The Bankwatch

Tracking the consumer evolution of financial services

Posts Tagged ‘bank strategy

G20 Finance Minister regulation changes will constrain new investment and require a strategy rethink


The G20 Finance Ministers meeting in London concluded some new principles for Bank supervision, that follows the predictable path we have been seeing. Here is a summary from BIS, and some additional analysis from Financial Times.

The key points that will drive banks to seek additional efficiences to compensate, are raised capital and liquidity requirements. Another key one is #4, the countercyclical buffer; in other words during good times put money away for a rainy day. These changes in particular will constrain new investment in lending and in anything that does not drive higher profits.

In any event this will require a serious strategy review, and again, this does not sound like a return to business as usual.

Comprehensive response to the global banking crisis | BIS

The Central Bank Governors and Heads of Supervision reached agreement on the following key measures to strengthen the regulation of the banking sector:

  • Raise the quality, consistency and transparency of the Tier 1 capital base. The predominant form of Tier 1 capital must be common shares and retained earnings. Appropriate principles will be developed for non-joint stock companies to ensure they hold comparable levels of high quality Tier 1 capital. Moreover, deductions and prudential filters will be harmonised internationally and generally applied at the level of common equity or its equivalent in the case of non-joint stock companies. Finally, all components of the capital base will be fully disclosed.
  • Introduce a leverage ratio as a supplementary measure to the Basel II risk-based framework with a view to migrating to a Pillar 1 treatment based on appropriate review and calibration. To ensure comparability, the details of the leverage ratio will be harmonised internationally, fully adjusting for differences in accounting.
  • Introduce a minimum global standard for funding liquidity that includes a stressed liquidity coverage ratio requirement, underpinned by a longer-term structural liquidity ratio.
  • Introduce a framework for countercyclical capital buffers above the minimum requirement. The framework will include capital conservation measures such as constraints on capital distributions. The Basel Committee will review an appropriate set of indicators, such as earnings and credit-based variables, as a way to condition the build up and release of capital buffers. In addition, the Committee will promote more forward-looking provisions based on expected losses.
  • Issue recommendations to reduce the systemic risk associated with the resolution of cross-border banks.

The Committee will also assess the need for a capital surcharge to mitigate the risk of systemic banks.

Written by Colin Henderson

September 7, 2009 at 18:09

Posted in Uncategorized

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You know its bad when … the government is more innovative than your Bank


This post from James following his first week at the DWP (Department of Works and Pensions, and hosts of direct.gov).

DWP, is running an innovation experiment where they allow citizens to put their own applications on top of government data. Yes, that’s right: an API for the government.Show me a bank with API. You can’t, because there isn’t one. I have to go to a third party like Wesabe, who basically have to suck data out of banks without their permission, to get one. I think it is early days for what Direct.Gov is doing, but you can see the potential. More particularly, the fact of this experiments existence tell you lots about the sorts of things it is possible to do in the public sector.

Strange days indeed, and something that ought to worry bankers.

Written by Colin Henderson

September 1, 2009 at 13:08

Posted in Innovation

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Alfa follows a good internet media strategy | Russia


Daniel notes good practices in managmenent of a merger using web media.

Alfa follows a good internet media strategy – covering its merger with Kazna | Retail Banking in Russia

An absolute majority of posts at this blog deals with operational aspects of banks business – but recent coverage of Alfa-Bank and Severnaya Kazna merger gives good examples on how a Web-media strategy of a bank can be formulated to better suit the wavering clients of the banks, and convey a positive image of banks in merger.

Written by Colin Henderson

August 18, 2009 at 14:53

Posted in Customer experience

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BofA could eventually cut 10 pct of branches | SF Chronicle


This is a theme that is gathering steam. It is based on the reality that customers are using internet for their banking, and there is a high level of redundancy in offerring similar capabilities in physical locations. The counterbalance is of course the need to attract customers, new accounts and deposits which has traditionally been a branch activity.

That balance is shifting now and the tension between those two opposing forces will be ineresting to watch, as banks exectute strategies and consider their cost base.

BofA could eventually cut 10 pct of branches SF Chronicle

Bank of America Corp. could eventually shrink its 6,100-branch network by about 10 percent as consumers utilize other methods of banking, a company spokesman said Tuesday.

The move would be a pullback from the bank’s two-decade expansion, most recently under Lewis’ command, which expanded the bank from coast to coast.

[update] A quick look at Online Banking Report reminded me of an attribution I should have made, of Jims far sighted report in 2006.  In that report he rightly took a 40 year view.  Which Chairman at a bank is taking a 40 year view today ?

Online Banking Report: The Demise of the Branch (April 2006), for more on the long-term trends in the mix of branch and alternative delivery.

Written by Colin Henderson

July 28, 2009 at 16:35

The Good, the Bad and the Ugly | which is your bank?


In this video commentary on the US Banks results they note that while large profits are announced, any parts of the business related to the US consumer consumer is flat. This includes all retail banking and credit cards. The only bright spots are the fee based revenue from the investment banking units, hence JP Morgan and Goldman Sachs results, although poor old Citi did not even make it there.

One quarter does not make or break anything in banking in and of itself. However the predictions of Roubini and Baker linked below are playing out as expected, so which banks are going to wait it out and hope for the best, and which will challenge and break out?

Citi and BofA fail to allay fears | FT

The problem with Citi it is not firing on any cylinders, at least with the others they are at least firing on one cylinder.

Relevance to Bankwatch:
The word ‘bank’ is quite generalised. On this blog I focus on retail and commercial (small ‘c) banking. I care little about investment banking. Looking at the US this week, the US consumer base is still being hit with ever increasing unemployment, and there is no indication that will change soon. Europe and Japan are no better. I go back to an earlier post about ‘recovery’ which is a word used too loosely by economists and politicians. What will the future look like? What will recovery look like and what does that mean for your bank?

While technical recovery meaning positive GDP growth may occur later this year or earlier next, that is of little interest here. That ‘recovery’ is driven by Government deficit spending in all major economies. What matters is the state of the consumer, their aggregate confidence level, and frankly their income level with which they choose to save, pay down debt or spend.

I will repeat that banks as they move into this post ‘recovery’ world will do well to consider what it will take to succeed in that world. James Baker worried about Zombie banks back in March. We are beginning to see the evolution of zombies, financial utilities who operate under government supervision and ownership with little benefit if any to people or the economy.

If it is not going to look like the pre recession world and if we accept that it will be a relatively smaller, more careful world with far less money velocity, then how should your bank adapt products, services, service and business model to thrive?

Written by Colin Henderson

July 17, 2009 at 15:12

A chat with Dave Birch | whirlwind review of changes in financial services


Today I had the pleasure of a chat with Dave while he visited Toronto on business. Inevitably the conversation weaved in and around banks, payments, and what is wrong with both. As we chatted it is evident there is much change going on in the world of financial services, and that change may or may not be as expected. It appears banks are not innovating much anywhere at the moment as predicted, while on the payments front there is a host of activity and very different activity in many parts of the world.

This fits with my general theme of these times that innovation in banking will come from outside banks, and that banks will generally (not all) be relegated to a role of financial utilities. We spoke about the enormous challenge banks have to digest the mergers and takeovers which resulted from the banking crisis. The combination of mergers, new regulation, and concern for conservation of capital leads many banks down this path. Euro banks have the additional challenge of absorbing SEPA and the associated changes there which are neither easy nor cheap.

Innovation will come from non-banks, from payments providers, even credit card companies, and Dave was kind enough to provide some insight there, and show me some pretty cool stuff coming later this year.

Back to the topic of banks the one thing they generally appear to have grasped is the importance of mobile; they remain unsure how or what to implement, but mobile is important, so we can expect to see more work in that area.

Now off to read my newly autographed copy of the 2009 Digital Money Reader!

Written by Colin Henderson

July 14, 2009 at 14:10

Are we finally seeing the demise of the bank branch


Finally we are seeing hints of what we all know is inevitable.  It has taken a long time and probably this latest economic crisis, but the long view on branches suggests a damatic shift with less of them.

Slow but inexorable move to online banking

Yet slowly but surely, the internet is starting to make its mark on the sector as more people move their banking online. Lloyds is to shut up to 400 branches as part of its integration of HBOS. Its rivals are likely to follow suit.

A decade from now, the local branch could well be an endangered species as “cyber-banking” grows ever more popular and more branches close.

Written by Colin Henderson

July 7, 2009 at 01:37

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