Long-Term Issues in International Banking: New report from the Committee on the Global Financial System

The Committee on the Global Financial System (CGFS) has just released “Long-Term Issues in International Banking”, a report prepared by a Committee on the Global Financial System (CGFS) Study Group chaired by Hans-Helmut Kotz, former Executive Board member of the Deutsche Bundesbank.

International banking has been an important driver of financial globalization and integration, so contributing to welfare gains over time and across countries. During the recent crisis, however, the plight of many internationally active banks epitomized the fragility of the financial system. This underscored the importance of a proper understanding of the drivers and effects of cross-border intermediation.

The report addresses structural issues in international banking from three angles: a historical perspective, what the drivers have been, and what might happen next.

• The development of international banking: the report documents its evolution over the last 30 years in terms of size, form and geographical coverage.

• The factors behind the development: the report provides a critical review of the literature on the various drivers of international banking. A noteworthy conclusion is that the fast growth of internationally active banks, which contributed to the vulnerability of their business model, is difficult to explain on efficiency grounds, at least at an aggregate level. This suggests that institutions' incentives might have been distorted, which warrants further investigation.

• Potential future developments: in addressing this more speculative question, the report pays particular attention to the regulatory reform environment, the pattern of economic growth worldwide and the rapidly evolving interactions between markets and banks.

You can download the full report HERE

Bank of England to take on a greater regulatory role

The Bank of England (BoE) may control a new regulatory committee as part of a number of proposals to change the way in which the financial services industry is supervised. A consultation document from the UK’s Coalition government outlines a strategy to set up a new Financial Policy Committee (FPC) in the autumn of 2010.

The creation of the FPC would provide the BoE with powers of macro prudential regulation. It will be headed up by the BoE’s new deputy governor with Hector Sant, the current chief executive of the Financial Services Authority (FSA), to be the first to take up the position.

Mark Hoban, financial secretary to the Treasury, said: “The Coalition government is delivering on its commitment to reform the financial system, to avoid repeating the mistakes of the recent financial crisis and to ensure that taxpayers are protected. “

He added that the launch of the consultation is a “crucial milestone” in its attempts to reform the industry.

The document also includes plans to create a Consumer Protection and Markets Authority, which would police conduct within the financial markets.

Bernie Madoff trustee to file suits against victims - Newspaper report

Irving Picard, court-appointed trustee for the victims of Bernard Madoff’s Ponzi scheme, is to take legal action against investors who benefited from the fraud, a newspaper report has claimed.

According to the Wall Street Journal, law suits will be filed against approximately 1,000 investors who have been dubbed “net winners” from the scam. Mr Picard told the news provider that the action will be taken against “the people who made money, who got more, have made money at the expense of the people who didn't”.

The trustee is expected to have filed the suits by December while he is also planning on targeting relatives of Mr Madoff and other funds which invested their money in Madoff’s business opportunities.

He recently expanded a law suit against the Fairfield Greenwich Group and a number of its affiliates for enabling Mr Madoff’s scam.

In an additional filing the trustee has demanded up to $3.6 billion in damages from the firm.

The fraud is thought to have amounted to almost $65 billion while Mr Madoff was sentenced to 150 years in jail in June 2009.

IMF launches online database on Financial Access

The IMF recently launched a new online database on financial access, which should start measuring access to and use of financial services systematically. The database measures the reach of financial services by bank branch network, availability of automated teller machines, and by four key financial instruments: deposits, loans, debt securities issued, and insurance. The website contains annual data from about 140 respondents for the six-year period, including data for all G-20 countries. Country surveys offer a wealth of information covering the use of banking services as well as access to banks' physical outlets. Data is downloadable in Excel format.

To visit the IMF site and explore the Financial Access Survey please CLICK HERE

North American FX data now available

The Foreign Exchange Committee (FXC) has released the results of its twelfth Survey of North American Foreign Exchange Volume.

You can download the survey HERE.

The FXC is made up of representatives of major financial institutions engaged in foreign currency trading in the United States and is sponsored by the Federal Reserve Bank of New York.

Summer 2010 “Risk Management Research Report” published

The Risk Management Research Report (RMRR) is published by the School of Business at Loyola University Chicago on a quarterly basis to serve the professional and academic risk management communities by presenting extended summaries of recently published academic articles of particular interest.

RMRR seeks to select the best and most important articles in risk management and corporate governance and to communicate the essential ideas of that research to risk managers and risk management scholars in a timely manner and a convenient format.

You can download the Summer 2010 edition FREE by clicking HERE.

China is leading in mobile banking uptake - US lags behind

China is leading the world in the uptake of mobile finance, with 77% of consumers using their phones to conduct financial transactions, according to a global survey carried out by KPMG. The study found that convenience is edging out consumer concerns over privacy and security.

These are some of the results of KPMG's fourth annual Global Consumers and Convergence survey (see our IN FOCUS tab).

Compared with only 18 months ago, the global percentage of respondents who have used their mobile device for banking has more than doubled from 19% to 46%, while the percentage that have used it to buy goods and services has risen from 10% to 28%.

This surge is being led by the world's fastest-developing economies. In China, 77% of respondents say they have used their mobiles for banking and 44% for retail transactions, while in India 38% are using them to shop, and 43% for financial business.

Asia-Pacific consumers are much more likely to be heavy users of mobile online services than those in Western Europe and the US, says KPMG.

Only 19% of US consumers have conducted banking transactions on a mobile device, the study finds. This is more than double the numbers counted 18 months ago. Among naysayers, 52 percent cited security and privacy as the primary reason.

Lack of availability may also be a major inhibitor. Nearly three-quarters of US respondents said that their current bank either does not offer banking through a mobile device or that they did not know if their bank offered this service.

Carl Carande, a principal in KPMG banking and finance advisory practice, says: "To continue to spur adoption, banks may need to continue to educate consumers about the security of the mobile banking environment and further promote the availability of this vehicle that helps make banking more accessible and convenient."