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The banking industry is traditionally risk-averse – but when many businesses are in need of help and some economies are flatlining, are some banks being too rigid in their approach to risk? Tapan Agarwal, Risk Product Council Chair, iGTB, explains how technology can help banks manage their risks more realistically and remain open for business

Tapan Agarwal

Tapan Agarwal

Banks are traditionally cautious, and this is entirely commendable: after all, they are the custodians of their customers’ wealth. However, in the current environment there are an overwhelming number of factors reinforcing this inherent tendency, causing some of them to keep too tight a grasp on the purse strings, or to batten down the hatches entirely.

This impulse is fully understandable: for bankers, nowadays, there really never is a worry-free moment. If they are not apprehensive about clients defaulting, they are concerned they might be money-laundering, or anxious about economic or political volatility undermining their financial viability. Add to this the pressure of regulatory risk which is now constant, and constantly growing.

To top it all, the media is awash with stories calculated to raise bankers’ blood pressures further, conjuring nightmares of the ultimate risk scenarios – like the recent publication of the Panama papers. As well as putting governments of countries as far apart as Argentina, Russia and Australia under pressure to answer allegations, publication of these documents threw up uncomfortable questions about how well some banks really know their customers.

A rock and a hard place

In the eyes of the rest of the world, of course, bankers can in any case never get it right when it comes to risk: too lax and they are accused of preparing the ground for the next financial crisis, but too tight and they are lambasted for stifling the economy by refusing to release funds desperately needed by corporates to grow and thrive.

Somewhat inevitably in the current economic climate, certain types of business – particularly start-ups whose financial viability is as yet unknown, and businesses with weak financial reporting – are liable to get bogged down in a kind of vicious circle. Unattractive prospects to banks, they will be penalised by high interest rates and high collateral requirements for loans, which may in turn lead to cash flow problems precipitating default.

Simply blaming banks for this is, however, a knee-jerk reaction. Banks’ aim is to remain healthy, liquid and profitable – and they can only do that if they effectively manage their risks.

As we have seen, being rigidly risk-averse is not ideal. What banks need are ways of finding a happy medium and offering businesses the help they need, in terms of loans, accounts or payments, while still keeping a firm grip on the risks involved.

Getting low down and digital

The solution is of course better risk management, based on improved knowledge of the risks. Technology can supply all the data and tools needed – to know which risk is supportable, for how long and at what cost – and can supply such knowledge in an ongoing, constantly updated and largely automatic way. This allows bankers to gauge and monitor each type of risk more accurately, and alerts them when there is a problem, giving them the data and tools to reclassify the risk level and adjust the cost, or indeed to pull the plug.

This is simply digital banking in the risk arena; putting more and better quality data than ever available before – along with more sophisticated processing and analysis – straight into bankers’ hands. Thus equipped, they can make balanced and realistic decisions in every instance.

When it comes to country risk, for example, instead of putting a blanket ban on doing business with a country, banks may use better and enhanced due diligence and screening techniques. This would allow them to assess precisely how risky business is likely to be with a particular client at a particular time, in a particular business sector and geographical region within that country.

When it comes to payments, rather than setting payment limits for each product across the board, banks can now deploy technology that allows them to implement complex limit structures at an individual client level, offering a pay/no-pay/refer decision based on limits and balances across accounts.

Lending is a further prime example. Technology can enable banks to measure the probability of default in various circumstances, taking into account the industry, region and country of the debtor, and to monitor changes in market variables for a constantly updated risk figure: a more empirically-based, productive and positive approach than simply denying a customer a loan out of hand.

A bank wanting to decide whether or not to grant a correspondent banking account – say, to an organisation in Africa, or to open an account for a corporate dealing in dual-use goods – may well be able to do either or both of these things by improving the operations, technology and processes put in place to manage the associated risks.

Banks are long accustomed to playing it safe, but they need business opportunities just as badly as their clients do. But technology can help in instances where banks are missing opportunities not because the opportunities are inherently risky but because bankers are either unsure about the precise nature of the risk, or have not been able to measure it with sufficient precision. With the right tools and attitude, bankers will soon become accustomed to leveraging technology to fine-tune their responses to any type of risk.


Bank of England told to stop buying ‘high carbon’ bonds



Bank of England told to stop buying 'high carbon' bonds 1

By David Milliken

LONDON (Reuters) – A group of British members of parliament said on Monday that the Bank of England should stop buying bonds from businesses whose activities accelerate global warming.

Britain’s central bank doubled its holdings of corporate bonds to 20 billion pounds ($27 billion) last year as part of efforts to support the economy through the coronavirus pandemic.

The House of Commons’ Environmental Audit Committee – which looks at public bodies’ impact on global warming – said buying bonds from firms such as energy companies with high carbon emissions contravened government goals to reduce global warming.

“The Bank must begin a process of aligning its corporate bond purchasing programme with Paris Agreement goals as a matter of urgency,” the committee’s chairman, Philip Dunne, wrote in a letter to BoE Governor Andrew Bailey.

The parliament committee has no formal power over the BoE, which is operationally independent, but finance minister Rishi Sunak could potentially change the BoE’s remit to require a greater focus on environmental issues.

Britain will host the global COP26 climate summit in September and Dunne said the BoE should set a good example.

Bailey said in July that the central bank would review its corporate bond holdings once the coronavirus pandemic was over, but said the BoE was right to provide financial support to a wide range of businesses in an economic emergency.

The BoE holds sterling corporate bonds roughly in proportion to the amount issued on markets.

This means 19% of bonds it holds were issued by electricity companies, 6% by gas companies and 3% by other energy companies, while 11% were issued by industrial and transport businesses that are often energy-intensive too.

Bailey has said financial institutions such as insurers need to pay greater attention to environmental risks and said a green ‘stress test’ of their business models to take place in June.

(Reporting by David Milliken, editing by Andy Bruce)

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Crown Agents Bank names Bhairav Trivedi as CEO Designate



Crown Agents Bank names Bhairav Trivedi as CEO Designate 2

UK-regulated bank appoints fintech-leader to complete its digital transformation

London: Crown Agents Bank is pleased to announce the appointment of Bhairav Trivedi as CEO Designate. His appointment is subject to the usual regulatory confirmations in due course. Bhairav and current Group CEO Albert Maasland will jointly oversee the transition.

Bhairav joins Crown Agents Bank as it completes its comprehensive modernisation and transformation programme, becoming a digitally-enabled, globally-focused payments and FX specialist for frontier and emerging markets. He brings over 30 years’ experience in financial services, with a core focus on digital payments, cross-border remittances and fintech development. His previous roles include that of Group CEO of Network International Payment Solutions, a UAE-based payments provider for the Middle East and Africa. He has been President and Chief Operating Officer of Sigue Global Services Ltd., a global moneytransfer company, and was Managing Director, Global Head of Remittance Services at Citi’s

Bhairav Trivedi

Bhairav Trivedi

Global Transaction Services from 2008 to 2010. He also founded PayQuik (later acquired by Citi) and has worked at McKinsey and Company, Fair Isaac and Providian Bancorp. He joins us after a nine-month stint as Group CEO of Finablr, having been appointed to oversee the sale of this LSE-listed payments provider, which was successfully completed in December (with Finablr sold to Prism Advance Solutions).

 “I am delighted to be joining Crown Agents Bank at such an important moment in its development,” said Bhairav. “Albert Maasland has done a fantastic job to lead the bank towards its stated objective of becoming a leading provider of digitally-enabled FX and payments for emerging and frontier markets. Our goal moving forward, as an institution, is to continue to expand the business in the markets we serve while providing our customers with fully compliant, state of the art products to meet their needs. I am honoured to now play my part in this journey.”

Albert was appointed a non-executive director of the bank when the London-based private equity fund Helios purchased the bank in 2016. In February 2017 he took on the role of Group CEO, overseeing the bank’s transformation.

The bank has become a digitally-enabled and multi-award-winning leader in frontier and emerging market FX, payments and financial services for its unique wholesale client base. Since 2016 the bank has experienced a four-fold increase in revenues, is profitable, with bolstered governance, robust compliance, a stable credit rating and a programme for sustainability and diversity. Thanks in no small part to the 2019 Segovia acquisition the bank now provides a much wider range of digital payment and FX capabilities across a muchexpanded geographical reach: all while maintaining and deepening the bank’s core wholesale client base and focus on frontier and emerging markets.

“I feel now is a good moment to hand over,” said Albert, “especially as – in Bhairav – we have found a new CEO for the Bank with the experience and capabilities to complete the bank’s transition, all in line with Helios’s strong future-vision for transforming what was a traditional bank with deep roots in developing markets into a global, digitally-enabled specialist provider of FX and payment services to some of the fastest growing but often under-served markets around the globe.”

“The appointment of Bhairav points to both continuity – of the transformational process begun by Albert in 2017 – and towards the bank’s final destination as a UK regulated, globally oriented, fully-digital provider of payments, FX and ancillary financial services to some of the most exciting growth markets in the world,” said Jeremy Parrish, Chairman of Crown Agents Bank.  “In his ability to take the business to the next level, Bhairav has my personal and full confidence.”

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ECB stays put but warns about surge in infections



ECB stays put but warns about surge in infections 3

By Balazs Koranyi and Francesco Canepa

FRANKFURT (Reuters) – The European Central Bank warned on Thursday that a new surge in COVID-19 infections poses risks to the euro zone’s recovery and reaffirmed its pledge to keep borrowing costs low to help the economy through the pandemic.

Having extended stimulus well into next year with a massive support package in December, ECB policymakers kept policy unchanged on Thursday, keen to let governments take over the task of keeping the euro zone economy afloat until normal business activity can resume.

But they warned about a new rise in infections and the ensuing restrictions to economic activity, saying they were prepared to provide even more support to the economy if needed.

“The renewed surge in coronavirus (COVID-19) infections and the restrictive and prolonged containment measures imposed in many euro area countries are disrupting economic activity,” ECB President Christine Lagarde said in her opening statement.

Fresh lockdowns, a slow start to vaccinations across the 19 countries that use the euro, and the currency’s strength will increase headwinds for exporters, challenging the ECB’s forecasts of a robust recovery starting in the second quarter.

Lagarde saluted the start of vaccinations as “an important milestone” despite “some difficulty” and said the latest data was still in line with the ECB’s forecasts.

She conceded that the strong euro, which hit a 2-1/2 year high against the dollar earlier this month, was putting a dampener on inflation and reaffirmed that the ECB would continue to monitor the exchange rate.

The euro has dropped 1% on a trade-weighted basis since the start of the year, but is up nearly 7% over the last 12 months. Against the U.S. dollar, that number rises to over 10%.


Opening the door for more stimulus if needed, Lagarde confirmed the ECB would continue buying bonds until “it judges that the coronavirus crisis phase is over”.

Lagarde also kept a closely watched reference to “downside” risks facing the euro zone economy, which has been a reliable indicator that the ECB saw policy easing as more likely than tightening.

But she signalled those risks were less acute, in part thanks to the recent Brexit deal.

“The news about the prospects for the global economy, the agreement on future EU-UK relations and the start of vaccination campaigns is encouraging,” Lagarde said. “But the ongoing pandemic and its implications for economic and financial conditions continue to be sources of downside risk.”

Lagarde conceded that the immediate future was challenging but argued that should not impact the longer term.

“Once the impact of the pandemic fades, a recovery in demand, supported by accommodative fiscal and monetary policies, will put upward pressure on inflation over the medium term,” Lagarde said.

Benign market indicators support Lagarde’s argument. Stocks are rising, interest rates are steady and government borrowing costs are trending lower, despite some political drama in Italy.

There is also around 1 trillion euros of untapped funds in the Pandemic Emergency Purchase Programme (PEPP) to back up her pledge to keep borrowing costs at record lows.

The ECB has indicated it may not even need it to use it all.

“If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full,” Lagarde said.

Recent economic history also favours the ECB. When most of the economy reopened last summer, activity rebounded more quickly than expected, indicating that firms were more resilient than had been feared.

Uncomfortably low inflation is set to remain a thorn in the ECB’s side for years to come, however, even if surging oil demand helps put upward pressure on prices in 2021.

With Thursday’s decision, the ECB’s benchmark deposit rate remained at minus 0.5% while the overall quota for bond purchases under PEPP was maintained at 1.85 trillion euros.

(Editing by Catherine Evans)

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