- Industry milestone: First new UK bank with all funds held at the Bank of England
- Bank for banks: Designed specifically to create a new level of open competition for financial services providers, FCA-regulated businesses and Fintechs
- Unique: Only bank ever to join all UK payment schemes at once, supporting regulators to improve access to payment systems
- Technology innovation: First UK clearing bank with purpose-built, integrated core banking technology system, and API developed in accordance with ISO 20022 to support easier connection
- THE BENEFIT: Encourages market competition, making transaction banking faster and more cost effective than ever before with far-reaching consequences for financial services businesses, their customers and the wider economy
ClearBank today announces at a press conference attended by Economic Secretary to the Treasury, Simon Kirby, that it is the first clearing bank to enter the UK market in more than 250 years.
ClearBank is regulated and authorised and is on track to open its doors in Autumn 2017 to financial services providers, FCA-regulated businesses and Fintechs that require access to UK payment systems and core banking technology to support current account capabilities.
Free from the constraints of legacy technology, built on a combination of public and private cloud infrastructure, ClearBank delivers open access to payment, current account and transactional clearing services. Financial services organisations, from banks and building societies through to new challenger banks and Fintechs will be able to process payments and offer new competitive transactional banking services more cost effectively, efficiently and quickly than ever before possible.
Principal clearing banks move money between different individuals and organisations via UK payment systems such as Bacs, CHAPS and Faster Payments. They are often the only banks providing agency banking services that have full and direct access to all of the UK payments infrastructure. The majority of banks and financial services providers must use agency banking services from a clearing bank to process payments or offer current account and sort code based services.
Before ClearBank, there were four principal clearing banks: Barclays, HSBC, Lloyds and Royal Bank of Scotland. ClearBank is the fifth UK clearing bank and the only one that does not offer services direct to the consumer. As a result, it offers a truly neutral and independent banking service to the financial services market and does not compete with its own customers.
ClearBank was founded by Nick Ogden, fintech entrepreneur and founder of WorldPay, who is Executive Chairman at ClearBank. Former CFO of RBS Ulster Bank and CFO of Royal Bank of Canada Europe and Asia, Charles McManus, is ClearBank CEO and leads an executive team of high-profile industry figures including: Chief Financial Officer, Marc Jenkins; Chief Risk Officer, Steve Barry; Chief Technology Officer, Andrew Smith; and Chief Governance Officer, Philip House.
Nick Ogden, ClearBank Executive Chairman, said: “There are thousands of new fintech startups and challenger banks improving choice, but the industry will never truly move forward while it’s constrained by the challenges of legacy operational structures. ClearBank was built specifically to create competition and aims to change the market dynamics radically. Figures from the Cruickshank Report indicate that, with the improved efficiency delivered by ClearBank’s built-for-purpose technology, between £2bn and £3bn could be saved from the annual costs that are paid for transactional banking in the UK.
“This represents a substantial boost to the UK economy delivering better operational processes without any impact on the way that commerce is operated in the country.
“We are delighted to share the result of more than three years of regulatory, operational and technology efforts, bringing true competition and a new level of transparency to UK banking. That is the ClearBank difference.”
ClearBank CEO Charles McManus, said: “There are two things that make ClearBank unique. Firstly, ClearBank is the first UK clearing bank to offer services that intentionally complement its customers’ market activities, driving choice and competition in the wider market. From our own customers through to the consumers they serve, we believe the benefits ClearBank offers will help develop greater choice, and more inclusive service offerings.
“Secondly, we’ve built ClearBank on cloud technologies from the ground up, meaning that our customers can access faster, more efficient and more cost-effective solutions and payment processing.
“It’s our mission to bring open competition, transparency and efficiency to the agency banking services market. The right technology and regulatory environment and demand for open competitive pressure now exist to support us in achieving that aim.”
Economic Secretary to the Treasury, Simon Kirby MP, said: “I am clear that UK financial services should be the most competitive and innovative in the world, which is why we are creating the right environment for new banks to enter the market.
“That is why I am so pleased to see ClearBank launch today – it will play an important role helping challenger banks access the services they need to do business, so they can compete effectively with the big players and deliver the benefits of greater choice and value for consumers and businesses.”
ClearBank’s leading edge technology platform has been built on a combination of public and private cloud infrastructure. It is specifically designed to handle core banking, clearing and settlement services, in a ground breaking partnership with Microsoft and other technology providers. Built from the ground up on Microsoft’s Azure cloud platform, and benefiting from Microsoft’s cyber security shields, ClearBank has been developed to meet the needs of the UK banking market now and in the future.
Cindy Rose, Chief Executive of Microsoft UK, said: “By embracing Microsoft’s cloud services, ClearBank is rewriting the rules on how financial services can be delivered in the UK. Through the power of Microsoft Azure, ClearBank has been able to create a robust banking infrastructure that is able to overcome substantial barriers to entry in a fraction of the time it has traditionally taken, and at minimal cost.
“Furthermore, by utilising Microsoft’s UK data centres, not only can ClearBank be confident that it has access to cloud services that offer world-class reliability and performance, it can also be assured that its data residency and regulatory requirements are fulfilled.”
ClearBank secured an investment of £25M from PPF Group and CFFI Ventures in addition to investments from the founding management team. All members of the ClearBank team participate in a share programme.
The ClearBank graduate programme, which screened more than 3,000 applications when it was launched late last year, has already started with six graduates in house and offers a two-year Professional Retail Banking Certification.
Former BOJ executive calls for ‘genuine’ review of central bank stimulus
By Leika Kihara and Takahiko Wada
TOKYO (Reuters) – The Bank of Japan must abandon the view it can influence public perceptions with monetary policy and conduct a “genuine” review that takes a harder look at the rising cost of prolonged easing, said former central bank deputy governor Hirohide Yamaguchi.
The BOJ will conduct a review next month to make its monetary policy tools more sustainable, nodding to criticism its policy is crushing bond yields, drying up market liquidity and distorting stock prices.
But Yamaguchi, who was deputy governor when the BOJ first began buying exchange-traded funds (ETF) in 2010, said the costs of the bank’s stimulus programme have become too large to mitigate in the review in March.
“It’s unlikely the BOJ can come up with an outcome that has a substantial impact on the economy and markets,” he told Reuters in an interview on Monday.
“The review will probably be just a show of gesture that it’s doing ‘something’ to address the cost,” said Yamaguchi, who retains strong influence on incumbent policymakers.
Under its yield curve control (YCC) framework, the BOJ guides short-term interest rates towards -0.1% and 10-year bond yields to around 0%. It also buys risky assets such as ETFs to fire up inflation.
Ideas floated in the BOJ, which could be discussed at the review, include allowing the 10-year bond yield to deviate more from its 0% target, and making its ETF buying nimble so it can slow buying when stocks are booming.
Tolerating bigger yield swings, however, could undermine the feasibility of YCC by highlighting the limits of the BOJ’s control over the yield curve, Yamaguchi said.
“It’s hard to control long-term interest rates within a tight range for a long period of time,” he said, calling for an overhaul of YCC – something the BOJ rules out as an option.
Yamaguchi also called for halting the BOJ’s ETF purchases, as the bank could “end up using monetary policy to prop up stock prices” if the programme continues.
“At the very least, the BOJ must end as soon as it can the current situation where its ETF holdings keep accumulating.”
When the BOJ began buying ETFs in 2010, it used a pool of funds to ensure purchases remain at a manageable level, said Yamaguchi, who was involved in the decision.
That cautious approach was replaced by Governor Haruhiko Kuroda, Yamaguchi said, after he took over as head of the BOJ in 2013. Kuroda ramped up purchases dramatically with his “bazooka” stimulus deployed that year under a pledge to deploy all available means in a single blow. Eight years on, inflation remains distant from the BOJ’s 2% target.
“It’s impossible for the BOJ to guide public perceptions at its will,” Yamaguchi said. “It’s time now for the BOJ to conduct a ‘genuine’ policy review and use the findings to modify its policy framework.”
(Reporting by Leika Kihara and Takahiko Wada; Editing by Ana Nicolaci da Costa)
Metro Bank expects defaults to rise as COVID-19 support measures fade out
(Reuters) – Metro Bank posted a much bigger annual loss on Wednesday and said it expects defaults to rise through the year in line with its provisions as government support measures set in place due to the COVID-19 crisis are wound down.
The mid-sized company, part of a breed of challenger banks set up to take on the dominance of bigger and more conventional lenders in Britain, said underlying pretax loss was 271.8 million pounds ($385.58 million) for the 12 months ended Dec. 31 compared to 11.7 million pounds a year earlier.
“The pandemic has clearly impacted performance, leading to significant expected credit losses, but our transformation strategy is firmly on track and we have accelerated initiatives to shift our asset mix, bringing higher yield and improving net interest margin, as evidenced in the second half,” Chief Executive Officer Daniel Frumkin said.
Metro, which relieved some of the pressure on its capital levels last year by selling one of its portfolios to NatWest, estimated impact from the coronavirus pandemic to be 124 million pounds.
The bank, whose net interest margin fell to 1.22% from 1.51% in a low interest rate environment, said provisions to cover loan losses amounted to 126.7 million pounds at 2020-end, compared with 11.7 million pounds a year earlier.
The company said the increase in expected credit losses was driven by deteriorating macro-economic scenarios that have increased the probability of defaults.
($1 = 0.7049 pounds)
(Reporting by Muvija M in Bengaluru; Editing by Vinay Dwivedi)
As We Get Back to the Future of Work, Banks Must Embrace WhatsApp
By Shaun Hurst, Technical Director, Smarsh
If you had told me a year ago that the world’s major financial services companies would all be operating almost entirely with a remote workforce, I would have broken out in a cold sweat.
Straight away my mind would have jumped to the severity of the compliance issues that such a move would involve. Then I’d worry about the magnitude of the investment that banks would need to make in innovative collaboration tools – a move they had put off for so long. For nights on end, I would have tossed and turned thinking about the creaking legacy archives so many banks still held onto, already struggling to keep pace with the exponential rise in data flowing in and out of modern businesses every nano-second.
What a difference a year makes.
Coming in to 2021, banks are light years ahead of where they were at the turn of the decade. The vast majority have implemented the technology they need to enable their workforce to compliantly use the collaboration tools. Most have either moved their archives to the public cloud or have seriously sped up their plans to do so. And the ‘Future of Work’ is no longer a buzz word. It is now a reality. We will never go back to a situation where employees are only able to work in a physical office.
But there is work still to be done. There is a valuable lesson that banks need to learn from 2020: embrace technology, do not fear it. Fear of compliance issues was one of the main reasons that so many had put off fully adopting the collaboration tools that are now the lifeblood of their businesses. What they need to do now is expand their newfound wisdom and embrace all communications platforms that enable employees to stay connected and work effectively, wherever they are.
WhatsApp and Financial Services Regulations
This is most evident with WhatsApp. Many people working in the financial services industry already know that the end-to-end encryption messaging tool is ubiquitous and widely used to keep in touch with colleagues, clients, and contacts. But while company policies largely prohibit the use of WhatsApp, financial regulators have stayed away from an outright ban. Instead, they have issued guidance requiring companies to ensure that the instant messaging tools used by their employees are supervised and in compliance with already existing record-keeping rules such as MiFID II.
In 2019, the FCA stated that firms need to “take reasonable steps to prevent an employee or contractor from making, sending, or receiving relevant telephone conversations and electronic communications on privately-owned equipment which the firm is unable to record or copy.” Similarly, the SEC issued guidance in late 2018 reminding companies of their responsibility to monitor electronic messaging and encouraged them to “stay abreast of evolving technology.”
Ensuring that these guidelines are adhered to has been complicated by the fact that many companies have brought in outright or partial bans on unmonitored instant messaging tools, while also adopting bring-your-own-device (BYOD) policies. Largely implemented to cut costs, these BYOD policies mean businesses are now less able to police which communications apps and platforms their employees are using. This means that they have now lost the oversight they need to ensure that employees are adhering to the bans.
Despite a mountain of anecdotal and judicial evidence that employees in the financial services industry have turned to WhatsApp even more since the outbreak of the pandemic, banks are still failing to adopt the compliance tools they need to ensure their employees are acting legally.
Legal Issues with WhatsApp
In 2020, there were several legal and disciplinary cases that centred upon the misuse of WhatsApp within banks.
In April, Bloomberg reported that a dozen traders at one investment bank were punished for using WhatsApp at work – one was fired and the others had their bonuses cut. In October, two senior executives working in the commodity sector quit after accusations that they had broken their company’s rules on instant messaging platforms.
While one banker was acquitted over a legal case with the FCA in which he was accused of purposefully obstructing an investigation by deleting WhatsApp messages, the UK regulator stated it would ‘take action whenever evidence we need is tampered with or destroyed.’ A clear message to banks that they will be expected to provide accurate accounts of any messages sent by their employees over WhatsApp.
The Solution: Capturing and Supervising WhatsApp Communications
The compliance challenges of the increased use of WhatsApp have been widely played out in the financial media in recent years, with multiple firms being handed significant fines due to their communications-monitoring oversights. This doesn’t have to be the case.
As I said before: We will never go back to a situation where employees are only able to work in a physical office. Companies working in regulated industries, and especially financial services companies, must embrace the tools that they know are in wide use by their employees.
Very few banks have introduced the monitoring solutions they would need to adequately manage the use of WhatsApp or other encrypted messaging tools by its employees. But encrypted messaging tools like WhatsApp and WeChat can be captured, monitored, and supervised. Firms simply need to invest in the technology in order to do so.
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