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There’s one bank I regularly visit, which have their values emblazoned over their reception. These values are:
... or RISES for short.
It’s nice, but I always have this cynical little buddy on my shoulder, shouting in my ear: “do you think they mean it?”
The problem with the things like corporate values and mission statements is that they’re often a little bit wishy-washy. As pointed out to me regularly, look at any bank’s mission statement and they all sound the same.
Citi works tirelessly to serve individuals, communities, institutions and nations. With 200 years of experience meeting the world's toughest challenges and seizing its greatest opportunities, we strive to create the best outcomes for our clients and customers with financial solutions that are simple, creative and responsible. An institution connecting over 1,000 cities, 160 countries and millions of people, we are your global bank; we are Citi.
I was asked which bank to invest in the other day, and it’s been on my mind ever since, as that’s a tough question.
Which bank stock would you buy?
Since January 2008, Bank of America has lost nearly 56% of its value, compared with 81% in Citigroup and 4% at Goldman Sachs. Conversely, J.P. Morgan has gained 47%, while Wells Fargo is higher by 91%. RBS has lost over 90% of its value, Lloyds 66%, Barclays 50% and HSBC 46%. BNP Paribas has lost 40% of its value, Banco Santander 53% and Deutsche Bank 65%.
I noted the disconnect between the bank community and the technology community sometime ago in my Red Pill moment, and as the year passes it becomes more and more obvious to me that we are going through a sea change in finance.
Almost every day, I encounter a new start-up who wants to change some part of the banking system.
Almost every day, I see news of a successful new business model in P2P lending, crowdfunding, front-end aggregation, PFM, mobile payments and more.
Almost every day, someone tells me how bitcoin is going to destroy the old banking system by working its way around that system.
Then I go to my banking conferences, and the people in suits – 1,000’s of Mr. Smiths here, as someone tweeted at SIBOS this year – spend all of their time talking about technicalities.
So I just chaired a panel discussion at Eurofinance 2014. There were six statements made during the panel which I wanted to discuss on stage but, being the moderator, I couldn’t really say: “what you just said is complete balderdash my friend” (I could, but it wouldn't have been appropriate). So luckily I blog and therefore I can say it here. There are six statements made by this panel that I completely disagree with (almost):
So it’s been another busy week with Financial Services Club meetings in London, Edinburgh and Warsaw. I’ll summarise each one over the next week, but will begin with our meeting in Warsaw which saw John Rendall, CEO of HSBC Polska, presenting his impressions of banking in Poland (see my blog from SIBOS for more background).
I have recently spent a lot of time talking about KYC (Know Your Client), AML (Anti Money Laundering, often confused with ALM which is Asset and Liability Management), Client Onboarding, PEPs (Politically Exposed Persons) and SARs (Suspicious Activity Reports).
It’s all wrapped up in financial crime, compliance, legal, audit and operational risk.
There have been some extraordinary activities of late, what with Barclays throwing money transmitters off their network and gaining the wrath of Mo Farah.
HSBC has taken similar action, but went one step beyond and annoyed all the diplomatic embassies based here in London by shutting any they view as suspect accounts based upon five criteria: international connectivity, economic development, profitability, cost efficiency and liquidity.
It is only going to get worse as these actions are all attributable to the behaviours of the US authorities last year, fining Standard Chartered in a move to make headlines and throwing the book at HSBC for being in cahoots with drug lords and terrorists.
This led to me blogging a piece earlier last month that gained some significant reactions, including a dialogue with Mike Laven, CEO of Currency Cloud, that clarified some aspects of what is really going on here.
We had a fascinating discussion about how to fix the banks at the Financial Services Club last night (Part Two next week)
and the gist of what most panellists came back to, as well as the audience, is
that we need to return to basics and get the culture right.
This is not an overnight change, a quick fix or an easy
thing, but it is a fundamental.
The values and culture need to focus back upon doing what’s
right for the customer and society, being ethical and moral, open and transparent,
trusted and secure.
In 2008, we all thought banks were bye, bye, bye. Five years later, everyone is saying buy,
buy, buy. Or Warren Buffet is
anyway. In an interview with Bloomberg last week, Buffett said:
“The banks will not get this country in trouble, I guarantee
it. Our banking system is in the best
shape in recent memory. The capital ratios are huge, the excesses on the asset
side have been largely cleared out. We do not have an unusually concentrated
banking system compared to the rest of the world, and there are certain
advantages in the largest capital market in the world to having banks that are
somewhat consistent with the size of those markets.”
Derek Wylde, Group Head of Fraud at HSBC,
presented at the Financial Services Club last week.
He talked about many aspects of fraud and risk,
and presented quite a few numbers
related to the issue.
One of the charts raised questions in my
mind. It related to the total cost of payment card fraud. According to Derek, payment card fraud costs
an average of six to eight basis points on sales. For those who don’t use the terminology of basis points, a basis point
is 1/100th of a point, or 0.01 if you prefer. So fraud costs between 0.06% to 0.08% of the
total sales in payment cards.
It appears to be related to the issues the bank has faced with anti-money laundering fines in the USA, but the way the bank has handled the problem adds to a growing list of issues the bank has raised in recent years where decision making appears to be in the bank's, rather than the customer's, interest (think student overdrafts and Securekey).
They need to tread the waters a little more carefully methinks.
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”.