The ability to work together despite cultural differences can be learned, writes Kathy Harvey.
“Think global, act local” is a cliché much beloved of business school professors keen to remind MBA students that global corporations still have to take account of national differences in order to be successful. Many institutions, including INSEAD in France, even organise their students into teams where conflict is likely, in order to emphasise that working across cultures is far from easy and encourage students to achieve team goals despite difficult group dynamics.
Globally, financial institutions are investing an estimated $334bn in IT hardware, software, specialised resources, and external services in 2003. Almost $119bn – over one-third of the total spending – is being entrusted to external parties. The inset pie chart highlights three significant IT components that integrate this amount:
Leveraging its global securities data platform, global investment bank Credit Suisse First Boston (CSFB), has launched a new service that provides market and financial professionals with one-stop access to enhanced securities data and analytics. Called DNA (CSFB Data & Analytics), the service integrates trader-sourced securities price information with state-of-the-art analytical tools to offer users quality market insight delivered via the internet and third party distribution services.
The service provides trader priced information on more than 25,000 fixed-income and convertible securities in more than 35 different asset classes in six currencies. The price and yield information is accompanied by more than 30 derived analytical values for each security and range of sectors.
Also on offer is the Sovereign Data website which provides detailed country specific information for around 100 economies including historic data, economic forecasts and analytics.
BT Group is bringing together Syntegra’s leading trading room applications and BT’s multi-protocol label switching (MPLS) network, bringing the virtual trading organisation nearer to reality. The combined technologies offer greater business resilience and remote turret connectivity for extended trading from home, or for contingency purposes.
Steve Eungbult, general manager of BT Global Financial Markets, says: “Our MPLS network is truly global, spanning 70 countries serving all financial centres. As a state-of-the-art internet protocol virtual private network, the MPLS network is optimised for the needs of the international trading community, providing class 1 quality of service for voice, as well as service level guarantees. This offers a secure, flexible global infrastructure.”
More structure budget allocation is required as efficiency needs drive western European banks’ IT spending. According to research company IDC, western European banks will increase their IT-related invested by a compound annual growth rate of 7% between 2002 and 2007. Total IT spending will reach $52bn in 2006, from $37bn in 2002.
According to the report, western European banks are refocusing on enhancing their infrastructure as the business environment is becoming calmer. “Efficiency remains the first objective of bank IT investments. As a consequence of their strong cost cutting policies, banks have realised that the only way to keep their operational costs under control is to rely strongly on IT,” says Daniele Bonfanti, programme manager, European IT opportunity, financial services, at IDC.
With a number of recent customer wins in eastern Europe, Hewlett Packard (HP) claims it is enjoying the greatest market share in the region. “With a growth in IT spend of 94% between 1995 and 2000 and estimated market growth at 12% annually, the eastern European region continues to be a strategically important market for HP,” says Kasper Rorsted, managing director HP EMEA. “As the eight eastern European countries prepare for accession to the EU in 2004, we will continue to deliver technologies that enable the transformation of governments and businesses to help accelerate future growth opportunities.”
Offshore outsourcing has become a controversial issue with possible wider macro-economic effects for Europe as well as the popular offshore locations. However, according to a new report by independent market analyst Datamonitor, offshore outsourcing stands to grow significantly as European financial services institutions remain focused on efficiency and cost-cutting as the main drivers of their IT strategy.
According to the report, Benefiting from offshore outsourcing in FS, expansion of offshore outsourcing will grow at a compound annual growth rate of 18% between now and 2005. It will be driven particularly by emerging business process outsourcing services, such as core back office process outsourcing, and also by a sustained growth in traditional offshore areas like application development and contact centres. During the next two years, offshore outsourcing in European financial services will create a market opportunity in excess of $240m for IT vendors.
If banks have to pay out for new computer systems in order to be compliant with the Basel II Accord, they may as well ensure they are spending strategically for the greater good of their business, too. Parveen Bansal reports.
Lately there has been much discussion about the need to reduce operational costs. Legacy system replacement is one strategy being debated. Also high on the many banks’ agendas is the impact of the impending Basel II Accord on the operations of the business. Both core systems change and compliance present a great challenge for financial services institutions as both initiatives add to the pressure on IT budgets.
Industry chief Dominick Cavuoto tells Parveen Bansal why banks must seize control of their IT strategy.
As president of Unisys’ Global Financial Services division, Dominick Cavuoto leads a practice that provides strategic technology business transformation solutions to financial institutions around the world. With years of management and consulting experience, Mr Cavuoto has strong views on the current state of the financial services industry and its technical perspective.
Poor reporting systems make bank fraud difficult to track in the UK but the industry can take steps to protect itself, including providing more reliable data on suspicious or anomalous transactions. Alex Foreman-Peck reports.
Far from becoming a rarity, branches are being renewed and made more welcoming, as banks accept that is what customers want. Susana Fernández Caro reports.
The bank branch is alive. And kicking. The dot.com boom in the late 1990s was deemed by many as a death threat to bank branches, whose number was forecast to be reduced. But the small number of e-illiterate customers proved to be reluctant to use the new electronic distribution channels. Money is conservative and so are its owners. Banks now know that customers refuse to conduct complex operations like obtaining a mortgage or picking a pension by phone or internet. Face-to-face interaction is still highly regarded by customers and the obvious place for a bank to offer it is still the branch.
‘Technology has been the key behind the success of
our bank’
Parveen Bansal and Stephen Timewell spoke with K V Kamath, ICICI Bank’s managing director and CEO, to gain insight into the bank’s burgeoning customer numbers and pioneering projects.
From only 100,000 customers three years ago to more than 5.5 million customers today, ICICI Bank has grown to become the second largest bank in India by Tier One capital and total assets. So what is the secret of the success of this bank and its phenomenal growth in customer numbers?
As this beleaguered nation tots up its accounts payable, Mark Wallace asks whether debt forgiveness from the international community can pave the way to economic restoration.
For the Coalition Provisional Authority that has occupied Iraq since the recent war, rebuilding the country’s financial and economic system will prove as difficult as putting back together any of the tattered country’s physical infrastructure. And it will have ramifications that are just as far-reaching – not just for Iraqis but for the international financial community as well.
Luz Maria de Portillo: believes change to the dollar will bring increased prosperity
Countries which have swapped their national currency for the US dollar have not found the strategy to be an immediate success. Monica Campbell reports.
The idea of dollarising a nation’s economy is considered either a political impossibility or a high-stakes policy gamble. But, in recent years, two Latin American countries, El Salvador and Ecuador, have taken the leap. Each came to the US dollar under distinct circumstances and their performance so far under the greenback is mixed.
M&A activity and strong performance has generated a swathe of new arrivals – and dropouts – in The Banker’s Top 100 Latin American listing.
Latin banks as a whole managed a relatively strong year in 2002 despite a sputtering US recovery, uncertain financial markets and contagion from the Argentine collapse allied to fears about Brazil’s new government. In terms of Tier One capital, the cut-off point for entering the Top 100 rose to $58m, as compared to $45m last year, while pre-tax profits came in at $8244bn and total assets were $605,750bn.
One benefit of the 1997 financial crisis in Thailand has been the resulting focus on regulatory reform.
If necessity is the mother of invention, it is hardly surprising that Thailand’s bankruptcy proceedings did not take shape until the 1997 crisis engulfed the region’s economies. Six years on, many observers say the creation of a dedicated bankruptcy court underpinned by a comprehensive framework is among the country’s most significant regulatory reforms.
Ahead of the forthcoming APEC forum meetings, Simon Montlake, in Bangkok, outlines the issues up for discussion.
When the 21 leaders of the Asia-Pacific Economic Co-operation (APEC) forum meet in Bangkok in October, their agenda will span a range of issues that are certain to attract intense worldwide attention. Investors in the region will be hoping to get more direction on how the countries are working towards common goals of trade and development.
Thirachai Phuvanat-Naranubala has his eyes firmly fixed on the future
Thailand’s central bank was in trouble when the global financial crisis swept across Asia in 1997. The Banker asks Bank of Thailand deputy governor about the current state of play and the master plan for the financial sector.
Like many Thais, Thirachai Phuvanat-Naranubala remembers clearly the dramatic events of July 2, 1997, when the Bank of Thailand (BoT) announced its decision to allow the national currency, the baht, to float. That fateful day was the tipping point of the 1997-98 financial crisis that swept across Asia and roiled emerging markets worldwide. It was also a day when the central bank was in the spotlight, not to mention in the firing line for tycoons who had borrowed offshore and failed to hedge the currency risk.
Thailand’s stock market fortunes continue to grow on last year’s successes but, with the 1997 crash still fresh in investors’ memories, is it enough to convince the doubters to invest in other instruments, asks Simon Montlake in Bangkok.
Early repayment of its IMF loan has brought confidence back to Thailand’s consumers, who have driven up economic growth.
When Thailand repaid the final loan outstanding from its 1997 IMF-led rescue package in July, the impact on its capital account was barely felt. That in itself was a reminder of just how far the country has climbed in the six years since the Asian financial crisis brought the IMF knocking on its door.
As economic uncertainty lingers, lending banks are vying for a slice of the retail market and, along with credit brokers, are honing their risk management skills. Nicholas Spiro reports from Warsaw.
As industry, insurance companies and asset managers alike relocate to Munich, Bavaria’s capital is biting at the heels of Frankfurt as a financial centre of importance. Jan Wagner reports from Munich.
John Wilson: use of the FIX functionality could save the securities industry $100m annually
The latest version of the FIX protocol negates the need for banks and fund managers to use central matching facilities, such as Omgeo, in order to achieve straight-through processing for securities. Frances Maguire looks at the potential.
When the Global Straight-Through Processing Association (GSTPA) went under at the end of last year it left not so much a void as a monopoly. The only contender left standing in the industry drive to move to central matching of order allocations, confirmations and settlement was Omgeo, the joint venture between Thomson Financial and the US’ Depository Trust and Clearing Corporation.
The European Council summit in Porto Carras, Greece in late June defined a final size for Europe – although it may not be achieved before 2017. The establishment of geographical parameters to European integration has deep foreign exchange market implications for the currencies of the potential members and the euro itself.
The arrival of Jean-Claude Trichet as president of the European Central Bank (ECB) in October should have a positive impact on financial markets. The euro/dollar relationship will be underpinned by the tacit understanding that ECB intervention will be more wisely undertaken, interest rate policy better explained, and Euribor, the euro interest rate curve, will price less uncertainty over ECB rate policy.
Banks’ and insurance companies’ use of credit derivatives continues to grow but corporate interest in the field is minimal by comparison. While there are many hurdles to overcome, some bankers expect activity to increase, reports Mark Pelham.
Ed Hulina: FX strategies need to be implemented at the regional and local level
As the Asia-Pacific region picks up again, there has also been an increase in Asian FX trading. But, unlike most other regions, it is not necessarily the large institutional players that are exhibiting the most sophistication. Mark Pelham reports.
After six years in the doldrums, the Asia-Pacific region (excluding Japan) seems to be on a genuine upswing again. Combined with the global search for yield, this is generating a renewed interest in FX trading. As in the rest of the world, FX is increasingly being used as an asset class; but, unlike other regions, those using the most advanced FX products are the supposedly less sophisticated, small corporate users and retail investors.
Mladjan Dinkic was always an unusual kind of central bank governor. I once spent an hour with him in the historic offices of the Serbian National Bank, where he keenly debated everything from monetary policy to corruption to politics. Most central bank governors measure their words carefully. Mr Dinkic had no such inhibitions.
Credit derivatives may be a boom business for banks but the market as a whole has a problem: it is running out of risk takers.
At first, insurance and reinsurance companies loaded up on risks that the banks were happy to offload. Then we had the Worldcom, Enron and Argentina crises and everyone marvelled at how big busts could go through the system without any serious disruption.
Some regulators and central banks have voiced concerns about the use of ever more complex derivative tools. But there are others, such as Reserve Bank of India, that welcome the potential that derivatives have to mitigate and manage risk. Natasha de Teran reports.
Dream team: (from left) Viswas Raghavan, Eva Lindholm and Ina De
The JP Morgan team that chased its triple-A ‘trophy’ dream deal for three years explain how they won the waiting game. Geraldine Lambe reports.
Investment banking can be a dynamic, sometimes transient, business. People come, people go. Often, no sooner have bankers made a name for themselves at one firm than they are head-hunted to shine a little of their light at another.
Q2 losses have cost the electronics giant its star rating. But a breakdown of the figures have given the company reason to remain bright. Geraldine Lambe reports.
When Philips Electronics announced an 18% drop in sales and an operating loss in Q2 of E26m last month, its A- rating from Standard and Poor’s immediately began to look vulnerable. Within two days, S&P had reduced the rating to Triple B+, bringing it into line with Moody’s earlier rate cut to Baa1.
Securitising future flows or mortgage portfolios is rare in central and eastern Europe, but interest in this financing tool is growing in the region. Geraldine Lambe reports.
Securitisations of one flavour or another may be the financing plat du jour in western Europe, America and parts of Asia, but in many financial markets they remain a rare dish. While lots of bankers in New York and London feel that securitising future flows or mortgage portfolios is commonplace, maybe even old hat, few, if any, deals have been struck in regions such as Russia, the Commonwealth of Independent States (CIS) and eastern Europe.
BNP Paribas is a French dynamo with healthy cash flows and a robust presence both in Europe and in Asia. A bigger footprint on US soil may be next on the list. Philippe Blavier explains to Geraldine Lambe what BNP Paribas will and will not do to get it.
It is sometimes overlooked that BNP Paribas (BNPP) is a European powerhouse. More often, it is the Swiss houses and Deutsche Bank that spring to mind when talking about major European players, and yet according to The Banker’s Top 1000 Banks 2003, BNPP’s market capitalisation outstrips Credit Suisse Group by $13,335m and Deutsche’s by $5469m. In the face of the US giants colonising the European investment banking scene, it can also go unnoticed that BNPP is stealthily consolidating its position in the league tables, and doing so outside of what are seen as core strengths, such as domestic French business and equity derivatives.
“Today there are fewer opportunities. You have to spend more time and think of more than just creating good relations with someone in government”
Andrei Melnichenko, the precocious talent at the helm of MDM, talks to Karina Robinson about his business empire’s place in the new Russia.
Dripping in diamonds for a City banquet at the Mansion House, I received Andrei Melnichenko, a top-10 Russian billionaire, as he walked out of the lift dressed in jeans, patterned t-shirt and a Dolce & Gabbana anorak. He didn’t blink an eye; my jaw dropped to the floor. Russia is different.
Tanned, with the cropped hair of a Russian conscript and the embarrassed, laughing manner of a 16-year old, Mr Melnichenko’s MDM Group owns the country’s largest coal company, its largest producer of nitrogen and phosphate fertilisers (which is the second largest in Europe), a 33% stake in the largest industrial pipe company, as well as one of the most successful private banks.
The US decision to opt for the most sophisticated approach to measuring credit risk and operational risk for its largest banks will raise the regulatory bar for banks elsewhere. Stephen Timewell reports.
The new Basel Capital Accord (Basel II), which is due to be finalised by the end of this year, is no mere regulatory hurdle to be overcome. Due to be implemented in January 2007, it will provide one of the biggest structural shocks to the banking industry for decades, says the latest report from consultants Mercer Oliver Wyman. But, as the shape of the new accord becomes clearer, do banks across the globe fully grasp the implications?
Bankers used to roll out the red carpet for corporate CEOs who were their most important clients. Now most of their business is coming from other banks. Brian Caplen reports on the rise of the financial institutions group.
Despite good intentions, vulnerable economies remain marginalised by the West. Don McKinnon, secretary general of the Commonwealth, calls for less talk, more action.
In the Top 1000 World Banks listing in the July issue, the Tier One capital figure for Russia’s Alfa Bank appeared inaccurately as $262m and placed it at 760. The bank’s Tier One capital is $362m and places it at 635 in the world. We apologise for the error.
The International Finance Corporation (IFC), the World Bank’s private sector affiliate, ABN Amro, Holland’s biggest bank, and other international investors have joined the Chicago-based ShoreBank Corporation to launch an investment vehicle that will make equity investments in financial institutions in developing countries that lend to small businesses.
A sigh of relief was heard in the august City offices of NM Rothschild as boss Sir Evelyn de Rothschild bowed out. Baron David de Rothschild (pictured), a distant cousin and saviour of the French family bank, is taking over by merging the French and English assets.
However, Sir Evelyn’s words in an interview (“I’m not giving up; I’m not retiring or anything. Things happen in this world where people are called back”) must have struck fear into the heart of his successor, an inspired banker with a legendary charm sadly lacking in his English counterpart (see The Banker, September 2001).
To anyone who wants to know what is happening in South Korea’s banking industry, a recent deal between Shinhan Financial Group and the South Korean government could be all-revealing.
Critical to modernising a bank is installing the right technology. Small wonder then that Banca Comerciala Romana (BCR) president Nicolae Danila (left) and Oracle chairman and CEO Larry Ellison should have a lot to talk about. “BCR is an innovative and dynamic bank and is very interested in new technologies,” said Mr Danila. “We are in the process of implementing a new client-oriented strategy using modern IT systems and solutions developed by Oracle.”
Former Turkish leaders may face criminal charges on privatisation irregularities after a parliamentary committee completes an investigation into government corruption.
As investment in developing nations grinds to a halt, Stephany Griffith-Jones considers the alternatives.
Encouraging capital flows to developing countries is crucial at a time when they are faced with a dearth of investment. If a drought of capital flows to emerging markets continues, the policy agenda needs to shift sharply, both nationally and internationally, encouraging sufficient stable private flows.
Will Lehman get value for money from its acquisition of Neuberger Berman?
Investment banks have long aimed to smooth out the volatility of their business model by deriving some of their revenues from the steadier income streams of private client business. The potential of cross-selling and repacking products for clients with whom the firm has an existing and, they hope, close relationship is also compelling.
Demonstrations against limits on free speech may lead to renewed consideration of the benefits of democracy.
When Chris Patten, the last governor of Hong Kong, used to traipse over to China in pre-handover days, he was sneered at as “Fat Pang”. His calls for more democracy in Hong Kong were deemed at best irrelevant, at worst counterproductive – at least by the business community. The former colony was all about making money, said its denizens. As long as the rule of law continued to be observed under Chinese administration as it had under UK administration, and no impediments to business were introduced, Western-style democracy was unnecessary.
Sandy Weill’s successor at Citigroup, Charles Prince, has proved he can cut the deals, but he still has to convince the sceptics.
Ever since Sandy Weill announced in July that Charles Prince will replace him as chief executive of Citigroup, many have worried he will haunt his successor like the ghost of Hamlet’s father.
“Are you really going to write about FIG?” asks an earnest banker from the financial institutions group of a major European institution at his firm’s summer cocktail party. He cannot believe that the FIG department, where he has laboured all his life with little recognition or respect, is going to be the stuff of headlines and magazine covers. But FIG’s time has come. This month’s cover story explores how the new shape of the banking system means that banks are doing more work with other banks than with companies.
Basel II remains at the top of the agenda of key issues and The Banker picks out two angles: fears about where the new rules are leading and, in the technology section, the IT challenges of Basel II.
