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Jane wakes to the sound of Michael Bublé on her wristband communicator (a 4G broadband videostrap).
She reads the paper on her 3D glasses, which show a 24” screen of digital news feeds from her wristband communicators.
I know Barclays have some imaginative marketing ideas - for example, the excellent game 56 Sage Street, where teenagers are encouraged to play a game to earn money, rewards and responsibilities ...
... but did they really have to sponsor London Mayor, Boris Johnston?
p.s. they're actually sponsoring the London Cycle Hire Service, which launches today.
I popped down to the launch party for Metro Bank last night, as the bank opens its doors for business this morning.
Having previously blogged about the bank a bit and their challenges, to get off the ground is impressive.
The bank was under wraps on arrival ...
... but, as the Chairman and Chief Executive made their welcoming statements, the branch was unwrapped ready to launch this morning.
It turns out that it’s launching with big support from the BBC, who will be broadcasting Breakfast exclusively form the new Metro branch. That’s a coup.
Equally, it’s a coup that attendees at the launch included major influential pundits Robert Peston and Meredith Whitney.Other folks amongst the launch party cocktails were Jim McCormick (Investor) and Gene Lockhart (non-executive Director), who are both investors in the new bank with Vernon Hill, as well as Anthony Thomson (the bank's Chairman) and his dad (William), who I happened to capture in a candid picture with Metro man ...
... this bank is different.
It's so different that their launch is marked by the opening speech giving £1,000 ($1,500) to a charity (Centrepoint).
This bank is very different.
On leaving, I got my gift of the Metro mug and pen ...
Particularly intriguing is the left-handed mug, but then most Brits have been taken for mugs over the past decades so, having a bank that's different is very welcome.
So here’s to Britain’s first new major retail bank launch.
We wish you well.
Metro Bank's team of UK Executives:Here’s a shocker.
I blog all the time about social media.We all love Facebook, with 500 million people in their community.We love to twitter via tweetdecks 24*7 on our iPhones and Androids.We Google, Amazon and PayPal.The internet is pervasive.
It is so pervasive that the country is going to ban paper, with the Payments Council looking for an end-date for the cheque by 2018.
We can pay in real-time with Faster Payments every day.
Visa can clear a payment through a worldwide network in just over a second of time.
That’s via all the bank and payments infrastructures globally to clear and authenticate the payment.
All in just a second.
Yes, it’s the 21st century.So I meet my bank manager and tell him that the landline telephone number they have on my account is wrong.It’s my old office number.I didn’t even know they had it, but they need it to authorise a payment via telephone, as proof that it’s me, and I couldn’t remember the old number.After all, it’s years since I moved from that office.
I just didn't realise they had it on my account.
Or that they would try to use it to authenticate a payment.
So I tell him my new number.
Bish-bash-bosh, should be all done and dusted.
A week later, this arrives in the post:
It has a double A4 form with it for changing the address:
I ring the bank and ask them what that’s all about.
“Oh”, they said, “you want to change your telephone number.”“Yes”, I reply, “I gave it to my relationship manager.”“Oh”, they said, “well he asked us to send you the form.”“Well”, I reply, “do I have to fill it all in or can I do this online?”“Oh”, they said, “just fill in the bit about the telephone number and then follow the instructions.”The instructions are on the other A4 sheet:
Yep, this is the 21st century.
On a more serious note, the consumer magazine Which? issued news that banks don't inform customers of interest rate changes on their loans and savings.
The BBA responded by saying:
“If all customers were to be notified of all changes to their interest rates - as Which has suggested - the costs to the environment, the economy, to banks and ultimately to customers would be considerable:
Answer?
STOP SENDING OUT BLOODY PAPER ...
I interviewed good friend Brett King last week, author of Bank 2.0, and here’s a podcast that some Finanser readers might enjoy:
Download Brett King Podcast (right-click link to save file)
Brett King from Chris Skinner on Vimeo.
Note that I started by trying to bait Brett a little bit by being a technology and innovation cynic, which I’m not. In fact, most of what he says I’m in violent agreement with.For example, Brett says that banks “have to unhinge themselves from the physicality of banking” due to the behavioural shift of customers to digital media, which is what his book is all about. Right now, “most banks won’t be able to cope with that behavioural shift of customers and the way we look to interact daily in terms of money and financial transactions and products. What will happen is organisations such as Apple, PayPal, Zopa and these sorts of organisations will come in and fill the gaps. “The banks will still be there as the back-end facilitator, but the user experience will be increasingly owned by a third party.”This is going to get worse as “most customers can get access to their footprint of information about their relationship with the bank through internet banking, and get a more consolidated view of their relationship with the bank than staff within the bank themselves can get, because they have so many disparate systems within the branch and the call centres. “The single customer view, which a lot of the banks are working on at the moment, is going to be important.“But moving forward in the three to five years time span, as traditional media continues to deteriorate in terms of its ROI and ability to engage customers, the key will be behavioural analytics: understanding what customers have done before and trying to anticipate what they will do in the future to provide them with an on-target, impactful offer.”
All good stuff and well worth a listen or even a read.
That's the new refrain reverberating along the tweets of the twitterati, after Mark Webber's celebrations were marred by the unfortunate placement of the sponsor's logo:
Thanks to Tabloid Prodigy for the piccie, and Jack Schofield for pointing this one out.
I will not spend much more time on this, but was irritated by the CEBS stress tests last week and so one more quick note.
The reason CEBS, the European Commission and European Central Bank gave for not including the scenario of a sovereign default in the stress tests is that they just don’t think it’s going to happen.
“It is not possible”, they said.“Why”, we asked.“Because it is just incredibly unlikely and, even if anything did start to fragment in the fissures of finance in Greece or Spain, we have the European Financial Stability Fund (EFSF) to solve it”, they replied.Now that’s an interesting statement ... because it is also a fuddle.The EFSF is a €440 billion fund designed to cover any sovereign debt crisis in Europe in the future.Therefore, the concept of a bank being exposed to huge losses from Greece and Spain is no longer an issue.That is the logic.And it’s quite good.But it’s already been shot to pieces.Ken Wattret, a market analyst with BNP Paribas, performed a really interesting analysis of the EFSF and issued a note in July that provides a clear Q&A overview. The analysis is available through their website (large pdf, see page 10) and a public version was summarised nicely by Financial News.Here’s my summary of Ken’s research note:The EFSF is a limited liability company based in Luxembourg announced in May as a measure to “preserve financial stability in Europe”. Its CEO is Klaus Regling, a former senior German Finance Ministry official who worked on the preparations for EMU and who has also worked at the IMF.The purpose of the EFSF, according to its terms of reference, is “to collect funds and provide loans in conjunction with the IMF to cover the financing needs of Eurozone member states in difficulty, subject to strict conditionality”.According to the Framework Agreement, the EFSF will finance the provision of loans via the issuance of “bonds, notes, commercial paper, debt securities or other financing arrangements” which will be backed by unconditional and irrevocable guarantees from those member states which participate. Only the member states of the Eurozone participate in the scheme, providing guarantees up to a total of €440bn on a pro-rata basis. If a Eurozone member state seeks assistance from the EFSF, they must initially agree a Memorandum of Understanding (MoU) with the European Commission, in liaison with the IMF and the ECB. This MoU will set out the budgetary and economic policy conditions which the Eurozone member state must comply with in order to receive financial assistance.The detailed terms and conditions would then be set out in a Loan Facility Agreement which is subject to the agreement of all the guarantors (i.e. those countries in the EFSF). The EFSF will enter into force when five or more member states, comprising at least two-thirds of the total guarantees, have confirmed that they have concluded the necessary procedures under their national legislation. It will last for almost three years, with the guarantees applying to loans made on or before 30 June 2013.Now then, what Mr. Wattret did next is the most intriguing part. He produced this chart (double click to see larger image):
Column C3 is the one that interests me, for it shows that Germany and France contribute almost half of all of the ECB’s capital for this scheme, whilst the PIIGS – Portugal, Italy, Ireland, Greece and Spain – contribute almost 35% of the scheme, with Italy and Spain representing 30%.
Greece does not contribute anything to the scheme at this time for obvious reasons.So what the ECB are saying is that the $1 trillion exposure of European banks to the sovereign debt of just Greece and Spain, as discussed yesterday, can be covered by the €440 billion available in an emergency through this scheme.But let’s take this a step further.Spain gets into distress and has to leave the scheme.That removes a further 12% of the scheme’s funding.In fact, if Ken had continued his percentages and logic across columns C6 and C7, then the new figures look like this:
In other words, should Spain have issues, the burden on France and Germany increases by a further 7% of the fund – or an additional €7.5 billion to bring their number to a total of €250 billion between them.
This is what prompted me to ask at the end of the CEBS press conference: “so what you’re really saying is that you didn’t use the scenario of a sovereign default because you believe French and German citizens will be happy to bailout Spain like they did with Greece?”That didn’t go down well but it had to be asked and, no matter how unlikely it is for this to occur, it is the reality of the situation.Having spent much of the weekend absorbing the European bank stress test results, I’ve got to ask why they bothered.
OK, so it was to get bank share prices up, but the whole thing was just a typical European sham where every country does things in a different way, with the whole thing designed to cover up the real weaknesses in the European banking system.
Bearing in mind that the stress tests were called to shore up confidence in the system due to the concerns in the markets over a sovereign default in Greece or Spain, the fact that the tests left out that particular scenario is ridiculous.
In case you didn’t catch it, the tests looked at a double dip recession and a sovereign debt shock, but purely based upon debt that banks were trading, not debt that banks had in their vaults.
With sovereign debt trading on the bank's books worth about a tenth of their total exposure, that means that around $900 billion of potential sovereign debt has been ignored. How this can be ignored is beyond me.
Secondly, the tests ignore any liquidity risk issues, and just looked at market and credit risks. Why?This crisis started with liquidity risk when interbank lending dried up, and then exploded when sovereign debt became a major concern. The fact that CEBS left out these two clearly important dimensions just seems silly.But then it is purely a politically motivated exercise to try to stop the haemorrhaging of confidence in the European system.Now, I actually went to the press briefing on Friday night – a time chosen to ensure that markets could not react immediately to this sham – and saw the baying hounds of the media looking totally incredulous as the headlines were announced.“We have seven bank failures that, between them, in the most adverse scenario would need €3.5 billion of new capital.”I’m sorry, but that’s nuts.When the Americans did their stress tests, half their banks failed and they needed $75 billion of new capital. So how come, in the worst of situations, our banks would only need €3.5 billion and fewer than 10% fail?Because it’s a fix.It’s fixed because each country interpreted the stress test conditions for unemployment and house prices and other economic conditions in their own way.
It's fixed because each regulator and central bank applied the test conditions against their bank's balance sheets in dfferent ways.
And it’s fixed by leaving out the sovereign debt exposures and potential defaults on the bank’s books.Nevertheless, something useful did come out of it: data.
There's lots of data about the state of the bank's balance sheets released by CEBS that can now be analysed by the markets, rather than the fudge that the regulators applied.
Therefore, with the reservations stated above, I went through the numbers over the weekend and found an interesting result.
First, a little explanation of the numbers.The tests are based upon three scenarios.Scenario 1 is the benchmark, which is based upon the current ECB forecasts for macroeconomic developments across the European Union.Scenario 2 is then based upon a double dip recession, which sees no growth in 2010 and a 0.4% downturn in GDP in the European Union in 2011, versus 1% in 2010 and 1.7% forecasted in the benchmark.Scenario 3 studies the impact of a sovereign debt shock to the European Union on top of this recession, and is geared towards higher debt losses and impairments in the PIGS – Portugal, Ireland, Italy, Greece and Spain – than in other countries.
This does not assume a sovereign default, just corporate debt and sovereign debt on the trading books of the banks. That’s about 10% of the total exposure for the banks, should a country default.
In the CEBS tests, they looked at Tier 1 Capital Ratio – not core capital, just Tier 1 capital – and said that the ratio should not fall under 6%. Under the EU Capital Requirements Directive, as it stands uncorrected since this crisis hit, the lowest level by law is 4%. Meanwhile, the likelihood is that a minimum 8% Tier 1 Capital will be required in the future and, in this context, is a far better ratio to apply.For example, based upon the CEBS view of the world, using the combined worst case of a double dip recession and a sovereign debt shock, they find seven banks would fall under the 6% Tier 1 Capital Ratio level: five in Spain, one in Germany and one in Greece.Looking at the numbers using an 8% Tier 1 Capital Levels - a level that is rumoured to be required under revised terms for EU bank trading in the future - 39 banks would fail in the worst case scenario: one in Austria, one in Cyprus, five in Germany, three in Greece, two in Ireland, four in Italy, one in Portugal, one in Slovenia and twenty one in Spain.
Figure 1: 8% Tier 1 Capital Measures Failed by 39 Banks (double click image to enlarge)
Figure 2: Banks that Pass the 8% test (double click image to enlarge)
That would have been a far more realistic number to have announced and, based upon the fragmented application and interpretation of the tests by member states, is probably more likely to be the worst case scenario than the seven bank fails CEBS announced last Friday.
NOTE: failure does not means the banks are insolvent just undercapitalised, and so this would have been a much better way for CEBS, the ECB and the European Commission to have achieved some credibility from this exercise.
Skinner Says Stress Test Methods 'Pretty Weak' - Washington Post
Bloomberg appearance, 26th July 2010 from Chris Skinner on Vimeo.
Meanwhile, if you’re interested, here are the CEBS documents related to the stress tests:
The biggest news stories of the week include ...
Economy set for 'triple whammy', admits Bank chief - The Independent
The British economy faces a triple whammy of higher inflation, lower growth and rising unemployment, according to one of the Bank of England's most senior policy makers. Living standards over the next few years will rise only "minimally".Bond chaos forecast as Wall Street reform restricts use of credit ratings - The TelegraphWidespread chaos has been predicted in the bond markets as the world's three largest ratings agencies said their ratings could not be used in any marketing material.Santander considers £3bn UK listing, report - The TelegraphSantander is thought to be considering a flotation of its UK banking operations in London in move that could raise up to £3bn.British banks face £390bn 'funding gap' - The TelegraphUK banks face a funding crunch next year as they attempt to refinance debt amounting to double the amount they raised on average in credit boom.JP Morgan bases executives in New York in protest over UK financial regulations - The TelegraphUS bank's decision not to locate the new international business chief in London driven by pessimistic views on UK regulation.Fraud reaches record levels in UK - BBCOne of the world's biggest accountancy firms says fraud has hit a record of £1bn in the first six months of the year.I should cocoa: Trader takes big chunk of market - BBCInvestor Anthony Ward takes a large piece of the world's cocoa market after buying 240,000 tonnes of cocoa beans, reports suggest.Markets braced for turmoil after IMF and EU withdraw £17bn Hungary financing deal - The TelegraphEuropean equity and credit markets are set for a volatile day of trading after the IMF and the EU withdrew a €20bn financing deal for Hungary.Cable: Banks are ripping us off - BBCThe business secretary tells BBC Panorama that Britain's banks are not giving private customers and small businesses a fair deal.JP Morgan UK future at risk - The TelegraphBank now sees expansion in Asia not London as a priority, as the £1.5bn Canary Wharf development is under threat.
And our biggest stories of the week are ...
After the PSD and SEPA, has anything changed?Last year, we performed a major survey in anticipation of the implementation of the PSD and SEPA Direct Debits, to see how the world viewed these areas.This year, we're doing it again. Click here to take survey
You're all individuals, you're all differentWhat a funny old week it’s been. Having blogged a lot about identity in the past, the week began with two peak time TV viewing programs about identity on Monday: Who do you think you are? on the BBC and Identity on ITV. These programs are all about finding out about you and then keeping your you-ness your own.
The Financial Services Club's Program, Autumn/Winter 2010 (draft)For those who are interested, we have just put together our draft program for the London Financial Services Club Autumn/Winter Season. The dates and details are as follows ...
I had a couple of really interesting dialogues with bankers yesterday who expressed their frustrations with the UK regulatory system, the FSA, licensing and operations. Their basic issue is that the regulatory system makes it virtually impossible to launch a new bank.
Revising MiFID and RegNMS for HFT
Gawd, I hate acronymns and look at that! Three in one blog entry title!!! Anyways, for equities guys, this will grab their attention. It's all to do with trading in European and American stocks and shares using High Frequency Trading (HFT) systems, and the regulations therein with EU MiFID rules applying over here and USA RegNMS rules applying over there.
I've talked a lot about Metro Bank already, and will probably talk a lot more about them as they are the first brand new spanking retail bank to launch in Britain since Charles Dickens popped his clogs. Well, almost. But then I received their first marketing brochure the other day ...
Rethinking customer experiences and the future ATM
Just got a really interesting survey from Deloitte looking at the future of financial services based upon a survey of 200 industry execs. Most of the banks say that it is their relationship with customers that has been hit hardest by this crisis, and so their #1 focus is to rebuild relationships by focusing upon improving the customer experience.
The Financial Services Club is sponsored by:
For details of sponsorship email us.
What a funny old week it’s been. Having blogged a lot about identity in the past, the week began with two peak time TV viewing programs about identity on Monday: Who do you think you are? on the BBC and Identity on ITV.
These programs are all about finding out about you and then keeping your you-ness your own.In the case of the Beeb, celebrities trace their family history and find out what skeletons, heroes and rogues they have hiding in the cupboard.In the case of ITV's Identity, these descriptions give away the idea:
Identity is a new series following an elite police unit working on identity crime. In the first episode, a man arrested for shooting a police officer claims he has been set up by an identity thief. In episode two, the team are brought in on a murder investigation when a young British woman is killed abroad - and her passport used by another woman after her death. And in last Monday’s episode, a woman is in the witness protection scheme when her name is leaked online.
Why am I blogging about this?
Because identity is now entertainment.
Take the new exhibition being advertised all over London at the Science Museum with the theme: Who am I?
Who am I? invites you to explore the science of who you are through intriguing objects, provocative artworks and hands-on exhibits.Discover what your voice sounds like as a member of the opposite sex, morph your face to see what you’ll look like as you age, or collect DNA to catch a criminal in our brand-new interactive exhibits. Investigate some of the characteristics that make humans such a successful species, such as personality, intelligence and language. Reflect on the big questions that new techniques in science are raising, and explore how your genetics and brain combine to create your unique identity.This exhibition is on every billboard on the London train network ...
... right next to this one from Experian ...
What all of this tells us is that our uniqueness is important. Our identity is our key to unlocking the riches of the world or losing them. Our identity is so intrinsic to access and ownership, that it is our most important asset.
Our identity is us.
You are you and me is me thanks to this unique code.
In other words, we are all individuals. We are all different ...
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