8 million Filipinos now use mobile banking

Over eight million Filipinos are now using mobile banking services in the country, which the central bank says would boost more efficient financial services in rural and other hard-to-reach areas at relatively lower costs.

Central bank Deputy Governor Nestor Espenilla Jr. said there are now 49 rural banks offering mobile banking from none before 2005.

These eight million users use the electronic money (e-money) services of major telecommunications companies Smart Communications and Globe Telecom, which offer Smart Money and G-Cash, respectively, BSP said.

These allow mobile subscribers, particularly those without bank accounts, to deposit, transfer, and withdraw money from one e-money account to another in the telecom company's business centers nationwide.

Espenilla noted that the Philippines has been recognized by international organizations for its microfinance initiatives and is considered as the leading pioneer in mobile banking solutions for the poor.

Some banks even lowered interest rates on microfinance loans for clients who use text-a-payment platform by 50 basis points on monthly rates, Espenilla added.

"Technology extends outreach of microfinance and banking services to a large number of bankable but un-banked especially those in rural and hard to reach areas at lower costs and higher efficiency," he said.

He explained that the mobile phone industry in the Philippines serves all income groups especially low income groups and more than 75 percent of the population have mobile phones.

Electronic transactions, which involve the payment of purchased goods and services, could also be used for remittances from Filipinos abroad, Espenilla noted.

“The amount of e-money transactions is already huge, and we expect it to grow further," the BSP official added.

The BSP said it has ordered firms offering e-money services to register with the central bank as an electronic money issuer (EMI).

These could include banks, non-bank financial institutions, and money transfer agents. Those qualified as EMI include stock corporations with a minimum paid-up capital of P100 million. E-money is also not considered a bank deposit and is not covered by the deposit insurance provided by the Philippine Deposit Insurance Corp. (PDIC).

The guidelines also limit the maximum amount that can be loaded to any e-money instrument to P100,000 a month.

Reserve Bank of India prefers the bank-led mobile banking model

The Reserve Bank of India (RBI) prefers the bank-led mobile banking model over the mobile operator-led one, as it offers facilities such as deposit insurance, access to affordable credit and payment system, not just remittance, the RBI governor D Subbarao has said.

The growing concerns about money laundering and financing of terrorism is also a reason the central bank favours a bank-led model.

“World over, there are two distinct models - the ‘bank-led’ model and the ‘mobile operator-led’ model. The RBI has a clear preference for the bank-led model,” Subbarao said while addressing a banking event in Hyderabad last week.

On interoperability of technological solutions, the governor said the priority clearly has to be to facilitate ‘inclusion’ first. ‘Interoperability’ is no doubt important but it can follow. Clearly inclusion cannot wait for interoperability to happen.”

Subbarao also expressed concerns over the tech barrier between banks and customers as the absence of human touch can be intimidating for those just entering the banking network. He asked banks to take extra care to ensure poor are not scared away by technology.

Referendum possible on UBS handing client data to US

The controversial plan for UBS to hand over client data to American tax authorities may be put to a referendum in Switzerland.

Last week, the lower house of the Swiss parliament voted against allowing the data to be passed on to the US, which alleges that almost 4,500 American citizens are avoiding tax by holding secret accounts with UBS.

While it has now reversed its decision and voted in favour of the plan, the lower house has also called for a referendum of Swiss citizens to take place on the issue.

But the idea of a ballot has been opposed by the upper house of the parliament, along with Switzerland's bankers' association, reports the Financial Times.

The referendum proposal is complicated by the fact that under Swiss law, citizens are granted 100 days to get the 50,000 signatures needed for a plebiscite.

If the full period was taken up, the August 19th deadline agreed between the US and the Swiss on delivering the customer information would be broken.

An agreement on what is to be done will have to be made between the two houses before the end of this week, when parliament is scheduled to break up.

Last week, a spokesman for the Inland Revenue Service warned: "We continue to monitor the events in Switzerland and we stand ready to pursue all legal options available to us should the Swiss fail to provide the required information."

The dispute has been rumbling for some time, with UBS agreeing to a $780 million settlement of criminal charges brought against it by US authorities in relation to aiding tax evasion back in February 2009.

A civil action was pursued against the bank in an attempt to access the names of the clients, with the Swiss agreeing to pass over the data in August last year.

European Parliament: Bank bonuses should be capped at 50% of salary

Bankers' bonuses should be capped at a figure equivalent to half of their annual salary, a European Parliament committee has suggested.

The Economic and Monetary Affairs Committee has also called for bank directors at firms which received bailouts to be paid no more than €500,000 ($616,000) a year until all public money has been refunded by their company.

It also wants to see 40 per cent of any bonus payout deferred for a five-year period.

Sharon Bowles, chair of the committee, told Bloomberg: "If bankers and traders want to leave and go to other jurisdictions, it just shows that they do not have confidence in their own performance.

"To those that would leave I say good riddance."

The proposals set out by the committee will be voted on by the full European Parliament in July.

MEP Arlene McCarthy initially proposed the 50 per cent cap for banking bonuses back in March, while she also suggested that up to 60 per cent of such payouts should be deferred over the course of three years.

FSA chairman welcomes chancellor’s plans for regulatory reform

The Chairman of the Financial Services Authority (FSA), Lord Turner, has welcomed the changes to financial regulation outlined by the Chancellor of the Exchequer in his Mansion House speech and Hector Sants’ agreement to remain as Chief Executive of the FSA, leading the transition and the creation of a new prudential authority.

Lord Turner said: "The FSA now has the clarity of direction and timescale as well as the leadership that we need to meet the challenges ahead.

"In particular I am delighted that Hector, who has done so much to transform the FSA during the past few years, has agreed to lead the transition to the new structure in 2012, and to become the first Chief Executive of the Prudential Authority and a Deputy Governor of the Bank of England."

"The crisis demonstrated the need for new regulatory approaches and more intense supervision, and the FSA has already implemented major change. But it also demonstrated the need to bridge the gap between macro-prudential policy and the supervision of individual firms. The Chancellor's proposals for prudential regulation will enable us to do that, while building on the major changes we have made over the last few years. The timescale will enable us to manage the transition in a smooth and orderly way.

"On retail customer protection, the FSA has recognized the need for a shift in our past approach, moving to the more interventionist approach which we set out in our recently published Retail Conduct Strategy. The new Consumer Protection and Markets Authority will have a strong focus on this challenge, while also maintaining strong focus on conduct issues in wholesale products.

"There are important issues still to be resolved – in particular the arrangements for our Enforcement activities and for those Markets activities which relate to exchanges, clearing infrastructure and prudential issues – and we look forward to working closely with the government in considering the relative merits of different possible arrangements for these. But the overall future shape of financial regulation is now much clearer and we are in a strong position to create a future regulatory system which builds on the FSA's achievements over the last few years of major change."

Mobile payments set to double

The value of purchases made by mobile phones is set to more than double by 2012 on back of increase in smartphone usage and greater consumer acceptance of new payment methods

Analyst Jupiter Research has forecast that the rise in smartphones will fuel an increase in mobile payment transactions that will see their value more than double to US$200 billion by 2012.

Jupiter Research said the availability of secure, easy-to-use payment applications and the growing realization of users that they can make e-commerce purchases by mobile will drive the value of payments for physical and digital goods from under $100 million this year to $200 million in two years.

Other findings from the “Mobile Payments for Digital & Physical Goods: Players, Markets & Opportunities, 2010-2014” report indicate that the frequency of physical goods purchased will be higher than average in developed regions such as North America and Western Europe; and brands, retailers and merchants have an opportunity to increase their revenues through targeted marketing campaigns, using apps and mobile web payments as a convenience play for users.

Report author Howard Wilcox said: “Our research showed that the purchase experience has been enhanced by improved mobile commerce transaction processes due to faster mobile networks, more powerful devices and much more user-friendly smartphone apps.

“Amazon Payments for example has recently introduced payment processing tools for mobile devices, enabling smartphone users to buy with one click.”

UK regulatory system set to change

The UK government has unveiled a shake-up of the countries system that will consolidate power within the Bank of England and eliminate the Financial Services Authority, long the main overseer of the nation's financial center, the City of London.

The new Conservative-led coalition government plans to splinter the FSA into three new agencies, including a bank-regulating subsidiary inside the Bank of England. The new regulatory approach was unveiled in a speech last Wednesday night in London by the UK's Treasury chief, George Osborne, who trumpeted "a new system of regulation that learns the lessons of the greatest banking crisis in our lifetime."

In the House of Parliament in London on Wednesday, George Osborne, trumpeted the 'new system of regulation.'

While more ambitious than expected, the structural changes are more functional than specific, leaving for a later date thorny questions over the appropriate structures of banks. The US is debating a range of rule changes that would impact the finance sector in much more extensive ways than Mr. Osborne's proposals. The European Union is pushing its own policies, including new oversight for hedge funds.

Forced to forge a coalition with the Liberal Democrats after a tight election, the Conservatives were expected to move more deliberately on their pledges of financial-system regulatory changes. But the Lib Dems are backing the government's attempt to make a clean break with a regulatory system tarred by the financial crisis, meaning that the changes are almost certain to come into effect.

At the heart of the proposed overhaul—which requires approval by Parliament and would be implemented by the end of 2012—is an empowered Bank of England. In addition to its current responsibility for monetary policy, the central bank will take charge of preventing systemic risks and of day-to-day supervision of the UK financial sector, including foreign companies that operate in the City of London, through a newly formed subsidiary, tentatively dubbed the Prudential Regulatory Authority.

The Bank of England's governor, Mervyn King, will become chairman of the expanded authority. He welcomed the changes as "the right direction of reform." He didn't address his past comments, specifically his argument that big banks should be broken up to separate risk-taking from utility banking, something the City has fiercely resisted.

The revamp has big implications for giant banks around the world, not just those headquartered in the UK. The FSA already has been getting tougher regulating overseas banks' London subsidiaries. The growing clout of Mr. King, who has talked openly of breaking up big banks, could subject the U.K. and foreign banks alike to more draconian oversight.

In the UK, the new agency within the Bank of England will inherit some of the powers of the FSA, which never fully recovered from its legacy of "light touch" regulation of London's financial community in the wake of the financial crisis. Further tarnishing the FSA in the eyes of many Tories, the previous Labour government established the agency in 1998 shortly after taking power, removing bank-regulatory oversight from the Bank of England.

While the FSA will cease to exist on paper, much of its current structure is likely to live on in the new prudential authority. Its supervisory staff is expected to remain largely intact, as is its newly muscular approach to policing banks, traders and insurers.

Even the agency's leader will be the same. The FSA's chief executive, Hector Sants, had announced plans to retire this summer, but Mr. Osborne persuaded him to take the helm of the new agency for three years. Mr. Sants will become a deputy governor of the Bank of England.

A restructuring will eliminate the UK's Financial Services Authority. Two of the FSA's other duties—consumer protection and law enforcement—will be assumed by new independent entities, including an agency focused on white-collar crime.

In addition to fulfilling a Conservative campaign pledge, the revamp of the regulatory system is intended to bring bank supervision under one roof at the central bank. The Tories blame a disjointed approach, in which officials from different agencies didn't coordinate with each other, for allowing the banking system to grow bloated with debt and for impeding the government's response when the crisis hit.

"Because central banks are the lenders of last resort ... they need to be familiar with every aspect of the institutions that they may have to support," Mr. Osborne said in Wednesday's speech, at a black-tie dinner attended by London's financial elite.

The new structure doesn't include a spot for the FSA's well-regarded chairman, Adair Turner, who is expected to remain at the FSA during a two-year transition. Lord Turner endorsed the shake-up Wednesday, saying it resolves the uncertainty surrounding the agency.

The planned overhaul is the product of weeks of negotiations and horse-trading that highlights the delicate nature of the coalition government. In order to win over Vince Cable, the Liberal Democratic business secretary who had opposed abolishing the FSA, Mr. Osborne let him pick at least two of the five members of a high-profile committee charged with making recommendations about the structure of the UK banking industry, according to a person familiar with the matter.

The proposed revamp is likely to prove controversial.

Some experts have said it risks distracting the Bank of England from its paramount role of setting monetary policy and controlling inflation at a particularly crucial time for the UK's struggling economy.

Mr. Sants himself was critical of the Conservatives' proposal to fold the FSA into the Bank of England. "There remains the possibility of tougher times to come for those we regulate," he said in a speech in November. "Now is not the time, therefore, to be diverting resource to looking at structural questions."

Bringing the FSA's supervisory infrastructure under the Bank of England's roof is likely to be especially tricky because of the two organizations' cultural differences.

For example, past and present officials at both organizations say the FSA tends to pay employees up to 50% more than the Bank of England. Senior FSA bank supervisors can pocket more than £300,000 ($444,000) annually, and the agency sometimes doles out lucrative bonuses. Mr. Sants received total compensation of £742,011 last year, more than double the £305,764 that Mr. King took home.

The FSA has argued that to police banks effectively, it needs to lure talent from them, which requires competitive pay packages. A lesser-paid civil-service culture pervades at the Bank of England.