The Banker Shorts: Week ending February 10, 2023

This week we launch a new regular feature – the Fintech Fortnightly – which offers a one-stop shop for interesting news from the world of fintech, examine the cross-border ambitions of Puerto Rican neobank Zenus Bank, and consider the outlook for UK banking litigation in 2023. Our European editor, Anita Hawser, looks at the Edinburgh Reforms and whether UK financial services are headed back to the casino. Comment and opinion look at bank transformation challenges, concerns around the use of AI, and the need to upgrade financial crisis-era capital requirements in the age of climate action. Our global perspective looks at the Philippines as they welcome a new president with a legacy surname. 

Trending topics

• Zenus Bank’s cross-border ambitions – Barbara Pianese | Click here to read

Mushegh Tovmasyan, founder of Puerto Rico-based Zenus Bank, lays out its growth plans amid a changing fintech landscape. Barbara Pianese asks the questions.

“We see ourselves as an essential instrument for somebody with cross-border needs, especially in emerging markets.”

• Fintech Fortnightly – February 8, 2023 – Liz Lumley | Click here to read

For this first instalment, the UK dominates the fintech news that took our notice, with the death of Tech Nation, and the birth of the CFIT, the ongoing chatter about ‘Britcoin’, an uneasy future for open finance and Lloyds Banking Group investing in the cars and payments sector. Elsewhere, Asia welcomes a new digital asset joint venture and MyBank in Europe continues to grow. 

• What is the outlook for UK banking litigation in 2023? – Jonathan Clark, Liu Hui and Elissa Foord | Click here to read

A key legislative development of 2022 was the unprecedented expansion of financial and trade sanctions against Russia following its invasion of Ukraine. With the UK sanctions regime extended further at the end of 2022, sanctions will remain a key focus for financial institutions this year. 

In its annual review, the Office of Financial Sanctions Implementation (OFSI) stated that “the OFSI is significantly enhancing its ability to ensure effective enforcement. Over the coming year, OFSI will take on more, and more complex, enforcement cases to match its increased resourcing and capabilities.”

This may signal a shift in focus from development and implementation of the widened regime in 2022, to enforcement in 2023. 

• The Edinburgh Reforms: Are UK financial services headed back to the casino? – Anita Hawser

Opinion sharers

• Editor’s Blog: Are banks lost in transformation? – Joy Macknight | Click here to read

The most frequently cited cause of unsuccessful transformation is an unclear vision. Less than half of employee respondents say they understood and believed in their organisation’s transformation vision and strategy. Much of this confusion is down to executive management’s failure in agreeing and then actively and consistently communicating a transformative vision aligned with the bank’s strategy.

• Disruptive data: banking’s AI imperative – Mustafa Domanic | Click here to read

If stale and low-quality data is inputted, it will teach AI the wrong things and can lead to negative selection bias, at the risk of the bank’s reputation. Banks, as responsible owners of AI, need to overlay ethical considerations because historical biases can affect certain customer groups when models unfairly select based on class, race and gender; or they can act like a loan shark — lending unethically.

• Climate and capital: complexity is a poor excuse for not properly insuring against risk – Lukasz Krebel | Click here to read

Climate-related risks are forward-looking (past data being a poor predictor of future impacts of the worsening climate crisis) and characterised by ‘radical uncertainty’. Therefore, traditional approaches that rely on calibrating safe levels of capital using historical data are not fit for purpose.

Globe at a glance

• Philippines outlines five-year growth plan – Kimberley Long | Click here to read

The Philippines has outlined ambitious plans for economic growth, riding on the wave of strong gross domestic product (GDP) figures from 2022. 

The country’s new administration under president Ferdinand Marcos Jr., colloquially known as Bongbong, has seen a period of economic strength since it came to power in June 2022. The country is expected to record GDP growth of 7.6% for 2022, ahead of government projections of 6.5%–7.5%: one of the highest growth figures recorded in the region. Additionally, the unemployment rate was recorded at 4.2% in November 2022, lower than pre-Covid-19 pandemic levels.