Cover_BI_Dec19_Final.pdf 1 25/11/2019 1:06 PM

IDEAS FOR LEADERS | DECEMBER 2019

EXCLUSIVE INTERVIEW WITH DATUK YVONNE CHIA, CHAIRMAN OF STANDARD CHARTERED BANK (MALAYSIA) BERHAD AT THE TOP OF HER GAME

PP 17327/05/2013(032407) Scepticism: An Essential Quality For Banking Professionals CULTURE IN GOVERNANCE MATTERS

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Up in Arms Are you financing weapons of war?

TAX THAT BOT!

Editor’s Note

becoming an ‘over the table’ UNCEASING act, being committed openly by the top leaders. Others EFFORTS TO WREST will then do the same without fear.” WHITE-COLLAR CRIME How timely then that Banking Insight takes the bull by its horns with a As 2019 draws to a close, we reflect on the hard-hitting exclusive on the perils of proliferation momentous events that have marked our journey deals, Up in Arms: Are You Financing Weapons of toward elevating professional and ethical standards War? It questions whether banks’ zero-tolerance in banking. for corruption is out of sync with reality in the arms Of the many milestones, few have been more trade. + Convening rewarding than the successful conclusion of AICB’s Weighing in is Datuk Yvonne Chia, AICB Council global top International Conference on Financial Crime and Member and Fellow Chartered Banker, whose financial Terrorism Financing (IFCTF) 2019 in November. trailblazing career follows a life of purpose and crime experts Convening global top financial crime experts mission. Insightful, motivational, and personal, she and industry veterans and industry veterans in Kuala Lumpur, this year’s shares her philosophy as well as predictions on in Kuala theme – Building Trust and Transparency: Collaborate, banking’s not-too-distant future. Lumpur, this Accelerate, Strengthen – is a clarion call for financial As always, keeping our members on point, Banking year’s theme institutions to dig their heels deeper and combat Insight presents forward-looking trends from global – Building Trust and criminal behaviour in the financial system. thought leaders. Transparency: World renowned experts at the IFCTF 2019 Alex West, also on the panel at the IFCTF 2019, Collaborate, include Tom Keatinge, Director, Centre for Financial elaborates how banking technology has caught up Accelerate, Crime and Security Studies, Royal United Services with aspiration as surveillance efficiency evolves, Strengthen – is a clarion call Institute; and blockchain expert Roberto Capodieci of linking isolated occurrences into patterns of behaviour for financial Blockchain Zoo, Indonesia. to deliver more granular detection of market abuse. institutions Tun Dr Mahathir, the Prime Minister of Malaysia, Brian Hansen advocates why diversity in to dig their launched the much-awaited Malaysia Financial cybersecurity enhances operational effectiveness heels deeper and combat Intelligence Network (MyFINet), an intelligence- through the cultivation of different perspectives criminal sharing partnership to counter money laundering and and talents for creative problem-solving. As behaviour in terrorism financing, comprising the Royal Malaysia cybercriminals are single-mindedly collaborating to the financial Police, the Malaysian Anti-Corruption Commission, cheat the system, leaders must incorporate diversity system. the Royal Malaysian Customs, Securities Commission as “a business imperative, not a nice-to-have”. Malaysia, and 18 other reporting institutions. Which begs the question: Can we win the race In his keynote address to over 1,300 delegates, against white-collar crime? Tun Dr Mahathir said: “While we appreciate the The jury is still out. insights and the latest development in dealing with It is certainly food for thought as financiers take a the present day sophistication of financial crime and well-deserved breather from boardrooms, banking terrorism financing, the chink to the armour is always halls, and trading floors.Q linked to bad and ineffective governance due to lack of integrity.” “I used to say that previously, when corruption Hope you have a fruitful read. was an ‘under the table’ act, it was a scourge to our nation’s future. But the last few years saw corruption The Editor

December 2019 | BANKING INSIGHT | 3 Contents page December 2019

Prospects 06 Insights Governance 24 Licencing Fintech A.K.A. How to Get Along with Frenemies 28 Not Just For Tree-huggers: Asia’s Do-Good’ Loans A slew of news reports indicate ESG loans are gaining ground in Asia Pacific. Here’s a primer on sustainability for lenders. 32 Why Effective Detection of Market Abuse Requires A Trader-Centric View Moving to a more effective risk- based approach in surveillance. 36 Creativity Mindset in Business: The Next Competitive Edge Getting your mind to look at more. cover story governance 42 Culture in Governance Matters UP IN arms ‘I Have No Vested Interest’ 44 The Cost of Going Cashless Are you financing weapons Ex-trader Kweku Adoboli Cash needs to stay core to life of war? pg.12 takes on notions of in the UK – or millions could be ethics, systemic failure, excluded. Natalie Ceeney CBE and banking’s ‘power few’ in this no-holds-barred shares her thoughts on the interview. Access to Cash Review. pg.18 Thought Leadership 52 Tax That Bot! Can a ‘robot tax’ level the playing field for humans? Thought Leadership Psychological 56 Scepticism: An Essential Safety in Quality For Banking successful teams Professionals Team members who are security exclusive empowered to share 60 Why Your Company at the Top of Her Game ideas, take risks and Vibrant, bold, and incisive as ever, be themselves are top Needs More Diversity in Datuk Yvonne Chia, FCB, Chairman performers enjoying a Cybersecurity culture of psychological of Standard As cyberthreats become smarter, Chartered Bank safety. (Malaysia) pg.48 bringing in fresh perspectives Berhad, can make all the difference. security graciously pulls Cryptocurrency technical back the curtain Kryptonite? 66 Bringing Down Charge-Offs on her defining Far from becoming a moments and 70 Pause. Think. Apply. ubiquitous payment shares her Redesigning Customer method, digital thoughts on currencies seem to be Experience in Banking banking’s future. sliding down a slippery A paradigm shift on regulatory pg.07 slope. compliance and what it takes to pg.62 gain loyalty.

The views expressed in this magazine are not necessarily those of AICB or its Council. Contributions including letters to the Editor and comments on articles appearing in the magazine are welcome and should be sent to the Editor. All materials without prejudice appearing in Banking Insight are copyright and cannot be reproduced in whole or in part without written permission from AICB. Note: All information provided in this publication is correct at the time of printing. prospects insights

“I wish to applaud the Financial Services BUSTING FINANCIAL Professional Board (FSPB) on its recent CRIME & TERRORISM publication of standards on whistleblowing and on managing conflicts of interest…I hope that the industry will adopt these standards and this means moving beyond symbolic gestures, to the diligent implementation of policies and programmes that promote the desired From left: Arsalaan Ahmed, Secretary, Association of Islamic Banking Institutions Malaysia; Tan Sri culture.” Tay Ah Lek, MD/CEO, Public Bank Berhad; Tan Sri Azman Hashim, Chairman, AICB; Datuk Syed Zaid Albar, Chairman, Securities Commission Malaysia; Datuk Nor Shamsiah Mohd Yunus, Governor, D atuk Nor Shamsiah Mohd BNM; Tun Dr Mahathir Mohamad, Prime Minister of Malaysia; Latheefa Koya, Chief Commissioner, Yunus Governor of Bank Negara MACC; Dato’ Pahlawan Mazlan Mansor, Deputy Inspector-General, Royal Malaysia Police; Dato’ Malaysia Azimah Abd Hamid, Deputy Director General, Royal Malaysian Customs (Enforcement/Compliance); Nik Azmir Nik Anis, Organising Chairman & Chairman, AICB Compliance Officers’ Networking “A Icb focusses its efforts Group; Prasad Padmanaban, Chief Executive, AICB. on raising the professional and ethical standards of bankers through Jointly organised by the Asian Strengthen – covered a range of issues our membership and Institute of Chartered Bankers and from the systemic challenges of bribery professional qualifications the Compliance Officers’ Networking and corruption to increasingly complex as we believe that capacity Group, the 11th International threats such as money laundering, building plays an important role in preparing bankers for Conference on Financial Crime and proliferation financing, and cybersecurity. the fight against financial Terrorism Financing gathered over The conference convened luminaries crime and maintaining the 1,300 leading regulators, experts, such as Tun Dr Mahathir Mohamad, the highest levels of integrity in thought leaders and industry Prime Minister of Malaysia; Datuk Nor one’s professional practice. practitioners onto a common platform Shamsiah Mohd Yunus, the Governor of It is vital for bankers to have a code of ethics to debate and consolidate global Bank Negara Malaysia; Latheefa Koya, that promotes honesty, efforts to combat financial crime. the Chief Commissioner of the Malaysian accountability and ethical Supported by Bank Negara Malaysia, Anti-Corruption Commission and Tan Sri conduct to maintain the Securities Commission Malaysia and Azman Hashim, the Chairman of AICB. highest levels of integrity in Labuan Financial Services Authority, They shared their riveting bird’s-eye their professional practice.” this year’s theme – Building Trust and views alongside global subject matter Tan Sri Azman Hashim Transparency: Collaborate, Accelerate, Q experts. Chairman of AICB

EUROPE’S EUR60 BILLION money from state funds is estimated testified that the scheme reflects to reach up to EUR31.8 billion in the attitude of banks and bankers ‘ROBBERY OF THE CENTURY’ Germany, EUR17 billion in France, who were bent on “taking EUR4.5 billion in Italy, EUR1.7 billion advantage of any opportunities That’s how French newspaper Le in Denmark, and EUR201 million in that could be found or created. Monde describes the Cum- Belgium. This was not the clandestine Ex scheme, a massive EU Trials commenced in Bonn on approach of a few. Rather, I trading scandal involving 26 March 2019 to convict the saw it as the clear and openly an extensive network alleged perpetrators on multiple communicated expectation of of bankers, traders ,and counts of economic espionage, most major banks and their lawyers. Uncovered in violation of banking secrecy customers.” 2012 by a collective of laws, and tax fraud. Has banking truly laid the European investigative One of the architects of ghost of 2007 to rest…or are journalists on tip-offs from the scheme, Oxford-trained there more criminal spectres German whistle-blowers, investment banker Martin Shields, lurking in the shadows? Q the plot to siphon taxpayers’

6 | BANKING INSIGHT | December 2019 Repo rting by the Banking Insight editorial team Exclusive

At The Top of Her Game

Vibrant, bold, and incisive as ever, Datuk Yvonne Chia, FCB, Chairman of Standard Chartered Bank (Malaysia) Berhad, graciously pulls back the curtain on her defining moments and shares her thoughts on banking’s future.

Your career has been marked by many money out of the equation, and in the process, Malaysian ‘firsts’, including the first female feel contented and fulfilled. Before you know it, CEO of a commercial bank and steering you are on the road to further success. two banks simultaneously during the In retrospect, I believe my character and Asian financial crisis. values were indelibly shaped Please share your journey by my 50-year-old father who in charting your course in suddenly passed away when I the sector. was a young teenager. In my early days, I didn’t I was raised in a Hokkien know I wanted to be a household in Seri Menanti/ banker but I knew I wanted Kuala Pilah, where my father to work for a multinational. owned and operated the family Then I got lucky; I got my business – a wholesale store,a start in banking with a global retail grocery shop, a one- bank. I fell in love with it pump petrol station, a rubber and it became the catalyst factory, and a four-lorry fleet for me to explore my full for hire – while my mother was potential. a traditional housewife. Many The excitement and fast- knew me as the tauke’s (boss’) paced nature of finance, daughter as I followed him and the landscape pushes in his lorry along the supply you to constantly evolve. I route to the smaller towns was hungry to learn, to stay before heading to school in the ahead and, most importantly, afternoon. excel in what I loved to do. This was my first peek Anything you set out to into entrepreneurship. As I do in life can only be sustained if your actions watched my father, I picked up practical resonate with your inner voice. It’ll drive you to business knowledge on negotiating deals and wake up early, feel excited about your job, leave collections, decisions to extend or withhold

December 2019 | BANKING INSIGHT | 7 UP IN ARMS Are you financing weapons of war?

hen asked to describe The Financial Action Task Force banks’ ability to detect illicit (FATF) defines proliferation as the Wfinancial transactions, one transfer and export of nuclear, chemical risk manager at a major bank said: or biological weapons; their means of “We only catch the dumb ones.” delivery; and related materials that may The interviews, conducted by or may not be included in control lists financial crimes expert Dr Togzhan as ‘sensitive materials’. Kassenova and published in a Proliferation financing is the trade research paper titled Challenges with financing and other forms of financial Implementing Proliferation Financing support extended to persons and Controls: How Export Controls Can entities engaged in the procurement of Help for Carnegie Endowment for illicit arms. International Peace, illustrates the Yet, as Dr Kassenova points out, this challenges banks have in wrapping is increasingly difficult to pin, given that their heads around the illicit financing of almost anything could potentially be The risks posed weapons of mass destruction (WMD), used to construct a WMD. by WMD stem also known as proliferation financing. “The risks posed by WMD stem not not only from ready-made “Compared to money laundering only from ready-made bombs, nuclear, bombs, nuclear, and terrorism financing, proliferation chemical, or radiological material, but chemical, or radiological financing is a relatively recent and from dual-use goods and technology material, but from less understood challenge,” writes Dr that are traded, shipped, and used dual-use goods Kassenova. globally. and technology that are traded, “Laptops, transistors, instant shipped, and A Changing Typology coffee – almost every single moment, used globally.

There is no universally accepted no matter where you find yourself Dr Togzhan definition of proliferation financing. in the world, you are surrounded by Kassenova

December 2019 | BANKING INSIGHT | 13 Governance Repo rting by the Banking Insight editorial team

‘IN Have o Vested Interest’

Ex-trader Kweku Adoboli takes on notions of ethics, systemic failure, and banking’s ‘power few’ in this no-holds-barred interview.

onvicted in November 2012 for In 2011, under pressure to accelerate the US$2.3 billion trading loss trading profits through client and Cat Swiss investment bank UBS, proprietary trading, the desk incurred a Kweku Adoboli served half of a seven- significant trading loss. Kweku took sole year prison term before being deported responsibility for this and the systems from the UK. employed by the desk. Now, the former equities trader is In the final weeks before he was working to change the system. redetained and deported from the UK Since June 2015, Adoboli has worked in November 2018, he worked with the with regulators, corporations, academics, counterterrorism unit of the UK Special and students on transformative risk Forces alongside ex-British Prime Minister management, ethics, and systemic Tony Blair, and British Army chief-turned- failure. banking consultant General Sir Peter Wall. Starting out as an operations analyst at Today, his view on ethics turns the table UBS, within three years, he was recruited on conventional wisdom. He advises to the exchange-traded fund (ETF) and governments and the private sector on index desk on the equities trading floor. embedding ethics in organisational culture In 2007, with just 10 months under his and the requisite system designs to keep belt as an ETF trader, he jointly managed the ‘ethical engine’ running. the desk’s US$50 billion trading book.

18 | BANKING INSIGHT | December 2019 Governance B y Julia Chong

Licencing Fintech A.K.A. HOW TO GET ALONG WITH FRENEMIES

Governing innovation today will determine how well banking thrives tomorrow.

24 | BANKING INSIGHT | December 2019 Governance Br y D Amanda Salter

NtJ F o uST or Tree-huggers AsIA’s Do-Good’ Loans

A slew of news reports indicate ESG loans are gaining ground in Asia Pacific. Here’s a primer on sustainability for lenders.

he period from 2012 to 2018 has clearly set out The sustainable debt market the global growth trajectory in the sustainable itself surged 26% in 2018, with Tdebt market (see Chart 1). a record US$247 billion worth In the last year, Hong Kong and Japan both of sustainability-themed debt established programmes to incentivise market growth, instruments raised during the year. whilst China emerged as a global leader in sustainable Of this, US$36.4 billion worth came debt issuance (US$25.5 billion), second only to the US from sustainability-linked loans – (US$45.4 billion). facilities in which the interest rate is linked to sustainability performance targets – which chalked an C hart 1 Annual issuance of global sustainable debt unprecedented seven-fold increase from the previous year. US$ billion This level of growth represents 300 an opportunity for far-sighted Asia 247 250 Pacific lenders. A study by the ASEAN– 196 200 Japan Centre in 2019 found Other 150 that environmental, social, and Sustainability- 112 Linked Loans governance (ESG) firms in the region 100 Green Loans were more profitable on average 57 Social Bonds 50 40 than firms without an ESG thrust, 15 Sustainability Bonds 5 reflected in higher average net profit 0 Green Bonds margins (11.41% vs 9.61%). Leading 2012 2013 2014 2015 2016 2017 2018 ESG awareness was concentrated in Source BloombergNEF, Bloomberg LP. three industry groups: food, beverage

28 | BANKING INSIGHT | December 2019 Governance B y Alex West

WHY EFFECTIVE DETECTION OF MARKET ABUSE REQUIRES A TRADER- CENTRIC VIEW

Mo oving t a more effective risk-based approach in surveillance.

ome of the fundamental problems with detecting market abuse stem from the Ssiloed view that most organisations have to contend with when performing surveillance. People commit market abuse. Yet, most surveillance approaches take a transaction-centric view where alerts are generated based on rules-based triggers with little regard to the motivation or intent of the individual traders. Behavioural approaches have long been an aspiration. Technology has now caught up with aspiration and a trader- centric approach is an achievable possibility. A trader-centric view would significantly + Compelling enhance the ability of analysts to link isolated efficiencies could be occurrences into patterns of behaviour and achieved by deliver more effective surveillance. hands to alerts representing taking this a Compelling efficiencies could be achieved greater risk. Considering that step further by taking this a step further and applying surveillance solutions generate a and applying an integrated an integrated and risk-based approach. The very high number of ‘false positive’ and risk-based current lack of appreciation of how alerts alerts – PwCs 2019 Market Abuse approach. The relate to behaviour in turn leads to a situation Surveillance Survey indicates that current lack of where every alert is treated as equally 99.9% of alerts were deemed appreciation of how alerts relate valuable. A risk-based approach would enable ‘false positives’ by surveyed banks to behaviour in surveillance teams to discriminate between – it is apparent that a risk-based turn leads to a very strong indicators of market abuse approach could deliver considerable situation where and very weak indicators. Consequently, efficiencies while also allowing every alert is treated as surveillance teams could review alerts in effort to be focused on areas of equally valuable. priority order or assign more experienced greater risk.

32 | BANKING INSIGHT | December 2019 Governance Br y Derek A iss

C er ativity Mindset in Business: The Next Competitive Edge

Getting your mind to look at more.

echnology is driving change at an difference will be the age of creativity, ever-increasing rate. So quickly, where ideas that add value to our Tin fact, that as businesses and businesses in new and productive ways individuals, we need some skills that will will be the hallmark of success. allow us to thrive in these ever-changing Creativity and, for that matter, innovation times. One of these skill sets lie in the area seem to be at the heart of this opportunity of creativity We’ve often heard about the list. need for organisations to be more creative, In this article, we will present a cross both as a strategy and an operational tactic. section of information on creativity, why But what does this mean? it is vital in business, how all of us have If we look back on the past 100 years, tremendous creative ability and how we civilisation has been continuously can start to apply it daily in our work and improving. We have gone from the personal lives. industrial age, where the ability to build products was the competitive strength, Defining Creativity to the information age, where information Creativity in this article is seen as the and data analysis will be the competitive ability to use our minds and imagination advantage for organisations. However, to create something new and add value the next age that will provide a point of to the world. Often, we use creativity to

36 | BANKING INSIGHT | December 2019 Governance B y Perbadanan Insurans Deposit Malaysia (PIDM) culture in governance matters

Culture Versus Committee published the Seven Principles Institutional Design of Public Life, the principles were considered Independent board members, “revolutionary”simply because the focus of the aligning pay incentives, internal discussion was on behaviour and culture, not on controls, risk management, and so process. on. These corporate governance Today, the expectation of corporate boards to arrangements are no longer new play an active role in ensuring corporate culture concepts. Since the Cadbury is explicit. The UK Corporate Governance Code, Report in 1992, there have been for example, states that the board is to assess innumerable publications, codes and and monitor culture. The ASX’s Corporate laws on this subject. Governance Principles and Recommendations Yet, despite these guides and requires the board charter to include the role exhortations, we continue to of the board to approve the entity’s statement witness corporate scandals – Enron, of values and code of conduct to underpin the WorldCom, Countrywide Financial, desired culture within the entity. VW, Wells Fargo, to name a few. The 2008 global financial crisis The Challenge exposed massive failures of ethics The reality is that ethics and integrity + Many and leadership in finance, business have always been part of the governance employees and government. conversation. A significant challenge is that within ensuring this “culture” is impervious to organisations that purportedly Conduct and Ethics implementation and measurement. subscribed to The consensus is that many of In the financial services world, at least we ‘best practice’ these issues boil down to the lack of are beginning to see this change. In 2015, the in governance, a culture of ethical behaviour. Many Group of 30 published the Banking Conduct and were in fact living a different employees within organisations Culture:A Call for Sustained and Comprehensive ethical culture. that purportedly subscribed to ‘best Reform, reflecting a global regulatory agenda to They role practice’ in governance, were in pin down this slippery issue of culture. What is modelled fact living a different ethical culture. interesting is that regulators today have begun after their leaders. They They role modelled after their to use behavioural science to assess how were driven leaders. They were driven by the institutions are treating consumer interests. by the wrong wrong incentives or they may have An international survey has reported that 25 incentives or operated under undue influence. regulators from across the world are now they may have operated under In 1994 when the UK Nolan using behavioural tests to check on customer undue influence.

42 | BANKING INSIGHT | December 2019 Governance B y the Chartered Banker, UK

Te h cOST of going cashless

Cash needs to stay core to life in the UK – or millions could be excluded. Natalie Ceeney CBE shares her thoughts on the Access to Cash Review.

s Britain ready to go cashless? And if not, given the trends I towards digital payments and away from notes and coins, how do we ensure that no one gets left another story in the media of bank behind? branches and rural ATMs closing, or pubs, These two key questions shaped restaurants, charities and shops going the final report of theAccess to Cash cashless,” Ceeney says in her foreword to Review, which was published in the final report. + “10 years ago, six out March 2019 to examine the future of “10 years ago, six out of every 10 of every 10 physical money across the UK. transactions were cash. Now it’s three in transactions Natalie Ceeney CBE, the former 10. And in 15 years’ time, it could be as were cash. head of the Financial Ombudsman low as one in 10.” Now it’s three in 10. And in Service, led the review, which was 15 years’ time, set up amid concern about ATM Financial exclusion it could be as accessibility and startling statistics The review found that around 17% low as one in showing declining cash use in Britain. of the UK population – more than eight 10.” “Almost every day there is million adults – would struggle to cope in

44 | BANKING INSIGHT | December 2019 Thought Leadership B y the Chartered Banker, UK

Psychological Safety in successful teams

Psychological safety describes a group environment where individuals are not hindered by interpersonal fear. Team members aren’t afraid to speak up. They’re not afraid to take risks when it comes to raising any concerns or sharing ideas. And you’ll find that leaders and peers in a team with high psychological safety also have the courage to listen to perspectives that differ from their own.

Nicole Brigandi

48 | BANKING INSIGHT | December 2019 Thought Leadership B y Angela Yap

Tax That Bot! Can a ‘robot tax’ level the playing field for humans?

ritish-based research firm IHS Markit firms, it’s hard to dispute the logic or announced in its April 2019 report, Artificial business case for automation in the B Intelligence (AI) in Banking, that robots sector. and AI could be the cause for the disappearance It isn’t just finance that’s getting of over 1.3 million jobs in the US and 500,000 hot under the collar. Virtually every jobs in the UK by 2030. If extrapolated globally, industry touched by AI or automation the figure reaches tens of millions of job losses or will see job cuts and the risk of human reassignments throughout the industry. obsolescence in the workforce. The report also projects global business value From manufacturing to the of the deployment of AI in financial services to hit services industry, in the US alone, US$300 billion by 2030, a staggering 630% leap Brookings Institute estimates that from US$41.1 billion clocked in 2018. AI and automation will take away 36 Leading the pack is North America (2018: million jobs. McKinsey Global Institute US$14.7 billion vs. 2030: US$79 billion) and the pessimistically doubles that figure at Asia Pacific (US$11.5 billion vs. US$98.6 billion) 73 million American jobs by 2030. with China, Japan, South Korea, Hong Kong, and What alternative have we when Singapore driving demand for AI within the banking the value proposition for AI is sector over the next 10 years. clear? Don Tait, Principal Analyst at IHS Markit, points + It isn’t just finance that’s out the most vulnerable segments in the banking Income (In)equality getting hot value chain: “Banking employees potentially Andy Haldane, the under the impacted by the introduction of AI include tellers, Bank of England’s collar. Virtually customer service reps, loan interviewers and Executive Director every industry touched by AI clerks, financial managers, compliance officers, and of Financial Stability or automation loan officers.” and once listed by will see job From automated collections processes to anti- Time magazine as cuts and the money laundering detection and compliance, in among the world’s risk of human obsolescence in an era of thinning margins, greater competition, 100 most influential the workforce. and the advent of financial technology (fintech) people, has called

52 | BANKING INSIGHT | December 2019 Thought Leadership B y Robert Souster

ScEPTICISM AEn sSENTIAL Quality For Banking Professionals

A ‘trust no one’ approach can be a good thing.

odes of conduct issued by professional bodies and corporate codes issued by C organisations are characterised by a focus on the duties of a professional banker. These duties are often described using words and phrases such as integrity, honesty, probity, trust, respect and transparency. This is right and proper, as bankers must pay due regard to these duties, and if they fail to do so they will fall short of the expectations of their stakeholders. Codes of conduct rarely mention scepticism, which despite its absence is an essential quality in the work of many banking practitioners. This article explains the concept, and by using some case scenarios underlines why it is so important.

What is Scepticism? At face value, scepticism appears to be a negative quality. Scepticism implies adopting a questioning mind, or a disbelieving attitude.

56 | BANKING INSIGHT | December 2019 BI_PCC_OL.pdf 1 18/11/2019 4:04 PM

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oWhy Y ur Company Needs More Diversity in Cybersecurity

As cyberthreats become smarter, bringing in fresh perspectives can make all the difference.

ith millions of unfilled in ethnic groups, with 74% Caucasian towards that end. positions around the employees, 9% black, and 8% Any and all weaknesses can and W world, the cybersecurity Asian. The report also revealed a will be exploited by cybercriminals, industry is in dire need of talent. Yet, discrepancy in earnings, with minority whose business is built on the field remains overwhelmingly groups being paid significantly understanding their adversaries’ homogeneous, with only 11% less than their male Caucasian unconscious bias. When solutions of roles being filled by women, counterparts. are built by only one group, they according to a study, The 2017 Global These numbers need to change; become much easier to circumvent. Information Security Workforce not just because we can’t find enough We need to make our strategies less Study: Women in Cybersecurity, by talent where we are currently looking predictable. Diversity in cybersecurity the International Information System or because ‘diversity and inclusion’ is, therefore, a business imperative, Security Certification Consortium are current corporate buzzwords. not a ‘nice to have’. (ISC)2. In the Asia-Pacific region, the numbers are worse with women in The ‘Enemy’ is Already The Many Dimensions of only 10% of cyber roles and 0% of Diverse Cyber leadership positions. Cybersecurity thought leaders have Today’s cyberthreats are not only Beyond gender inequality, noted that today’s cybercriminals are technological; they are psychological, another (ISC)2 study, Innovation so collaborative that their work almost political, and even socioeconomic. Through Inclusion: The Multicultural seems crowdsourced. No matter their Protecting against them requires Cybersecurity Workforce, that group, affiliation, language, or skill set, a wide array of skills and a surveyed the US cybersecurity many cybercriminals share a common multifaceted approach that can only workforce found a serious imbalance goal and willingness to collaborate come from maintaining a diversity of

60 | BANKING INSIGHT | December 2019 Security By Kannan Agarwal

Cryptocurrency Kryptonite?

Far from becoming a ubiquitous payment method, digital currencies seem to be sliding down a slippery slope.

n April 2018, a Thomson Reuters survey found I that one in five financial firms – from hedge funds to the biggest banks – were considering trading in digital currency within the next three to 12 months. Joining the chorus was Brian Kelly, CEO of digital currency investment firm BKCM and CNBC + Given the volatility and talking head, who was quoted as uncertainty saying: “In the last month we have governing seen Goldman and Barclays publicly crypto acknowledge they are planning to trade exchanges like Coinbase, it cryptocurrency. That has everyone on notice adds up why that institutional money is ready to enter the legit investors market.” still view Fast forward to 2019. cryptocurrencies like Bitcoin and On 21 June, the intergovernmental Financial Monero as high- Action Task Force (FATF), issued a much-debated risk investments standard encompassing its 37 member nations, rather than requiring cryptocurrency exchanges to pass on information about reliable payment customers when transferring funds. FATF Interpretive Note to methods. Recommendation 16 requires originator and beneficiary data to

62 | BANKING INSIGHT | December 2019 Technical By Kannan Agarwal

B Ringing DOWN CHARGE- OFFS With delinquencies on the rise, here’s how banks can tip the scales in their favour.

harge-off – the declaration that a debt is unlikely to be collected Cafter a customer is delinquent – is a significant risk for banks. What’s more, global growth is softening, and lending is, once again, at pre-crisis levels with an increase in defaulters across consumer segments. Take, for instance, credit cards. According to data released by the central bank of China in its 2019 Second Quarter Payments System Operations General Circumstances report, major Chinese banks reported a slowdown in active credit card growth in 2H2019 with a corresponding rise in delinquency rates. As of 30 June this year, one of China’s largest financial institutions, Bank of Communications Ltd, reported a 2.49%

66 | BANKING INSIGHT | December 2019 Pause. Think. Apply. REDESIGNING CUSTOMER EXPERIENCE IN BANKING

A paradigm shift on regulatory compliance and what it takes to gain loyalty.

ustomer experience, or CX for What does a ‘great customer short, has become an established experience’ actually mean in banking? Cbuzzword in the services industry. Broadly, it means bringing a customer- In recent years, leading banks in Asia centred mindset to the ecosystem Pacific, including DBS, OCBC, and Hong of banking services, making banking Leong, have come forward to declare easy and enjoyable for customers. It their commitment to CX, recognising means recognising each customer as an the potential and capability of customer individual, prioritising their needs over just experience initiatives to drive service selling them more products. differentiation, customer loyalty, and As Bill Gates famously said, “Banking ultimately business performance. is necessary, but banks are not”. Financial + “Banking In fact, organisations that have institutions that truly understand this is necessary, strategically placed CX at the heart of undergo a complete transformation of but banks are not”. Financial their process (re)design have emerged mindset. This works its way from top- institutions that with the right end of the stick. level strategy all the way down to internal truly understand This article delineates good CX processes of each department. this undergo principles, its risk and rewards, and how it With the rise of ‘digital only’ banking a complete transformation successfully dovetails with current Open and proliferation of digital banking of mindset. This Banking regulations to inspire greater products, customer-led thinking has a works its way customer loyalty. huge influence in how these products from top-level (websites, apps, kiosks, etc.) are strategy all the way down Banking’s New Lexicon designed to be human and user-friendly. to internal For those who are new to the concept Specifically, there are a number processes of each of CX, let’s start with a quick definition. of emerging themes in delivering a department.

December 2019 | BANKING INSIGHT | 71