The Financial Services Club's Blog

Risk is a many splendored thing

I was asked to give a pre-dinner speech by SAS for a group of Chief Risk Officers (CRO’s) in Amsterdam recently. Here’s the speech.

Good evening ladies and gentlemen. 

I wasn’t sure how to start this evening, and decided to begin with the collective noun for a group of CRO’s.  You are collectively known as a murder.

Now I hope you won’t murder me for telling you that as a murder of CRO’s you are a collective failure. 

Oh dear, that’s not a good start, is it? 

How the Russian mafia use the banking system (especially Britain's)

I was wondering what to blog about today, as it’s grey and cold and wet and miserable and … then I realised, I should blog about Russia.

Here in London, we’ve gradually seen a takeover of some of our key financial and national assets by billionaires from the former Soviet Union states.

Some of these are glamorous, such as Roman Abramovich with his Chelsea dreams and billion-dollar yacht, and some are a little bit more odorous, such as Vladimir Antonov.

Jesus Christ Superstar, and the Occupy Movement

I recently went to see the latest revival of Andrew Lloyd-Weber’s Jesus Christ, Superstar.  

The new version of the musical toured the UK’s largest Arenas, with an all-star cast and a lengthy TV audition show to select the man to play JC.

Having seen the musical a few times already – we love all things Lloyd-Weber – I expected it to be the same, familiar story, but was surprised to find the show had been updated and changed considerably with Jesus now being an activist in the Occupy Movement sitting outside Saint Paul’s.

Hurricane Sandy: a good time to create some good PR

It surprises me that banks rarely get lauded and applauded, as it is far easier to critique and blast. 

A good example is the post Hurricane Sandy fallout, where banks in the USA are doing everything they can to support hard hit Americans.

I didn’t see much about this in the news generally but, whilst following a few tweets, discovered that most US banks are waiving fees and doing the right thing.

A few examples .

Has your customer sold their soul?

Every time I click on something online, I get this funny thing about agreeing terms and conditions.

The popup window appears and my brain shuts down.  I just hit ‘accept’, ‘agree’ and move on.

I guess the reason is that I don’t care what the small print says, I just want the end result.

I want the game, the goods, the download, the music, the movie, the wine, women and song.

I don’t want to read a whole load of legal guff that I assume is just corporate gobbledygook to cover their asses if things go wrong.

And what could go wrong?

A truly social bank advisor is the key

This week has been fascinating with lots of discussions about branch versus no branch and financial advisor versus product seller.

I was going to leave it at that, but feel one final blog post worthy of discussion and this is about the role of social media.

We all talk about Facebook and Twitter in the abstract whilst, for most banking people, it's an alien world that is firewalled away from them.

One banker knows his industry is trashed, and here's his plan

I often present around the depressed state of the banking markets.

Usually, it’s a political and economic overview of the banking system that shows the issues of regulatory change, customer trust and systemic risk.

So I was surprised and amused when a senior vice president of retail banking for one of Europe’s largest banks gave a similar presentation.

It went something like this …

Financial brands falling (again)

Interbrand published their Global Top Brands report yesterday, which makes for interesting reading.

The world’s most valuable brand is still Coca-Cola, followed closely by Apple and IBM.

Tech firms feature heavily in the list, with Google and Microsoft in fourth and fifth place, Intel in eighth and Samsung in ninth and Oracle, in eighteenth place, is one of the fastest risers.

Even Facebook, that seven-year-old upstart, gets in on the act in 69^th place. 

Meantime, the financial brands take a big hit with Barclays and UBS disappearing from the Top 100 (they were 79^th and 94^th most valuable brands last year), and many others losing traction.

American Express is the top financial brand in 24^th place, 23^rd last year.

JPMorgan comes in at a respectable 32^nd, although that’s four down from last year’s 28^th.

And most others see a big drop, particularly Credit Suisse (95^th this year, down from 82^nd last year).

Here’s the sector review and individual brand reviews from this year’s report, and you can download last year’s complete report if you want a comparison.

NFC: No Flippin' Chance (or why contactless is a dead tech)

The world is a wonderful place, as times shift fast and things turn faster than an egg on a timer.

Just as you get used to one technology, another comes along and turns things on its head.

What technology do we mean?

NFC.

Near Field Communication.

No Flippin' Chance.

The more I think about NFC, the more I realise it is a dead technology.

NFC is a technology past its sell-by date.

How do you behave when no-one is watching?

During my trip around the Middle East, I met a lot of banks looking at a lot of new ventures with lots of dialogue about new business models, new products and services, new organisational structures and new ways to communicate with staff, customers and stakeholders.

One of the key questions was how to maximise human resources.

OK, now you could debate whether humans are resources or assets or whatever, but the core of this answer was that humans need to be valued and have values.

We concurred that the clearest way to convince people of their role is to give them a very memorable understanding of what the company is about and then let them get on with it.

A kind of values or principles based organisational model.

The Future of Hacktivism: the Collective Party

During the week, I’ve been discussing various aspects of risk and riot in the system, from the potential for an uprising to how anonymous works.

One of the key areas to consider is also where all this goes in the future.

That’s what I thought would be good to talk about today.

I should be clear that the focal point here being where anonymous and occupy go in the future, rather than how the cyberwars play out.  That’s something I’ll come back to tomorrow as it’s worth a chat about Stuxnet and the potential for corporate cyberwars.

But circling back to wikileaks, anonymous and the power of one, we are seeing an emergence of a new form of crowdsourced activism.

We are Legion: the History of Hacktivism

I went to see a screening of a new film about Anonymous last night called We Are Legion: the Story of the Hacktivists.

The film tells the story about the rise of Anonymous and the hacktivism movement, portrayed through interviews with many of the key players.

The uprising

I spent some time contemplating history last week, and realised just how many times we have been through moments like this.

The Civil War in Britain; the storming of the Bastille in France; the Russian Revolution; the themes of many German philosophers during the 1800s, such as Karl Marx and Friedrich Nietzsche; and more.

Throughout history there have been many moments where the mass poor attack the elite rich to rob them of their wealth.

‘Let them eat cake’, is a fine response, until the them concerned decide to spit the cake back.

What is the alternative to LIBOR?

After the LIBOR debacle and the money laundering affairs of Standard Chartered and HSBC, the UK’s banks reputation are in the toilet.

Now we have to rebuild, and this is where it gets interesting and challenging.

Who are you f-ing Americans?

Standard Chartered paid off the new Sheriff of New York City, Benjamin Lawsky, to the tune of $340 million to get rid of the pest.  As Investec's commentator Ian Gordon said yesterday, they “acted with pragmatism and integrity in the face of extreme provocation”.

Can our banking system achieve the Olympic dream?

The Olympic Games have ended.

What will we do now?

Back to reality?

Back to LIBOR fixes, money laundering scandals and selling products you weren’t supposed to sell to muppets who weren’t meant to buy them?

Can banks mind control with video tests?

I was amused to read the story about Barclays Bank making all of their staff watch a video about how not to rig interest rates recently.

This followed the LIBOR scandal, and is a 12 minute piece to camera starring interim Barclays CEO Rich Ricci, Bob Diamond’s other right hand man at the bank after Jerry Del Missier resigned. 

The City of London in 2050

I’ve blogged a lot about the history of the City of London, but what about its future?

Right now, we could all imagine there won’t be one, but there is.

It’s just going to be different.

Now, I could speculate on the wholesale restructuring of British Banking and British bank regulations, as that’s definitely going to happen.

With RBS and Lloyds in the mire over the credit crisis, and now Barclays, HSBC and Standard Chartered in the shackles over rate fixing and money laundering, UK banking doesn’t look particularly bright.

But the City is the City.

It’s different.

I’ve heard talk of the City losing its place in global finance many times over the years, but it hasn’t happened.

Will it happen now?

I don’t think so.

As they say, liquidity doesn’t move easily, and it’s even harder to move when all the ancillary services that go with liquidity – accountancy, legal, audit, technology and more – have to move with it.

But I’ll save that debate for another day, as the reason for talking about the City in 2050 is more to do with an exhibition taking place in the centre of London right now called the Developing City.

It’s sponsored by the City of London and, as their website states:

The Developing City Exhibition will look at how the physical environment of the City - its buildings, public spaces and culture have helped it to thrive as a major business centre. The Black Death, the Great Fire, the Blitz brought pestilence and destruction, yet the City survived and rebuilt itself. Today it faces major challenges as a result of the financial meltdown, the changing nature of financial institutions and drive for more sustainable buildings. How will these factors impact on the physical fabric of the City? What will it be like to work in the Square Mile in 2050? 

The Exhibition is free and runs through to 9^th September, along with a few seminars and events including:

Breakfast talk

Friday 10 August, 08.30-09.30
Re-Imagining the City

During 2011-12, the London Met Diploma 5 have been studying the City of London from its Roman beginnings to its current pre-eminence. Their studies have found the City of London to be shrouded in myth, distanced from the rest of London - isolated and self-policed as any 'sink estate' but with infini...

Walk

Saturday 11 August, 14.00-15.30
City West

Covering ground between Bank Junction and St Paul's Cathedral, this walk, led by the Blue Badge Guides, illustrates the City planning authorities willingness to take architectural risks. We encounter striking visual contrast with the placement of uncompromising contemporary designs adjacent to Grade...

Breakfast talk

Friday 17 August, 08.30-09.30
What Lies Beneath

With well over 2000 years of intensive development in the City of London, new building and development projects often uncover vital discoveries about the City's past. At this free breakfast talk, archaeological experts from MOLA will present some of their most recent archaeological discoveries and dis...

Alongside this are various exhibits that explain how building and architecture changes over the next three decades to create a de-carbonised City.

This bit is particularly interesting, as it shows how work and London life changes.

A decarbonised City is one where pedestrianized streets mix retail and residential space with far more green space.  Along with a far more nomadic workforce, the City of 2050 will therefore have a 50 percent increase in the workforce using 25 percent less space.

The biggest change however will be to the East of the City, where a plan is already in place to build a new financial centre with its heart in Aldgate, and then extends from there to the Tower of London and up to Broadgate.

This plan is based upon a new generation of low to zero carbon emitting buildings on a scale larger than anything ever seen before in London.

I could write a lot more about this but, as it’s free, I’ll just recommend that you go along and have a look.  It’s particularly worth a look if you’re interesting in green buildings and sustainability, but also as a vision of the City of forty years from now.

Lovely.

 

 

 

Olympic Visions: the television you will be watching ten years from now

Technology develops at a pace and this is no more vividly illustrated than by the Olympic Games, as I discovered in a visit to the BBC’s Olympic theatre yesterday.

The BBC has been involved in the Olympics pretty much since they were first established back in 1922 and the Olympic Games are the perfect showcase for the media broadcaster to test out their latest gizmos and gadgets.

This is what they are doing this year, demonstrating the next generation televisual experience and so, for those interested in technology, here’s the low down on how the Olympics has changed our sports coverage through the years and an insight into the television you will be watching ten years from now.

The 1924 Olympics in Paris was the first media Olympics, with the first live radio broadcast.

Television coverage of the Games began with the Berlin Games in 1936, although these broadcasts were purely within the Olympic village.

The first ever outside broadcast of the Olympics took place in 1948, at the last London Olympics. 

A total of 64 hours of programming was broadcast.

The Winter Olympics of 1956 saw the first ever television being broadcast outside the host country and, by 1964, we had come a long way as the Olympics were now in colour and broadcast by satellite from Tokyo to the USA.

The 1964 Tokyo Olympics was also the first time results were stored on a computer.

The 1968 Mexico Olympics saw live colour broadcasting to over 600 million viewers worldwide and technology took another leap forward when, sixteen years later, HD TV was broadcast for the first time from the Los Angeles Olympics in 1984.

Although it took twenty years for HDTV to find its way into our living rooms, another technology – email – was also used for the first time in 1984.  Amazingly, that technology flourished and died in the period since as we now status update and text message far more than we email today.

The 1992 Barcelona Games saw digital recording being used for the first time and by the time of the Beijing Olympics four years ago, over 4,500 hours of full HDTV coverage, surround sound and multimedia feeds were broadcast using Super Hi-speed cameras.

What could possibly top this?

Well, the introduction of next generation television at the 2012 Olympics.

The BBC has been working with the Japanese broadcast network NHK to develop Super Hi-Vision.

Super Hi-Vision combines Ultra HD images with 22.2 multi-channel surround sound, and I saw it demonstrated for the first time yesterday in the BBC Radio Theatre, London.

Ultra HD is 16 times higher resolution than HDTV and 22.2 multichannel surround sound is 360 sound (most home cinema systems are 5.1 surround sound).

The demonstration is truly amazing and began with a short excerpt from the Opening Ceremony.

The Super Hi-Vision experience literally felt as though they had put me live and into the best seat in the stadium.

Every human face is clearly visible in the Olympic Park crowd during the opening ceremony.

As the Queen parachutes into the stadium from the helicopter, you can hear people cheering from left and right, and almost every individual hand clap is audible.

Then the show went on to a couple of events: basketball and swimming.

As the US basketball dream team are playing, you can see every bead of sweat on the foreheads of their opponents and hear every squeak of their trainers as they run across the court.

And as Rebecca Adlington picked up an Olympic bronze in the Aquatics centre, you could see each drop of water breaking on the surface of the pool as she free stroked across it.

So, if you want to know what the next generation home television experience will be like, well, it’s like … being there.

Here are the technical specifications:

• The raw uncompressed data rate is 40 Gbits per second, the speed that the digital data comes out of the camera at 60 frames per second
• The compressed data rate is 350 Mbits per second
• 16 times the resolution of HDTV with 7680 x 4320 pixels, the broadcast is designed for a TV display size of over 2.5 metres or 100 inches
• 22.2 multichannel sound, with speakers at 3 different heights

What’s it got to do with banking?

Not much, except that the next Olympics in Rio in 2016 might be the time that you have a Super Hi-Vision of your banker from the comfort of your armchair.

Image Source: Mish Sci Fi Musings

The Top Five Most Embarrassing Mistakes By Banks

I kinda thought that some of the things that have happened in banking in the past – like the collapse of Lehmans and Barings Bank; Jerome Kerviel, Henry Blodgett and Frank Quattrone;  insider trading and Ponzi schemes; and more – were pretty bad, but someone asked me to make a list of the top five most embarrassing mistakes made by banks and, as I pondered the list, they all appeared to be recent ones.

Sure, I could put in things like Chuck Prince having to apologise in person before the Japanese FSA about Citigroup’s private banking failings or Goldman Sachs calling their clients muppets,  but these things are mild compared to the five here.

So, as it’s summertime and things are changing, here are the top five most embarrassing mistakes made by banks, and they all happened within the last twelve months:

#5: Bank of America’s social media gaffe

There were a number of major PR gaffes in the last year, where banks were caught short over social media usage.  The biggest one was from Bank of America, who tried to introduce a charge of $5 a month to use debit cards in October 2011, in response to the Durbin amendment to the Dodd-Frank Act that limits debit card transaction charges to 12 cents per transaction.  Customers didn’t like the new fee and one – Molly Katchpole, a 22-year old nanny – forced the bank to change its position purely by using Change.org to create a petition that garnered over 300,000 signatures.  The fact that BoA retracted the fee was then rewarded with the award for the worst PR gaffe of 2011 and a 20 percent increase in account closures in Q4 2011.

#4: RBS’s computer glitch

You can have issues over reputation but the #1 reason why customers close accounts is when mistakes are made.  In this case, the RBS glitch was huge, with customers at Ulster Bank closed out of their accounts for almost a month.  The mistake was made by an update to CA-7, a core payments program, which corrupted the payments files.  The issue has been that no matter how hard RBS try, they cannot recreate the issue to find out what caused it, or so I hear.

#3: Citibank’s mortgage mistake

When the head of mortgage Quality Control sues her employer over their mortgage processing system, you know something’s wrong.  When Sherry Hunt did this, claiming that three out of five mortgage applications were missing key pieces of information including signatures and proof of salary, you know something’s really wrong.  Especially when her employer told her to fudge it and stop complaining.  That’s why, when the Department of Justice backed her case, she received $31 million for being the whistle-blower her blew the whistle on Citigroup and succeeded in bringing them to justice as the first test of the new Dodd-Frank whistle-blower rules.

#2: HSBC’s money laundering scheme

You would think that with global AML controls in place, a bank of HSBC’s size and breadth could handle a little tracking of terrorist cash.  David Bagley, Global Head of Compliance for HSBC, has been co-chair of the Wolfsberg Group that set the rules for Anti-Money Laundering worldwide for banks since 2005, so they should know something about it.  However, he and the bank got caught out as accounts in Mexico enabled drug cartels to gain monetary movements via the Cayman Islands, and terrorists were engaged in similar activities via the Saudi bank division and its counterparty Al-Rajhi Bank.  The result is that he stepped down from his position in the bank, even though he wrote emails warning of the Mexican banks lack of a “recognisable compliance or money- laundering function.”  The lesson learned is that when business leaders see billion dollar accounts, they ride rough-shod over their risk, audit and compliance folks.  The balance has to shift the other way around so that when risk, audit and compliance folks see businesses they don’t like, they can tell the business leaders that when the going gets stuffed, the stuffed get going. 

[Read the full senate hearing on AML and HSBC here]

#1: Barclays LIBOR moment 

It’s not so much that LIBOR had faults so that rates could be rigged, which we all now know, but more that the messenger got shot.  Barclays were the messenger who blew the whistle on LIBOR rate rigging.  That’s why they got the first massive fine, as they have been co-operating with the authorities.  Meanwhile, all the other banks have now been drawn into the crossfire with HSBC, RBS, Lloyds, Deutsche, Mitsubishi and more being investigated with multimillion dollar fines.  So what’s the problem here?  That Barclays allowed the release of the LIBOR news to make them look like the sole bad guys.  Result: Diamond, del Missier, Agius and more all go and the bank becomes a headless mess.  How did it happen?  Well, apparently the day the news came out about Barclays fine was the first day of a brand spanking new Head of Corporate Communications joining the bank.  Not a bad day’s induction training to find yourself in the middle of the biggest comms crisis of all time and #epicfail for not dealing with it effectively.

So there you have it.

Five massively embarrassing moments for five megabanks.

Nevertheless, my award for the bank with the all-time brownest stuff dripping off its fan has to go to UBS.

Yes, UBS.

UBS – the bank that changes management more often than Shameless star Frank Gallagher changes underpants. 

UBS – the bank with the multibillion dollar loser.

UBS – the bank that tells their staff how to dress and not dress.

UBS – the bank that trains their staff in how to avoid the FBI and US Customs.

UBS – the bank that has employees willing to go the extra mile, like doing illegal activities on behalf of their clients.

UBS – the bank that received one of the largest Federal Reserve fines in history in 2004 for peddling dollar bills to Saddam Hussein, something that HSBC copied this year.

Need I go on?

Oh yes, but it’s still a very good, reputable bank.

 

 Pictures sourced from WHYDTINOGO and Flickr