Chartered Summer 2019 Banker The future of banking
Open mic: Davidson column: Country spotlight: Young Banker: When is selling Eric P. Usher discusses Malaysian banking Meet this year’s in financial services the importance of embraces digital finalists. ethical? Responsible Banking. transformation. Climate of change Universal principles for a sustainable future
Make it count Individual conduct Access to cash Customer interests The six principles for Key to sustainable The cost of How to be an Responsible Banking. banking. going cashless. ethical banker.
2 Charteredcharteredbanker.com Banker The future of banking Winter 2019 55
The Advanced Diploma in Banking and The AdvancedLeadership Diploma in a Digital in Banking Age and Leadership in a Digital Age
Launching October 2018 Launching October 2018 • The Advanced Diploma in Banking and Leadership in a Digital Age is the Institute’s • Thegold-standard Advanced qualificationDiploma in Banking and Leadership in a Digital Age is the Institute’s • The Advanced Diploma in Banking and Leadership in a Digital Age is the Institute’s • gold-standardGlobally recognised qualification in setting the standard for those who seek to achieve the highest gold-standard qualification • Globallylevel of excellence recognised and in settingprofessionalism the standard in banking for those who seek to achieve the highest • Globally recognised in setting the standard for those who seek to achieve the highest • levelDeveloped of excellence by industry and expertsprofessionalism and students, in banking it blends core banking skills with a level of excellence and professionalism in banking • Developedtechnological by edge,industry suitable experts to enhanceand students, current it blends and future core banking roles.skills with a • Developed by industry experts and students, it blends core banking skills with a technological edge, suitable to enhance current and future banking roles. technological edge, suitable to enhance current and future banking roles. This revised Diploma: This revised Diploma: This• Can revisedbe completed Diploma: in 18 months to support • Each unit is assessed by knowledge checks to • Canapprenticeship be completed and in graduate 18 months programmes to support • demonstrateEach unit is assessed application by knowledgeof learning checksat work to • Can be completed in 18 months to support • Each unit is assessed by knowledge checks to • apprenticeshipBlended learning and approach graduate with programmes core reading, online • Ensuresdemonstrate that individualsapplication can of learning meet current at work apprenticeship and graduate programmes demonstrate application of learning at work • Blendedresources, learning and an approach interactive, with online core Study reading, Guide online to • andEnsures emerging that individuals regulatory can requirements meet current for the • Blended learning approach with core reading, online • Ensures that individuals can meet current resources,support learning and an interactive, online Study Guide to demonstrationand emerging regulatory of high professional requirements standards. for the resources, and an interactive, online Study Guide to and emerging regulatory requirements for the • supportIncludes learningsubstantial coverage of technology, leadership demonstration of high professional standards. support learning demonstration of high professional standards. • Includesand change, substantial in addition coverage to core of banking technology, knowledge leadership • Includes substantial coverage of technology, leadership and change, in addition to core banking knowledge and change, in addition to core banking knowledge
www.charteredbanker.comFor further information please visit: www.charteredbanker.com Alternatively please contact the Institute’s Membership Engagement Team via: [email protected] please contact the Institute’s orMembership +44 (0) 131 Engagement 473 7777. Team via: Alternatively please contact the Institute’s Membership Engagement Team via: [email protected] or +44 (0) 131 473 7777. [email protected] or +44 (0) 131 473 7777.
EF5290 CB Magazine Winter 2019 S21.indd 55 06/03/2019 12:47 charteredbanker.com Winter 2019 55 charteredbanker.com Summer 2019 3
Chartered Banker Institute Drumsheugh House 38b Drumsheugh Gardens Edinburgh EH3 7SW tel: 0131 473 7777 fax: 0131 473 7788 www.charteredbanker.com [email protected]
Chartered Banker Institute The future of banking (London Office) 2nd Floor, Bengal Wing 9a Devonshire Square London EC2M 4YN tel: 020 7464 4440
Chartered Banker magazine is published four times per year The front line in Spring, Summer, Autumn and Winter on behalf of the Chartered Banker Institute. The principles of responsible
Subscriptions banking must be embedded Chartered Banker is sent free to Institute members. For in our industry. Simon Thompson, Chief Executive non-member subscriptions, contact the Institute on 0131 473 7777. The Advanced Diploma in Banking and ince our Institute was founded in 1875, we have played a leading Editor in Chief role in helping finance professionals develop and demonstrate The Advanced Diploma in Banking and Simon Thompson The Advanced Diploma in Banking and S the ‘traditional’ (in fact, universal) banking principles of Leadership in a Digital Age Deputy Editor in Chief stewardship, thrift, prudence and professionalism. Our early Leadership in a Digital Age Martin Fishman appreciation of the importance of strong professional and ethical values Publishers in banking has established us as a trusted and distinctive voice in the UK Editions Financial and internationally. www.editionsfinancial.com More recently, the global financial crisis demonstrated – by their absence in some parts of our sector – just how important these universal principles are if our profession is to rediscover its sense of social purpose and reconnect banks and bankers with the customers, communities and societies we serve.
One of the ways we can best do this, in my view, is for our profession to support the transition to a sustainable, low-carbon, socially just world, by putting stewardship in the broadest sense at the heart of banking. Launching October 2018 By this I mean going well beyond being Launching October 2018 a steward of depositors’ funds, as our Institute’s founders would have seen it, and • The Advanced Diploma in Banking and Leadership in a Digital Age is the Institute’s recognising our responsibilities as stewards “We must • Thegold-standard Advanced qualificationDiploma in Banking and Leadership in a Digital Age is the Institute’s of our natural resources, people and planet • The Advanced Diploma in Banking and Leadership in a Digital Age is the Institute’s recognise our • gold-standardGlobally recognised qualification in setting the standard for those who seek to achieve the highest for current and future generations. gold-standard qualification • Globallylevel of excellence recognised and in settingprofessionalism the standard in banking for those who seek to achieve the highest responsibilities • Globally recognised in setting the standard for those who seek to achieve the highest With this in mind, endorsing, promoting • levelDeveloped of excellence by industry and expertsprofessionalism and students, in banking it blends core banking skills with a and encouraging the adoption of the UN level of excellence and professionalism in banking as stewards • Developedtechnological by edge,industry suitable experts to enhanceand students, current it blends and future core banking roles.skills with a Principles for Responsible Banking across • Developed by industry experts and students, it blends core banking skills with a the banking sector is something that our technological edge, suitable to enhance current and future banking roles. of our natural technological edge, suitable to enhance current and future banking roles. Institute wholeheartedly supports. The This revised Diploma: Principles, to be launched at the UN General resources, This revised Diploma: Assembly in September with the anticipated This• Can revisedbe completed Diploma: in 18 months to support • Each unit is assessed by knowledge checks to support of 100 global financial institutions, people and • Canapprenticeship be completed and in graduate 18 months programmes to support • demonstrateEach unit is assessed application by knowledgeof learning checksat work to set out a framework through which banks • Can be completed in 18 months to support • Each unit is assessed by knowledge checks to can demonstrate their alignment with the • apprenticeshipBlended learning and approach graduate with programmes core reading, online • Ensuresdemonstrate that individualsapplication can of learning meet current at work planet.” apprenticeship and graduate programmes demonstrate application of learning at work UN Sustainable Development Goals. • Blendedresources, learning and an approach interactive, with online core Study reading, Guide online to • andEnsures emerging that individuals regulatory can requirements meet current for the • Blended learning approach with core reading, online • Ensures that individuals can meet current resources,support learning and an interactive, online Study Guide to demonstrationand emerging regulatory of high professional requirements standards. for the resources, and an interactive, online Study Guide to and emerging regulatory requirements for the Signatories to the Principles will be expected to ensure that all staff receive the • supportIncludes learningsubstantial coverage of technology, leadership demonstration of high professional standards. training and development needed to apply these in their daily work as bankers. support learning demonstration of high professional standards. • Includesand change, substantial in addition coverage to core of banking technology, knowledge leadership We are the first educational body in the world to incorporate the Principles for • Includes substantial coverage of technology, leadership and change, in addition to core banking knowledge Responsible Banking into our qualifications via our Green Finance Certificate™ and change, in addition to core banking knowledge and relaunched Professional Banker Certificate. In truth, this wasn’t hard, as Mission Hall 1 Roxburgh Place educating current and future generations of bankers in the universal principles Edinburgh EH8 9SU of responsible, professional banking is simply what we do. CB For further information please visit: tel: 0131 476 2502 www.charteredbanker.com fax: 0131 476 2672 www.charteredbanker.com 10 Little Portland Street www.charteredbanker.com London W1W 7JG tel: 0203 911 7530 Alternatively please contact the Institute’s Membership Engagement Team via: www.editionsfinancial.com [email protected] please contact the Institute’s orMembership +44 (0) 131 Engagement 473 7777. Team via: Alternatively please contact the Institute’s Membership Engagement Team via: [email protected] or +44 (0) 131 473 7777. [email protected] or +44 (0) 131 473 7777.
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Contents
Regulars
The Front Line Open Mic Lessons Learned 03 Stewardship belongs 24 When is selling in financial at the heart of banking, services ethical? IAN HENDERSON on the says SIMON THOMPSON. rise of unconventional monetary policy. People and Davidson 06 numbers 31 ERIC P. USHER introduces 62 the UN Principles for Latest news and moves in Responsible Banking. the UK banking industry. Institute agenda Personal 10 What’s happening at the 46 development Chartered Banker Institute? BOB SOUSTER dissects debt financing from a legal, ethical and reputational perspective.
Special report
Climate Six Principles for 14 Responsible Banking of change How banks can make a difference. Responsible 16 bankers Individual behaviour is key. Access to cash Does going cashless come 18 at a cost?
Ethical selling 20 Changing culture in a post-crisis world.
Bankers 22 for climate A force for good. charteredbanker.com Summer 2019 5
“It’s important that there’s a commitment The to responsible banking at industry, professionals institutional and individual level.” p16 in this issue
Hilary Cooper is Associate Keep it simple Personal Financial Director at the think tank 26 Stress-testing solutions 48 Advice The Finance Foundation, for banks and regulators. where she leads their work Word of mouth wins on financial inclusion, and a former in generating leads. government economist. p18
Green foundations Anders Langworth Banks’ role in mitigating is Deputy Head of Group 28 Sustainable Finance at climate change. Nordea and Founder of Bankers for Climate. He held previous roles at Citibank and Genworth New Institute Financial and has worked in the financial industry since 2006.p22 32 President BILL MCCALL shares Jo Paisley is Co-President his vision. of the GARP Risk Institute. She worked at the Bank of England for most of her FinTech Focus UK-Singapore career, before joining HSBC in 2015 as 35 How 5G and the IoT 50 partnership their Global Head of Stress Testing. p26 are reshaping banking. Chartered Body Alliance Bill McCall is President strikes a deal. of the Chartered Banker Institute and Principal Psychological Country spotlight: of McCall & Partners, a strategic corporate finance advisory safety 38 52 Malaysia’s banking business he founded in 1999. p32 What is it and why should revolution. firms take note? Abigail Freeman is an organisational psychologist and founder of organisational consultancy Brink, which Young Banker Payments helps global corporates and 40 of the Year 55 Architecture governments cultivate the mindsets and skill sets they need to be innovative. p38 Meet the finalists. Landmark infrastructure overhaul. Boris Plantier is Strategic Content Manager at Efma, a Vision for video Regulation watch global bankers’ and insurers’ The future of video Our pick of recent association, responsible for 42 banking services. 56 sector activity. producing exclusive content including articles, white papers, webinars and awards programmes. p42
Bangor Institute Governance Damien Simonneau is director of financial 44 Business School 58 Updates from our AGM, services solutions Annual Report and more. Finding the best marketing at Vidyo, a New forecasting method. Jersey, US-based specialist in video conferencing technology founded in 2005. p42
Prasad Padmanaban is Chief Executive of the ISSN: 1759-9520 Asian Institute of Chartered Charitable Body No SC013927. Bankers. He previously All rights reserved. The contents of this publication reflect the personal views of the individual authors and do not necessarily reflect those of the worked investment banks MUFG Chartered Banker Institute. No liability attaches to the authors or to the Chartered Banker Institute for any reliance on any part of the publication. The articles contain views, not advice or professional recommendations. You should consult your own professional advisers if you are minded to in Hong Kong and JPMorgan in both follow up on anything that you have read in this publication. London and Hong Kong. p52 6 Chartered Banker The future of banking
People & numbers
First-time buyers race ahead in Northern Ireland and Scotland
Northern Ireland has enjoyed the UK’s highest year-on-year growth in mortgage lending to first-time buyers, according to latest figures.
The region completed 11.4% more new first-time buyer mortgages in the first quarter of 2019 compared with the same quarter in 2018, according to trade body UK Finance. Remortgaging in Northern Ireland is also up by almost 25%. Global study to assess how the “This is the highest level of remortgaging in Northern Ireland since Q1 2009, when 3,280 remortgages were completed,” sector manages climate risk UK Finance said.
Scotland recorded the UK’s second-highest growth in first-time How financial institutions manage climate risk is the subject buyer mortgage completions, at 4.5%, followed by London of a new global, cross-sectoral study being published by the at 1.6% and Wales at 1.2%. Global Association of Risk Professionals.
Remortgaging in Scotland climbed 18.8% in the first “Climate risk management at financial institutions used to quarter of 2019 – the highest volume in a decade be viewed mostly as a reputational risk that could be addressed – compared with falls of 1.3% and 0.2% through the environmental, social and governance (ESG) respectively in London and Wales. agenda,” explains Jo Paisley, Co-President of the GARP Risk Institute. “Today, it is increasingly seen as a financial risk to be integrated into existing risk management frameworks.”
GARP’s research indicates it is still early days for many financial institutions. Alongside the survey, GARP intends to publish a guide exploring the challenges and opportunities arising from climate change.
Facts & Figures Supporting Alliance announced credit unions as CityUK partner
7.2 Lloyds Banking Group has announced The Chartered Body Alliance, which million digital financial services it will commit a further £1m of funding represents the Chartered Insurance users in Africa in 2019, on top of the £5m it has already Institute, Chartered Institute for delivered, to support the growth and Securities & Investment and the profile of the Credit Unions sector in Chartered Banker Institute, is one of the the UK. supporting partners for the CityUK’s Annual and National conferences in 2019. 11.4% Since 2014, it has awarded £5m to help increase in first-time buyer mortgages Credit Unions, with strong, sustainable CityUK represents British financial and in Northern Ireland in Q1 2019 proposals for growth, improve their related professional services and hosts capital base. Delivered in partnership events to bring together senior with the Credit Union Foundation and professionals, academia and media to the Association of British Credit Unions discuss the sector’s key policy issues. (ABCUL), it has so far helped 103 53% credit unions. This year’s programmes will examine of UK adults are open to depositing how the profession can further build their salary into a digital bank its digital credentials to ensure the UK remains a world-leading financial centre. charteredbanker.com Summer 2019 7
Call to reconnect banks Meet with society our new President In its response to the global consultation on the United Nations Principles for Responsible Banking, the Chartered Banker Institute is calling for greater emphasis on the role of the individual.
The Principles, which have been developed by 28 founding banks and endorsed by more than 100 banking, investment and insurance sector institutions, will be signed in September 2019 at the UN headquarters in New York.
The Chartered Banker Institute was one of the UK’s first supporters of the Principles.
“We understand the Principles are intended to help change the cultural mindset within banks and through their implementation work to reconnect banks and bankers with society,” says Simon Thompson, Chief Executive, Chartered Banker Institute. Bill McCall President of the Chartered “But more could be done though to highlight the importance of Banker Institute and Principal the latter: linking the individuals who comprise banks with the of McCall & Partners, customers they serve. For example, we are currently considering a corporate finance advisory a revision within our own code that would commit our members business he founded in 1999. to being ‘responsible stewards of our natural resources and planet, for current and future generations’.” Turn to page 32 to read more about Bill McCall and his vision The Institute suggests the UN encourage professional bodies and for the Institute over the next similar associations to review their own codes of conduct and two years. continuing professional development programmes, to ensure they are aligned to include an emphasis on the role of the individual.
Africa’s digital drive boosts inclusion
The growth of digital financial services in Africa is driving inclusion across the continent, delegates attending the Future Banking Tech West Africa Summit heard. The two-day event held at the end of April in Lagos, Nigeria, focused on increasing financial inclusion across West Africa by 2020. There are 7.2 million digital financial services users in Africa, 45,000 banking agents, and US$300m moved in monthly transactions, delegates heard.
Other topics included innovation in regulation; overcoming gaps in rural banking strategies and improving credit facilities to underbanked and small and medium enterprises. 8 Chartered Banker The future of banking
People & numbers
The digital gender gap
Over half of adults in the UK (53%) are open to depositing their salary into a digital bank such as Monzo or Starling, according to recent research from AltFi and Streetbees. But the research suggests women are less likely to be aware of – and trust – digital banks.
Of the 990 UK adults surveyed, more than Trust inequality three-quarters (79%) are aware of challenger banks. Metro (51%), Monzo (49%) and Starling The financial services sector has returned to record-high Bank (37%) are among the best known. levels of trust inequality, according to the 2019 Edelman Awareness was found to be consistently lower Trust Barometer. among women, however. A quarter (25%) of women surveyed said they had never heard The report indicates that trust in the sector is at its highest of any challenger banks, compared with level since Edelman began measuring it in 2012. At 57% 17% of men. trust among the general population, however, financial services remains the least-trusted sector measured by Across Europe levels of awareness are similar, the Trust Barometer. with men typically more aware of the 14 digital and challenger banks listed by the survey. But while trust levels among the informed public have However, 22% of female respondents admitted increased significantly from 2012 (49%) to 2019 (67%), they had never heard of any of them. trust among the general population (55%) does not reflect the same improved outlook today.
This 12-point trust gap was also observed as recently as 2017 – a record high at the time. According to Edelman, the disparity occurs in the context of a “mass-class” divide and is in the double digits in more than two-thirds of markets globally, increasingly reaching into developed nations with egalitarian heritages.
Green Finance Summit success
The City of London’s flagship annual Green Finance Summit showcased the latest in green financial policy, market developments and thought leadership.
The third summit, held at the Guildhall, London on 2 July, brought together industry experts, policymakers and influencers with an agenda focusing on investing, accelerating and delivering on green finance commitments.
The Chartered Banker Institute launched its revised Green Finance Certificate™, which provides an introduction to the science, principles and practice of green and sustainable finance.
The Green Finance Summit coincided with London Climate Action Week, and the audience heard from keynote speakers including Mary Robinson, Chair of The Elders and former President of Ireland; Hoesung Lee, Chair of the Intergovernmental Panel on Climate Change; and The Rt Hon Claire Perry MP, Minister of State for Energy and Clean Growth. charteredbanker.com Summer 2019 9
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editionsfinancial.com Insight. Strategy. Delivery. Analysis. 10 Chartered Banker The future of banking
Institute agenda
Purpose in Retail Banking
The Institute has recently been invited to support the FCA’s Roundtable programme investigating purpose in the financial services sector. Our CEO, Simon Thompson, has been asked by the FCA to Chair a workstream on the purpose of retail banking, which will report back to the main group in late 2019. The remit of the Working Group is to highlight the importance of purpose in driving culture, ensuring firms understand that defining and delivering their own purpose is fundamental to delivering positive outcomes for consumers and markets.
Several members of the Chartered Banker Institute have discussion and explore the purpose of retail banking from been invited to contribute alongside academics, customer a variety of perspectives. The roundtables will be held in representatives and a wide range of other stakeholders. different locations – Birmingham, Edinburgh and London Simon is convening three roundtables to encourage broad – to reflect the diversity of banking across the UK.
Chartered Body chiefs The three organisations are partners in the Chartered Body Alliance, which aims to enhance and sustain the level of join UK skills taskforce professionalism and trust in the financial services sector.
Earlier this year, Simon Thompson, the Institute’s CEO, Chaired by Mark Hoban, former City Minister, the new was invited to join the UK government’s new Financial taskforce is designed to ensure the UK’s financial services Services Skills Taskforce (FSST) alongside Simon Culhane, skills base remains world-leading, and will assess the Chief Executive, the Chartered Institute of Securities financial sector’s long-term skills needs. We’ll be reporting & Investments, and Sian Fisher, Chief Executive, on the work of the FSST in the Autumn 2019 edition the Chartered Insurance Institute. of Chartered Banker.
Improvements to the assignment submission process
The Chartered Banker Institute is committed to improving quality standards and ensuring good academic practice is evident across all its qualification programmes. One of the ways it does this is by requiring that all assignments submitted by students are passed through a software system called Turnitin to determine that the work is their own and shows no evidence of plagiarism or collusion. This currently requires students to upload files to a secure folder on OneDrive, which are then checked by the Institute before being sent for marking.
We are currently developing a self-service process, accessed via our learning management system (LMS), which will allow students to upload their own assignments to Turnitin. Not only will this simplify and speed up the marking process, but it will also enable students to take advantage of a pre-submission check, providing an opportunity to address any issues before the final assignment is submitted for marking. The new process is expected to be in place later this summer and full instructions will be issued to all students affected.
Further information about the Institute’s plagiarism and collusion policy can be found on our website within the quality handbook bit.ly/2KgV7C7 charteredbanker.com Summer 2019 11
Subscription reminder
Don’t forget to renew your membership in order to continue with your studies or maintain eligibility to use the professional designations or designatory letters appropriate to your grade.
We operate a rolling membership year, so subscription will generally fall due 12 months after your initial enrolment. However, July remains our busiest month for renewals.
You can pay your subscription online E V E N T: by credit/debit card but, to make your renewal even easier, we would encourage you to consider turning on auto-renewal Professional within your account. This enables you to set up a monthly or annual direct debit, Education meaning all future payments are taken automatically, with no action required. in Banking To do this you will be asked for your bank Conference name, sort code, account number and the name(s) of the account holder(s), so please make sure you have these available. The Future of Professional and Responsible Banking in a Digital Age is the theme E V E N T: You may edit your bank details at any of Chartered Banker Institute’s fourth time should you decide to use a different Professional Education in Banking Open Banking account. If you ever decide to cancel your Conference this autumn. direct debit, please let us know and round table remember to inform your bank as well. The event will explore topics including retraining and reskilling; apprenticeships To make payment or set up a direct debit, and creating value for customers and We have linked up with the Chartered please visit: www.charteredbanker.com/ communities, with a keynote speech from Institute of Securities and Investments subscriptions. Your login details will be Mark Hoban, Chair of the UK’s Financial (CISI) to discuss our special report on required. If you have forgotten your login Services Skills Taskforce. Open Banking in further detail, with password, you can request a password reset. a panel of experts. Our panel will look Panel discussions include Responsible at Open Banking from a variety of angles, Banking and sustainable skills – including raising awareness, delving into The Reality of Lifelong Learning the problem with authorisation journeys, and Reinvention in a Digital Age; and asking what’s next for the initiative Apprenticeships – Moving to Optimisation in the UK? and Responsible Banking – How can the UN Principles of Responsible Banking Tuesday 24 September 2019 be Embedded in Organisations? CISI, 3rd floor, 20 Fenchurch Street, London, EC3M 3BY Wednesday 18 September 2019 12:00 Registration and sandwich lunch Great Hall, One Moorgate Place, 12:30 – 14:00 Event. London, EC2R 6EA 09:00 – 14:00. Free. To attend this event, please email [email protected], For more information or to book go to: or look out for it on our website, Twitter, www.charteredbanker.com/event.html LinkedIn and Facebook channels. charteredbanker.com Winter 2019 12 Chartered Banker The future of banking
THE FLEXIBLE, ACCELERATED ROUTE TO CHARTERED BANKER FOR EXPERIENCED BANKING PROFESSIONALS
CHARTERED BANKER BY EXPERIENCE Designed for experienced banking professionals who wish to gain Chartered Banker status in as little as 12 weeks in three steps.*
The programme is ideal Upon completion of Chartered for individuals who: Banker by Experience you will:
• Have at least 10 years of business experience, • Become a Chartered Banker and will be able including 5 years of relevant banking and to use the “Chartered Banker” designation financial services experience • Will join the rapidly growing global Chartered • Want recognition for their expertise, Banker Institute of more than 31,000 experience and contribution to bankingg; members and gain industry recognition. • Aim to meet current and emerging regulatory requirements for the demonstration of high MORE INFORMATION professional standards For further information and guidance about • Seek an accelerated, flexible yet rigorous the eligibility criteria please route to Chartered Banker status. visit: www.charteredbanker.com/CBBE Alternatively please contact the Institute’s * Enhanced, accelerated routes are offered for holders of the Membership Engagement Team CB:PSB’s Advanced Standard for Professional Bankers and via: [email protected] or +44 (0) 131 473 7777. graduates of the Certified Bank Director programme.
EF5290 CB Magazine Winter 2019 S21.indd 21 06/03/2019 12:38 charteredbanker.com Winter 2019 charteredbanker.com Summer 2019 13
SPECIAL REPORT Climate of change
In September 2019, the United Nations will formally launch the final draft of its Principles for Responsible Banking – “From the Institute’s an initiative designed to promote sustainable practices in the finance industry. The six principles address priorities perspective as an ranging from acting in accordance with the Paris Climate Agreement to issues of accountability, which includes a education provider, THE FLEXIBLE, ACCELERATED ROUTE TO requirement that all signatories publicise their reporting. professionalism is key The Institute is a key proponent of the Principles for and sits at the heart CHARTERED BANKER FOR EXPERIENCED Responsible Banking – one of the first in the United Kingdom – but its active role doesn’t stop there. This Special Report of responsible banking. BANKING PROFESSIONALS explores the Institute’s understanding of the roles banks and bankers play in supporting responsibility, accountability It’s banking done well.” and sustainability both in the UK and worldwide.
CHARTERED BANKER BY EXPERIENCE Designed for experienced banking professionals who wish to gain Chartered Banker status in as little as 12 weeks in three steps.*
The programme is ideal Upon completion of Chartered for individuals who: Banker by Experience you will:
• Have at least 10 years of business experience, • Become a Chartered Banker and will be able including 5 years of relevant banking and to use the “Chartered Banker” designation financial services experience • Will join the rapidly growing global Chartered • Want recognition for their expertise, Banker Institute of more than 31,000 experience and contribution to bankingg; members and gain industry recognition. • Aim to meet current and emerging regulatory requirements for the demonstration of high MORE INFORMATION professional standards For further information and guidance about • Seek an accelerated, flexible yet rigorous the eligibility criteria please route to Chartered Banker status. visit: www.charteredbanker.com/CBBE Alternatively please contact the Institute’s * Enhanced, accelerated routes are offered for holders of the Membership Engagement Team CB:PSB’s Advanced Standard for Professional Bankers and via: [email protected] or +44 (0) 131 473 7777. In principle In practice Cashless Ethical Time graduates of the Certified Bank Director programme. 14 16 18 20 22 What is Individuals’ society banking to act ‘responsible behaviour key. The risk of How to guide Bankers for banking’? exclusion. change. climate.
EF5290 CB Magazine Winter 2019 S21.indd 21 06/03/2019 12:38 14 Chartered Banker The future of banking
SPECIAL REPORT Sign up to the six Responsible banking – with six core principles at its heart – is good for banks, customers and the planet.
ore than 10 years after the start of the 2008 financial The Chartered Banker Institute was one of the first UK crisis, the banking industry is still working to rebuild organisations to endorse the UN Principles for Responsible M trust and increase engagement with clients, customers Banking, alongside global banks and stakeholders including and employees. the Dutch Banking Association, Spain’s Asociación Española de Banca, the Bank of Greece, Standard Chartered, Landsbankinn of Global economies are becoming greener, while the millennial Iceland, Sumitomo Mitsui Financial Group of Japan, German ethical generation is changing consumption patterns and business culture. bank GLS Bank and DGB Financial Group of South Korea.
To continue to play a central role in the 21st century, the banking The 28 founding banks developing the Principles for Responsible industry must show how it is meeting society’s changing needs Banking represent more than $17tn in combined assets and span and demands. five continents.
This is the context for the Principles for Responsible Banking, They include Access Bank (Nigeria), Kenya Commercial Bank, a flagship United Nations initiative to promote sustainable Spain’s Santander, Société Générale (France), Westpac (Australia), banking and help the industry to demonstrate how it makes YES Bank (India) and Barclays in the UK. a positive contribution to society. Six Principles “As society’s expectations change, banks must be transparent and There are six principles covering Alignment, Impact, Clients and clear about how their products and services will create value for Customers, Stakeholders, Governance and Target-Setting and their customers, clients, investors, as well as society,” explains Eric Transparency and Accountability. P. Usher, Head, UNEP Finance Initiative (UNEP FI). This is a global partnership bringing the UN together with more than 230 banks, “Principle 1 – Alignment – involves a bank aligning its business insurers and asset managers to develop sustainable finance and strategy to be consistent with and contribute to individuals’ needs responsible investment agendas. and society’s goals, as expressed in the UN Sustainable Development Goals [SDGs], the Paris Climate Agreement and relevant national “The UNEP FI Principles for Responsible Banking will help any bank and regional frameworks,” Usher explains. – whatever its starting point – to align its business strategy with society’s goals. This alignment of a bank’s strategy with society’s At a historic summit in 2015, all 193 UN member states signed up to goals is the simplest definition of ‘responsible banking’.” the 17 SDGs, which include combating climate change and ending poverty, inequality, and hunger by 2030. Global action At the time of going to press, almost 100 banking, investment and The Paris Climate Agreement, signed by 174 countries and the insurance sector institutions had endorsed the Principles, which will European Union in 2016, aims to keep the increase in global average be signed in September 2019 at the UN headquarters in New York. temperature to well below 2°C above pre-industrial levels; and to limit the increase to 1.5°C, since this would substantially reduce the risks and effects of climate change.
“These are activities Usher continues: “A bank would identify and assess where its portfolio and service offerings generate, or could potentially generate, the most every bank should significant positive and negative environmental, social and economic already be doing.” impacts. In the identified focus areas, a bank would then set and publish targets that align its business with, and ensure its significant contribution to, the objectives and targets set out in the SDGs, the Simon Connell, Paris Climate Agreement, and other relevant national, regional or Standard Chartered international frameworks.” charteredbanker.com Summer 2019 15
Positive impacts Principle 2 – Impact – involves a bank striving to continuously Simon Connell, Head of Sustainability Strategy, Standard Chartered, increase its positive impacts while reducing the negative impacts says: “The Principles are really clear, and supported by practical on (and managing the risks to) people and environment resulting guidance. These are activities every bank should already be doing; from its activities, products and services. setting their strategy, measuring and disclosing progress, engaging with clients and stakeholders. Where the Principles differ is that This includes defining key performance indicators to address, reduce they are framed around societal goals.” and mitigate significant negative impacts and to continuously expand and scale up positive impacts. Gaining momentum Connell would like to see the Principles for Responsible Banking Under Principle 3 – Clients and Customers – banks pledge to support gain the momentum of the UN’s Principles for Responsible sustainable behaviour and consumption choices among their retail Investment, which have more than 1,000 signatories. These provide customers by adopting new technologies, business models and a global standard for responsible investing in the best long-term practices. interests of retail and institutional investors, the financial markets, the economy, and the environment and society as a whole. Principle 4, Stakeholders, is about proactively and responsibly consulting, engaging and partnering with relevant stakeholders to “We have long admired the way the UN’s Principles for Responsible achieve society’s goals. Investment provide a clear framework, and community of practice, for investors,” Connell says. “A bank would identify and map key external stakeholders such as regulators, investors, policy makers and civil society institutions “The UN’s Principles for Responsible Banking provide a framework – paying special attention to stakeholders directly or indirectly for banks, whether experienced at sustainability or relative affected by its business practices and lending and investment newcomers, to think about how they can best support society’s decisions,” Usher explains. “It would also engage, listen to and needs. Without customers, banks wouldn’t exist – but the Principles consult with these stakeholders to gather their expectations and deliberately ask signatory banks to think about all the stakeholders advice regarding the material issues in the bank’s strategy and they need to work with to be successful.” business practices.” Banks must serve their communities, in the way they work with Being accountable their clients and customers, and in understanding the community’s Implementation is the focus of Principle 5 – Governance and Target- wider needs, he adds. Setting – including setting public targets relating to a bank’s most significant impacts and integrating sustainability objectives across Connell concludes: “We can see this in the way that banks are the business. supporting the SDGs, or the Paris Agreement, taking clear positions and helping their clients’ transition to a more sustainable economy. Under Principle 6 – Transparency and Accountability – banks are required to review their progress annually and start reporting publicly “‘Responsible banking’ has many definitions, because banks across within the first 14 months of becoming a signatory to the Principles. the world have very different business models. The Principles for Responsible Banking provides a consistent way of thinking about, Standard Chartered, the London, Hong Kong and India-listed and acting on, the concept.” CB international bank, was an early endorser of the Principles. 16 Chartered Banker The future of banking
SPECIAL REPORT Responsible bankers are key to sustainable banking The focus of responsible banking needs to be on individual professionalism and conduct, argues the Chartered Banker Institute.
he Chartered Banker Institute has played a leading role professionalism is key and sits at the heart of responsible banking. in helping finance professionals develop and It’s banking done well.” T demonstrate the traditional banking values of stewardship, thrift, prudence and professionalism – and Closer alignment this year became one of the first UK organisations to endorse the The Chartered Banker Institute is further strengthening its alignment UN Principles for Responsible Banking. with the Principles for Responsible Banking as it updates two of its key education programmes this summer: the Green Finance Certificate™ “It’s important to remind our members and the world that we’ve and the Professional Banker Certificate. been embracing and championing responsible banking since 1875,” says Institute Chief Executive Simon Thompson. Launched last year as the world’s first benchmark qualification for Green Finance Professionals, the Green Finance Certificate™ sets the “Our founders would have talked about the importance of financial standard for green and sustainable finance professionals worldwide. stewardship – of banks being stewards of depositors’ funds. Now we talk It provides an overview of and introduction to the underpinning about stewardship of people and planet –but it’s the same principle. science, principles and practice of sustainable finance.
“For me, responsible banking is banking with a positive social The revised Green Finance Certificate™ to be introduced in July purpose. It certainly encompasses the traditional banking role 2019 introduces the Principles for Responsible Banking alongside of wealth creation and facilitating economic life in society. It other UN and international initiatives. These include the Sustainable also encompasses aspects of serving customers well and ethically, Development Goals – 17 global goals set by the UN General Assembly in in a professional manner; of treating customers as human 2015 to end poverty, protect the planet and ensure that all people enjoy beings. From the Institute’s perspective as an education provider, peace and prosperity. Chartered Banker Institute course participants are expected to be able to explain the Principles and apply them to their own activities and organisations. charteredbanker.com Summer 2019 17
“We are also currently revising our benchmark Professional Banker Certificate – our foundation banking qualification,” Thompson explains. “It embeds a responsible, professional approach to banking throughout already, but when the revised version is released later this year it will cover the Principles for Responsible Banking too, providing a professional banking qualification for a responsible and digital age of banking.”
Positive professionalism As a professional body, the Institute believes individual behaviour is core to the delivery of responsible banking.
“It’s important that there’s a commitment to responsible banking “We believe the knowledge, confidence, support and stability at the industry level, at the institutional level and at the individual that professional bodies such as ours provide to these individuals level,” Thompson continues. “For us, the individual level is absolutely empowers them to collectively change the culture of financial key – because it’s what most customers experience. They experience services for the better and drive forward ethical standards that customer-focused, ethical, professional, responsible banking done well increase and sustain public trust.” that either works for them or it doesn’t. And that colours their view of the whole industry. So, at that level, the individual is important. But In another piece of work related to trust and reputation, the Institute individuals are important at another level too, because banks and has been asked to lead a project to explore the purpose of retail financial services firms are not sentient beings by themselves. They banking by City regulator the Financial Conduct Authority (FCA), as are collectives of individuals – and every individual has the potential to part of a wider project to explore the purpose of financial services. act for good or for bad – to be a positive agent of change, or otherwise. “As a regulator, the FCA doesn’t try to say what a firm’s particular “As a professional body, we encourage and urge all our members purpose should be,” Thompson explains. “But it is interested in to act as positive agents of change and create a responsible, exploring the overall purpose of financial services and different professional banking system – with banks and banking that we can subsectors of that. It’s particularly keen to see how an understanding all be proud of.” of purpose can impact on organisational culture and employee engagement – and, in turn, on customer trust. What positive In its response to the global public consultation on the Principles impact could that then have on economic outcomes for individual for Responsible Banking, the Chartered Banker Institute suggests institutions and for society?” that the UN consider the role of individuals alongside institutions when implementing the Principles. Professional bodies and similar Restoring trust associations could also be encouraged to review their own codes The outputs of three roundtables in Birmingham, Edinburgh of conduct and programmes of initial and continuing professional and London will feed into an FCA discussion paper on the purpose development, to include guidance on green and sustainable finance. of financial services to be published later in the year.
Changing codes “What we are trying to achieve is not just publishing a discussion Thompson explains: “For example, we are currently considering a paper,” Thompson explains. “Actually, what we’re hoping to do is revision within our own code, which would commit our members to spark a wider conversation between people both inside and to being ‘responsible stewards of our natural resources and planet, outside the industry around the importance of purpose and for current and future generations’. understanding purpose. And hopefully that will demonstrate that an alignment with purpose will be able to restore trust in banking “The Principles might go further and explicitly state the need and financial services.” for organisations to support individuals in developing and demonstrating a personal commitment, who understand they In terms of environmental sustainability, most finance does not must do the right thing by their customer, and that in serving that currently support carbon-reducing or climate resilience activities, customer well they also serve wider society. as set out in the Paris Agreement signed in April 2016. So, banks, insurers, investment funds and regulators all need to change their practices to ensure the industry finances low-emission, low-carbon activities, technology, businesses, services and products.
“For us, the individual “But responsible banking is about more than green or sustainable finance,” Thompson emphasises. “At its heart is responsible level is absolutely key lending, treating our customers fairly, ensuring access to financial services for all, championing diversity and inclusion, and providing – because it’s what most financial education.
customers experience.” “So, while the issues of green and sustainable finance should form a significant part of the effort, these wider issues should not be “Simon Thompson, lost in the development and implementation of the Principles for Chartered Banker Institute Responsible Banking.” CB 18 Chartered Banker The future of banking
SPECIAL REPORT The 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 Excluding this many people from being able to pay for goods the trends towards digital payments and away from and services in cash would cause myriad problems. The viability I notes and coins, how do we ensure that no one gets of rural communities would be threatened, there would left behind? be increased risks of financial abuse and debt and the prospect of loss of personal independence. These two key questions shaped the final report of the Access to Cash Review, which was published in March 2019 to examine the “We don’t believe that leaving this many people behind in a rush future of physical money across the UK. to a cashless society is an acceptable outcome for Britain, and it’s also not what the majority of the people of the UK want,” Natalie Ceeney CBE, the former head of the Financial Ombudsman Ceeney says. Service, led the review, which was set up amid concern about ATM accessibility and startling statistics showing declining cash use Taking action in Britain. To avoid this scenario, the final Access to Cash report proposes a set of recommendations – for the government, for regulators and “Almost every day there is another story in the media of bank for banks. They are: branches and rural ATMs closing, or pubs, restaurants, charities and shops going cashless,” Ceeney says in her foreword to the final report. 1. Guarantee access to cash
“10 years ago, six out of every 10 transactions were cash. Now 2. Ensure cash remains widely accepted it’s three in 10. And in 15 years’ time, it could be as low as one in 10.” 3. Create a more efficient, effective and resilient wholesale cash infrastructure. Financial exclusion The review found that around 17% of the UK population – more than 4. Make digital payments an option for everyone eight million adults – would struggle to cope in a cashless society. 5. Ensure joined-up oversight and regulation of cash. “We found that this was more about need than choice – for many, digital payment options just don’t yet work for them,” Ceeney “One of our core conclusions is that we need to start considering told Chartered Banker magazine. “And we found that this was far cash to be a core part of Britain’s national infrastructure, and not from being restricted to the old. Poverty is the biggest indicator as a simply commercial issue,” Ceeney says. “If we think this way, of cash dependency, not age. And for many, the lack of universal we can envisage more radical solutions to keep cash viable. For broadband and mobile connectivity simply means that digital consumers, we believe it’s both sensible and commercially viable payments aren’t possible.” for the banks and regulators to offer a ‘guarantee’ of cash access – in part by encouraging innovative ways of accessing cash, rather than just protecting increasingly unviable ATMs or, worse, charging consumers for access. “We need to start “To protect cash acceptance, we believe that if we can help the banks considering cash to be keep the costs of cash down as its use declines, and to innovate around cash deposit solutions, then there will be few commercial a core part of Britain’s incentives for retailers to stop taking cash. national infrastructure.” Natalie Ceeney, CBE charteredbanker.com Summer 2019 19
“And, underpinning all of this, we believe that a ‘utility model’ – namely a joined-up wholesale cash infrastructure – could significantly reduce the costs of running the cash infrastructure ELDERS’ ACCESS TO CASH – making cash commercially viable for the banks to fund on an ongoing basis.” Older people are highly dependent on cash for daily purposes and for paying people who do work or Global lessons shopping for them, according to research from The As part of the review, Ceeney and her team visited Sweden and Finance Foundation. China, two of the most cashless societies globally, to understand the challenges of reducing cash in society, and the actions they In its submission to the Treasury Committee’s inquiry into were taking. Consumers’ Access to Financial Services, the independent think tank argues that those in later old age (aged 80 In Sweden, cash use has fallen to just 15% of all payments, compared and over) are now at high risk of financial exclusion. with 34% in the UK. “Our research on older people found both a strong “Issues arose in Sweden when hospitals stopped accepting cash,” preference for cash and for face-to-face interaction as Ceeney explains. “In fact, around half of Swedish retailers say they part of their day-to-day banking,” explains finance expert probably won’t accept cash after 2025. The real death knell for cash and Finance Foundation Senior Associate Hilary Cooper, in Sweden was likely to be retailers and service providers refusing who wrote the submission. “There is also a dislike and cash, not the loss of ATMs and bank branches. This is causing real disinclination to use technology for a whole variety of concern and questions about how to maintain key services for those reasons, including physical and cognitive challenges who can’t or won’t go cashless. The Riksdag [Swedish parliament] and fears over security, theft and mistakes.” has agreed that the cash infrastructure must not be allowed to disappear before parliament is satisfied that no societal detriment The ability to access money and have an effective means will arise.” of paying for life’s necessities must be understood as being as fundamental as being able to continue with In China, cash use has declined 10% over the last two years and basic functions such as washing, dressing and eating. ATMs have plummeted, with 100,000 closures anticipated by 2023. Mobile payments have reached ubiquity, with 92% of consumers “If we do not find a way of ensuring that older people using the mobile and online payment platforms Alipay or WeChat can carry out routine financial transactions, even if it Pay as their primary payment method. is as simple as paying a neighbour for shopping, then all the other support we provide to them with other daily “Interestingly, innovation is playing a role,” Ceeney says. “Alipay tasks may not in the end be sufficient to enable them has developed biometrics as a payment tool to overcome literacy to continue to live independently,” Cooper adds. issues: everyone’s smile is unique, so people can pay for goods by smiling at a camera. “If this ends up pushing people into earlier than necessary institutional or other dependency, it will be costly for “However, China’s central bank has had to remind merchants that them, costly for their relatives and costly for society it’s illegal to reject cash as a payment method. The bank believes as a whole.” that not accepting cash could lead to loss of confidence in cash and be unfair to those who aren’t used to electronic payments.” CB 20 Chartered Banker The future of banking
SPECIAL REPORT How to be an ethical banker Banks must promote a culture of ethical conduct that’s in the best interests of their customers and wider society.
n the 11 years since the global financial crisis, ethical Honesty and integrity principles and practice have become key strategic “Selling in financial services is ethical when it is conducted I priorities for financial services providers. It is highlighted in accordance with the Chartered Banker Code of Professional by the compensation being paid to customers across the Conduct – with integrity, accountability, and with the customer’s globe by bank for past mis-selling, and necessitated significant interests genuinely at the heart of the advice and assistance governmental, regulatory and stakeholder scrutiny on the culture, given,” explains Lynn McLeod, Head of Qualification Development, conduct and ethics within the financial services industry. Chartered Banker Institute.
It’s an important focus for all at the Chartered Banker Institute, “In practice, this means: being honest and trustworthy, acting with members expected to display the highest standards of responsibly, and taking responsibility for what we do; respecting professionalism and a commitment to ethical conduct. This means customers, being sensitive to their circumstances and specific giving due care and consideration to others and putting the public needs, and treating them fairly and having a sound knowledge interest first at all times. of our products and services. It also means listening carefully to the customer’s description of their needs and circumstances; and This is set out in the Institute’s Chartered Banker Code of Professional applying our expertise and exercising our professional judgement Conduct, through which members make a personal commitment to to ensure that products and services discussed and provided really seven core principles, including treating all customers, colleagues and are in the customer’s best interests and serve them well.” counterparties with respect and acting with integrity; observing and demonstrating proper standards of market conduct at all times; and The Institute’s professional qualifications for bankers help acting in an honest and trustworthy manner. individuals learn about and apply the principles set out in the Code.
Professional qualifications These include the Certificate in Professionalism and Ethics, PROFESSIONAL EDUCATION which is designed to develop an individual’s understanding of IN BANKING CONFERENCE professionalism and ethics and the implications of professionalism and ethics for banking in a digital age. The Future of Professional and Responsible Banking in a Digital Age is the theme of Chartered Banker Institute’s “Our Certificate in Professionalism and Ethics will help you develop fourth Professional Education in Banking Conference. your skills in relation to thinking critically about how ethical behaviour can be encouraged in banking, whether through codes Taking place on Wednesday 18 September 2019 at the of ethics, regulation, or through good leadership,” McLeod explains. Great Hall, One Moorgate Place, London, the event will “You will also explore how ethical demands might change with consider, among other things: responsible banking and future developments, such as digital innovations and growing sustainable skills; retraining and reskilling; moving environmental pressures.” to optimisation in apprenticeships and creating value for customers and communities. As well as protecting the interests of customers, colleagues and counterparties, ethical bankers in the 21st century must be firmly The keynote speaker is Mark Hoban, Chair of the UK’s focused on the wider interests of society, as set out in the UN’s Financial Services Skills Taskforce. Principles for Responsible Banking. charteredbanker.com Summer 2019 21
GUIDING ETHICAL CHANGE
Implementing ethics at an operational level involves every aspect of a provider’s business, from leadership, systems and controls to workforce training and product design. An example of this in practice is the RBS ‘YES check’. The bank describes this as a simple tool that asks five questions to guide the thinking behind its decisions and actions.
“Our customers expect each of us to exercise good judgement and to do the right thing,” RBS explains. “We use our values to help us think through decisions and make sure we do the right thing. When in doubt, we use the YES check for guidance.”
QUESTION OF TRUST The five questions are: • Does what I am doing keep our customers “Successfully and the bank safe and secure? embedding the • Would customers and colleagues say I am acting with integrity? Principles for • Am I happy with how this would be perceived Responsible Banking on the outside? • Is what I am doing meeting the standards at the heart of our of conduct required? sector is crucial.” • In five years’ time would others see this as a good way to work? Giles Cuthbert, Chartered Banker Institute
Two of the Chartered Banker Institute’s key education “Having launched the world’s first Green Finance Certificate in 2018, programmes – the Green Finance Certificate™ and the we are now ensuring that the Principles for Responsible Banking Professional Banker Certificate – will be relaunched this summer are being included in all our qualifications. This will not only help to reflect their strengthened alignment with the Principles embed sustainability within our sector, but will demonstrate in a for Responsible Banking. very practical way the social purpose of banking and help reconnect banks and society.” The Institute is also considering a revision to its Chartered Banker Code of Professional Conduct, which would commit our members The Chartered Banker Institute’s Green Finance Certificate™ is to being ‘responsible stewards of our natural resources and planet, designed to help professionals understand what is meant by green for current and future generations.’ finance, products and services, and to help them play a leading role in developing a sustainable banking and financial services industry Embedding the Principles with a renewed sense of social purpose. CB Giles Cuthbert, Managing Director, Chartered Banker Institute, says: “Successfully embedding the Principles for Responsible Banking at the heart of our sector is crucial.
“As the oldest banking institute in the world, we have a long-term commitment to setting and driving upwards the standards for knowledgeable, accountable and responsible bankers and, through, this work our support of the responsible banking agenda. 22 Chartered Banker The future of banking
SPECIAL REPORT Banking on climate change Bankers can and should make a difference, says Bankers for Climate founder Anders Langworth.
he 66.4 million people working in financial services are being urged to join a new global campaign. Bankers for T Climate aims to drive industry ownership and action on climate change and has been launched by Anders Langworth, Deputy Head of Group Sustainable Finance, Nordea, the Nordic financial services group headquartered in Finland.
“The financial industry plays an important role in fighting climate change, since it is truly global and interconnects with all sectors,” explains Langworth, who was born and raised in Sweden and has worked in the financial industry since 2006.
“According to United Nations Environment Programme Finance Initiative [UNEP FI], the transition to low-carbon and climate-resilient economies will require at least $60tn investment from now until 2050. In other words – there will be no lack of opportunities to allocate capital.”
Global ambition Banks and other financial institutions should be leading the way by enhancing their focus on innovative and sustainable financial solutions and setting ambitious targets.
“As an employee in the financial industry, increase your knowledge and commit to support and spread information on sustainable financial solutions across investments, services and activities,” Langworth adds.
“Make time to discuss with your team or unit how you can contribute both to the development of sustainable financial solutions and reducing your footprint. For example, in relation to travelling and use of materials such as plastic cups, catering disposables and printing paper.”
Langworth is urging bankers to join the movement by visiting bankersforclimate.com and signing up. The aim is to reach 30,000 signatures and campaign globally for change by lobbying financial leaders, bankers’ associations, other interest groups and the media. CB
bankersforclimate.com Twitter @bankers4climate charteredbanker.com Summer 2019 23 e-CC Toolkit
culture
ethics
conduct
professionalism
An ethics, culture and conduct toolkit; available to members and designed to enhance your understanding of professionalism and ethics in banking.
Learn at your own pace and access your e-CC Toolkit on the go, on any device, 24/7. To get started login to the members’ area of our website and visit My CPD.
The e-CC Toolkit is part of a wide variety of CPD resources available to support members. To find out more about CPD and membership of the Institute, email: [email protected]
charteredbanker.com 24 Chartered Banker The future of banking
OPEN MIC When is selling in financial services ethical?
In this issue’s Open Mic feature, eight industry professionals explore the ethics of selling.
“In those cases, instead of speaking up, teams learn they have to keep BORIS PLANTIER quiet and bend the rules to hit their targets. That’s when selling practices Strategic Content Manager, Efma, can become unethical. We’ve seen the fallout of cultures like this time a global bankers’ and insurers’ association. and again, with regulators imposing the harshest of punishments.”
“Selling is ethical when the seller carefully listens to his customer’s needs, and then offers him the product or service that best meets these needs. And if the seller doesn’t have the right product RICHARD LANE or service, why not be honest and say so to the customer? He Director of External Affairs, will probably miss out on a sale, but he might win in the medium StepChange Debt Charity. to long term. “At StepChange, we believe that credit should be bought, not sold. “Aggressive sales tactics should be banned. All of us have This means that when people take out credit, they make active, experienced, at least once in our lives, a bank teller trying to upsell conscious and considered decisions based on needs they themselves a product in order to meet sales targets. This is one reason we have identified. would rather go to the dentist than hear what banks have to offer.” “Too many credit products are designed to exploit consumer behavioural bias, are complex and difficult to understand and are sold in pressured retail contexts, both offline or online, that lead ABIGAIL FREEMAN people to make poor decisions. Organisational psychologist and founding partner of organisational consultancy Brink. “Credit can be sold ethically when service providers design their products to take account of consumer vulnerability. StepChange “The word ‘selling’ is so loaded and it usually implies some kind supports the introduction of a ‘duty of care’ for financial services of persuasion. But that’s not always a bad thing. that would make clear that firms should not profit from consumer vulnerability, biases or constrained choices.” “Done well, selling introduces the customer to something that meets a need or solves a problem for them, and respects the customer’s right to say ‘no’ when the product or service isn’t quite right. That’s “Selling is ethical when it when it’s ethical. is focused on meeting the “Done badly, selling overrides the customer’s wishes using all sorts of influencing techniques or ‘dark patterns’ online, which force a needs of the customer.” sale regardless of the customer’s best interests. Typically, this is driven by aggressive sales targets and large incentives to reach Jo Paisley these, against a backdrop of bad company culture where teams can’t challenge their targets, and where anyone who challenges is fired. GARP Risk Institute charteredbanker.com Summer 2019 25
DANNY COX Chartered Financial Planner, “Short-termism and quick Hargreaves Lansdown. gains should never be “Use the word ‘selling’, and it suggest someone being the driving force behind persuaded to do something which may be more in the interests of the seller than the buyer. However, a financial plan doing business.” is totally useless unless you earn the trust of the client, and then influence them to act upon it. That requires skill and experience as well as the technical knowledge to back it up.” Anders Langworth, Nordea
NICOLE BRIGANDI Leadership coach and organisational psychologist; JO PAISLEY founder of Nicole Brigandi Coaching. Co-President, GARP (Global Association of Risk Professionals) Risk Institute. “Ethical selling all comes down to culture. Setting very ambitious sales goals comes with a responsibility for organisations “Selling is ethical when it is focused on meeting the needs of the to listen to their staff, listen to their customers and encourage customer. Since many people find financial decisions confusing, it’s an open culture where people can speak up, share ideas easy to get them to sign on the dotted line. If co-workers are doing or raise concerns. the same, it’s human nature to join the herd. But tolerance of this type of behaviour is falling. “Fear-driven cultures can look like they’re delivering great performance. But they can begin to force really unethical behaviour “A useful test for financial services sales professionals is – can you in people who are otherwise good people. We often later find out publicly defend what you are doing? If not, don’t pursue it. Not only that the employees have ended up doing things they wouldn’t is it wrong, but regulators and courts won’t look on it kindly. normally have done – because of the company’s incentive structure and the pressure and fear inside the organisation.” “Looking through a risk lens – as we do at GARP – means we understand that some of the biggest risks that firms face today rest on decisions involving ethical considerations and the application of appropriate standards to business decision making.” ANDERS LANGWORTH Deputy Head, Group Sustainable Finance, Nordea. LYNN MCLEOD “In all business relations, the sales transaction should be Head of Qualification Development, done in fairness for both parties, both for the small to the biggest Chartered Banker Institute. purchase or deal. “Selling in financial services is ethical when it is conducted “Short-termism and quick gains should never be the driving force in accordance with the Chartered Banker Code of Professional behind doing business. Focus should be on sustainable long-term Conduct – with integrity, accountability, and with the customer’s transactions where you can always look both yourself and the other interests genuinely at the heart of the advice and assistance given. parties in the eyes without even the slightest hesitation. Nordea CEO Casper von Koskull is spot on when he states that, in ethical “In practice, this means: being honest and trustworthy, acting business, it is not just ‘Can I do it?’; it must also be the question, responsibly, and taking responsibility for what we do; respecting ‘Should I do it?’ customers and being sensitive to their circumstances and specific needs. It’s also about treating them fairly; having a sound knowledge of our products and services – and listening carefully to the customer’s description of their needs and circumstances. We need to apply our expertise and exercise our professional judgement to ensure that products and services discussed and provided really are in the customer’s best interests – and serve them well.” CB 26 Chartered Banker The future of banking
Simplifying stress tests
Banks are subject to a glut of stress tests in a variety of formats over differing timescales. Simplifying the system would help both the sector and the regulators, argues Jo Paisley of the Global Association of Risk Professionals.
f bank stress tests were better co-ordinated and harmonised, “The most striking development has been the intensification and both banks and regulators would benefit from better quality proliferation of supervisory stress testing both across and even within Iinformation and lower costs, says risk expert Jo Paisley. jurisdictions, each with its own approach and operating details,” Paisley says. “The most resource intensive of these are the so-called Stress testing was introduced globally after the 2008 financial concurrent capital exercises – such as those run by the Fed, the crisis to check that banks could withstand severe shocks such as European Banking Authority [EBA] and the Bank of England [BoE] – deep recessions, misconduct scandals and geo-political upheaval. where multiple banks must run the same scenario at the same time. Climate-related financial risks are also being introduced into stress tests from this year. “Global banks operating in multiple jurisdictions have felt the brunt of this, spending a great deal of resources to meet multiple unco-ordinated “From a risk management point of view, stress testing is a good demands across different regulators,” Paisley continues. “Even beyond thing,” says Paisley, who is Co-President of the GARP Risk Institute, this inefficiency, there are some undesirable consequences for both part of the Global Association of Risk Professionals. supervision and risk management.”
“It’s forward-looking and provides insights into the riskiness of Uneven landscape a bank in a way that isn’t possible using static financial accounting The fact that supervisory stress tests are on completely different data. When done at an enterprise level, stress testing also brings bases makes them extremely hard to compare and, more importantly, together different disciplines within a bank – for example, risk and undermines the supervisors’ ability to communicate with each other finance – to look at their business in a holistic way. about the risks that they see in their jurisdictions.
“The issue, though, is that banks are subject to a glut of stress For example, stress-testing scenarios cover different horizons, tests. These are exercises that ask for a variety of information in a from nine quarters (the Fed’s Comprehensive Capital Analysis and variety of formats at a variety of times. This means results can’t be Review, or CCAR) to three years (EBA) to five years (BoE). Each test easily compared across jurisdictions, and the lack of co-ordination also rests on different assumptions about how the firms’ balances between regulators is heaping greater demands on banks.” evolve in response to stress.
Common standards “As each stress test has its own instructions/templates/methodology, Supervisors can potentially remedy these issues by creating an banks are in danger of focusing more on template filling than on agenda for developing more harmonisation across stress tests, the risk insights from the stress tests,” Paisley says. “Accordingly, Paisley believes. A common set of standards would benefit banks stress testing becomes a compliance exercise, rather than a risk and regulators alike, helping to build a more resilient financial system. management exercise.
“Overall, there are higher costs and a lower quality of outputs for both banks and supervisors than if there was better co-ordination and “There are some better harmonisation of approaches across regulators.”
undesirable Stress test solutions In a bid to inject more common sense and order into the world of consequences for stress testing, the GARP Risk Institute recently published a Code of Practice for Supervisory Stress Testing. This provides a framework to both supervision promote the co-ordination and harmonisation of supervisory stress tests, with the goal of starting a dialogue between risk practitioners and risk and regulators. management.” “For starters, supervisors could publish the schedule for the stress tests that they intend to run and discuss this at the college of Jo Paisley, supervisors,” Paisley suggests. “This would help banks facing multiple GARP Risk Institute supervisory demands to plan their resources accordingly. charteredbanker.com Summer 2019 27
“To a certain extent, stress testing is educated guess work.” Jo Paisley, GARP Risk Institute
PREPARING FOR THE STORM “Supervisors should also be wary of requiring highly granular projections, which arguably raise the risk of banks being ‘precisely Climate risk scenarios are being introduced to financial wrong’ rather than ‘roughly right’. The granularity required for sector stress tests as part of a global drive led by the regulatory stress tests should be set with consideration to the Bank of England and another 33 central banks. materiality of the risks, the time horizon of the projections required and the costs and benefits involved.” Voluntary guidelines as to how central banks can use scenario analysis to assess system-wide financial risks Greater harmonisation across stress tests could: from climate change have been set out by The Network for Greening the Financial System (NGFS). This is a • Aid the exchange of information between supervisors – as the group of central banks and supervisors collaborating tests would be more directly comparable on the development of environment and climate risk management in the financial sector. • Give banks the ability to produce the information more efficiently From 2019, stress tests for UK insurers will for the first • Improve the quality of the outputs time also include climate risk scenarios.
• Encourage greater investment in strategic IT infrastructure “The financial risks from climate change manifest through two channels – physical risks and transition • Help investors and analysts who need to interpret the results risks,” explains Sarah Breeden, Executive Director for of different stress tests. International Banks Supervision, Prudential Regulation Authority, which supervises more than 1,500 financial Time for change institutions including banks and insurance companies. “Almost as important as the steps firms should take is what they should avoid,” Paisley adds. “To a certain extent, stress testing is “Physical risks arise from damage to property, land educated guess work, so banks and regulators should not take comfort and infrastructure from catastrophic weather-related from asking for an inordinate amount of documentation. Since events and broader climate trends such as heatwaves, plausibility and reasonableness is probably the most one can hope hurricanes, droughts, floods and rising sea levels. for, it also doesn’t make sense to talk about ‘accuracy’ of projections.” “Transition risks arise from changes in climate policy, With many regulators, including the BoE, the Fed and the EBA, now technology and market sentiment as we adjust to a reviewing their approach to concurrent stress testing in the light of lower-carbon economy. lessons learned, it’s a good opportunity to step back and reassess the approach. “We can already hear distant thunder, but we must not wait for the storm to hit,” Breeden adds. “We need to “This is not about weakening standards,” Paisley concludes. “Rather, work together internationally and domestically, private it’s about being proportionate and coherent, and organising stress sector and public sector, to achieve a smooth and testing in a way that adds meaningfully to both supervision and orderly transition.” risk management.” CB 28 Chartered Banker The future of banking
GREEN FINANCE Leading the green finance debate Ensuring banks help mitigate – not contribute to – climate change is now a global priority.
ow can banks and investors help tackle the climate “We want to explore the role of financial services in driving the move emergency and drive the world’s transition to a low- to a low-carbon economy, and helping to develop the infrastructure carbon economy? A new series of essays commissioned and industries that will support this sustainable economy into the by the Chartered Banker Institute is sharing insights future,” explains Simon Thompson, Chief Executive, Chartered and opinions from financial services, academia, media Banker Institute. Hand public policy to help drive informed action. “I firmly believe that green finance values and principles must form the The greatest global challenge foundation for the future of banking and financial services worldwide. Created in partnership with cross-party think tank the Social Market Mitigating the effects of climate change and managing a successful Foundation, the essays feature contributions from high-profile transition to a low-carbon world is, in the view of many, the greatest figures including Sir Roger Gifford, Chair, Green Finance Initiative; global challenge for this and future generations.” Ben Page, Chief Executive, Ipsos MORI; Dr Paul Fisher, Fellow at the University of Cambridge Institute for Sustainability Leadership; Sustained effort Ingrid Holmes, Director and Head of Policy and Advocacy, The Facilitating this transition will require the combined and sustained Hermes Investment Management; Mary Robinson, Chair of The efforts of global bodies such as the United Nations, national Elders and former President of Ireland; Richard Monks, Director governments and the private sector, Thompson adds. of Strategy, Financial Conduct Authority and Dr Jun Ma, Chair of China Green Finance Committee. The Global Commission on the Economy and Climate, a major international initiative to examine how countries can achieve The sustainable finance essays were published on 2 July 2019 economic growth while dealing with the risks posed by climate at the Green Finance Summit in London, an event which brought change, estimates around $93tn of global infrastructure investment together industry experts, policymakers and influencers. Their between 2015 and 2030 will need to be green to meet climate-change discussion focused on investing, accelerating and delivering commitments. Most of this –80% – will come from the private sector, on green finance commitments. facilitated by the financial services sector.
“Green finance is a way for us banks to reconnect with customers and society.” Sir Roger Gifford, Green Finance Initiative charteredbanker.com Summer 2019 29
The green finance sector is already growing rapidly, with the green bond market alone growing by 78% between 2016 and 2017 to $155bn in issuances. WHAT IS GREEN FINANCE?
The Social Market Foundation conducts research and runs events The United Nations defines green finance as the flow of examining a wide range of economic and social policy areas, finance from the public, private and not-for-profit sectors focusing on economic prosperity, public services and consumer to sustainable development priorities. This might include markets. It will oversee the editing, publication and promotion investing in green technologies or extending microcredit to of the sustainability essays. community enterprises involved in environmental projects.
Other authors who contributed essays for the project include Professor Kern Alexander, Chair for Law and Finance, University of Zurich and Fellow at the University of Cambridge Institute for Sustainability Leadership; Peter Blom, Chief Executive, Triodos In a recent Bank of England report on the impact of climate change Bank; Simon Howard, Chief Executive, UK Sustainable Investment on the UK banking sector, Bank of England Governor Mark Carney and Finance Association; Huw Evans, Director General, Association says: “Climate change is a tragedy of the horizon which will impose of British Insurers; Ben Caldecott, Director, Oxford Sustainable major costs on future generations that the current one has no direct Finance Initiative and Nick Robbins, Professor in Practice – incentive to fix. The catastrophic impacts of climate change will Sustainable Finance, Grantham Research Institute on Climate be felt beyond the horizons of most actors. Once climate change Change and the Environment at the London School of Economics. becomes a clear and present danger to financial stability, it may already be too late to stabilise the atmosphere.
“The good news is that with foresight these risks can be managed “Green finance values and in an orderly, effective and productive manner. And the main actors in the quest for sustainability – governments, markets, financial firms principles must form the and regulators – are already transitioning their thinking and actions.” foundation for the future Global standards The Task Force on Climate-related Financial Disclosures (TCFD) was of banking and financial set up in 2015 by the Financial Stability Board to develop voluntary, consistent climate-related financial risk disclosures, and is emerging services worldwide” as the global, voluntary standard in this area. Simon Thompson, The UK’s new Climate Financial Risk Forum could also be used to agree a common approach to climate risk reporting on issues and developing Chartered Banker Institute voluntary market standards or guidance for such reporting.
The Forum, which met for the first time in March 2019, was set “In the UK, climate change is now very clearly on the radar of financial up by the PRA and FCA to build capacity and share best practice regulators,” Thompson says. “Many central banks from around in advancing financial sector responses to the financial risks from the world are also joining forces to warn about the financial risks climate change. of climate change.” The Chartered Banker Institute’s Green Finance Certificate™, Climate risk launched in 2018, is the world’s first benchmark qualification for The UK’s Financial Conduct Authority (FCA) and Prudential green finance. This encourages financial services professionals to Regulation Authority (PRA) are leading a body of work in this area, enhance their knowledge of green finance; develops the pool of green in consultation with industry. finance professionals; and helps position the UK as the global hub for green finance. They warn that the effects of climate change and the associated transition to a low-carbon economy may have a major impact “The change we seek in mainstreaming responsible, sustainable on financial markets and on products that serve those markets. finance needs to be led by increasing numbers of finance professionals with an understanding of the critical role of financial services in This April, the PRA – part of the Bank of England that ensures supporting the transition to a sustainable, socially just world,” says financial firms are well capitalised, have adequate risk controls in Thompson, who is also contributing to the essay series. “Professionals place and are run in a safe and sound way –published a Supervisory with the knowledge and skill of finance to be able to develop and Statement setting out new expectations for banks and insurers deploy products, services and tools that will mobilise capital to on managing the financial risks from climate change. support that transition, address climate-related and societal risks, and help customers and communities direct investment to responsible Its motivation is that while firms are enhancing their approaches and sustainable finance opportunities.” CB to managing the financial risks from climate change, few are taking a strategic approach that considers how actions today affect future Download the sustainable finance essays from the Institute’s financial risks. website at bit.ly/2J86Ql3 30 Chartered Banker The future of banking
GREEN FINANCE CERTIFICATE The world’s first benchmark qualification for Green Finance
The Green Finance Certificate is designed for financial services professionals wishing to enhance their knowledge and expertise of green finance. There are no entry requirements for the single-module Certificate, and no prior knowledge of the green finance sector is assumed.
Upon completion of the Green Finance Certificate you will have a comprehensive overview and understanding of the evolving green finance sector, covering:
• Scientific background to green finance - the transition to a low-carbon world, including MORE INFORMATION change/risk • Key concepts in green finance, including stranded assets For further information visit: www.charteredbanker.com/green • Green finance principles, including the UN Sustainable Development Goals Alternatively please contact the Institute’s • Risk management in green finance Membership Engagement Team via: [email protected] or +44 (0) 131 473 7777. • Green finance products and services (banking, insurance and investment). charteredbanker.com Summer 2019 31
THE DAVIDSON COLUMN
Driving change, realising impacts Eric P. Usher, Head of United Nations Environment Programme Finance Initiative, offers insight on the UN Principles for Responsible Banking.
ver the past year, 28 banks from more than it also prevents and addresses its areas of risk that may two dozen countries have stepped forward cause adverse impacts on society. O to redefine the role of the banking industry. Working together as members of the United The development of the Principles for Responsible Nations Environment Programme Finance Initiative Banking included not only the views and perspectives (UNEP FI), they have developed the forward-looking UN of the 28 founding banks, but also those of more than Principles for Responsible Banking. 250 other banks along with civil society, other financial institutions, banking associations, technical experts and This innovative framework enables any bank, whatever others. They took part in the extensive six-month public its starting point, to align its business strategy with consultative process that shaped the Principles. GREEN FINANCE CERTIFICATE society’s goals – creating a new era of ‘responsible banking’. This is vitally important now that the Now finalised, the Principles for Responsible Banking global community has set high bars for attainment will be officially launched during the UN General The world’s first benchmark qualification for Green Finance of the Sustainable Development Goals (SDGs), Paris Assembly in New York City on 22 September 2019 at a Climate Agreement, and other national, international high-level event attended by more than 40 bank CEOs, and regional societal development and sustainability representing all five continents. goals. Why? Because the needs and demands of a bank’s clients, customers, employees and investors are now To date, a growing number of banks have officially shifting as this sustainable development agenda takes committed to implement the Principles for Responsible a stronger hold, and a new sustainable development Banking. Once launched, this mechanism will initially economy emerges. empower 100 banks – jointly representing more than US$35tn or 20% of the global banking sector – to set This is not only important for society at large, but for corporate-level business targets that are aligned with banks themselves; the Principles for Responsible achievement of the SDGs and the Paris Climate Agreement. The Green Finance Certificate is designed for financial services professionals wishing Banking have been designed to enable today’s banking to enhance their knowledge and expertise of green finance. There are no entry industry to both leverage and drive this new sustainable This will create the momentum for a flood of responsible requirements for the single-module Certificate, and no prior knowledge of the development economy. This in turn creates new business financing activities – and will result in the scaling opportunities for a bank – and increased value for its up, at rates the world has never experienced before, green finance sector is assumed. clients, customers, employees and investors. It also of financial flows to economic activities that contribute enables a bank to stay ahead of the related changes to to achievement of society’s goals. And, in so doing, will Upon completion of the Green Finance Certificate you will have a comprehensive overview and its regulatory environment. Banks that do not respond also improve our planet and the lives of those that CB understanding of the evolving green finance sector, covering: to this shifting operational environment, and do not depend on it worldwide. harness these new opportunities, will struggle to remain relevant and competitive into the future. To learn how your bank can become a Signatory • Scientific background to green finance - the of the Principles for Responsible Banking, and to transition to a low-carbon world, including MORE INFORMATION The important role that banks can play in realising see the full list of current Signatories and Endorsers, change/risk society’s development goals should not be visit unepfi.org/responsiblebanking underestimated. More than two-thirds of all financing • Key concepts in green finance, including For further information globally is provided by banks; in developing countries stranded assets this jumps to more than 90%. In fact, banks directly visit: www.charteredbanker.com/green ABOUT UNEP FI: • Green finance principles, including the interact with and influence more corporate clients and individual customers than any other industry. This The United Nations Environment Programme Finance UN Sustainable Development Goals Alternatively please contact the Institute’s Initiative (UNEP FI) is a partnership between United Nations Membership Engagement Team makes the banking industry a crucial and powerful ally • Risk management in green finance in achieving society’s development and sustainability Environment and the global financial sector created in the via: [email protected] or +44 (0) 131 473 7777. wake of the 1992 Earth Summit with a mission to promote • Green finance products and services goals. Additionally, aligning its strategy in this way sustainable finance. (banking, insurance and investment). means not only that the bank takes into consideration people’s economic or financial necessities, but that 32 Chartered Banker The future of banking
NEW PRESIDENT Your Institute, your future
New Chartered Banker Institute President Bill similar words in the 1930s and another in the 1950s. The late 1800s weren’t short of upheavals either. From time McCall outlines his vision for the next two years. to time, lenders will make bad loans, underestimate risk, overstretch assets, and forget the import of balancing assets and liabilities – and the fine line between uring his 30 years connected to the Chartered liquidity and solvency. In any cycle, access to capital Banker Institute, new President Bill McCall will tighten at some point and the likely consequences has seen tremendous change and upheaval are well known.” within the industry. D There will always be challenges and opportunities, “The changes are enormous and most of the firms and but the focus for the Institute is to remain loyal to its banks I worked with are either gone or subsumed into founding principles. a larger entity,” says McCall, a seasoned corporate financier and independent director who has chaired more “The first thing is for the Institute to prevail in its mission, than 50 private-equity-backed companies across the set out by the original founders in 1875 and incorporated UK, Scandinavia and North America. in our Royal Charter,” McCall says. “This includes the education and professionalisation of bankers and care for “It has been a decade since most people in the world were clients and customers. That we continue in that mission aware of a financial crisis. For those who worked through is central, but how our Institute delivers has changed it, there will always be an element of having being there materially and will continue to do so.” and post-trauma stress. I still recall the 1987 stock market crash in a similar way, and the dot-com boom and bust New structure of the late Nineties. Yet for many of our members, they As part of its continued evolution, the Institute, which weren’t in the profession 10 years ago – and it’s ancient is a registered charity, is introducing a new governance history to them in relative terms.” structure to increase engagement with its 33,000- plus members. Currently the Institute’s Council, Rooted and resilient comprising elected Institute members and lay At almost 150 years old, the Chartered Banker Institute representatives, act as Trustees, responsible for has been the constant, McCall says, and has survived ensuring the Institute’s activities are compatible with the major trauma of war, recession, political unrest its charitable aims, and that it complies with relevant and crises. Looking ahead, the key is to be continually legislative and regulatory requirements. prepared for further change. In line with current corporate best practice, the new “What we should be is ready for is another setback, structure will see this trusteeship role administered by recession, shock – from an area we haven’t thought a separate Board of Trustees, which will deal with of – and that will surprise us,” he suggests. corporate governance and oversight, working closely with the permanent Executive team led by Chartered “The cycle is the cycle, and in my short time frame as Banker Institute Chief Executive, Simon Thompson. President, we may have such an event. A predecessor of Outgoing Institute President Robert Dickie led the mine on Council [the Institute’s governing body] wrote working group set up to review governance structures and this will be his legacy to the Institute, McCall says.
He adds: “The really important part of our new structure is the newly created Membership Forum. Chaired by “The first thing is David May, and Vice Chair Helen McKay, it provides a true representation of the 33,000-plus members for the Institute to we have in the UK and abroad. prevail in its mission, “Delivering the governance well through the Board set out by the original of Trustees, and increasing membership engagement via the Membership Forum through wider digital channels, founders in 1875.” will all result from the new structure.” charteredbanker.com Summer 2019 33
“My challenge to all members is to take that different perspective and see it as an opportunity to serve, not just be served.”
Three missions enough to cover my Continuing Professional A President’s tenure lasts two years, and McCall says Development requirement, dipping in and out of events it is invaluable to plan around several actionable that interested me and, wrongly, very self-centric about changes (instead of approaching every issue with the what the Institute was doing for me”. same strategy). This helped him focus his presidency’s key points. It was Anton Colella, the then Chief Executive of The Institute of Chartered Accountants of Scotland, who “Three things – first, our Charter mission and the showed McCall the error of his “wrong-headed thinking”, direction of travel continues to be to educate and promote during a conversation about the reputational hit professionalism,” he says. “Second, the international to bankers post the financial crisis of 2008. influence and collaboration we have been building in important areas, such as Australia and elsewhere, has “I had to be inside the profession to assist, not just to be a continued focus. a bystander on a distant orbit,” McCall recalls.
“And the third thing is our standing full square behind “After meeting with Simon and some of the then the development of green finance initiatives, given the Councillors, I realised that my stance should be the other importance of sustainable finance underscored by the way around. That was 10 years ago and I learned a great Governor of the Bank of England and United Nations deal from fellow Council members who have willingly some time ago.” given their time and skills freely over that decade – especially those from ‘outside’ the profession.” CB McCall hopes the new structure will borrow the meaning of the Royal Military Academy, Sandhurst, motto: “Serve to Lead”.
He says: “By individuals serving both our members and BILL MCCALL’S STEPPING STONES TO PRESIDENCY the Institute, we will lead as good stewards and then be relieved by the next wave of talent in due course. 1987 Completes CIOBS Diploma and Associate exams at Clydesdale My challenge to all members is to take that different Bank and joins stockbroker Campbell Neill & Co. perspective and see it as an opportunity to serve, not just be served.” 1990 Elected an Individual Member of the London Stock Exchange and thereafter Chartered Fellow of the Chartered Institute These values are reflected in the Institute’s 2025 for Securities & Investment. Foundation, which supports talented young people from under-represented groups to pursue a career 1994 Participates in buyout of investment firm Charterhouse Tilney in banking. from RBS.
Changing stance 1997 Director of former merchant bank Singer & Friedlander. Over the past decade at the Chartered Banker Institute, McCall has served as Councillor, Vice President and 1999 Becomes a “pluralist” and sets up corporate finance advisory Senior Vice President. He has seen Institute Chief firm McCall & Partners. Executive Simon Thompson and his team lead significant changes. 2007 Joint founder of institutional broking firm McCall Aitken McKenzie.
Before joining the Council, McCall admits he was 2009 Elected to the Chartered Banker Institute Council. “a passive user of the services offered by the Institute, CERTIFICATE IN BANK STRATEGY, OPERATIONS AND TECHNOLOGY
ENROL NOW TO TAKE THIS EXCITING CERTIFICATE
DEVELOPED FOR A DIGITAL AGE
AIM To develop your knowledge, understanding and skills relating to bank strategy, develop your ability to analyse the external and internal bank environment, evaluate strategic options, develop strategy, and manage its implementation through effective leadership and management of operations. A key theme of the Certificate is the impact of digital innovations on bank strategy and operations, and how banks can harness advances in technology to help them grow and flourish in an uncertain future.
Can be completed Upon completion you will be awarded a certificate and within as little as become a Certificated member of 12 months the Institute
Blended learning If you wish to study further, credits approach with attained can be used towards core reading, the Advanced Diploma in online resources, Banking and Leadership and an interactive, in a Digital Age online Study Guide
For further information please visit: www.charteredbanker.com
Alternatively please contact the Institute’s Membership Engagement Team via: [email protected] or +44 (0) 131 473 7777. charteredbanker.com Summer 2019 35 CERTIFICATE IN BANK STRATEGY,
OPERATIONS AND TECHNOLOGY FINTECH FOCUS Finance in ENROL NOW TO TAKE THIS EXCITING CERTIFICATE the fast lane DEVELOPED FOR A DIGITAL AGE From cars to kettles, the internet of connected things and the roll-out of 5G technology will transform financial services.
AIM y 2020, the ‘Internet of Things’ (IoT) will consist of more Enhancing experiences To develop your knowledge, understanding and skills relating to bank strategy, than 20.4 billion devices, including mobile phones, wearable Visa is particularly excited about the future of the ‘connected car’ develop your ability to analyse the external and internal bank environment, evaluate Btechnology, home appliances and cars. and the expansion of in-vehicle payments. According to research strategic options, develop strategy, and manage its implementation through effective leadership by Gartner, some 250 million connected cars will be on the road and management of operations. A key theme of the Certificate is the impact of digital innovations on Each device is a potential way to pay, using contactless and mobile worldwide by 2020. payment technology. bank strategy and operations, and how banks can harness advances in technology to help them grow “We believe this will enhance consumers’ everyday experiences and and flourish in an uncertain future. Drivers can already use their car to pay for fuel, food, parking, tolls make paying for things, such as gas and parking, easy and painless,” and more using in-car digital wallet technology from providers Mundy continues. “Drivers no longer need to rummage through such as Visa. their wallets to pay by pump or meter; and regular pain points for drivers will be removed.” Can be completed Upon completion you will be awarded a certificate and “For payment technology providers, the growing Internet-of- within as little as become a Certificated member of Things universe presents a wealth of opportunities to re-imagine 12 months the Institute the payment experience,” says Jeni Mundy, Regional Managing Director, UK & Ireland, Visa.
“Whether it’s the ability to turn any inanimate object Blended learning If you wish to study further, credits such as our fridges, kettles and home assistance devices approach with attained can be used towards into a point of sale, or the embedding of payments into core reading, the Advanced Diploma in messenger apps such as Facebook Messenger, we remain online resources, Banking and Leadership focused on exploring how these new technologies can and an interactive, in a Digital Age enhance the payment experience and make it easier, online Study Guide simpler and safer for consumers and merchants to engage in trade.”
Payments will be at the core of this new commerce experience, enabled by connected devices such as cars, phones, home appliances – and even bracelets and rings.
For further information please visit: “There are countless opportunities to make payments even more immediate, intelligent and rooted www.charteredbanker.com in a given experience than they already are today,” Mundy adds.
Alternatively please contact the Institute’s Membership Engagement Team via: [email protected] or +44 (0) 131 473 7777. 36 Chartered Banker The future of banking
FINTECH FOCUS
Connecting cars to a digital payment credential called a “token” “The availability to create connections digitally will also help enables drivers to view and complete purchases from smart parking support rural communities and ensure they’re included in the ever- meters and fuel pumps directly from their in-car consoles. growing digital economy. At Visa, we’re proactively looking at how we can ensure those communities benefit from digital payments. “We believe the connected car will make an important entry point In Mexico, through a partnership with the world’s largest bakery, for linking to the ever-expanding universe of data, smart devices and Bimbo, Visa is upgrading 70,000 ‘mom and pop’ corner stores the consumer benefits they yield,” Mundy says. “Apart from related enabling them to make and accept digital payments, including industries such as fuel, parking, transportation, the expansion of supply chain orders.” the connected car and other smart and internet-enabled transport systems will support the development of thriving cities.” Motoring ahead Globally, the IoT payments market is forecast to grow at an average Community benefits of 75% a year over the next five years, reaching US$410bn by 2023, This smart payments revolution will also bring challenges in areas according to Juniper Research, a mobile, online and digital market including security and inclusion. research specialist based in Hampshire, UK.
“We all know that security is essential for digital commerce to exist “This is up from an estimated US$24.5bn in 2018 and the biggest and thrive, yet we also know that we have to find the balance between growth will come from in-vehicle payments,” explains James Moar, security and convenience,” Mundy acknowledges. “Visa is investing in Lead Analyst at Juniper Research, in the report: IoT in Finance: and introducing a new suite of solutions that meet consumer demand Payments, Insurance & Banking Opportunities, Transaction for safety and control of their money, while helping merchants Forecasts 2018-2023. to be able to authenticate payments and minimise risk. Our goal is to minimise friction in the consumer purchase experience and “The US and China will ultimately be the largest single markets for enhance payment security at the same time.” in-vehicle payments; while China will near US$50bn and the US will be more than twice that. Longer term, Visa believes the increasing adoption of mobile and internet technology will be fundamentally positive for communities Contextual insurance already has a strong presence in the motor around the world. This includes widening access to financial services by insurance industry, with providers such as By Miles and Metromile making it easier to send or receive money or pay with mobile devices. offering per-mile insurance for low-mileage drivers in an effort to attract low-liability drivers away from traditional insurers, Moar adds. “For example, Visa’s mobile-network product, mVisa, is overcoming bank branch scarcity by helping people access money or initiate a “These universally require the installation of telematics devices transaction at any merchant with a Visa logo in Rwanda, Egypt, India in vehicles, to allow precise tracking of distance travelled and, and Kenya,” Mundy explains. in some cases, vehicle speed and driving behaviour,” Moar explains.
Accelerating growth Installing telematics technology in cars and other devices also “This economy of things makes billing on a per-use basis possible. will transform the “Personalised health insurance can also be provided,” Moar adds. “Some vendors, notably Vitality and John Hancock, offer discounts commercial landscape to customers who can demonstrate increased levels of activity with new behaviours, through use of smart wearables.” IoT transactions in the form of mobile payments are already new expectations and commonplace in several geographies and Juniper Research expects more than 450 billion transactions to be processed globally by 2023. new business models.” However, 80% or more of these transactions in any given year will be made on smartphones and tablets, rather than on devices that most Philip Clarke, people consider constitute the IoT. Hunch charteredbanker.com Summer 2019 37
5G technology – fifth-generation mobile wireless systems promising speeds of up to 20 times faster than current 4G technology – will “The extreme speed paves also transform financial services delivery. the way for innovations The UK government is investing £1bn in a national programme of 5G testbed facilities and trials from 2019, while device manufacturers in artificial intelligence, have already announced the first phones. robotics and large-scale In a recent report, Barclays forecast that 5G technology could boost the UK economy by up to £15.7bn by 2025. Internet of Things usage.”
The sectors expected to see the highest revenue growth are Barclays distribution (£3.6bn), manufacturing (£2bn), professional services (£1.1bn) and business services (£1bn). high, but only 9% of businesses were planning to allocate sufficient When Barclays launched the report in April, the bank said: levels of resources to take advantage of the imminent roll-out “The extreme speed paves the way for innovations in artificial of a national 5G network. intelligence, robotics and large-scale Internet of Things usage. For businesses, this means more extensive machine-to-machine Building on success communications, using self-driving vehicles and better overall The growth of the ‘Economy of Things’ – payments triggered by infrastructure – amongst other new applications.” smart devices connected to the Internet of Things – means payments are set to change as much in the next 10 years as they have in the 5G future last 20, according to Pay.UK. This is the UK’s leading retail payment The report, 5G: A transformative technology, is authored by Sean authority and the new home for Bacs, Faster Payments, and cheque Duffy, Head of Technology, Media and Telecoms at Barclays Corporate and credit clearing. Banking. He says: “5G has the capacity to boost the UK economy, keep Britain globally competitive and directly add revenue to businesses, Last year it co-authored a report with strategic consultancy Hunch, but only if firms act quickly. 5G will enable new and existing celebrating the tenth anniversary of 24/7 real-time payments in the technologies such as the Internet of Things, Big Data, connected UK and looking ahead to the future. and autonomous vehicles, smart cities and homes and augmented and virtual reality to reach their full potential.” Philip Clarke, Founding Partner of Hunch, says: “The future of real-time payments will let your fridge order and pay for The user experience of mobile internet will be completely your weekly essentials when they run out, and your home sell energy different with 5G, Duffy adds. Ever-greater speeds and much back to the grid when you’re not in. This economy of things will lower latencies will allow for the download of a high-definition transform the commercial landscape with new behaviours, new (HD) movie in 10 to 40 seconds, for example, or the upload expectations and new business models that change the way we buy, of a 1 gigabit video to YouTube in under 15 seconds. provision and use an emerging generation of products and services.
“A 5G network will, at a minimum, support around one million “Monetising these opportunities will require increasingly open access devices for every square kilometre, connecting them all to to high-volume, high-resilience, real-time payment services. Having the internet at the same time,” Duffy explains. “That function will pioneered and scaled Faster Payments, the UK’s payments industry revolutionise the growing Internet of Things, helping anything to must now look forward to a brave and bold second act – building on get online – an individual’s clothes, smartwatch, healthcare devices its success to enable a new wave of disruptive businesses.” and car, for example, or infrastructure such as traffic lights, parcel deliveries, warehousing – the list is almost endless.” According to Pay.UK, since Britain’s Faster Payments service went live on 27 May 2008, the number of Faster Payments sent every In a survey of more than 500 medium-sized and larger UK hour has soared from around 3,000 per hour to more than 255,000 businesses, Barclays found that awareness of 5G was reasonably per hour. CB 38 Chartered Banker The future of banking
SAFETY IN BANKING Psychological safety in successful teams Team members who are empowered to share ideas, take risks and be themselves are top performers enjoying a culture of psychological safety. Firms who ignore this concept do so at their peril.
here’s a leading predictor of high- fear,” explains Brigandi, who is also a leadership coach. performing, healthy teams and organisations, Brigandi recently worked with the Financial Conduct called ‘psychological safety’. It’s the ability Authority (FCA) to engage the industry in a dynamic to question, speak up, and most importantly, dialogue on creating healthy culture in firms, including listen up to challenging or different views. how to encourage a ‘speak up, listen up’ mindset TIt’s one of the factors helping some banks consistently in financial services. outperform the market, while others that don’t take time to cultivate it are more susceptible to major breaches “Team members aren’t afraid to speak up. They’re of conduct. not afraid to take risks when it comes to raising any concerns or sharing ideas. And you’ll find that leaders In a member webcast, the Chartered Banker Institute and peers in a team with high psychological safety also explored the concept of psychological safety with have the courage to listen to perspectives that differ organisational psychologists Abigail Freeman and from their own.” Nicole Brigandi. Organisational oxygen “Psychological safety describes a group environment As the founder of organisational consultancy where individuals are not hindered by interpersonal Brink, Abigail Freeman helps global corporates and governments to cultivate the mindsets and the skill sets that they need to be innovative.
Freeman describes psychological safety as being rather like oxygen.
“It can be hard to spot,” she says. “But we know when it’s not present. Typically, when companies don’t operate well or have major compliance issues that we hear about in high-profile press stories, we find out later that psychological safety wasn’t present.”
Wells Fargo is a good example. The California-based financial multinational famously set goals that were aggressive and audacious, with incentive schemes to motivate teams to hit these targets.
“We all have targets in our work and sometimes they can be very healthy and helpful,” Freeman says. “The challenge with Wells Fargo was that no one could challenge those targets. And it began to force really unethical behaviour in employees who were normally good people. People were opening fake accounts to hit their targets and at one point it was found that 3.5 million false accounts had been opened. This charteredbanker.com Summer 2019 39
time last year, the bank was a hit with one of the harshest punishments ever handed down by the Federal Reserve. “It can be hard to spot. But we It turned out that some employees had reported the unethical behaviour to their managers and even some know when it's not present.” to the CEO – but they were fired for speaking up.” Abigail Freeman, Google groundwork Brink When Google spent two years studying 180 teams in an initiative called Project Aristotle, it found that psychological safety was the strongest predictor of high-performing teams. Ultimately, the company resilience. Leaders have a role to play in encouraging reported that: ‘Who is on a team matters less than how learning at the outset.” the team members interact, structure their work, and view their contributions.’ An update to the UK’s Corporate Governance Code earlier this year highlights the importance of Brigandi says: “Even if you have all the best talent a healthy culture in delivering long-term, sustainable on one team, if they can’t come together to performance and trust in business. communicate, work and share ideas, they’re more likely to be outperformed by a team of lower performers who Freeman explains: “Boards are now expected to lead have learned to collaborate effectively. Ultimately, firms by example and promote the desired culture. Even the which underestimate the importance of team dynamics chair has a role to promote a culture of openness and are at a huge disadvantage to their competitors.” debate. So, these more intangible things are beginning to be hard-baked into how we tackle governance Inviting multiple perspectives and being open and in organisations.” honest is key to promoting psychological safety. The FCA views culture as a widely accepted root cause of “Try to ask more open questions – and ask people outside some of the major complex failings in financial services your normal circle for their perspective – more diverse over the past couple years, Brigandi adds. Equally ideas are likely to be found at different levels, roles committed to understand culture, the Banking Standards or functions in the organisation,” Brigandi says. Board recently released its third annual Assessment, “designed to inform, support and challenge banks and “Try to work in a more candid and respectful way,” she building societies that are committed to managing advises. “That doesn’t mean insulting people, but it their cultures and raising standards of behaviour and does mean being able to give open and honest feedback. competence across the sector”. Being able to speak up if you disagree with an approach or decision can help surface blind spots or expand While psychological safety is relevant to all industries thinking – and that takes a lot of courage.” and organisations, firms that are committed to adopting healthy team practices stand a better chance to weather Language of learning current disruptions in the banking sector. CB At Brink, one of Freeman’s approaches to cultivating more safety involves avoiding the language of failure.
“The word failure is quite emotive, highly emotional and SEVEN TIPS FOR PSYCHOLOGICAL SAFETY has pretty negative connotations,” she says. “Instead, we use the language of learning. If you tested a hypothesis 1. Encourage a culture of speaking up and sharing and it didn’t work, then that’s not a severe failure. That’s different perspectives a disproven hypothesis. So, we try to keep it much more focused on the science and learning instead of using 2. Avoid the language of failure – a disproven hypothesis highly personal and emotional words like failure.” is less emotional than an epic failure
Framing work as a learning journey rather than 3. Build a learning environment; turn mistakes into learning an execution problem is vital, Brigandi adds. opportunities and focus on the problem, not the person who made the mistake “Make it part of the process to learn from work and not be solely focused on execution,” she suggests. 4. Appoint organisational ‘canaries’ whose role is to spot issues “Of course, you want to deliver the end product. But and share challenging, divergent views there is tremendous value in reflecting on the factors of success, failure and how to improve. Particularly in 5. Demonstrate that different views will be heard, welcomed, times of failure, it’s critical to get curious about what and acted upon happened and what needs to change to increase team 6. Practise and promote humility and coping skills
7. Ask open questions and give open and honest feedback. 40 Chartered Banker The future of banking
YOUNG BANKER OF THE YEAR Today’s Young Bankers – tomorrow’s stars Meet our finalists ahead of the Chartered Banker Institute’s Young Banker of the Year Awards in September.
Nika Muller Lauren Fuller
Nika currently leads technology innovation Lauren is a telephony-based Mortgage Adviser projects at NatWest, driving products from with the Royal Bank of Scotland in Norwich. inception and origination into fully scaled solutions. She also chairs the NatWest Women’s “I have worked for almost four years with RBS, Network Senior Leadership Committee. where I have fallen in love with the brand and the work we do,” Lauren says. “I currently help “I’m passionate about diversity and have launched bank initiatives customers with their home-buying and ownership needs, from including a project to help women who took career breaks to Ulster Bank to First Active.” successfully start and scale their own businesses,” Nika explains. She is part of Norwich’s Great Place to Work Team, organising She has 15 years’ global leadership experience within Europe, the charity and volunteering events, and the See It Raise It Fix It Team, US, the Middle East and Africa. This includes private equity and which tackles challenges pointed out by colleagues. leveraged finance deal origination and transaction across all sectors, ranging in deal size from £50m to £1bn. “I’m also part of the RBS Women’s Network, where I sit on the development committee as a strategy officer. And finally, I am Nika is also a successful independent venture capital investor and a member of the Chartered Banker Institute Forum.” serial entrepreneur, with a focus on the social enterprise and plant- based sectors. In her spare time, Lauren is studying for a Master’s degree in Innovation, Leadership and Management from the University of York.
Sarah Walker Paul MacLean
Sarah Walker is a Branch Director for Santander Paul joined the Royal Bank of Scotland in 2005 and started her banking career nine years ago after completing SQA Highers. when she was 18. “I have accumulated experience in several divisions She joined Santander as a customer service of the bank, recently taking on a secondment as adviser and has worked in many different roles Capability Partner to build Agile Capability across across multiple locations. A passion for helping people was her Personal Banking,” Paul explains. motivation for joining the banking sector. “From 2014 until 2018, I was Senior Implementation Manager “I was inspired to try to make a difference to people’s lives and for Commercial & Business Banking, leading a team to deliver help in whichever way I could,” Sarah says. “I am the Women in a portfolio of projects that contributed to the successful launch Business lead for my region and this is something I’m extremely of the Business Banking Switch scheme, which was mandated passionate about. by the European Commission.”
“I feel that women should empower other women – and this Before this, he worked on several innovative change projects, is something I strive to achieve in my workplace and among including the design of the proposed Williams & Glyn challenger my colleagues.” bank and creation of a sector strategy.
Sarah, who is currently based in Bristol, is a keen football supporter “I am a keen learner and am now working towards Chartered Banker and enjoys travelling in her free time. status with the Chartered Banker Institute,” Paul adds. charteredbanker.com Summer 2019 41
A round of applause is due to our Stuart McLaren semi-finalists for their excellent Stuart is a Corporate Relationship Director at work in this tight race. HSBC UK. His role involves managing client relationships and executing debt transactions in support of investment, acquisition and restructuring requirements for clients across the Shabir Ravji North East of England with revenues ranging from £10m to £350m per annum. Shabir is a statistical modelling professional who is passionate about the use of analytical “After leaving school at 17 and opting to go straight into the tools and scientific methods to illuminate workplace, I spent four years at a local independent financial real-world problems. advisory firm before joining HSBC in 2010,” Stuart says.
“After my honours degree in Physics and He started out as an inbound call handler and worked his way Astronomy from the University of Glasgow in 2011, I embarked on up to his current role, which involved a relocation from Edinburgh a PhD project,” Shabir explains. “This was a collaborative project to the North East of England. between Honeywell and the University of Glasgow, with the goal of applying experimental and theoretical physics techniques Outside of work, Stuart enjoys spending time with his family. to solve problems faced by engineers.”
Shabir subsequently went on to work as a statistical programmer in the pharmaceutical industry, analysing clinical trial data. Henry Shuen
He joined the Credit Risk team at Sainsbury’s Bank in 2017 Henry currently works as a business and data as a senior modelling analyst, and has worked across a number analyst at the Royal Bank of Scotland. of high-profile projects in the organisation. “I was awarded an MSc in Carbon Management This includes working as a lead modeller in the redevelopment from the University of Edinburgh and have of the application scorecard suite for Argos Financial Services. a real passion for combating sustainable issues, specifically climate change mitigation,” Henry says. “I conducted In his free time, Shabir volunteers with Move On in Glasgow and a carbon audit for the Edinburgh Sculpture Workshop and proposed a Edinburgh, a charity that mentors and supports vulnerable youths, district heating business plan for the Heriot-Watt University Campus. and he is also a keen runner. “I would like to, and am pursuing, a career combining the use of data with the world of sustainable development.”
Dan Stephenson Henry was brought up in Hong Kong, where he was a volunteer for the World Wildlife Fund. He currently lives in Edinburgh and Dan currently works as an analyst within the has fundraised for various charities, including the British Heart Retail Distribution division of CYBG, providing Foundation and ME Association. management information and insight to the wider business. He is an avid sportsman and plays for Galaxy Scotland, a local touch rugby team. He also enjoys playing football, squash, “My primary focus at present is investigating how wake-boarding – and bagging Munros (mountains exceeding customers interact with the bank through online aggregators and the 3,000ft) across Scotland. ways in which we can further improve their experience,” Dan explains.
“I am finding it immensely rewarding to work directly on projects that have a meaningful impact on how customers interact with CYB.” “I would like to, and am Since graduating with a BSc Economics degree from the University pursuing, a career combining of York in 2015, Dan has worked in the automotive and insurance sectors. the use of data with the
In his spare time, he enjoys travelling at home and abroad, tinkering world of sustainable with “all forms of technology – and real ale.” development.” Henry Shuen, the Royal Bank of Scotland 42 Chartered Banker The future of banking
VIDEO BANKING Vision for video banking Video banking will rehumanise the digital experience, offer more choice to customers as branch networks shrink and create new career paths for staff.
ith more than 80% of financial institutions planning VIDEO PROFESSIONALISM to offer video banking services in the future, there are implications for skills, security and Video banking is part of the Chartered Banker Institute’s customer satisfaction. new Advanced Diploma in Banking and Leadership W in a Digital Age. US-based video technology specialist Vidyo offers real-time video and cloud-based services that enable high-quality video The diploma’s Personal and Private Banking module conferencing from almost any mobile or desktop device. includes a unit on distribution channels, including video banking, and considers how this is increasingly being Its services are currently used by more than 450 banks, credit unions used by banks for certain customer interactions, and financial services companies, including six of the top 25 largest banks in the world. with a view to increasing customer choice and enhancing the customer experience. “We strongly believe that video banking is only in its infancy Video banking, along with other digital distribution and its adoption will dramatically increase in the coming years,” channels, will also be included in the new version says Damien Simonneau, Director, Financial Services Solutions Marketing, Vidyo. of the Institute’s Professional Banker Certificate, which will be launched in September 2019. “According to a survey of 288 financial services professionals in 43 countries that we conducted in 2018, only 20% of financial institutions already have a fully operational service – but 82% say they plan to offer video banking in the future.”
Customer benefits Video banking fundamentally transforms the customer experience by delivering two essential benefits. It rehumanises the digital experience and offers access to the right expertise wherever and whenever it’s needed.
“In a world that is more and more digital, and where branch traffic decreases, customers have fewer opportunities to have meaningful interactions with their bank,” Simonneau says. “Video enables them to have a fully engaged conversation in moments that matter most, bringing an enhanced element of trust into the conversation.
“Also, skilled resources are often scarce resources. With video banking, customers can have access to them wherever they are, in the comfort or their home or even in a small branch with limited staff, through a video kiosk or in a video-enabled room.”
Only 15% of consumers say they have ever been invited to join a video banking session. But more than 75% of those who have been invited agreed to take part, according to Vidyo research in 2018 among more than 4,000 consumers in the UK, US, France, and Germany. charteredbanker.com Summer 2019 43
Security and compliance are real issues for bankers, with 30% “Traditional in-person reporting that this has prevented them from offering video banking bankers get an additional services, according to Efma research in 2018. Some regulation is helpful. For example, in countries where way of interacting with it’s legal to sign contracts digitally, video banking can help increase their customers.” sales, Plantier says. Branch services Damien Simonneau, In Europe, Efma is seeing more and more banks proposing video Vidyo banking services as their branch networks shrink.
“In Turkey, Garanti Bank offers a video loan application feature Security and compliance in its mobile app,” Plantier notes. “In Greece, Eurobank offer its As for any other banking service or transaction, there are security small- and medium-enterprise (SME) customers ‘v-Banking’. and compliance issues. The privacy of the communications needs to This involves customers being served by a dedicated adviser be guaranteed through encryption mechanisms, and it’s important performing the whole range of SME banking services virtually to integrate features such as digital authentication and secure digital from their business premises with convenience, security, speed signature to be able to securely close video banking transactions. and functionalities that help to simplify everyday business. The immediate results of this initiative saw deposits increase 24%.” “On a compliance perspective, there are a number of constraints in terms of how the customer data is processed and where According to Efma’s research, 77% of those measuring their sales it is stored,” Simonneau explains. “It’s also almost always a close rate said video banking is higher (36%) or equivalent (41%) requirement to be able to record the video sessions to keep track to other channels. of the transactions, which often raises the question of where the recordings are stored. This is especially true in the EU, where many And 97% of those tracking net promoter score (NPS), which measures banks require that everything remains local. customer experience of a brand, find video banking is higher (54%) or equivalent (43%) to the average NPS of other channels. “The good news is that the technologies that enable us to overcome these constraints and challenges are mature, so they are no longer Being perceived as an innovator, increased customer satisfaction and a show-stopper.” faster service were the top three benefits reported by organisations using video banking. CB For bank employees, harnessing the benefits of video banking requires particular skills.
“Interacting over video is different from having an in-person meeting or VIDEO BANKING – KEY DATES a phone conversation,” Simonneau says. “It requires specific skills, such as being comfortable on camera and using technology, as well 2014 A Californian credit union becomes the first as an ability to comply with video meeting etiquette.” financial institution to launch interactive video teller services with point of sale specialist NCR. Etiquette considerations include clothing choices. For example, polka dots or fine stripes can be distracting and cause camera flicker. 2014 In the UK, Barclays launches a video banking service facilitating face-to-face conversations with advisers Skills for staff via a smartphone, tablet or computer. Bank staff should not be afraid of video banking, because it opens new opportunities for them. 2015 Nationwide Building Society launches an in-branch video banking service to connect “Traditional in-person bankers get an additional way of interacting customers to mortgage, personal banking with their customers that enables them to build a stronger and financial consultants. relationship and be more successful,” Simonneau says. “In the contact centre, it offers a new career path for text-chat or phone 2016 Lloyds Bank and Halifax launch video agents who can become video agents, which is usually perceived as mortgage appointments. a more rewarding role.” 2017 Santander launches video mortgage appointments. Efma, an association of 3,300 retail financial services companies in more than 130 countries, notes that the skills video bankers need 2017 Alaska becomes the 50th US state to Launch NCR’s also depends on what advice they’re offering, and their context. Interactive Teller machine; the first video teller machines are launched in Singapore. Boris Plantier, Strategic Content Manager, Efma, says: “It really depends on the services you are offering through video banking – 2018 Kenya launches East Africa’s first video teller financial advice, simple banking transactions, credit or mortgage service; Dutch bank ABN Amro launches a webcam sales. It also depends on what kind of employees are using it, for advisory service. example, financial advisers in branches or contact centre staff.” 44 Chartered Banker The future of banking
BANGOR BUSINESS SCHOOL Tricks of the forecasting trade Professor Kostas Nikolopoulos, Dimitrios D. Thomakos and Konstantia Litsiou provide lessons from forecasting competitions.
ime series dominate the information bankers use when That way, we can create an ensemble that might be less accurate they need a meaningful estimate of the future. This but more robust for out-of-sample extrapolation. And the cycle goes is complemented often by narrative or even richer on: new data, (empirical) forecasting competition, new forecasts information. So, for example, a statement and probably etc. So, as they say in UK, the proof of the pudding is in the eating. a press conference will accompany a balance sheet You are never sure what is the best method for your data; you have Tof a major corporation. Nevertheless, a longitudinal sequence to empirically test many methods and rely on the one that would of meaningful numerical observations (for example number of loans do the trick for your data. In other words, do whatever works! per period, a stock index, an asset price, etc.), and their respective projections in the future, drive our decisions in most decision- We do, however, need a starting point. If we don’t have enough data making contexts. to empirically decide on the best method to use, then we need an a priori selection protocol. Previously published empirical forecasting Whatever works competition results can be very helpful; these give you an idea To that end, one question comes to mind: what time series of what methods are expected to perform well for different contexts. forecasting method should we use? Nowadays the forecasting Even more importantly, published forecasting completion results arsenal is so rich, ranging from exponential smoothing approaches highlight benchmarks to beat. It is very often the case, in practice, (dating back to the 1950s) to AI, machine- and deep-learning for forecasters to strongly argue for a new ‘wonder method’ they have methods. Nevertheless, despite theoretical advances in analytics, developed in-house, but fail to recall to test it against similar and statistics and econometrics, still as of today no method fits all! No computationally cheap time series forecasting benchmarks. Methods method can forecast consistently better in all contexts: there are such as the random walk, exponential smoothing and multiple horses for courses, and even these unfortunately change over time. regression are so hard to beat in the long run!
Therefore, to play safe we really need to continuously perform The Makridakis (M) Forecasting Competitions empirical forecasting competitions. We must compete different Book excluded, there are more than 18,000 citations in Professor forecasting models over a holdout of our data (usually the last 20% Spyros Makridakis’ work to date; the most are around M1, of our data), each time new data become available, in order to pick a competition among 1,001 time series, and M3 – done in 2000 a ‘winner’ to be used to prepare forecasts and respective prediction – and testing models over 3,003 time series. But the impact of intervals. If in doubt, we can always combine, so if we feel the the former at its time was huge. You can arguably claim that the ‘winner’ is a first-time-ever or just not our cup of (forecasting) tea whole discipline for forecasting as we know it is an offspring of M1 – some bankers absolute hate ‘black-box’ methods – then we can and that very publication. The main lessons learned from these always use the combination of our top three or top five winners. competitions are: charteredbanker.com Summer 2019 45
“If we don’t have enough data to empirically decide on the best method to use, then we need an a priori selection protocol.”
• Statistically sophisticated methods do not necessarily provide time it forecast an individual time series. Forecast pro was more accurate forecasts than simpler ones the top-performing commercial software, while the Theta Method was the top statistical benchmark. • The relative performance of methods varies according to the accuracy measure being used The ones to beat We have seen so many forecasting reports that advocate • The accuracy when methods are combined outperforms, for wonder-forecasting-methods but which can only outperform on average, the individual methods being combined Naïve, a moving average or just ARIMA. This is fundamentally and methodologically wrong and we should eliminate it as bad practice. • The accuracy of methods depends upon the length of the It has been obvious for the last two decades that there exists a series forecasting. of accurate methods – methods that do run very fast and are free to use. These include computationally cheap benchmarks In the latest iteration of these studies – The M4 competition – available in R or Python, such as Hyndman’s forecast package, for 100K+ time series had to be forecasted and for the first time we had example. The Theta method, ARIMA, ETS, Damped Exponential a wide variety of innovations. These included industry participations, Smoothing and many combinations in between them perform many well-performing combinations, machine learning methods, well consistently and as such should always be used as benchmarks w testing of prediction intervals, transparency and replicability in practice. of black-box methods. Uber forecasting team won the competitions via a hybrid machine learning and statistical method. It was For any method you want to try in-house to be considered rationally state-of-the-art technically and also intuitively appealing as it employed, it should be on par, or better than, these fast and cheap used and exploited properties of the entire dataset every benchmarks. It is a hard fact of forecasting! CB
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PERSONAL DEVELOPMENT Distress by any other name A business seeking support runs afoul of dire debt financing… but how much of the fallout is the fault of the debtor?
The story Glen ran a farm machinery and agricultural goods business for agreed to a debenture secured by a fixed charge over the company’s many years. He took it over when his grandfather (whose own business premises. This would have the effect of securing the loan, father founded the company) retired. The company’s main office in a similar manner to a mortgage. Glen reluctantly agreed to this and shop was located close to the centre of a large city, and over course of action, though he made it clear that he felt disappointed time it became increasingly difficult to generate new business. The that the bank was prepared to exert pressure on a customer whose company had relied on a small, loyal customer base of relatively family had a continuous relationship with it over many decades. prosperous farmers and horticulture businesses, but Glen found that new potential customers were reluctant to come into the city, The two years that followed were a disaster for Glen and his business. which suffered from major traffic and congestion problems. While The commercial turnover of the company continued to decline and the company had launched a website, it was also clear that typical it was unable to service the new, higher level of debt. Eventually, the customers wanted to physically inspect what they were buying, bank appointed a receiver under the terms of the debenture and the so the ecommerce approach was not particularly successful. company was liquidated. The premises of the former company were eventually offered for sale by auction; there was little interest in the As the company’s turnover became static and then began to fall, premises, but the successful bidder was a subsidiary of Fearey Bank, Glen started to explore new options for the business, including the which opened an office on the site. possibility of relocating to an out-of-town site. This proved difficult, as most of the land on the periphery of the city was designated as Glen and his family were devastated by the demise of the business. part of the local ‘green belt’ for environmental purposes, so sites One year after the land was sold, Glen and Stephanie attended the were few in number – and expensive. annual general meeting of Fearey Bank and voiced their concern at their treatment. They alleged that the bank had permitted them The deterioration in the financial position of the business resulted in to build an unsustainable level of debt to the point where Glen had Glen having to approach Fearey Bank for ongoing debt financing. By signed up to a debenture under duress. They also accused the bank this time, business pressures were causing Glen to suffer considerable of benefiting from a conflict of interest, as a wholly owned subsidiary stress and anxiety. However, the company, and Glen’s family, had been had purchased the premises at rock-bottom prices. customers of the bank for several generations, so they anticipated that the bank would help if it could. In fact, Glen and his sister Stephanie To the disappointment of the bank, Glen and Stephanie attended owned some shares in the bank, which had been inherited from their successive annual general meetings to voice their criticisms of the bank grandfather. The bank already financed Glen’s company, as there was in relation to how they and some other customers had been treated. an overdraft facility in place, reviewed annually.
The bank’s response to Glen’s approach for finance was By working through this scenario and developing your own disappointing; the business manager stated that the bank was now solution before reading the author’s analysis, you may claim more averse to taking risks in the agricultural sector, but offered up to one hour towards the professionalism and ethics to convert the overdraft to long-term finance and even increase component of the Institute’s CPD scheme. the overall level of financing – on the condition that the company
“It might appear to be a case of the bank benefiting from the misery and misfortune of one of its customers.” charteredbanker.com Summer 2019 47
“There is nothing illegal in the sale, but the reputational ramifications are clear.”
Glen accused the bank of effectively forcing him into the debenture, under duress. The term “duress” is a powerful word with a specific meaning in law; there have been numerous past cases that have resulted in contracts being struck down where duress was proven. However, to succeed in pursuing such an outcome, Glen would have to establish that he was indeed subjected to excessive pressure, and the fact that he took this no further implies that he was anxious, under pressure and felt as if he had been forced into a corner. But duress comes from the actions of the other party; the pressures on Glen appear to have come from his own situation.
The bank was unwise to even countenance a situation through which a subsidiary company would purchase a property in possession, and for this reason alone, Glen and Stephanie deserve their moments of retribution at successive annual general meetings. There is nothing illegal in the sale, but the reputational ramifications are clear. To an observer looking in from the outside, it might appear to be a case of the bank benefiting from the misery and misfortune of one of its customers.
Cases such as these are ready-made for sensational tabloid journalism. Glen and his sister had no ability to prevent the sale as there were no legal grounds for doing so. Case law has established that it is wrong to sell a property in possession to an officer of the banking institution (Martinson v Clowes, 1882), but a wholly owned subsidiary of Fearey Bank is a different ‘person’ to its parent company in the eyes of the law. However, if the transaction was at arm’s length, there is no conflict of interest. Unfortunately for Fearey Bank, it still looks like one. CB
Did the bank do anything wrong? This case is loosely based on a situation that arose in the Republic The bank did nothing wrong from a legal perspective, and it has a of Ireland more than 40 years ago in which the Rowan family fought strong argument that it did nothing wrong ethically – but through an ongoing battle with two major banks over several years. its conduct it did open itself up to criticism and its actions were instrumental in exposing the bank to reputational risk. Bob Souster is a Module Director, Professional Ethics, Chartered Banker MBA at Bangor University. Share your views on Bob’s verdict Banks are the life blood of businesses for both short-term and long- about this ethical dilemma by joining the Chartered Banker term financial sustainability. Overdrafts are intended to provide a LinkedIn discussion forum. buffer against short-term variations in cash flows, and sometimes to lever business opportunities as they arise. However, overdrafts were not designed to provide a permanent basis for long-term financing. Sooner or later, if a debit balance on an overdraft becomes part of the permanent profile of an account, the bank will look to convert this to a long-term debt in the form of a commercial loan or debenture, depending on the risk appetite of the bank. This may be offered on a secured or unsecured basis.
Arguably, some banks added to their own problems in the 1980s and 1990s. As banks grew and sought still higher rates of growth, it was quite common for business managers to offer ever-increasing overdraft limits, and in some cases actually increased overdraft limits unilaterally. This was also a practice adopted by some credit card companies, though in the UK this is no longer permitted. 48 Chartered Banker The future of banking
PROFESSIONAL FINANCIAL ADVICE The value of friends and family referrals With financial services often being viewed as a ‘dark art’, it’s no wonder people ask their friends and family to recommend an IFA. Here, we examine how finance professionals can stay front of mind with clients of all ages.
ersonal recommendations from family and friends are or that it might be a problem for them, to engage in the advice a tried and tested source of referrals for those seeking process. Running client seminars can help to stimulate interest financial advice, especially at key life stages such as house- in particular topics. Regular newsletters with examples of how you P buying or planning for retirement. have helped other clients also helps.” How can independent financial advisers (IFAs) ensure they stay In the banking sector, a growing number of ‘refer-a-friend’ schemes front of mind in this process? have introduced cash incentives for customers if they refer a friend or family member who switches to their bank. “Personal recommendations are among the best introductions, as you’re receiving an endorsement from someone your prospective Angela Murfitt is a Chartered Financial Planner at Fairstone, which client trusts – and people don’t give that away lightly,” says Danny has a network of 450 independent financial advisers and highly Cox, a Chartered Financial Planner at fund supermarket Hargreaves trained staff across the UK. She says: “Banks seem to be offering Lansdown. “Once you’ve done a good job for a client, it’s very common financial switching incentives to attract business, but in the IFA to be recommended to their family and close friendship group. world, I think pricing is always a difficult one to trade on – as commoditising the service will always result in a price war. Some “The main life stages are buying a house, reviewing your retirement clients will be won over in this way, however are they the right plans as you approach retirement – a mid-life MOT – taking clients to have? I look for a long-term relationship with clients and your pension at retirement, receiving a windfall, complex issues will never offer the ‘cheapest’ or the most ‘expensive’ option but such as defined benefit pension transfers, and estate and inheritance instead I like to think fair value.” tax planning.” Good referrals Staying in touch Personal word-of-mouth recommendations are a kind of ‘social Regular contact and updates are key to advisers staying front proof’ and set the scene for a trusted relationship. of mind, Cox adds. This could include newsletters, market updates, regular reviews, but should now also include social media. “One of the best referrals I received was from a client I somehow never really felt rated me,” Murfitt adds. “But I must have got “To most people, financial services is a dark art,” he says. “People that wrong, because he referred a client to me who is an absolute lack the time or confidence to build their knowledge. You have to pleasure to deal with and turned out to be the largest client by fees trigger sufficient interest in something they may know little about, in my practice.
“I find that when describing my business and services to prospective clients, making specific references to the ideal type of client using scenarios that they can visualise helps them to make good referrals.”
“Get in the habit of Gary Sunderland is Head of Research and Indices at the Personal Investment Management & Financial Advice Association (PIMFA), explaining your services in the UK’s trade association for the investment management and plain, everyday language.” financial advice sector. He is also a Member of the Chartered Institute for Securities & Investment, the global professional body Unbiased.co.uk for those working in the financial and investment industry. charteredbanker.com Summer 2019 49
Sunderland believes personal recommendations are very important, as word-of-mouth referrals tend to be ‘stickier’. “As with most “Personal businesses, a satisfied client is a great advert,” he says. recommendations “In terms of key life stages and decisions, getting married, planning a family, buying a house and starting a pension all are among the best rank highly, along with deciding to make investments. Later in life, decumulation of a pension and/or other assets is a key decision point.” introductions.” Hargreaves Lansdown Valued advice Sunderland believes that advice from friends and family is a good place to start, but the value of advice from a qualified, skilled and objective independent financial adviser can’t be overstated. “Trust is the most important aspect of this relationship and “IFAs mainly get their leads from existing contacts or referrals ultimately, unconditional trust drives and establishes good as well as inter-business contacts such as lawyers and accountants,” client relationships – which in turn drive client referrals of friends he adds. “Encouraging business relationships where there’s and family.” mutual benefit to both parties can help improve the quantity and quality of leads. Lawyers and accountants figure in this, but so can The right fit banks and other financial institutions where third-party advice Unbiased.co.uk is an online advice platform where people can is often required. search listings of 27,000 qualified financial advisers, mortgage brokers, accountants and solicitors. “There’s much focus now on the transfer of intergenerational wealth, so early interaction with existing clients in respect of their children Karen Barrett, founder and Chief Executive, Unbiased.co.uk, says: or other beneficiaries can also prove to be highly productive.” “It’s natural for people to ask friends and family, ‘Can you recommend a financial adviser?’, but this is one instance where word-of-mouth Sunderland says developing and maintaining a close relationship might not be so useful, either for the client or the adviser. with clients is key to staying front-of-mind at key life stages. There should also be regular catch-ups and reviews of the client’s “A financial adviser who’s a great fit for one person may be not objectives to ensure the advice and target outcomes are still suitable. quite right for their close friend or relative, whose needs and circumstances may be different. This can lead to disappointment Trust is a more compelling proposition than direct incentives, on both sides. So, although personal referrals have their place, they he suggests. are unpredictable and don’t necessarily match you to the most suitable clients for your business model.” “IFAs need their clients to trust them and believe that every decision they take is ultimately geared towards getting the best possible Advisers who want to improve the quality and quantity of their leads outcome for the client,” Sunderland says. should first ensure they have a strong, high-ranking web presence. Using accessible language will also help.
“By definition, most people seeking financial advice aren’t experts, so get in the habit of explaining your services in plain, everyday language,” Barrett says.
The most popular enquiries on Unbiased relate to the two biggest life decisions: buying a home and retiring.
“But these are only the most obvious moments to seek advice, and many consumers are missing other key opportunities,” Barrett adds. “For example, advice sought on pension saving early on in a career can end up delivering remarkable value by the time that person retires. So, there’s a huge untapped market of younger advice clients to be reached, if advisers can get this message across.” CB 50 Chartered Banker The future of banking
NEW PARTNERSHIP Strengthening financial ties with Singapore
A new Chartered Body Alliance agreement is set to deliver mutual benefits to financial services professionals in the UK and Singapore.
hree leading UK-based Chartered Professional Bodies, Sharing skills collectively known as the Chartered Body Alliance, will In particular, the Alliance, MAS and IBF will be improving help to strengthen financial ties between the UK and competencies in ethics and integrity, professional conduct and Singapore following the signing of a new skills-sharing behaviour, cybersecurity, digital skills, green and sustainable declaration in London in June. finance, risk management (including operational, technology and T conduct risks), and specialised insurance. The Chartered Body Alliance (the Alliance) and Institute of Banking and Finance Singapore (IBF) made the mutual agreement by signing “I believe that we are promoting a more consistent approach a declaration between the City of London Corporation (CoLC) and to the ethics education of financial services professionals in the the Monetary Authority of Singapore (MAS). UK and Singapore, which should help develop a strong and consistent culture of customer and client-focused, ethical professionalism The Chartered Banker Institute, along with its partners in the in financial services, and contribute to improving financial Alliance, the Chartered Institute for Securities & Investment and stability,” says Simon Thompson, Chief Executive, Chartered the Chartered Insurance Institute, will look to further develop their Banker Institute. existing relationships with their Asian counterparts and collaborate to raise the skills of financial professionals. “It also represents a clear recognition of the strength of the ‘Chartered’ brand at a global level.”
In the 56 years of Singapore’s independence, the nation has retained strong ties to the UK and there are still more than 30,000 British nationals in residence there, along with over 700 British firms and The Institute of Banking and Finance Singapore billions of pounds of UK investment. According to the Office of (IBF) was established in 1974 as a not-for-profit National Statistics, there are also around 52,000 Singaporeans living industry association to foster and develop the in Britain and there are strong links between the two countries’ professional competencies of the financial industry. financial sectors. IBF represents the interests of close to 200 member financial institutions including banks, insurance Last year saw the fourth annual UK-Singapore Financial Dialogue companies, securities brokerages and asset on market developments and regulatory initiatives to strengthen their respective financial sectors. The countries expressed interest management firms. in closer co-operation in areas such as asset management, insurance and payments, and strengthening cybersecurity collaboration. They In partnership with the financial industry, also agreed to build on their existing UK-Singapore FinTech Bridge to support firms looking to operate across both markets. The next government agencies, training providers and dialogue will take place in Singapore this year. the trade unions, IBF is committed to equipping practitioners with capabilities to support the growth Innovation and best practice of Singapore’s financial industry. The agreement between the Alliance, MAS, IBF and the CoLC will further strengthen cooperation between the two financial centres. It enables the bodies to share innovations and best practices as to how they develop and deliver education and training programmes, charteredbanker.com Summer 2019 51
As Singapore’s central bank, the Monetary Authority of Singapore (MAS) manages Singapore’s exchange rate, foreign reserves and liquidity in the banking sector and is and help professional standards and qualifications to be recognised also an integrated supervisor overseeing in both countries. all financial institutions in the country. MAS also helps shape Singapore’s financial “I am extremely pleased to be endorsing this declaration. industry by promoting a strong corporate It builds on the important synergies which already exist between our stakeholders in the areas of ethics and professionalism, raising governance framework and close adherence awareness of the Chartered brand as the ultimate mark of trust for to international accounting standards and the consumer,” says Simon Culhane, CEO, Chartered Institute for spearheading retail investor education. Securities & Investment.
“This new agreement is great news for the profession,” adds Sian Fisher, CEO, Chartered Insurance Institute. “The Chartered Body Alliance is committed to standards and trust across the whole of financial services, and the signing of this agreement is a good step “The initiatives we to promoting this initiative and building on the professionalism that is already a firm focus in Singapore.” are working on will
Continued collaboration enable continued As well as the skills declaration with the Alliance, Singapore’s MAS dynamism and stability also concluded two memoranda of understanding with the City of London on key areas of financial cooperation, including a partnership in Singapore’s and arrangement on the UK’s Green Finance Initiative and intentions to cooperate on cross-border data flows and processes. London’s financial “The initiatives we are working on – data flows and governance, centres.” cybersecurity, skills development, and green finance – will enable continued dynamism and stability in Singapore’s “Tharman Shanmugaratnam, and London’s financial centres,” says Senior Minister of Singapore and Chairman of MAS Tharman Shanmugaratnam. “I look Senior Minister of Singapore forward to the continuing, active collaborations between and Chairman of MAS our authorities as well as between our partners in the financial industry.”
Countries with strong financial sectors, particularly those in and affiliated with the G20, are hugely supportive of continued financial sector reform and international cooperation to support the stability and resilience of global capital markets. Strengthening economic and financial ties across borders and improving the skills and education of financial professionals wherever they work are integral to these efforts. CB 52 Chartered Banker The future of banking
COUNTRY SPOTLIGHT Malaysia’s banking revolution
Huge change is under way in Malaysia’s financial services industry as social, digital and international agendas collide.
alaysia’s banking sector has come a long way “We’ve seen the consolidation of the banking sector, significant since the Asian financial crisis of 1997, when a advancements in the adoption of improved institutional series of collapsing asset bubbles saw so-called infrastructure, risk management processes and practices, as well as ‘tiger economies’ including South Korea, Thailand, enhanced governance and regulatory frameworks. Banks in Malaysia Malaysia, Indonesia and Singapore lose around 70% are also well capitalised and have remained resilient throughout the Mof their stock market and currency values. last financial crisis.” To strengthen Malaysia’s banking system and keep it internationally Rebuilding trust competitive, the government’s response was to encourage That said, trust in the banking sector has been decimated by a series consolidation in the sector. This led to a series of mergers that of scandals around the world. Malaysia has not been immune, and reduced the total number of domestic commercial banks from 77 over the last five years, BNM has imposed around RM116m (£22m) before the crisis to eight today. in penalties on financial services providers.
Maintaining capital strength and keeping pace with international “Bankers are in the business of trust, therefore I cannot stress standards has been a key focus for Malaysia’s central bank, enough how vital independent, highly competent and professionally Bank Negara Malaysia (BNM). Regulators have also driven a raft qualified bankers are to further strengthen corporate governance of initiatives to encourage innovation and digitalisation, boost and contribute to financial stability of the banking system in business lending and promote financial inclusion. Malaysia,” Padmanaban says.
“Malaysia has come a long way in the development of its banking Islamic finance is a key growth area for Malaysia as it looks and financial services industry,” says Prasad Padmanaban, Chief to expand the international footprint of its banking sector and Executive, the Asian Institute of Chartered Bankers (AICB), which promote inclusion and social value. The country is Asia’s biggest has more than 27,000 members and is the sole professional body Islamic finance market and in 2018 financing by Islamic financial for the banking sector. institutions grew 10.5%. The sector now accounts for almost 37%
“Adoption of technology has never been faster.” Hong Leong Bank charteredbanker.com Summer 2019 53
“Malaysia is now pushing strongly to make Islamic finance its unique selling point.” Association of Islamic Banking and Financial Institutions Malaysia
of total bank lending in Malaysia, with the Malaysian government medium enterprises through wide-ranging offerings of financial hoping to push that figure to more than 40% by 2020. products and services such as term financing, trade financing, overdraft and revolving credit. Islamic banking is a system based on the principles of Sharia law and guided by Islamic economics. Two fundamental principles are At the 2018 Global Islamic Finance Forum in Kuala Lumpur, Rafe the sharing of profit and loss, as well as the prohibition of interest Haneef, Deputy President, AIBIM, said: “The application of VBI collection or payment by lenders and investors. Instead, Islamic practices will result in a better facilitation of entrepreneurship, banks make a profit through equity participation, where borrowers community well-being, sustainable environment and economic give the bank a share in their profits, rather than paying interest. growth, which are very much aligned with shareholders’ focus on sustainable, long-term returns.” Ratna Sha’erah Kamaludin is Acting Executive Director of the Association of Islamic Banking and Financial Institutions Malaysia AIBIM says examples of VBI in action include the launch of the (AIBIM), which represents Malaysia’s 16 Islamic banks. myWaqf Fund, a social finance initiative for both Muslims and non-Muslims. Six Islamic banks are taking part in the scheme, which She says: “Malaysia is now pushing strongly to make Islamic finance invests in education, health and economic empowerment projects. its unique selling point in its quest to become a major finance hub, Other innovations include the launch in 2016 of an investment and is part of the government’s strategy to achieve the nation’s goal account platform. of becoming a high-income nation by 2020.” Ratna Sha’erah Kamaludin at AIBIM comments: “This is gradually International growth emerging as an important enabling infrastructure to mobilise and Countries including Indonesia and Pakistan are increasingly channel investment accounts towards funding entrepreneurial turning to Islamic bonds, known as sukuk, for sovereign lending – ventures. and Malaysian institutions now account for more than 60% of all sukuk lending. “For instance, funds raised through investment accounts are being channelled to a variety of purposes, including to provide risk capital Malaysia’s central bank believes Islamic finance is key to for entrepreneurs, such as small and medium enterprises.” the development of sustainable financial services and outlined this in a Strategy Paper on Value-based Intermediation (VBI) Digital revolution in July 2017. In digital and mobile banking, Malaysia is seeing seismic growth as the central bank drives a 10-year plan to migrate the country towards A key message is that the practice of Islamic finance is not and more efficient epayment systems. Mobile payment transactions should not be exclusive to Muslims. Islamic banks in Malaysia also surged 20-fold from 1.2 million to 23.7 million between 2017 and play an important role in supporting businesses including small and 2018, according to Bank Negara figures. Debit card transactions 54 Chartered Banker The future of banking
COUNTRY SPOTLIGHT
“Malaysia has come a long way in the development of its banking and financial services industry.” Asian Institute of Chartered Bankers
grew by 51.5% to 245.7 million transactions in 2018, while cheque But the landscape may change as instant payments converge use has halved since 2011. with incoming Open Banking standards – where banks can share customer data with third-party providers developing new Bank Negara is now developing the licensing requirements for products. New payment models and schemes – such as account- virtual banks. It follows the opening of all-digital banks in the to-account payments and in-app payments – may just overtake Philippines and Vietnam by CIMB Bank, which has 1,000 branches traditional credit card payments in the long run. across Southeast Asia. “For this to truly take off, we need the ecosystem and the market Kuala Lumpur-based Hong Leong Bank Berhad, a major publicly to shift,” Yap continues. “We need to enable merchants, many of listed banking group in Malaysia, is also introducing digital them small and medium enterprises, with the right infrastructure branches as well as exploring technologies including augmented to accept digital payments. In short, to meet the customers at reality, robotics and blockchain. their point of need. The impetus of this is really to drive value and convenience to the customer.” Domenic Fuda, Group Managing Director and Chief Executive Officer, Hong Leong Bank, says: “As the use of technology becomes even more FinTech challenges entrenched within our daily lives, we continue to see digital banking For Malaysia’s banks, continued digitalisation will bring new offerings continuing to expand in reach, depth and functionality. regulatory and risk challenges. Adoption of technology has never been faster, as customers are taking advantage of enhanced experiences, security and convenience in Irene Tan, Country Head of Compliance, Standard Chartered fulfilling their banking and financial needs. Bank Malaysia, says: “Financial services innovation and digital disruption will continue to remain top of Malaysia’s regulatory “This dynamic environment has been encouraged by regulators, agenda. Banks will face pressures around data management and with the push for a cashless ecosystem, better payment experiences, data access from big FinTech competitors, as well as helping to convenience, and efficiency through digital banking services such as build a cyber-resilient ecosystem. ewallets and cashless payments. It is therefore important for banks to keep ahead of the curve through innovation and, in turn, this “Banks should also start preparing for increased supervisory push for enhanced customer experience drives wider collaboration interest in the management of risks associated with environmental, – especially among financial institutions, FinTech and BigTech social and governance challenges. Meeting the crowd of regulatory companies.” requirements and expectations will be challenging, although this is certainly not a new state of affairs.” Epayments future Malaysia’s ‘ewallet’ electronic payments market is crowded and Tan notes that the evolution and ever-changing nature of the numerous local firms compete with the likes of PayPal, Google Pay financial landscape has unveiled new and emerging threats – and the Chinese mobile payment giants Alipay and WeChat Pay. including trade-based money laundering, terrorism and cyberfraud – which has, in turn, led to numerous regulatory reforms, not just Audrey Yap, Financial Services Practice Lead in Malaysia for in Malaysia, but globally. professional service firm Accenture, says: “When you look at the demographics of Malaysia, a substantial part of our workforce is “Improving industry culture and conduct will continue to be a comprised of millennials, with no credit history and no access to regulatory priority in the country, with individual accountability, credit cards, so the ewallet firms are tapping into that and meeting industry codes, as well as deep customer understanding, being the financial services needs of those young consumers. particular focal points,” she says.
“Within the short-term, ewallet companies will continue to expand “As a result of greater expectations from clients and regulators, and acquire customers for two main reasons: the market is growing banks have to be able to respond swiftly and effectively to new at speed, so there’s a need to gain market share, and to understand developments – and the changing rules of the game.” CB consumer behaviour and data, and monetise that.” charteredbanker.com Summer 2019 55
PAYMENTS ARCHITECTURE PROGRAMME New dawn for payment processing
The UK’s multi-trillion payments infrastructure is poised for a landmark overhaul.
he UK’s £7tn payments infrastructure is changing, with Fighting fraud procurement under way to build a new retail payments The New Payments Architecture programme also includes an platform to process Bacs payments, Faster Payments ‘Enhanced Data’ project designed to deliver the capability for and, potentially, cheque payments. additional information to be added to payments. This could include the purpose of the payment, tax and benefit information, a T “Faster Payments, Bacs and cheque payments have personalised message, and underlying business transaction details. historically been processed using separate infrastructures, with a mix of rules, standards and processes,” explains Mark Bowerman, UK Finance, the trade association representing around 300 UK spokesperson for Pay.UK, the retail payments authority overseeing financial services firms, says Confirmation of Payee is a major the creation of this new central platform for clearing retail technical change to digital payments and another important tool payments, known as the ‘New Payments Architecture’. in the fight against fraud, so it’s vital that the industry gets it right.
“Bringing these together creates an historic opportunity to rebuild A UK Finance spokesperson adds: “The finance industry supports this infrastructure from the bottom up, simplifying requirements the new service and is working hard with the Payment Systems for payment service providers.” Regulator to deliver the best possible outcome for consumers and small businesses, while ensuring there is sufficient time for it to be Choice and flexibility introduced in a way that delivers an effective customer experience Ahead of full implementation after 2021, customers will start to see across the entire retail payments market. changes from this year regarding how they send and receive payments. “However, it is not a silver bullet, which is why the industry will ‘Request to Pay’ is a secure messaging service – almost akin to email continue tackling fraud on every front, investing millions in advanced – that will enable people, businesses, and organisations to ‘request’ security systems to protect customers and to support law enforcement payment, rather than just sending an invoice or a bill. in combating the organised criminal groups responsible.”
“For each request, customers will be able to pay in full, pay in part, ask Pay.UK launched the competitive procurement process for the for more time, communicate with the biller, or decline the payment,” New Payments Architecture in October 2018, with the successful Bowerman explains. “It is not designed to replace anything – it will technology partner expected to be announced in spring 2020 and sit alongside Direct Debit and other existing bill payment methods the build to start thereafter. CB to give consumers and businesses additional choice and flexibility. Participants will be preparing their own competitive launches of this service from 2019 onwards.”
‘Confirmation of Payee’ will provide customers with greater assurance “Bringing these together creates they are sending their payment to the intended recipient. “It is, in essence, an ‘account name checking service’ to help avoid payments an historic opportunity to being misdirected due to errors,” Bowerman says. rebuild this infrastructure By providing an extra level of security, Confirmation of Payee can from the bottom up.” also address certain types of Authorised Push Payment (APP) fraud – where people are tricked into sending money to fraudsters. Pay.UK 56 Chartered Banker The future of banking
REGULATION WATCH Regulations under review Advice remains on the agenda for regulators reviewing retail and mortgage banking.
ummer is traditionally the time when regulators tend to In our submission we have focused on the fact that not only publish significant papers for consultation before heading the affluent should benefit from professional advice, but those off into the summer sun. Without tempting fate, we’re not requiring guidance and assistance should also be served by expecting anything particularly significant this summer, knowledgeable professionals. as regulators try to keep on top of the twists and turns Sof Brexit, while also preparing for the full extension of the Senior Alongside these UK initiatives, the implementation of Markets Managers and Certification Regime (SMCR). in Financial Instruments Directive II (MiFID II) has seen the knowledge and competency requirements needed to support However, the Institute team has still been kept busy engaging with mass-market retail investment decisions diluted. a couple of interesting papers that appeared in May. Many consumers will not be in the market for ‘qualified, Call for input professional advice’ but rather could be supported by ‘qualified, The first was a call for input into a review being run by the Treasury professional guidance givers’. and Financial Conduct Authority (FCA). We have argued that it is just as important to have minimum This review will investigate whether the outcomes of the Retail standards in this area. This would ensure ‘guidance givers’ are Distribution Review (RDR) and the recommendations of the fully aware of where the line between guidance and advice lies. subsequent Financial Advice Market Review (FAMR) have achieved They would also cover how to deal with situations when the their objectives. discussion comes close to this line, and how to effectively say ‘no’ in a professional and helpful manner (such as explaining where While elements have been successful (increased professionalism in advice can be found and why it must be found there). the advice community being noted as one such example), there still remains evidence of an ‘advice gap’, the repercussions of which are The call for input formally closed at the start of this month; extremely concerning for the financial services sector and society however, the FCA is looking for as much evidence as possible to as a whole. help shape their review and we would encourage any members with strong views on the matters to contact the review team at: charteredbanker.com Summer 2019 57
“Those requiring guidance and assistance should also be served by knowledgeable professionals.”
[email protected]. For more information about the review, visit the FCA website and search under publications for the Call for Input on the evaluation of RDR and FAMR.
Consultation builds on interim report The second paper is the consultation on mortgage advice and selling standards (FCA CP19/17).
This builds on an interim report last year following the FCA’s Mortgage Market Study. Studies such as this are one of the tools So, what does the regulator propose? It plans to change the perimeter the regulator uses to assess its performance against its statutory guidance on mortgage advice to make it clear that tools allowing objectives, and this one found three harms requiring remedy: search and filtering based on objective criteria are not necessarily giving advice, and to more closely align this guidance with that • The advice rules and guidance were posing a barrier to the recently updated with regard to advising on retail investments. development of tools to help consumers choose and buy a mortgage The FCA also plans to permit more interaction with customers before firms are required to give advice and other changes that may • Consumers who would like to buy a mortgage on an execution- help firms making their execution-only sales channels easier to use. only basis are finding it hard to do so because they are diverted to advice and because execution-only sales channels are not With regard to the issue of overpayment, advisers will be required, always easy to use, and if they recommend a mortgage that is not the cheapest of the products that meet the customer’s needs and circumstances, • Many consumers are overpaying for their mortgages, to explain why they have not recommended a cheaper mortgage. even when they get advice. Our response While in our response we make few recommendations on the proposed changes, we do stress that the importance of seeking suitable advice cannot be under-estimated.
For many, property purchase remains the biggest financial commitment they will make, and it is essential that in communicating and promoting these changes to consumers the good work done so far must not be undermined.
However it is presented to firms and consumers, the FCA’s guidance should continue to stress the value of receiving good quality, professional advice.
We have also taken the opportunity to suggest to the FCA that, when considering future amendments to the existing mortgage rules and guidance, it is mindful of its influential position in driving forward a sustainability agenda.
With the increased availability of green mortgages, there is much the regulator could be doing through this initiative to set its expectations of lenders with regard to such broader societal issues. This would include encouraging more responsible and sustainable lending and incentivising consumers to make better, more sustainable choices in their decision making. CB 58 Chartered Banker The future of banking
AGM 2019
Minutes of Annual General Meeting HELD ON 20 JUNE 2019 The 144th Annual General Meeting of the Institute took place at the Scotsman Hotel, 20 North Bridge, Edinburgh.
1. Minutes of the 143rd Annual b. Election of Vice-Presidents Members voted to approve the appointment General Meeting and Vice-Chairs 2019-2021 of the above individuals to the new Board The Minutes of the 143rd Annual General The nomination for Vice-Presidents of Trustees for the terms noted. Meeting, which was held on 21 June 2018 had been considered and approved by The President vacated the Chair and in Edinburgh, were printed in the October the Nominations Committee. Members invited the new President and Chair, 2018 edition of Chartered Banker and were confirmed the election of Lynne Burns to assume office. taken as read. FCBI and Steve Pateman FCBI as Vice- Presidents and Vice-Chairs for 2019-2021. 7. Membership Subscriptions 2. President’s Address The new President advised that there Extracts from the President, Robert c. Appointment of Members of the was one item of business, brought by Dickie’s address are to be published in the Board of Trustees the outgoing Council, for the approval of Summer 2019 Chartered Banker magazine. Following an open selection process the Meeting. conducted in accordance with the 3. Annual Report Institute’s new Charter and Rules, the He noted that subscriptions were last The 2018-2019 Annual Report had been Nominations Committee recommended reviewed in 2017 and advised that the made available on the Institute website in the following individuals for appointment outgoing Council had asked that these be advance of the Meeting. The adoption of the to the new Board of Trustees for the compared with those of similar member Annual Report was proposed by the Chair following periods. bodies and the services they offered to their and, subsequently, approved by the Meeting. members. As a result of that review, Council Nomination: David May FCBI recommended that annual subscriptions 4. Annual Accounts (Chair of Membership Forum: 2019-2021) for Fellows, Members (Chartered Bankers) The adoption of the accounts was proposed Nomination: Hugh McKay FCBI and Associates should be increased at this by the Chair and, subsequently, approved (2019-2020) time, with the following rates to be applied: by the Meeting. Nomination: Brian McCrindle FCBI (2019-2020) Fellows: £220 (currently £200) 5. Appointment of Auditor for Nomination: Ian Hardcastle FCBI Members: £145 (currently £132) 2019-2020 (2019-2021) Associates: £103 (currently £94) The Chair proposed the re-appointment Nomination: Robin Bulloch FCBI Members voted to support the proposal. of Messrs Chiene + Tait as the Institute’s (2019-2021) auditor and this was approved by the Nomination: Paul Riseborough MCBI 8. Any other business Meeting. (2019-2022) As there was no further business the new Nomination: Peter McCormack FCBI President concluded the formal business of 6. Election of Office Bearers and (2019-2022) the 144th Annual General Meeting of the Appointment of the Board of Trustees Nomination: Stephen Pearson FCBI Chartered Banker Institute and thanked a. Election of President and (2019-2022) Fellows and members present for their Chair 2019-2021 Nomination: Susan Younger attendance and support. The nomination for President had (Independent Member: 2019-2020) been considered and approved by the Nomination: Sheila Gunn 9. Address by the new President Nominations Committee in line with the (Independent Member: 2019-2021) and Chair new Royal Charter and Rules. Members Extracts from the new President, Bill confirmed the election of Bill McCall, FCBI McCall’s address are to be published in the as President and Chair for 2019-21. Autumn 2019 Chartered Banker magazine. charteredbanker.com Summer 2019 59
Changing the guard
President Robert Dickie passed the baton to Bill McCall at the Chartered Banker Institute’s AGM.
s outgoing president of the Chartered Banker Institute, Dickie was also proud of the work that the Institute has done within Robert Dickie is leaving the legacy of a renewed Royal the Chartered Body Alliance to raise the profile of Chartered status Charter and a string of strong partnerships, both to financial services professionals and to other key stakeholders. geographic and strategic. A “The rising influence of the Chartered Body Alliance is In the last year, member numbers have grown more than 3% to demonstrated by all three Alliance member CEOs being invited 32,487, including 8,005 student members from 87 countries.* The to become members of the UK government’s Financial Services Institute has also seen a significant increase in numbers following Skills Taskforce, which among other things will identify university routes this year, with 648 learners on accredited and codify key skills required for future financial services university partner courses. professionals. The Taskforce will be putting forward a series of recommendations to the UK government later this year,” As at the end of February 2019, there were 11,414 individuals said Dickie. studying for Institute qualifications (not including those studying with university partners) and during 2018, some 4,998 individuals The AGM was also an opportunity for new President Bill McCall to completed an Institute qualification. honour Dickie’s contribution to the Institute.
“I have known Robert as a colleague on Council for approaching a decade, we were both near contemporaries at Clydesdale Bank, “Trying to do a few things before our paths took us in different directions. Robert has consistently been a force for good through his Institute involvement really well beats mediocrity and our Institute has benefited greatly from his ‘above and beyond in myriad forms.” the call’ efforts,” he said. Setting out his own agenda for the next few years, McCall said “I have been an active member of the Institute for over 40 years he aimed to continue to educate and promote professionalism and as I come to the end of my two-year term as President, I feel in banking, build on the Institute’s international influence and extremely proud to have presided over a growing professional body collaboration and “stand full square behind the development and one that 10 years on from the financial crisis has been at the of green finance initiatives”. vanguard of leading change in the banking profession,” said Dickie at this year’s AGM. “There is a limit to what a team can achieve in two years and I have learned that trying to do a few things really well beats Dickie pointed to many highlights over his tenure, including mediocrity in myriad forms,” he said. the relaunch of the flagship Chartered Banker Diploma and the partnership with the Financial Services Institute of Australasia, “It is far and away the most important function of our Institute to which helped FINSIA develop its own suite of banking qualifications educate bankers with the necessary knowledge and skills required, – and of course, the reward of a new Royal Charter at the end of and I hope we will continue to cherish the Institute,” he said. 2018. The Royal Charter will change the Institute, modernising its governance by replacing the Council with a new Board of Trustees. A video of both speeches in full can be found in the Corporate Governance section of our website or on our YouTube channel. CB “The award of the Institute’s new Royal Charter recognises the collective efforts of our Council, the Governance Working Group subcommittee of Council, the Institute’s staff, supporting banks and, in particular, our thousands of members to enhance and sustain *As reported in the Chartered Banker Annual Report 2019. At the time of this professionalism in banking in recent years,” said Dickie. edition of Chartered Banker going to press, this has increased to 33,367. 60 Chartered Banker The future of banking
ANNUAL REPORT Annual Report summary A new Royal Charter, increased membership and a focus on delivering the professional standards that will define the banking industry in the future are just some highlights from this year’s annual report.
n this year’s Annual Report, President Robert Dickie celebrated the awarding of the new Royal Charter to the Institute at the “A forward-looking Institute end of 2018, saying that it reflects “a new, global identity linked by a common commitment to high standards of responding to the future Iprofessionalism in banking”. needs of members, the As a result of the new Royal Charter, changes to the Institute’s banking industry and governance structure include a new Board of Trustees to replace the Council, and a new Membership Forum. wider society.” We are delighted that membership increased by more than 3% last year, taking the number of members to almost 32,500 from across 87 countries. The development of the 2025 Foundation and our partnership with The Robertson Trust continues our founding aims of providing Our international influence is not limited to our global education and development for young bankers, by supporting membership, however. Our partnership with the Financial individuals who would otherwise find it difficult to pursue a career Services Institute of Australasia has been particularly positive in banking. in helping it launch its own banking qualifications. We also recognise our responsibility to the future of banking in Similar relationships in Ireland, Malaysia and India have all contributed promoting thought leadership around key issues such as green to the number of individuals becoming Chartered Bankers. finance, ethics, and the rise of digital technology.
We continue to focus on building our influence in the area of As well as embracing digital technology in our own operations, apprenticeships, both as an End Point Assessment provider for which includes the roll-out of our new website and member services apprenticeships in England, and by aligning our qualifications online, we have created new qualifications, which address advances framework with apprenticeship standards where appropriate. in regulation, technology and customer expectations.
The Chartered Banker Diploma has been relaunched as the Advanced Diploma in Banking and Leadership in a Digital Age, and KEY NUMBERS FROM THE ANNUAL REPORT: the five modules comprising it are each available as a standalone certificate. This update comes alongside development of the Green • 32,487 members* Finance Certificate™, designed to set the benchmark for knowledge • 54% female and skills required of green finance professionals worldwide. • Members across 87 countries • 163,448 bankers achieved the Foundation Standard They demonstrate our role as a forward-looking Institute globally responding to the future needs of members, the banking industry • £218,589 raised towards the 2025 Foundation and wider society. CB • 11,414 new and continuing learners currently working towards an Institute qualification, 60+ online and The full Annual Report is available on the Institute website face-to-face networking events. at bit.ly/2YGhO6B
*33,367 at the time of this edition of Chartered Banker going to press. charteredbanker.com Summer 2019 61
A living ROYAL CHARTER AND GOVERNANCE: A BRIEF HISTORY
1875 Institute of Bankers in history Scotland is established December 1975 What does the Institute’s new Royal Charter status is granted, creating the Royal Charter mean for members? Chartered Institute of Bankers in Scotland 1991 he Institute’s Royal Charter dates back New charter is granted to 1975, the centenary of the Institute of Bankers in Scotland. In the final July 2000 weeks of 2018, as a formal recognition The Institute is given of the Institute’s leading role in banking the unique right Tprofessionalism, the Institute received a new Royal to confer ‘Chartered Charter. This formally established it as the Chartered Banker’ status upon Banker Institute – the UK’s professional body for qualified members – a bankers with growing global impact and influence. term now widely recognised globally This new Royal Charter does more than merely enhance the status of the Institute. Governance changes entered 2016 effect at the Annual General Meeting held in June 2019, A Working Group and more developments are soon to come. reviews the Institute’s Royal Charter and governance arrangements, and recommends changes to reflect the Institute’s wider UK and international role, the scale of its activities, and the changing KEY CHANGES WHICH TOOK composition of its EFFECT FROM JUNE 2019 membership
• The Institute’s Council is replaced by June 2017 a smaller Board of Trustees, comprising Changes are approved (as now) both member Trustees and at the AGM lay members (‘Independent Trustees’). The 13 members of the new Board of Trustees have been recruited via open selection December 2018 A new Royal Charter • A new Membership Forum will provide formally establishes an opportunity for a much larger and the Chartered Banker more diverse group of members to Institute, introducing become involved in the governance new designatory letters and strategic direction of the Institute. for qualified members The new 30-member Forum will advise and confirming the new Board of Trustees on strategy governance changes. and matters of interest and concern to Institute members. 62 Chartered Banker The future of banking
LESSONS LEARNED
Here come the helicopters Ian Henderson asks if, in these troubled times, we are going to see more unconventional ideas such as helicopter money being sold to the public by policymakers.
elicopter money’ is exactly as it sounds – stimulating As a reaction to QE and austerity, the Labour Party’s manifesto of growth by giving lots of money directly to the public, as 2015 talked about an idea called ‘Peoples’ QE’ – “upgrading the ‘H if being scattered from a whirlybird. Invented by economy to invest in new large-scale housing, energy, transport economist Milton Friedman in 1969 and popularised by and digital projects: Quantitative Easing for people instead of Fed Chair Ben Bernanke in 2002, it’s almost become an economic banks”. Economists such as Richard Murphy liked it; perhaps more brand name. surprisingly, so did the Financial Times. Unfortunately, it was quickly rebranded by others as ‘Corbyn’s Magic Money Tree’ and – in the way Quantitative easing (QE) sounded a lot more responsible than complex economics are often reduced by being likened to household throwing money at consumers (out of helicopters or otherwise) when budgeting – it didn’t fly. it was used as a response to the 2008 economic crisis. It still involves creating new money, but the cash is used to buy securities in the Labour’s economic thinking since has moved further back to the financial markets with the intention of sparking economic growth. mainstream, via ‘moral economics’ to ‘democratising capital’. There The man in the street looks upward, but there are no helicopters… are high initial costs to some of the ideas, like renationalisation and, despite good intentions, no money floating down on the breeze. (though this time around with distributed, not central, control) and it would mean a lot more regulation. But the objectives of reducing I’m not an economist but I do know a bit about marketing – and as a inequality, greater collective happiness and the idea of ‘taking back brand, QE has got a bad name. Giving money to institutions is more control’ of the economy at a local and individual level are hard to e are delighted to controllable than giving it to the public, who may not give it back; argue against. and QE did have the effect of helping the global economy avoid a launch our new Digital crash landing. But that came at a cost, mainly to ordinary people, when the expected onward lending didn’t happen. As the Bank of England admits, the new money in the system went to the banks Mentoring rogramme and asset owners, propelling asset prices upwards and depressing “Broadly speaking, interest rates. So, broadly speaking, the haves got more as a result of QE – and the have-nots got less. the haves got more as to all Institute members. a result of QE – and the The helicopters kept on flying over the cities and towns, on their way to country estates and superyachts. Down on the ground, money was have-nots got less.” scarce, savings rates were low and people began to notice. Austerity, cuts and food banks became part of populist politicians’ rhetoric, and the divisions and inequalities in developed societies became This platform has been designed to help members’ more and more apparent. The wonks and the theoreticians started Helicopters are difficult to fly. Unlike ordinary aircraft, if you take professional development, expand their network The Mentoring rogramme has enabled great to look for new answers. your hands off the controls, they tend to crash – an unfortunate and build their industry knowledge. The new digital conversation with someone who has a lot of experience parallel for more interventionist economic policies like ‘helicopter platform allows mentees and mentors to easily in the sector. I have received good advice on how to reach my career goals and have also been put in contact One is Modern Monetary Theory (MMT), which is about as money’. But that’s no reason not to think about them seriously as manage their mentoring relationship online, and we modern as modern art having been invented around the same ways of lifting inequality and the social and political tensions to which with others to discuss potential opportunities. I would hope members fi nd this new service benefi cial. strongly recommend the programme to others. time (1905, by Georg Knapp). It basically means printing money that has contributed. We need to communicate some of these well- As a valued member of the hartered anker again (because governments can do so with impunity, according intentioned, more radical ideas in ways that people on the ground can Institute Mentee to the theory), but instead of loading it into helicopters or giving understand both rationally and emotionally. We need to rebrand new Institute, we invite you to create a profi le on the it to banks, it gets spent by the government on useful projects that economic models in ways people can grasp, believe in – and maybe mentoring platform either as a mentor or mentee. create full employment. The main risk is then of inflation, which is even make an informed decision about. CB (theoretically) controlled by taxation. That would mean trusting politicians to yank on the controls at times when it might not be Ian Henderson is CEO of AML Group Discover the new platform, visit Becoming a mentor has allowed me to give something popular to do so. aml-group.com or please back to the next generation of professional bankers; to pass on the experience I have acquired in the industry get in touch if you have any questions: and to press home the importance of professionalism. Institute Mentor
e are delighted to launch our new Digital Mentoring rogramme to all Institute members.
This platform has been designed to help members’ This platform has been designed to help members’ professional development, expand their network The Mentoring rogramme has enabled great andprofessional build their development, industry knowledge. expand their The newnetwork digital Theconversation Mentoring with rogramme someone haswho enabled has a lot great of experience conversation with someone who has a lot of experience andplatform build allows their industry mentees knowledge. and mentors The to new easily digital in the sector. I have received good advice on how to platform allows mentees and mentors to easily reachin the mysector. career I have goals received and have good also advice been on put how in contact to manage their mentoring relationship online, and we reach my career goals and have also been put in contact manage their mentoring relationship online, and we with others to discuss potential opportunities. I would hope members fi nd this new service benefi cial. stronglywith others recommend to discuss the potential programme opportunities. to others. I would Ashope a valued members member fi nd this of the new hartered service benefi anker cial. strongly recommend the programme to others. As a valued member of the hartered anker Institute Mentee Institute, we invite you to create a profi le on the Institute Mentee Institute,mentoring we platform invite you either to create as a mentor a profi leor on mentee. the mentoring platform either as a mentor or mentee.
Becoming a mentor has allowed me to give something Discover the new platform, visit Becoming a mentor has allowed me to give something Discover the new platform, visit or please back to the next generation of professional bankers; to or please passback onto thethe nextexperience generation I have of acquiredprofessional in the bankers; industry to get in touch if you have any questions: andpass to on press the experience home the importanceI have acquired of professionalism. in the industry get in touch if you have any questions: and to press home the importance of professionalism. Institute Mentor Institute Mentor 64 Chartered Banker The future of banking 2 1 The year to invest in you
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