the SSG. These initiatives involved a series of interviews with firms about funding and liquidity challenges and a self-assessment exercise in which firms were asked to benchmark their risk management practices against a series of recommendations and observations taken from industry and supervisory studies published in 2008.
The report may be downloaded at http://www.newyorkfed.org/newsevents/news/banking/2009/SSG_report.pdf
Wednesday, 21 October 2009
Bank Lending – Some Basic Principals
By Stanley Epstein - Principal Associate
The financial world is in a pretty messed up shape at the moment. So in examining the Financial Services Authority’s proposals regarding the reform of the mortgage market in the UK I get the basic impression that I am in Alice in Wonderland, at the Mad Hatter’s Tea Party to be exact.
What on earth has happened to basic lending principles? The FSA speaks of a changed approach to a more “intrusive and interventionist style of regulation”. As a part of these proposals they set out what they refer to as “key features”, six in all.
But of the six, three should, as a matter of course, be part and parcel of a bankers’ normal business practice. A regulator should not have to tell a bank what the basic principles of lending money are. Just consider the three following “key features”;
• “Imposing affordability tests for all mortgages and making lenders ultimately responsible for assessing a consumer’s ability to pay” – there are two conditions wrapped up in one; affordability and the lender’s responsibility regarding the borrower’s repayment ability. The first is a dead standard condition for the granting of any consumer loan. The second issue goes without saying.
• “Banning ‘self-cert’ mortgages through required verification of borrowers’ income” –this is like leaving the fox in charge of the henhouse. Third party certification of a borrower’s income is also a standard consumer credit tool.
• “Calling for the FSA’s scope to cover buy-to-let and all lending secured on a home” – lending for a home to live in, is one thing. When a borrower purchases a property with a view to letting it and generating income this is something else. Here he or she is running a business and sound lending practice should also call for additional information like details of the letting market’s potential, letting conditions, contractual arrangements with renters, refurbishment costs, insurance and other business expenses and the like. This is a commercial loan not a consumer one. It is a logical extension of the first “consumer” aspect that the regulator should be looking after both facets of the business, not just one.
There should be absolutely no need to tell a banker, never mind make it a regulation, as to what the basic principles of lending money are. Unless of course the lenders aren’t really bankers! This of course begs the question as to why these people are even allowed to be in the business of lending money in the first place? These “banks” have obviously thrown all caution and prudential behaviour to the wind in their pursuit of market share and profits.
A few days ago I railed in Blog on the Finextra website against a new range of obscene staff bonuses to be paid by Goldman Sachs (“Is this just a Bad Dream?” http://www.finextra.com/community/fullblog.aspx?id=3438 ). I wondered there whether I had awoken in “Alice in Wonderland”. Now I know I have, and I am at the Mad Hatters’ Tea Party.
Good luck to the Financial Services Authority in what they are trying to achieve.
The financial world is in a pretty messed up shape at the moment. So in examining the Financial Services Authority’s proposals regarding the reform of the mortgage market in the UK I get the basic impression that I am in Alice in Wonderland, at the Mad Hatter’s Tea Party to be exact.
What on earth has happened to basic lending principles? The FSA speaks of a changed approach to a more “intrusive and interventionist style of regulation”. As a part of these proposals they set out what they refer to as “key features”, six in all.
But of the six, three should, as a matter of course, be part and parcel of a bankers’ normal business practice. A regulator should not have to tell a bank what the basic principles of lending money are. Just consider the three following “key features”;
• “Imposing affordability tests for all mortgages and making lenders ultimately responsible for assessing a consumer’s ability to pay” – there are two conditions wrapped up in one; affordability and the lender’s responsibility regarding the borrower’s repayment ability. The first is a dead standard condition for the granting of any consumer loan. The second issue goes without saying.
• “Banning ‘self-cert’ mortgages through required verification of borrowers’ income” –this is like leaving the fox in charge of the henhouse. Third party certification of a borrower’s income is also a standard consumer credit tool.
• “Calling for the FSA’s scope to cover buy-to-let and all lending secured on a home” – lending for a home to live in, is one thing. When a borrower purchases a property with a view to letting it and generating income this is something else. Here he or she is running a business and sound lending practice should also call for additional information like details of the letting market’s potential, letting conditions, contractual arrangements with renters, refurbishment costs, insurance and other business expenses and the like. This is a commercial loan not a consumer one. It is a logical extension of the first “consumer” aspect that the regulator should be looking after both facets of the business, not just one.
There should be absolutely no need to tell a banker, never mind make it a regulation, as to what the basic principles of lending money are. Unless of course the lenders aren’t really bankers! This of course begs the question as to why these people are even allowed to be in the business of lending money in the first place? These “banks” have obviously thrown all caution and prudential behaviour to the wind in their pursuit of market share and profits.
A few days ago I railed in Blog on the Finextra website against a new range of obscene staff bonuses to be paid by Goldman Sachs (“Is this just a Bad Dream?” http://www.finextra.com/community/fullblog.aspx?id=3438 ). I wondered there whether I had awoken in “Alice in Wonderland”. Now I know I have, and I am at the Mad Hatters’ Tea Party.
Good luck to the Financial Services Authority in what they are trying to achieve.
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