FSA publishes its plans for 2011/12

The Financial Services Authority (FSA) has published its business plan setting out its priorities for 2011/12. In it   the FSAoutlines its priorities and specific initiatives for the year ahead, which reflect the continuing challenges facing the financial services industry.

This year’s business plan has been created against a backdrop of considerable change, with the UK government last year announcing plans for changes to the structure of financial services regulation in the UK. The FSA will restructure into the Prudential Regulation Authority (PRA) and the existing FSA legal entity will become the Financial Conduct Authority (FCA). This change will occur at the end of 2012 or early 2013. Until then the FSA will continue to deliver on its statutory objectives and implement the major initiatives that are already underway. The key areas will include:

• Maintaining ongoing supervision in a period of continued fragility in markets
• Continuing to influence the international and European policy forums, delivering, in particular, the new prudential regulatory agenda
• Implementing the current EU major policy initiatives, including Solvency II
• Delivering on the principal national sector initiatives to improve consumer protection - the Retail Distribution Review (RDR) and Mortgage Market Review (MMR)
• Continuing to improve the FSA’s operating systems and the quality of its staff
• Implementing the government’s regulatory reform agenda.

Reflecting the extensive resources needed for the regulatory reform program and the need to recognize the difficult economic circumstances for many firms, the FSA is not planning any new discretionary initiatives and is capping headcount at the current level.

The majority of the FSA’s resources are utilized providing ongoing supervision. The two biggest policy initiatives are Solvency II and influencing the substantial international prudential reform agenda, especially in respect of Basel III.

Foreign exchange settlement risk - Guidance being updated

The Basel Committee on Banking Supervision (BCBS) and the Committee on Payment and Settlement Systems (CPSS) are establishing a joint working group to revise the BCBS's “Supervisory Guidance for Managing Settlement Risk in Foreign Exchange Transactions” (2000), with the goal of ensuring that financial institutions adequately control their foreign exchange settlement exposures. The group will be chaired by Ms Jeanmarie Davis, Senior Vice President at the Federal Reserve Bank of New York.

Foreign exchange settlement risk is the risk that one party to an FX trade pays out the currency it sold but does not receive the currency it bought. It consists of both liquidity risk (the risk that the purchased currency is not received when due) and credit risk (the risk that the purchased currency is not received when due or at any time thereafter). In this situation, a party's foreign exchange settlement exposure equals the full amount of the purchased currency.

Foreign exchange settlement risk was identified as a significant risk to market participants in a 1996 CPSS report “Settlement Risk in Foreign Exchange Transactions”. An update to that report, “Progress in Reducing Foreign Exchange Settlement Risk”, published in May 2008, found that, through mechanisms such as CLS Bank, the financial services industry has made substantial progress in reducing FX settlement risk. The report notes, however, that part of the market still settles in a manner that does not mitigate FX settlement risk and that some bilateral settlement exposures are large in relation to capital.

CLS Bank provides a means of settling foreign exchange transactions on a "payment versus payment" basis. Established in 2002, CLS Bank currently settles FX-related payment obligations in 17 currencies. CLS Bank is owned by private sector banking and other financial institutions.

The 2008 report therefore recommended further action by individual institutions, industry groups and central banks:

• Individual institutions need to ensure that the risk controls and incentives they have in place favour the use of risk-reducing FX settlement methods.
• Industry groups should continue to develop services for settling FX trades that will help to reduce remaining risks, particularly services for settling same day and certain next day trades and trades involving additional currencies and counterparties.
• Central banks will work with supervisors to encourage continued progress by the financial industry.

The current announcement indicates the re-launch of the planned work between central banks and supervisors, which had been postponed with the onset of the financial crisis. This is an important step to ensure that market participants focus on FX settlement and that their exposures are properly controlled.

The guidance issued by the BCBS in 2000 was before CLS Bank and other payment versus payment (PVP) settlement systems were operational and does not fully reflect advances in the market and key differences between trades that settle through sound PVP arrangements and those that settle bilaterally through correspondent banking relationships. The revised guidance will address these and other developments with respect to FX settlement risk management.

The two committees plan to issue revised guidance by the end of 2011 for public comment.

The future is almost here

Watch "A Day Made of Glass" and take a look at Corning's vision for the future with specialty glass at the heart of it.

More than just glass, this is a vision of where technology is taking us. Many of the concepts shown are already with us or on the drawing board.

Fantastic as it may look, the future is almost here.

Tel Aviv – Venue for our International Payments Course in May

Join us for a quick tour of Tel Aviv, the venue for our May International Payments Course.



For more details about our International Payments course on 10 & 11 May 2011 in Tel Aviv please CLICK HERE

Mobile Payments: Are Retailers Ready?

Doug Bergeron, CEO of Verifone on when you will be able to use your smartphone in most stores.

Augmented Reality – Where tablet computing may be taking us

The iPad 2 is here. Apart from all the praise being heaped on it, something interesting is emerging: Is the iPad2’s light weight, large screen and twin cameras perfectly positioned to make the iPad an “Augmented Reality” giant?

Augmented Reality apps have slowly propagated on smartphones, bringing a potential genuine usefulness to some data streams that are overlaid on reality through the device's rear cameras. Now there are tablet computers with rear cameras, too - and already some AR apps have surfaced for it.

Just look at what the future may hold. Its mindboggling.



.... and ....

Banks, Payments & Migrant Workers Remittances

Many banks think that because they offer a set range of payment products and solutions the potential lucrative Remittances market is just waiting to be picked.

But remittances are more than expanding your bank payment products to the Migrant Worker community. It is all about survival. It is all about banks maintaining their niche in the payments space, an area that has traditionally been the domain of the banks.

Today this is under threat. And where do the threats come from? From alternate payment systems – operations such as informal systems like Hawala to a whole range of new purpose built systems like PayPal, Google Checkout, Amazon Payments, to mention but a few.

Mobile payments are also on the move and the network operators are dying to capture huge new revenue streams from millions of clients that they already service through their mobile payment networks.

A few of the big banks have dipped their toes into the remittance market, many have only announced plans to do so – and seem to be sitting back with many others waiting in the sidelines.

Remittance payments through alternative payment mechanisms are here to stay. Banks really have no alternative but to play in the game or to lose out. Banks need to take advantage of the different options available to them while leveraging their consumer and merchant relationships, their existing payment infrastructure and their strong secure operational processes.

Please join us for “REMITTANCES – CREATING VALUE”, a two day intensive course on Payments, Remittances and Opportunities. This course is the definitive A to Z on Remittances – from informal systems to the revolutionary appearance of the Mobile Phone as a remittance tool.

London - 16 & 17 May 2011 – For additional details please CLICK HERE.

Johannesburg - 22 & 23 June 2011 – For additional details please CLICK HERE.