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By the Center for Financial Professionals

Ahead of the upcoming Liquidity Risk Management Congress, the research team at the Center for Financial Professionals conducted a range of one on one interviews with leading industry professionals to gain an insight as to the critical challenge areas. The results of this research will be summarized and presented to an audience of over 150 at the 2nd Annual Liquidity Risk Management Congress, taking place in NYC on October 17-18. Some summary points are outlined, but for full results visit and join us and industry professionals to review, debate and discuss the liquidity risk landscape and evolution of the risk function.

The results of the research study highlighted a diverse range of key points across the industry, with many concerned with regulatory updates and the influx of regulatory changes and how all of these requirements interlink and work under one unified platform. Below are just a snapshot of some of the topics identified and areas of focus over the coming 12 months for liquidity risk professionals across the industry.

The continued debate around NSFR remains at the forefront of professional’s minds across the industry and different institutions. With the focus having been on NSFR for quite some time now, many were concerned that the topic has been over debated and yet confusion and uncertainty remains. The questions still remain as to what the final rule will look like, and the impact this will have on companies’ individual progression towards compliance with timelines seemingly set.

“We want to know if that will continue because right now its targeted for 2018, we want to know if that will continue to stay on the same timeline… NSFR is going to impact companies that have a stronger or bigger investment portfolio, also FBO’s. Without seeing all their direct books, we just want to see how its changed the way they are funding themselves, is it going to impact current liquidity buffer at all?”

“Depending on the final rule, the impact on the industry may be different and maybe material, so if we have to comply to a rule that has been issued 6 or 3 months before the implementation date, it will be very hard to adapt the business”

Many respondents also expressed concern or interest in the potential impact of the financial choice act, and how that would impact regulation such as NSFR:

“At this point, although nothing has been finalized and the full implementation of NSFR is up in the air at a ground level, the regulators are pushing us to implement it. We have to think about what we are going to do, and how we are going to implement it. Some of the disclosures that have come up from the big banks, they are all acknowledging NSFR, they are all saying they are working towards compliance towards the proposed Jan 2018 deadline. There is a lot of acceptance within the industry, no matter what the administration are saying lot of people are working towards it and the proposed rule”

“It could give banks a way out, and would potentially eliminate the Volcker Rule here in the US. If you’re out from under Dodd Frank in the US that means you don’t have to do LCR, you don’t have to do NSFR and you don’t have to do a lot of these liquidity reports. So there is a whole bunch of business decisions someone would have to make… All of those impacts liquidity because it opens up new products… it changes the value of different kinds of securities that people hold for HQLA, because people can hold what they want, they don’t have to hold government and agency bonds- that would have a huge impact on liquidity and offloading to smaller banks and changing the market dynamics”

A key focus when considering regulation in general was around the interaction of different regulatory programs, particularly LCR and NSFR:

“We have started analysing NSFR at a very high level, but the point is the NSFR requires long term funding and LCR is a short-term ratio, the basic challenge is how do you go through the peaks and values of the 30 day LCR whilst not disrupting long term NSFR calculations? There will be times when you have a big maturity coming up which will impact your 30 day LCR, while you try and fix that you may deviate from the maximum requirement on the NSFR side, so how do you keep a good balance between the two?”

“So, it’s really the connections between the NSFR, LCR and capital, with the capital, how its released to capital and how the regulators use that. Last time it sounded like they did it in isolation, so lets say capital metrics and liquidity metrics. But then there were some kind of future trends to start looking at it together’

Another key area of focus across respondents within certain institutions is the requirements and changes under funds transfer pricing and how this impacts institutions and restructuring.

“The more sophisticated and robust FTP one has, would mean the better job they would do to control liquidity risk and to manage or control the amount of inventory or assets they have under the balance sheet that are not liquidity friendly. Depending on how sophisticated your methodology is, you could have an FTP model that is quite granular and goes down to the asset or product level, or you could have one that is not so robust and doesn’t allocate the cost of funding or the cost of liquidity to the produce level, you may not be able to incentivize behaviour in a dynamic way and you may not be able to influence traders or business in a real-time fashion if you’re not allocating your FTP charges or your liquidity charges appropriately””

“There is a regulatory requirement to do it, or at least regulatory pressure. It becomes critical in that a lot of business lines, profitability, a lot of traders businesses depend on what kind of liquidity charge you are putting on their positions. It goes into a profitability discussion for allocation profit between different segments or desks”

“You look at the liquidity positions and as you can imagine that become very political. There are lots of pressures to support whatever liquidity risk you are transferring through, but at the same time you want to make sure that you are capturing all of the liquidity risk you need, if a position on a desk requires you to hold more of a liquidity buffer on the LCR, or more of a liquid buffer in your intraday monitoring then there is a cost associated with holding that extra buffer for that particular desk. The whole perspective is that you want to understand if the ideas of these rules is to influence behaviours and understand the liquidity risk they are taking relative to the business decisions they are making, you want people making those decisions to understand that and FTP is the best way to present that to them”

Along the same lines of regulatory challenges and implementing the influx of changes and requirements, comes the ongoing discussions around intraday liquidity and understand the regulatory regime and what it means for specific institutions. Institutions need to better understand where they can benefit from these changes and responses. Some comments pertaining to the challenges of intraday liquidity include:

“The intraday liquidity is becoming a larger issue for a lot of banks, it goes into resolution planning and finding out minimum operating liquidity. That is based off the intraday flows and intraday flows between legal entities in jurisdictions, so that’s a key calculation”

“The whole idea Is that you need to understand what your intraday risks are and there are a sub set of people who have large intraday exposure than they have overnight exposure. A lot of the foreign banks that do operations and have somewhat limited operations in New York, and most of it is for the parent, they could have a much larger intraday liquidity requirement than they could have an LCR requirement. So, it becomes pretty important how you calculate that and how you support that.

As a whole, liquidity as an industry are facing continual change and regulatory pressure to not only implement all of these requirements, but to also align them all to ensure they run smoothly and interact efficiently. With areas such as NSFR still unclear as to what the future holds and what the final rule will be, institutions are forced to push ahead with implementation based on current guidance, with timelines remaining the same for now. In amongst such change comes the uncertainty of the future of regulation as many turn their focus to what the potential regulatory changes could be under the Trump administration and the impacts of the financial choice act. Many are in two minds as to their opinion on the proposed changes, and whether this is beneficial or detrimental to their work, if this were to take effect, institutions would have to turn their focus to work that has already been done and what should be considered best practice as they begin unravelling progress.

The Center for Financial Professionals have brought together a senior line up presenters and panellists to review and discuss the above challenges, plus many more areas that arose from the research efforts including; recovery and resolution planning, money market reform, LCR, pricing liquidity, EPS, stress testing, lines of defense and much more.

Join us on October 17-18 to network with peers, interact, debate and share best practices over two days of interactive discussions. All information can be found at


The Psychology Behind a Strong Security Culture in the Financial Sector



The Psychology Behind a Strong Security Culture in the Financial Sector 1

By Javvad Malik, Security Awareness Advocate at KnowBe4

Banks and financial industries are quite literally where the money is, positioning them as prominent targets for cybercriminals worldwide. Unfortunately, regardless of investments made in the latest technologies, the Achilles heel of these institutions is their employees. Often times, a human blunder is found to be a contributing factor of a security breach, if not the direct source. Indeed, in the 2020 Verizon Data Breach Investigations Report, miscellaneous errors were found vying closely with web application attacks for the top cause of breaches affecting the financial and insurance sector. A secretary may forward an email to the wrong recipient or a system administrator may misconfigure firewall settings. Perhaps, a user clicks on a malicious link. Whatever the case, the outcome is equally dire.

Having grown acutely aware of the role that people play in cybersecurity, business leaders are scrambling to establish a strong security culture within their own organisations. In fact, for many leaders across the globe, realising a strong security culture is of increasing importance, not solely for fear of a breach, but as fundamental to the overall success of their organisations – be it to create customer trust or enhance brand value. Yet, the term lacks a universal definition, and its interpretation varies depending on the individual. In one survey of 1,161 IT decision makers, 758 unique definitions were offered, falling into five distinct categories. While all important, these categories taken apart only feature one aspect of the wider notion of security culture.

With an incomplete understanding of the term, many organisations find themselves inadvertently overconfident in their actual capabilities to fend off cyberthreats. This speaks to the importance of building a single, clear and common definition from which organisations can learn from one another, benchmark their standing and construct a comprehensive security programme.

Defining Security Culture: The Seven Dimensions

In an effort to measure security culture through an objective, scientific method, the term can be broken down into seven key dimensions:

  • Attitudes: Formed over time and through experiences, attitudes are learned opinions reflecting the preferences an individual has in favour or against security protocols and issues.
  • Behaviours: The physical actions and decisions that employees make which impact the security of an organisation.
  • Cognition: The understanding, knowledge and awareness of security threats and issues.
  • Communication: Channels adopted to share relevant security-related information in a timely manner, while encouraging and supporting employees as they tackle security issues.
  • Compliance: Written security policies and the extent that employees adhere to them.
  • Norms: Unwritten rules of conduct in an organisation.
  • Responsibilities: The extent to which employees recognise their role in sustaining or endangering their company’s security.

All of these dimensions are inextricably interlinked; should one falter so too would the others.

The Bearing of Banks and Financial Institutions

Collecting data from over 120,000 employees in 1,107 organisations across 24 countries, KnowBe4’s ‘Security Culture Report 2020’ found that the banking and financial sectors were among the best performers on the security culture front, with a score of 76 out of a 100. This comes as no surprise seeing as they manage highly confidential data and have thus adopted a long tradition of risk management as well as extensive regulatory oversight.

Indeed, the security culture posture is reflected in the sector’s well-oiled communication channels. As cyberthreats constantly and rapidly evolve, it is crucial that effective communication processes are implemented. This allows employees to receive accurate and relevant information with ease; having an impact on the organisation’s ability to prevent as well as respond to a security breach. In IBM’s 2020 Cost of a Data Breach study, the average reported response time to detect a data breach is 207 days with an additional 73 days to resolve the situation. This is in comparison to the financial industry’s 177 and 56 days.

Moreover, with better communication follows better attitude – both banking and financial services scored 80 and 79 in this department, respectively. Good communication is integral to facilitating collaboration between departments and offering a reminder that security is not achieved solely within the IT department; rather, it is a team effort. It is also a means of boosting morale and inspiring greater employee engagement. As earlier mentioned, attitudes are evaluations, or learned opinions. Therefore, by keeping employees informed as well as motivated, they are more likely to view security best practices favourably, adopting them voluntarily.

Predictably, the industry ticks the box on compliance as well. The hefty fines issued by the Information Commissioner’s Office (ICO) in the past year alone, including Capital One’s $80 million penalty, probably play a part in keeping financial institutions on their toes.

Nevertheless, there continues to be room for improvement. As it stands, the overall score of 76 is within the ‘moderate’ classification, falling a long way short of the desired 90-100 range. So, what needs fixing?

Towards Achieving Excellence

There is often the misconception that banks and financial institutions are well-versed in security-related information due to their extensive exposure to the cyber domain. However, as the cognition score demonstrates, this is not the case – dawdling in the low 70s. This illustrates an urgent need for improved security awareness programmes within the sector. More importantly, employees should be trained to understand how this knowledge is applied. This can be achieved through practical exercises such as simulated phishing, for example. In addition, training should be tailored to the learning styles as well as the needs of each individual. In other words, a bank clerk would need a completely different curriculum to IT staff working on the backend of servers.

By building on cognition, financial institutions can instigate a sense of responsibility among employees as they begin to recognise the impact that their behaviour might have on the company. In cybersecurity, success is achieved when breaches are avoided. In a way, this negative result removes the incentive that typically keeps employees engaged with an outcome. Training methods need to take this into consideration.

Then there are norms and behaviours, found to have strong correlations with one another. Norms are the compass from which individuals refer to when making decisions and negotiating everyday activities. The key is recognising that norms have two facets, one social and the other personal. The former is informed by social interactions, while the latter is grounded in the individual’s values. For instance, an accountant may connect to the VPN when working outside of the office to avoid disciplinary measures, as opposed to believing it is the right thing to do. Organisations should aim to internalise norms to generate consistent adherence to best practices irrespective of any immediate external pressures. When these norms improve, behavioural changes will reform in tandem.

Building a robust security culture is no easy task. However, the unrelenting efforts of cybercriminals to infiltrate our systems obliges us to press on. While financial institutions are leading the way for other industries, much still needs to be done. Fortunately, every step counts -every improvement made in one dimension has a domino effect in others.

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Has lockdown marked the end of cash as we know it?



Has lockdown marked the end of cash as we know it? 2

By James Booth, VP of Payment Partnerships EMEA, PPRO

Since the start of the pandemic, businesses around the world have drastically changed their operations to protect employees and customers. One significant shift has been the discouragement of the use of cash in favour of digital and contactless payment methods. On the surface, moving away from cash seems like the safe, obvious thing to do to curb the spread of the virus. But, the idea of being propelled towards an innovative, digital-first, cashless society is also compelling.

Has cashless gone viral?

Recent months have forced the world online, leading to a surge in e-commerce with UK online sales seeing a rise of 168% in May and steady growth ever since. In fact, PPRO’s transaction engine, has seen online purchases across the globe increase dramatically in 2020: purchases of women’s clothing are up 311%, food and beverage by 285%, and healthcare and cosmetics by 160%.

Alongside a shift to online shopping, a recent report revealed 7.4 million in the UK are now living an almost cashless life – claiming changing payment habits has left Britons better prepared for life in lockdown. In fact, according to recent research from PPRO, 45% of UK consumers think cash will be a thing of the past in just five years. And this UK figure reflects a global trend. For example, 46% of Americans have turned to cashless payments in the wake of COVID-19. And in Italy, the volume of cashless transactions has skyrocketed by more than 80%.

More choice than ever before

Whilst the pandemic and restrictions surrounding cash have certainly accelerated the UK towards a cashless society, the proliferation of local payment methods (LPMs) in the UK, such as PayPal, Klarna and digital wallets, have also been a key driver. Today, 31% of UK consumers report they are confident using mobile wallets, such as Apple Pay. Those in Generation Z are particularly keen, with 68% expressing confidence using them[1].

As LPM usage continues to accelerate, the use of credit and debit cards are likely to decline in the coming years. Whilst older generations show an affinity with plastic, younger consumers feel less secure around its usage. 96% of Baby Boomers and Generation X confirmed they feel confident using credit/debit cards, compared to just 75% of Generation Z[2].

Does social distancing mean financial exclusion?

As we hurtle into a digital age, leaving cash in the rearview, there are ramifications of going completely cashless to consider. We must take into consideration how removing cash could disenfranchise over a quarter of our society; 26% of the global population doesn’t have a traditional bank account. Across Latin America, 38% of shoppers are unbanked, and nearly 1 in 5 online transactions are completed with cash. While in Africa and the Middle East, only 50% of consumers are banked in the traditional sense, and 12% have access to a credit card. Even here in the UK, approximately 1.3 million UK adults are classed as unbanked, exposing the large number of consumers affected by any ban on cash.

Even when shopping online – many consumers rely on cash-based payments. At the checkout page, consumers are provided with a barcode for their order. They take this barcode (either printed or on their mobile device) to a local convenience store or bank and pay in cash. At that point, the goods are shipped.

There are also older generations to consider. Following the closure of one in eight banks and cashpoints during Coronavirus, the government faced calls to act swiftly to protect access to cash, as pensioners struggled to access their savings. Despite the direction society is headed, there are a significant number of older people that still rely on cash – they have grown up using it. With an estimated two million people in the UK relying on cash for day to day spending, it is important that it does not disappear in its entirety.

Supporting the transition away from cash

Cashless protocols not only restrict access to goods and services for consumers but also limit revenue opportunity for merchants. While 2020 has provided the global economy with one great reason to reduce the acceptance of cash, the payments industry has billions of reasons to offer multiple options that cater to the needs of every kind of shopper around the world.

Whilst it seems younger generations are driving LPM adoption, it is important that older generations aren’t forgotten. If online shops fail to offer a variety of preferred payment methods, consumers will not hesitate to shop elsewhere. With 44% of consumers reporting they would stop a purchase online if their favourite payment method wasn’t available – this is something merchants need to address to attract and retain loyal customers.

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UnionPay increases online acceptance across Europe and worldwide with Online Travel Agencies



UnionPay increases online acceptance across Europe and worldwide with Online Travel Agencies 3
  • UnionPay International today announces that two of Europe’s leading travel companies, Logitravel and Destinia, have started accepting UnionPay.
  • This acceptance will enable users of the groups’ travel websites to make purchases using UnionPay payment methods.

The acceptance partnerships between the OTAs and UnionPay began in July 2020 for customers across 13 European countries and another 90 countries and regions worldwide.  The European countries covered by the agreements include the UK, Germany, France, Italy, Spain, Portugal, Norway, Denmark, Sweden, Austria, Switzerland, Hungary and Ireland.  The brands covered by these acceptances include and which together deliver more than 8.5 million worldwide travel bookings each year covering flights, hotels, holidays, car hire and other experiences.

With over 8.4 billion cards issued in 61 countries and regions worldwide, UnionPay has the world’s largest cardholder base and is the preferred payment brand for many Chinese and Asian expatriates and students based in Europe, as well as an increasing number of global customers. These cardholders are also particularly attractive to the two OTAs.  Despite the impact of Covid-19, Logitravel and Destinia expect to see the demand for travel across the European continent as well as that between Europe and Asia return to growth in the coming years. They are now placing significant focus on offering more payment options and smoother payment services to meet this demand.

The partnerships incorporate UnionPay’s ExpressPay and SecurePlus technology, which will ensure seamless transactions for the customers, contained within a single process through the relevant websites.  UnionPay’s technology also provides for the requirement to authenticate transactions under the EU regulation Payment Services Directive 2 (PSD2) ensuring that sites will be compliant as soon as the relevant countries apply the requirements.

Wei Zhihong, UnionPay International’s Market Director, said: “This is a major partnership with two of Europe’s leading online travel companies.  Logitravel and Destinia are brands which have been at the forefront of e-commerce for many years and we are very excited to be working with them to extend their reach to new audiences. This highlights the work that we have carried out in ensuring that our technology provides effective solutions for the biggest e-commerce sites both in Europe and around the world. We look forward to announcing many more similar agreements in the near future.”

Jesús Pons, Chief Financial Officer at Logitravel Group said: “UnionPay has always been on our radar, and since travel has become a crucial part of its development, Logitravel felt it important to develop this important partnership. It really was an obvious decision for Logitravel since both companies share a passion for e-commerce and emphasising the payment experience for their customers.”

Ricardo Fernández, Managing Director at Destinia Group said: “We believe that this is the beginning of a really strong relationship.  Our discussions with UnionPay in reaching this partnership have demonstrated their understanding of the needs of major online merchants and their ability to deliver the highest quality systems.  We look forward to working together on further partnership as we move forward.”

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