MANAGING OPERATIONS RISK - Registrations are closing this Friday

Join us for a 2-day intensive course on Operations Risk Management & Mitigation– from assessment to implementation at the Don III, 125 Pretoria Avenue, Sandton, Johannesburg on the 17 & 18 November 2010.

But you need to act fast as REGISTRATIONS ARE CLOSING this Friday - 29 October. We still have a few spots available.

For more details CLICK HERE.

Registrations for our International Payments course close this Friday (29 October)

Registrations for our intensive 2-day primer on International Payments are closing this week - on Friday 29 October. We still have a few spaces available. Dont be dissapointed.

For more information CLICK HERE.

Safaricom expands M-PESA Mobile Payments to supermarkets

Kenya's Safaricom has expanded its mobile money service, M-PESA to enable payments at all Uchumi and Naivas Supermarket outlets across the country. Speaking at the launch ceremony held at an Uchumi outlet, Safaricom CEO Michael Joseph said the company was leading the way towards a cash-less society where most payments will be made via the telephone or online, hence reducing the risks involved in carrying cash.

"I am extremely excited to be launching Nunua na M-PESA service allowing cashless payments at-the-till for people without a bank account. It resonates with our company?s commitment to lead the way in innovations that provide convenience and security to our subscribers," said Joseph. "Following positive feedback from customers who participated in a pilot, as well as the Central Banks go-ahead to roll-out, we shall now proceed with expanding the merchants that will accept Nanua na M-PESA".

Joseph said Safaricom will continue partnering with organizations to expand the variety of payments that can be made using M-PESA with the aim of providing increased convenience to Kenyans while at the same time maximizing their mobile phone usage.

The Single Euro Payments Area - where do we stand?

In a speech at the European Payments Council offsite meeting held in Brussels, on 14 October 2010, Gertrude Tumpel-Gugerell, Member of the Executive Board of the ECB delivered a wide ranging review of the current status of SEPA and what still remains to be done.

You can read her full remarks in our IN FOCUS section – Click Here.

ECB wants “realistic but ambitious regulatory end dates” for SEPA Migration

The European Central Bank (ECB) has publisged its 7th Progress Report on the Single Euro Payments Area (SEPA).

Currently, 32 European countries are participating in SEPA, more than 4,400 banks have joined the SEPA credit transfer scheme, and more than 3,000 banks have signed up for the SEPA direct debit scheme. Hence, much has been achieved in implementing SEPA.

However, further action by European legislators is needed for SEPA to be completed successfully. In this respect, a mandatory timeline for the migration to SEPA payment instruments will significantly accelerate the pace of transition, enabling SEPA to be completed, preferably, by the end of 2012 for credit transfers and by the end of 2013 for direct debits.

The 7th Progress Report, entitled “Beyond theory into practice”, shows achievements in major areas. For instance, the launch of the SEPA direct debit in November 2009 has made direct debit payments possible for the first time across borders. By 1 November 2010 the reachability of payment accounts for SEPA direct debits will be guaranteed legally, allowing SEPA direct debits to be used effectively throughout Europe.

In addition, the governance structure of SEPA has been improved by the creation of the SEPA Council, which enables a more formalised involvement of high-level representatives of consumers, retailers, corporates, SMEs and public administrations in the SEPA dialogue.

Other areas where progress has been made include: the transposition and implementation of the Payment Services Directive, and standardisation in the area of cards.

Despite this progress, SEPA migration as a self-regulatory process, has not yet achieved the results that were initially expected. The banking industry’s self-imposed deadline of December 2010 for SEPA credit transfers and direct debits to be in general usage will not be met. By August 2010 only 9.3% of all credit transfers processed in the euro area were SEPA credit transfers. Since its launch in November 2009, SEPA direct debits remain at a share well below 1% of all direct debit transactions processed in the euro area. Therefore, the Eurosystem strongly supports the work of European legislators to create the necessary momentum to bring the SEPA project to completion. The envisaged regulation establishing a SEPA migration end date(s), in which the usage of national payments instruments will be discontinued, will be a key element for the timely and smooth adoption of SEPA. The Eurosystem is also confident that concerns raised by market participants on the envisaged regulation on SEPA migration end date(s) will be properly addressed by the European authorities.

Other key elements for the success of SEPA that still need to be addressed include: the provision of innovative payment services (e.g. online and mobile payment services), the creation of an additional European card scheme and the enhancement of the security of card transactions by phasing out the magnetic stripe on European cards.

Ms Gertrude Tumpel-Gugerell, Member of the ECB’s Executive Board, said: “SEPA is progressing from the market-driven phase of design and implementation to the phase of mandatory migration, aiming to ensure that the necessary adoption really takes place. At this stage, SEPA faces a number of specific challenges that only the market and the regulators together can master. I hope that the constructive cooperation between all stakeholders will become even closer in the decisive two to three years ahead, so that our joint efforts help us to achieve the final goal: an attractive integrated and competitive European market for euro payment services.”

EPC and GSMA publish mobile contactless payments white paper

The European Payments Council (EPC) and global wireless trade group GSMA have published a while paper on mobile contactless payments and the role of 'trusted service managers' (TSMs).

The white paper comes after the pair launched a consultation on SEPA and mobile contactless payments at the beginning of the year. They aim to get payment services providers and mobile network operators to cooperate on a system to enable over 500 million Europeans to make SEPA payments using their handsets.

The new paper describes the provision and lifecycle management - including distribution, configuration, activation, maintenance and deletion - of banks' contactless payment applications when integrated with a mobile phone.

It also outlines the role of the TSM, which is to support banks and operators aiming to promote mobile contactless payments. TSMs facilitate the distribution, configuration and activation of the bank's payment application on the Universal Integrated Circuit Card (UICC, or SIM) within bank customers' NFC handsets.

The hope of the EPC and GSMA is that the joint project will boost commercial relationships between issuing banks, the mobile network operators and TSMs and therefore speed the deployment of contactless m-payments.

Dag-Inge Flatraaker, chair, EPC m-channel working group, says: "Building a common architecture for mobile contactless payments is a key objective of the EPC's initiatives for mobile payments in the Single Euro Payments Area (SEPA). The implementation of interoperable and user-friendly mobile payment solutions makes it even easier for bank customers across 32 SEPA countries to access state-of-the-art SEPA payment services."

Financial Stability Board meets in Seoul

The Financial Stability Board (FSB) met this week in Seoul on key elements of financial reforms ahead of the G20 Summit that will also take place in Seoul. The meeting welcomed the Basel Committee’s global bank capital and liquidity standards; agreed on a framework for addressing systemically important financial institutions; endorsed recommendations for increasing the intensity and effectiveness of financial supervision; approved recommendations for implementing central clearing and trade reporting of over-the-counter (OTC) derivatives; and endorsed principles for reducing reliance on credit rating agency ratings.

The FSB has been established to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts.

At the meeting the FSB also reviewed progress on other elements of the financial regulatory reform agenda, including accounting convergence, established FSB regional outreach arrangements, and discussed the future work programme.

Key financial regulatory reforms

The meeting focused on the following elements of the program of financial regulatory reform agreed by the G20 economies and coordinated by the FSB in the wake of the financial crisis. The FSB will remain engaged with the remaining policy development and closely monitor national implementation of these reforms in 2011 and beyond:

New bank capital and liquidity standards. The new standards developed by the Basel Committee on Banking Supervision have been designed to markedly increase the resilience of the global banking system by raising the quality, quantity and international consistency of bank capital and liquidity, constrain the buildup of leverage and maturity mismatches, and introduce capital buffers above the minimum requirements that can be drawn upon in bad times. The new standards will reduce the likelihood and severity of future financial crises and create a less pro-cyclical banking system that is better able to support long-term economic growth.

The FSB and the Basel Committee, in close collaboration with the BIS and IMF, have assessed the macroeconomic impact of the transition to the stronger capital and liquidity standards. The implementation horizon and transition arrangements have been designed to ensure that implementation does not harm the recovery. National implementation of the risk-based capital requirements by member countries will begin on 1 January 2013. Member countries will translate the capital rules into national laws and regulations before that date. From that point forward, the capital standards rise each year, reaching their new level on 1 January 2019.

Addressing systemically important financial institutions. The FSB agreed and will recommend to the G20 Leaders’ Seoul Summit for their endorsement a policy framework, work processes and timelines to address the “too big to fail” problem associated with systemically important financial institutions (SIFIs). The FSB’s work to address SIFIs is also part of the broader G20 financial reform process, and specifically follows up on the Leaders’ mandate at the Pittsburgh Summit.

The framework calls for jurisdictions to put in place:

• Capacity to resolve national and global SIFIs without disruption to the financial system and without taxpayer support
• A requirement that SIFIs and initially in particular global SIFIs (G-SIFIs) have higher loss absorbency capacity to reflect the greater risks that these institutions pose to the global financial system
• Supplementary prudential and other requirements to reduce the probability and impact of SIFI failure
• Increased intensity of SIFI supervision, and
• Updated standards for more robust core market infrastructures, including central counterparties in the OTC derivatives market.

The effectiveness and consistency of national policy measures for G-SIFIs will be subject to review by an FSB Peer Review Council.

Increasing supervisory intensity and effectiveness. The FSB endorsed recommendations to increase supervisory intensity and effectiveness. Strong supervision is a necessary complement to stronger rules. Supervisors are expected to detect problems proactively, intervene early to reduce the impact of potential stresses on individual firms and therefore on the financial system as a whole. The actions and processes endorsed cover the following elements necessary to deliver greater supervisory intensity and effectiveness:

• Ensuring that supervisors have unambiguous mandates, sufficient independence and appropriate resources
• Providing supervisors with the full suite of powers necessary for effective early intervention
• Improving supervisory standards to reflect the complexity of financial institutions and the system as a whole, and
• Increasing the frequency of assessments of supervisory regimes.

National authorities and standard setters will follow up on these recommendations as they make improvements to their core principles. FSB thematic peer reviews and IMF/World Bank FSAP assessments will assess national implementation.

Implementing central clearing and trade reporting of OTC derivatives. The FSB approved a report containing recommendations to promote consistent implementation of the G20 commitments concerning:

• Increasing the proportion of the market that is standardized
• Moving to central clearing of OTC derivatives by (1) implementing mandatory clearing requirements, (2) strengthening oversight and regulation of central counterparties (CCPs) and (3) introducing robust risk management requirements for the remaining non-centrally cleared markets
• Trading on exchanges or electronic platforms, where appropriate, by asking IOSCO to complete an analysis by end-January 2011, and
• Ensuring that OTC derivatives transactions are reported to trade repositories.

The FSB will assess implementation of these recommendations, and monitor progress to identify if further work on the international level is needed, on a regular basis.

Reducing reliance on CRA ratings. The FSB endorsed principles to reduce authorities’ and financial institutions’ reliance on credit rating agency (CRA) ratings. The principles cover five types of financial market activity: prudential supervision of banks; policies of investment managers and institutional investors; central bank operations; private sector margin requirements; and disclosure requirements for issuers of securities. The goal of the principles is to reduce the cliff effects from CRA ratings that can amplify procyclicality and cause systemic disruption. The principles call on authorities to do this through:

• Removing or replacing references to CRA ratings in laws and regulations, wherever possible, with suitable alternative standards of creditworthiness assessment
• Expecting that banks, market participants and institutional investors make their own credit assessments, and not rely solely or mechanistically on CRA ratings.

The FSB has asked standard setters and regulators to consider next steps that could be taken to translate the principles into policy approaches tailored to specific financial sectors and market participants. As market participants need to build up their own risk management capabilities, clear milestones should be set to achieve a transition to a reduced reliance on CRA ratings over a reasonable timeframe into the medium term.

Accounting convergence. The FSB recognized progress toward improved, converged accounting standards in four main areas: impairment of financial assets; derecognition; addressing valuation uncertainty in fair value measurement guidance; and netting/offsetting of financial instruments. The FSB reaffirmed its support of standards that do not expand the use of fair value measurement recognition for lending activities, a position echoed by the comments of many investors and other stakeholders, and expressed hope that the FASB and IASB consideration of stakeholders’ comments on proposed standards will result in improved and converged approaches. More generally, the FSB encourages the IASB and FASB to continue their efforts to achieve improved converged financial instrument accounting standards by June 2011.

Outreach to non-members

The FSB is establishing regional consultative groups to strengthen the involvement of non-members in its work. The groups will bring together financial authorities from member and non-member countries to exchange views on vulnerabilities affecting financial systems and on initiatives to promote financial stability. The structure and membership of the groups is under discussion and will be finalized in time for the first meetings to take place in 2011.