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Mrs. Gordana Baltovska

By Mrs. Gordana Baltovska– member of the Stopanska Banka a.d. Bitola board in charge of risk, finance and accounting.

Financial stability is crucial for an economy and its disruption may cause many side effects, as it was witnessed during the global financial crisis, which was triggered by the high rate of indebtedness and the inadequate risk management. In Macedonia, the financial stability,to a large extent depends on the banking system, while other segments such as leasing, pension funds, investment funds and insurance sector, have smaller share and modest impact. The stability of the banking system is in a relatively good level, primarily because of the caution and capitalization of banks, the low level of inter-sectoral linkagesof individual financial institutions, as well as, the absence of cross-ownership and large financial groups which minimize the risks of spilloversfrom one segment to another .

Mrs. Gordana Baltovska

Mrs. Gordana Baltovska

However, the banking system and Macedonia did not remain immune to the events on the world scene. As a result of the negative effect of crisis on the real economy, the credit risk and the uncertainty of recovering of the investments increased, and also the credit exposure in riskier categories and the number of non-performing loans registered growth. In order to improve the resilience of the financial system and create conditions for overcoming the weaknesses, the National Bank of The Republic of Macedonia, continually innovated the regulatory reforms, whose implementation meant taking a deeper approach to risk management.

Risk management involves the activities such as: identification of risk exposure for all categories of assets with estimate of their potential losses, risk assessment including measurement and analysis of losses in the past in order to estimate the variables that will affect the future,  control of the risk in terms of reducing or eliminating the risks of losses using all types of collaterals, financing risks by providing reservations, insurance, development of administrative techniques and use of expert knowledge and practices, and finally, monitoring of the risks.

Risk management in the banking sector in Macedonia is in accordance with regulatory requirements and the risk profile of banks, and each bank is obliged by its internal policies, to cover all material risks that the bank is exposed to,while performing certain or all types of financial activities , thereby achieving the suitable indicators such as the rate of capital adequacy, liquidity indicators, indicators for the credit risk, interest rate risk, foreign exchange risk, operational and other risks on a consolidated basis.

So far, the progress in the approach to risks in the banking system of The Republic of Macedonia can be seen from the following table.

Table: Indicators of financial stability of the banking system in the Republic of Macedonia

Indicators (in %)20132014
Liquid assets to total assets31,229,8
Rate of capital adequacy16,815,7
The net open foreign exchange position / own funds15,617,5
Non-performing loans / gross loans10,910,8

The indicators show that the liquidity of banks is satisfactory, the capitalization is high and the rate of capital adequacy is twice higher than the legally prescribed one. The exchange rate’s risk is controlled by maintaining the net open foreign currency position at the lowest level, while non-performing loans to gross loans are slightly increased.

Considering the importance of the process of risk management for long-term stability and profitability of the Bank, as well as the expected further changes in the regulation of the Central Bank in accordance with changes in the Basel Capital Accord – Basel 3, Stopanska banka a.d. Bitola managed to significantly improve the performance in the area of risk management during the year 2014.

Thus, credit risk indicators point to quantitative and qualitative strengthening of the credit exposure. The growth rate of 16.76% of total credit exposure in 2014 was followed by simultaneous improvement of the qualitative structure so that exposure to clients classified in A risk category increased from 81.56% in 2013 to 84.89% in 2014. Credit exposure to clients classified in B risk category also registered an annual growth from 1.10% to 2.44%, while exposure to clients in C, D and E risk category decreased from 17.34% in 2013 to 12.67% in 2014. In parallel with the positive trend in these indicators, impairment provisions as a percentage of total credit exposure decreased from 16.32% to 12.22%.

As a complementary feature of the credit risk management, Stopanska banka a.d. Bitola paid proper attention to non-performing loans management and sale of foreclosed property. The Bank’s activities in this area have contributed to the reduction of the share of non-performing loans in the gross loan portfolio of non-financial entities from 24.65% in 2013 to 17.43% in 2014, and recovery of previously written-off interest receivables in the amount of 4.00 million euros. The share of foreclosed properties in total assets was reduced by 4.92 percentage points annually and were realized capital gains in the amount of 59.51 million euros. The improvement in the stated indicators had a positive reflectionon the financial results of the Bank.

As to liquidity risk as one of the risks to which banks are exposed, during the 2014 Stopanska banka a.d. Bitola continued to successfully manage the assets and liabilities while ensuring timely and regular settlement of the Bank’s liabilities i.e. optimal liquidity. In that context, the liquidity ratio up to 30 days, as the ratio between assets and liabilities falling due in the next 30 days was 2.77. Liquidity ratio up to 180 days, as an indicator of the coverage of liabilities falling due within the next 180 days with assets maturing within the same period, was 1.69. The share of liquid assets in total assets during the whole of 2014 was higher than 30% so that as of 31.12.2014 this indicator amounted 37.57%.Such indicators have a large contribution in providing long-term financial stability and further strengthening of the customers’ confidence as a precondition for improving the market position under the Bank’s strategic objectives.

Besides credit and liquidity risk management, the Bank placed an appropriate emphasis on management of other risks (market, operational, strategic, reputational risk) while maintaining the appropriate capital levelsin accordancewith the regulation. During 2013 and 2014, currency risk-weighted assetsamounted less than 2.00% of the total risk-weighted assets, while the share of operational risk-weighted assets amounted about 8.00% in two consecutive years. The rest of the risk-weighted assets is attributed to credit risk.

Speaking of risk management, maintenance of proper capital adequacy ratio is crucial for the Bank. As of 31.12.2014, this indicator amounted up to 20.20% which is significantly higher than the legally prescribed minimum of 8%. The capital adequacy ratio was also higher than 20% and amounted up to 20.77%, as of 31.12.2013. The indicator for the coverage of risk-weighted assets with core capital (Tier 1 Ratio) at the end of 2014 stood at 19.71%, which indicates the high quality of the structure of the Bank’s own funds in which the core capital accounts for 97.57%.

Such realization will facilitate the Bank’s transition towards the Basel 3 capital requirements that predict further strengthening the capital framework especially the core capital, aiming to increase the resilience of the banking sector and creating conditions for achieving sustainable economic growth in the short and long term. In this context, the Basel 3 requires an increase in the minimum rate of core capital from 4% to 6%, and introduces two additional amounts of capital:capital conservation buffer (min 2,5% of the risk-weighted assets) and countercyclical buffer (0 to 2.5% of therisk-weighted assets). Although Basel 3 does not predict changes in the minimum capital adequacy ratio of 8%, however with the introduction of the two additional capital buffers the real capital adequacy ratio will increase by at least 2.5 percentage points.

Considering the Basel 3 innovations in the area of capital base strengthening, the Central Bank’s activities for migration from Basel 2 to Basel 3, as well as the current performance of Stopanska banka a.d. Bitola in this segment, we can expected relatively easy and quick adjustment of the Bank to the new bank capital requirements.

To sum up, the risk management data for Stopanska banka a.d. Bitola represent an image of healthy and stable bank, which successfully balances between optimizing the risks on one hand and profitable operation on the other hand, while acting in accordance with existing regulation. In the future, the Bank’s efforts will be directed towards improving the risk management processes in accordance with the expected changes in regulation and internal evaluations, aiming to maintain financial stability as a prerequisite for profitable operations in the long term.


How new trends are creating the perfect recipe for rapid digital transformation throughout the world’s oldest institutions

How new trends are creating the perfect recipe for rapid digital transformation throughout the world's oldest institutions 1

By Wayne Johnson, CEO, Encompass

Digital banking has drastically changed the landscape of financial transactions over the last few years. Technologies used to be limited when it came to banking, however, now they cover every step of banking or investment services, from behind the scenes due diligence checks to customer facing channels. Embracing this change through emerging technologies is the future for the financial industry.

In recent years, financial technology (FinTech) has developed to facilitate online payments, instant banking, trading, lending, and more.

This new era of digital transformation has been driven by technologies such as artificial intelligence (AI), APIs, blockchain, process automation, and internet of things (IoT) technologies, which have provided vital upgrades to the outdated legacy IT systems institutions historically relied on. The aforementioned technologies streamline and enhance processes, consequently generating a much more reliable and pleasant customer experience. These technological advancements have transformed modern banking operations, changing how the banking industry operates today.

Every new advancement in technology in the finance sector, like expanding a financial service offering to business customers, brings with it new risks and compliance obligations, but the latest trends are creating the perfect recipe for rapid digital transformation throughout the world’s oldest institutions.

The acceptance of new-age technologies

Technology is already driving massive changes in the banking landscape as we know it, and it will be an influential contributor to shaping the industry of the future.

Focus on improving customer experience

One of the areas that banks are increasingly trying to improve through digital banking is customer

experience. Customer expectations for online services are constantly being influenced by the experience provided by big tech companies like Google, Amazon, Apple, and Facebook. With their influence, everyone is looking for a similar experience from their own providers. While digitally savvy Millennials are mainly responsible for the rise in expectations across the board, the wide-spread use of digital technologies in most industries has meant that it is more important than ever for banks to be on top of their delivery at all times.

Wayne Johnson

Wayne Johnson

Interactive banking channels

There has been a huge decline in branch visits in recent years, with some re-evaluating their very role, and an increasing shift from just providing transactional services to allowing for a practical banking experience. This was initially done by moving banks to key locations in town centres, investing in video chat services and offering self-service points – all of which has only been possible through the use of digital technologies. Financial institutions have realised that customers, with their busy and demanding lifestyles, like to have a choice and rely on a full range of channels, online access and 24/7 availability.

The rise of open banking

The increased popularity of open banking and rise in API usage is set to drastically change the industry with the flexibility offered by APIs allowing financial institutions and FinTech’s to put innovation at the heart of their service, resulting in improved customer service and enhanced convenience.

The importance of organisational structure transformation

In order to achieve true digital transformation, financial services institutions need to change their organisation functions from the inside out. To reap the greatest rewards, they must promote a “digital first” strategy internally. Only then will they see a positive change and truly release the benefits of digital transformation and the solutions available today.

The  market is constantly evolving , and adapting, and whilst the survival of traditional institutions is not under immediate threat, key players are going to have to modernise their processes and ways of working to keep up with developing requirements and customer needs.

Financial institutions are now starting to recognise the importance of digitalisation, which many other businesses realised was a priority years ago. This is demonstrated by the emerging trends mentioned, which indicate a rapid altering of the operating environment, from increased customer expectations and improved processes, back-end technology and newer operating models to organisational priorities shifting with the times. Digital transformation can no longer be ignored, and financial services organisations will have to embrace it if they want to remain competitive


This is a Sponsored Feature.

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Standard Chartered Bank partners with Microsoft to become a cloud-first bank

Standard Chartered Bank partners with Microsoft to become a cloud-first bank 2

Standard Chartered Bank and Microsoft Corp. on Tuesday announced a three-year strategic partnership to accelerate the bank’s digital transformation through a cloud-first strategy. This partnership marks a significant milestone for Standard Chartered in making its vision for virtual banking, next-generation payments, open banking and banking-as-a-service a reality. Leveraging Azure as a preferred cloud platform, the companies will also co-innovate in open banking and real-time payments to help the bank unlock new banking experiences for clients.

Standard Chartered Bank partners with Microsoft to become a cloud-first bank 3

Embarking on a cloud-first strategy

As part of its digital transformation, Standard Chartered will adopt a multicloud approach, where significant applications, including its core banking and trading systems and new digital ventures such as virtual banking and banking as-a-service, will be cloud-based by 2025, subject to regulatory approvals. The bank will also adopt a cloud-first principle for all new software developments and major enhancements.

As technology reshapes the banking industry, Standard Chartered recognizes that a cloud-first strategy is critical to the bank’s ambition to make banking simpler, faster and more convenient. By being digital-first, the bank will be able to meet the demand for seamless banking virtually anytime, anywhere, and make banking more accessible to people across its network.

Michael Gorriz, Group Chief Information Officer of Standard Chartered, said, “Cloud is a cornerstone of Standard Chartered’s strategy to meet the present and future banking needs of our clients. Cloud providers have invested massively in the reliability and automation of infrastructure and platforms. Using cloud services improves our ability to be agile and innovative, while increasing our operational efficiency and resilience. As disruption in the financial industry continues, we can focus on client benefits by deploying our solutions quicker and allowing for faster integration of new business models and partners. To realize our digital ambitions, Standard Chartered has chosen Microsoft as a strategic partner and this partnership marks a major milestone for the bank in adopting a cloud-first approach.”

Bhupendra Warathe, Chief Technology Officer, Cloud Transformation at Standard Chartered, added that “The pandemic has shone a spotlight on the need for businesses and banks to be resilient from a risk mitigation, cost and security perspective. With the increasing trend of an always-on digital economy, commercial and consumer clients are looking for applications and services that empower them to do online banking from anywhere, flexibly and efficiently. The speed and scale of continuous innovation offered by Azure allows us to innovate with the latest AI services to meet evolving client needs. We can pilot new apps in one market and scale them rapidly across others. This is especially important for a bank with a footprint as broad and diverse as ours.”

Standard Chartered will adopt Microsoft Azure as a preferred cloud platform to meet the bank’s need for resilient data centers and cloud services and addressing customers’ security, privacy and compliance requirements across the bank’s global footprint.

The first set of capabilities to move to Microsoft Azure will be Standard Chartered’s trade finance systems, allowing for seamless cross-border trade for the bank’s corporate and institutional clients.

The partnership will also advance the bank’s digital workplace transformation with Microsoft 365 and Microsoft Teams providing modern productivity and collaboration tools to Standard Chartered’s 84,000 employees across its 60 markets.

Co-innovating the future of banking

Standard Chartered will also use Microsoft Azure artificial intelligence (AI) and data analytics capabilities to enhance and automate banking processes as well as deliver hyper personalization of its client products and experiences. Co-innovation in open banking application programming interface (API) and Internet-of-Things-based, real-time payments will also help the bank unlock new banking experiences for clients.

Bill Borden, Corporate Vice President of Worldwide Financial Services at Microsoft said, “Cloud computing is an enabler for financial institutions to modernize their infrastructure and systems, to gain the agility they need to respond to competitive pressures, regulatory environments and customer demand. We are committed to helping Standard Chartered Bank in its ongoing digital transformation journey as it strives to address evolving customer needs and build the next generation of banking experiences.”

Addressing the social needs of communities in the emerging markets

Standard Chartered strives to understand the evolving needs of its communities and be an enabler for change. As a part of the strategic partnership, the bank and Microsoft will explore sustainable finance and business initiatives to expand sustainability across the industry.

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What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card

What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card 4

By James Herbert, CEO & founder, Hastee

Let’s begin by looking at how our brains are wired. Think about the hunter-gatherer mindset: when we expend effort, we expect an immediate reward.

It’s therefore no surprise that over time, different areas in society have adapted to our nature as humans. Almost everything we want, we can get on-demand. Whether it’s instantly streaming movies on Netflix, online shopping from Amazon, or fast-food delivery from the likes of Just Eat. And, because of such technological innovations our expectations have accelerated when it comes to the pace of delivery. This isn’t individual to us as consumers in our day-to-day lives, it’s also reflected in the workplace. We ultimately want work to work for us.

Part of this of course comes down to accessing wages. Workers should be able to access a portion of their earned wages whenever they need it, in advance of the monthly pay cycle – whether to help during challenging times or in day-to-day life. We solved this solutionBut, to take this up a level, ready for the future, we introduced the world’s first Earnings on Demand contactless debit card, powered by Visa – giving users access to their accrued earnings in real-time, with the card’s balance dynamically increasing every day they work.

So what is the card, and how will it change how we access earnings in the future?

The basis is very much the concept of Earnings on Demand. At university I set up a company called Brightsparks to connect students with work opportunities so they could earn money. Yet I noticed a common trend. With students often having to wait for the monthly pay cycle to get their earnings, many were having to turn down work simply because they couldn’t afford the travel day-by-day. It became very apparent that not having £20 today could stop them earning £200 tomorrow.

It struck me that payday itself doesn’t have to be a rigid construct that people have to wait for. But this isn’t specific to students. Liquidity is a widespread issue faced by people in all industries and of all ages, and according to our most recent Workplace Wellbeing Study, 82 per cent of people turn to high-cost methods of financing to tide them over when needed.

The Hastee Card effectively makes wages directly accessible: it simply lets people spend a portion of  what they’ve already earned.

Some people might wonder why they’d want to step away from the standard monthly pay cycle. But consider this: the monthly payroll (via a cheque) only came about in the 1960s as an Act of Parliament. Before this, most people were paid weekly in cash. The first major firm that shifted to monthly payments did it for cost-cutting. It worked for the employer more than the employee. In fact, that firm’s employees had rejected their employer’s change of payment type when it was first trialled a decade before (look up ‘Pye Radio’). So the way that workers and organisations interact around pay is not set in stone – it changes as technology and society shifts.

The way we perceive and use money keeps evolving. Apple Pay, Monzo, and PayPal have completely changed the way payments can happen, yet payroll still remains largely unchanged. It’s only a matter of time before disruption becomes more widespread.

Looking at it from the employer side, it has its benefits too. Before the climate changed, businesses were accommodating enhanced workplace benefits such as no-desk policies, flexible or remote working. In all cases by businesses offering more, they tend to see a more engaged, happier and less financially stressed workforce – leading to increased productivity.

Earnings on Demand is ultimately a perk that presents an ethical alternative to high-cost credit options such as payday loans, credit cards and overdrafts. And existing solutions offer zero impact on payroll processes, zero impact on the cashflow of the business and are designed for quick, simple integration.

The Hastee Card is an evolution of this all – preparing for the future. It builds upon and enhances the user experience by reducing friction and offering immediate spending power as well as a path to greater benefits such as cashback and rewards in the not-to-distant future.

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