MiFID: EC 'must listen' to industry

European parliamentarians have urged Brussels officials to listen closely to feedback from the financial services industry following the publication of its long-awaited review of the Markets in Financial Instruments Directive.

Kay Swinburne MEP, economics spokeswoman for the European Conservatives and Reformists group, warned that the review would find it difficult to keep up with the changing face of financial services, but said the proposals were nonetheless welcome.

"Regulation is always a step behind new technology and practices," Swinburne said.

"However, the MiFID review provides a timely opportunity to update the legislative framework to ensure continued confidence and competition in our markets."

The proposals, which were widely leaked and revealed by GFS News last week, were officially unveiled by Michel Barnier, European commissioner for the internal market and services on Wednesday.

Dubbed "MiFID II", the consultation document is billed as an opportunity to deal with new types of trading venues and products as well as technological developments such as high frequency trading.

Barnier insisted the "world has changed" since the directive was first introduced in 2007, saying that a revision would improve market transparency and efficiency and promote investor protection.

"We all know the current framework needs improvement," he said.

"My objective is to ensure that the revision of MiFID will lead to a stronger regulatory framework, adapted to the new trends and players on financial markets."

The consultation document puts forward new mandatory trading requirements for OTC derivatives and the application of pre and post-trade transparency to equities and non-equities as well as requirements on position reporting obligations for commodity derivatives.

Under suggested changes, the European Commission will have power to ban certain products and activities.

The new European Securities and Markets Authority will be able to ban the trading of certain financial instruments and have a supervision role in setting certain standards for high-frequency traders.

The industry has been given a deadline of 2 February to respond to the consultation document. A formal draft of the review proposals is set to be tabled next Spring.

Other measures in the document released on Wednesday include:

• High-frequency traders reaching a designated threshold to be required to seek investment firm authorization.
• All automated trading firms to introduce pass algorithms to regulators and put in place circuit breakers and stress-tests.
• For pre-trade transparency, waivers will be maintained although some adaptations will be applied.
• Real-time reporting of post-trade transactions reduced from three minutes to one minute.
• Bonds and structured products with a prospectus will be subject to pre-trade transparency requirements.
• Organised trading such as inter-dealer broker systems using voice or hybrid voice or electronic execution to be regulated under new definition of "organised trading facilities".
• Organised trading facilities that reach a certain asset threshold will be required to become a multilateral trading facility.
• Introduction of a mandatory EU consolidated tape across all financial instruments to improve transparency.

Swinburne added: "The European Commission has come forward with a very comprehensive consultation document but it needs industry to respond with us much practical evidence as possible."

Operational risk - Consultative papers issued by the Basel Committee

The Basel Committee on Banking Supervision has issued for consultation two papers on operational risk: Sound Practices for the Management and Supervision of Operational Risk and Operational Risk - Supervisory Guidelines for the Advanced Measurement Approaches.

Sound Practices for the Management and Supervision of Operational Risk updates the Committee's 2003 paper on this topic. The updated version highlights the evolution of operational risk management since 2003 and is based on best industry practice and supervisory experience. The principles outlined in the report are discussed within the context of three overarching themes: governance, risk management and disclosure.

The Committee also issued for consultation Operational Risk - Supervisory Guidelines for the Advanced Measurement Approaches. The regulatory capital adequacy framework envisages that, over time, the operational risk discipline will continue to mature and converge towards a narrower band of effective risk management and measurement practices. The guidance seeks to better achieve this by setting out supervisory guidelines relating to governance, data and modeling.

Comments on the reports can be submitted up to 25 February 2011.

NAB customers hit by more technical problems

National Australia Bank has been hit by more tech woes today, with ATMs, Internet banking and card processing all affected by intermittent network issues.

Since 25 November the bank has been plagued by payment processing problems that were initially attributed to a "corrupted file in the processing batch".

According to The Australian newspaper, today saw customers in Melbourne unable to withdraw cash from ATMs while others were unable to access their accounts online and some noted balance inaccuracies.

In an updated statement on its Web site, the bank says: "NAB can confirm that the majority of customer payments and transactions have been completed and most account balances are now up-to-date. We know that some customers are still experiencing inconsistencies and we're actively working to address these as soon as possible."

With over 6,000 customers understood to have lodged compensation claims over the outages, NAB has called in KPMG to investigate. According to the Herald Sun, Christmas parties have been postponed until the New Year as staff struggle to deal with the fall out.

M-PESA

M-PESA has become a significant part of the 'banking' scene in Kenya. Writing recently in the New York Times, Nick Kristof said;

“That’s why the most powerful idea in microfinance isn’t microloans, but microsavings — helping the poor safely store their money. And mobile phones offer a low-cost way to make microsavings feasible and extend financial services to the poor. About three-fourths of Haitians have access to a mobile phone, and similar numbers are found in many poor parts of the world.


Kenya has been a leader in mobile money, but many other developing countries in Africa, Asia and the Americas are now jumping on board as well. For the poor, mobile telephones could have as profound an impact on finance — on banking the unbanked — as they have on communications.

The following video is a recent M-PESA commercial. It says it all.

London buses to go contactless

London buses are to be equipped with contactless card readers to enable commuters to pay for transit fares with a swipe of their debit or credit card.

"Transport for London expects that it will begin to accept debit and credit cards as direct payment media on buses from early 2012 and on the Underground around a year or so later," says London mayor Boris Johnson, confirming reports that first surfaced in October this year. "This would enable many visitors to London or occasional users to avoid the need to purchase an Oyster card, while still enjoying many of the benefits of pay-as-you-go."

A switch to bank cards, or mobile phones, has long been touted, with TfL floating the death of Oyster back in October 2008. Barclaycard launched a combined contactless Oyster travel and debit card, OnePulse, in 2007.

The move is designed to make travelling more convenient and save TfL money on the commission it currently has to pay Oyster operators every time one of the accounts is topped up.

TfL is also understood to be talking to counterparts in the US, Australia and Europe on harmonising systems, which would enable travellers from London to use their bank cards to travel on the Paris Metro or New York subway.

Transit issues have also moved up the agenda at the Cartes show in France, with Giesecke & Devrient, Infineon Technologies, Inside Secure and Oberthur Technologies announcing the launch of the Open Transport Alliance (OSTP), an international collective formed to develop new, interoperable transit fare collection systems.

The Alliance currently is developing the initial version of an open security standard - dubbed Cipurse - as well as documentation and reference implementations for cards, stickers, fobs, mobile phones and other consumer devices.

The idea is to create an open standard capable of enabling the public to use a single payment device - from standalone tickets to multi-application cards, microSD cards and NFC mobile phones - seamlessly across mulitple modes of transport in different locations, and across different regions and systems.

M-Kesho named best mobile application in 2010

Kenya’s Equity Bank's M-Kesho innovation has won this year's Best Mobile Banking Application during the annual Computer Society of Kenya 2010 Gala awards.

Jointly developed in partnership with Mobile firm Safaricom, the M- Kesho service allows customers to transfer money to and from their M-PESA accounts via their mobile handsets while enjoying other benefits that come with the Equity bank account

Presenting prizes to the winners at the Gala, Dr. Bitange Ndemo, of the Kenyan Ministry of Information and Communication said the government had completed most of the fiber optics infrastructure and is currently tackling the last mile in the provision of broad band network.

"Kenya is now the country with the most Internet users in the whole of Africa at 20 per cent usage Kenya moved from 15% to 20% after the fiber optic cable landed. Most countries are at between 10% and 15%" he said.

Mr Ndemo called on the information and communications technology industry to set ethics and values like the developed and emerging economies.

"14 million of our youth are on Facebook daily, he said.” We must have a set of values and ethics. No country in the world has developed without ethics and values. We must embrace those values and that is why the constitution created the value systems", he said.

Mr Ndemo challenged the computer Society of Kenya to base future awards on individuals or institutions that had come up with the best applications to help Kenyans.

The Computer Society of Kenya considered M-Kesho an innovative idea as it provides a platform for Kenyans to save money and also enjoy the benefits of having the added value services of both M-PESA and Equity Bank accounts.

Launched in May this year, M-Kesho has contributed in demystifying banking and making it easy for Kenyans owning a mobile phone to access financial services and enjoy the freedom of modern banking.

UK looking to develop a new cheque system to replace its existing one

Have the Brits finally lost it? The UK’s Payments Council wants to replace cheques with …. “a paper based payment method”. I guess that is a cheque by any other name.

The UK Payments Council says it is working with banks to develop an alternative paper-based payment method as part of a commitment not to leave customer "high and dry" when the cheque clearing scheme is finally abolished.

The Council has already set a provisional target of 2018 for the abolition of cheques, with a review scheduled for 2016.

The move has been slammed by consumer groups, small businesses and charitable organisations, which rely on cheques as an established payment mechanism. The Payments Council has promised to develop alternative electronic payment methods that can meet the needs of all consumers.

However, in a progress update, the Council holds out a fig leaf to the lobbyists: "Where there there are gaps in the current range of payment options, we will look to foster innovation and investigate the feasibility of providing a paper-based method of payment, to address the needs of some consumers who are highly dependent on cheques and who may find it difficult to migrate to the electronic alternatives."

Richard North, chairman of the Payments Council says: "By setting a target date for closing cheque clearing, we know we have set ourselves a massive challenge in developing alternatives that work for customers and that people will choose to use in place of cheques."

Payments Council research shows that 55% of consumers are still not aware that a target date of 2018 has been set to close the cheque clearings. Of those (42%) that are aware of a target being set, a quarter believe that the date is either next year or in 2012.

Finextra, a UK based independent newswire and information source for the worldwide financial technology community commented on this breakthrough announcement as follows;

“What form could this innovative new payment method take, we ask ourselves. A piece of paper with a space for a signature, payee name, cash amount and date, perhaps? Amazing! Whatever will they think of next?”