Bankers believe Dodd-Frank 1073 will have little benefit for consumers but will have far-reaching negative impacts on the payments business, according to a new survey from Fundtech. The survey concentrated on banks’ sentiments towards Dodd-Frank section 1073, which mandates transparency around costs, timing and repudiation for consumer cross-border transfers.
The survey showed that nearly 90% of banks expect that Dodd-Frank 1073 will have a negative impact on their payments businesses. Less than 5% of banks believe that the regulation will have a positive impact. When asked whether the regulation will deliver the intended benefit to the consumer, 52% of respondents stated that it would have more of a negative impact than a positive one. Only 2% of respondents felt that the regulation would deliver the intended benefits. Dodd-Frank 1073 mandates that consumers are given 30 minutes to cancel cross-border transactions – however, only 2% of banks state that consumers rescinding orders is a frequent occurrence. Of those banks that knew the frequency, 43% state that consumers never rescind orders. The survey took place in December 2012.
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Transaction Banking revenues are set to grow rapidly over the coming decade, according to research by Boston Consulting Group. "Despite shrinking margins, significant revenue growth of approximately 170 percent—or a compound annual growth rate of roughly 11 percent—is anticipated between 2011 and 2021.", says the consultancy in its newsletter BCG Perspectives. Much of the growth is expected to come from developing economies, especially in the Asia-Pacific region and in Latin America, where the group says "There is significant room for growth in terms of key indicators such as the value of wholesale payment transactions per GDP and the number of wholesale payment transactions per capita." Transaction banking suffers from banks’ lack of a uniform definition of these products and services., according to a new report by Transaction Baking Academy tutor Enrico Camerinelli for the Aite Group. Transaction banking—the set of instruments and services that a bank offers to trading partners to financially support trade, monetary flows, or commercial papers—tracks financial instruments through their entire lifecycle. In a stressed economy, this makes transaction banking a safe source of bank revenue. Today, market transformation is shaping new scenarios for transaction banking. Subject to external factors tied to changes in corporate treasury policies, regulatory pressures, and technological advancement, a bank’s transaction banking business is likely to morph over time, says the report. “Although the majority of the analyzed European banks declare transaction banking to be a significant portion of their business, banks strongly suspect that it is more marketing hype than real business strategy,” says Camerinelli. “For many of those banks, the positive financial results that transaction banking units provide are completely nonexistent.” The full report reviews the transaction banking offerings of top European banks, identifies common denominators and strategies among them, and suggests a taxonomy for banks looking to clearly brand their transaction banking services. This report also discusses how specific market dynamics and business initiatives are likely to affect the different units of a bank’s transaction banking business and how banks should prepare for such significant changes. The rapidly-changing regulatory environment is holding back growth in global banking, according to a new survey by KPMG. In the Banking Outlook Survey, 69 percent of respondents identified regulatory and legislative pressures as the most significant barrier to growth over the next year, while 43 percent said that bank management will be spending most of its time and energy on initiatives related to increasing operational efficiency and reducing costs in the next two years. “Banks are still in recovery mode after the financial crisis and coming to grips with the new regulatory environment in which they now operate, which is impacting revenue and driving up compliance costs,” said Brian Stephens, national leader of KPMG LLP’s Banking and Capital Markets practice. “‘The new normal’ for the industry seems to be slow and steady growth as banking leaders streamline costs and evaluate strategies to drive future revenue.” According to the KPMG survey, banks are anticipating modest headcount gains in the year ahead, with 39 percent adding to the payrolls and 32 percent decreasing jobs. Stephens feels that hiring will more firmly take hold “when business conditions improve and loan demand picks up.” In the past year, 44 percent of the banking executives said they reduced headcount and 31 percent said they added jobs. “Headcount increases and reductions will be sporadic and largely depend on the mix of businesses within each bank,” said Stephens. A year from now, 6 percent of respondents expect revenue to be significantly higher with the majority (69 percent) eyeing moderate revenue growth. For an insight into adapting IT systems for regulatory change, visit The Forum for Regulatory Change The volume of trade finance transactions continued to increase in 2011, suggesting a slow but steady recovery in world trade, according to the 2012 ICC Global Survey on Trade Finance. The report, which can be downloaded here, polled 229 banks in 110 countries, a greater response than in any previous year, and found that, while world events such as the Arab Spring and Japan's earthquake had impacted on trade volumes, the trend was still upwards.
Almost three quarters of banks say they know of and understand Swift's new Bank Payment Obligation, according to new research from The Aite Group. The figures will make comforting reading for Swift and the ICC, which have championed the new instrument, although only 2% of banks are already using it. The Bank Payment Obligation is effectively an electronic replacement for Letters of Credit (LoC) and should help speed up trade finance transactions. “The BPO represents a fresh entry to trade finance,” said report author Enrico Camerinelli, senior analyst with Aite Group and a Transaction Banking Academy tutor. “Its current, lukewarm acceptance by banks and corporations will turn into full endorsement only after real examples prove its use as a payment instrument and risk mitigation tool for trade transactions in any part of the trade lifecycle.” The report is available from Aite Group: http://www.aitegroup.com/Reports/ReportDetail.aspx?recordItemID=930 Fig 1: Working Capital Priorities. Source: RBS/Greenwich research (click for larger image) Corporations in the US and Europe are taking an 'extremely conservative' approach to working capital management, according to a new report from RBS and Greenwich Associates. The survey, which saw 50 corporations interviewed in depth, shows that risk-averse strategies adopted during the financial crisis have become the norm, with the overwhelming majority of companies in the US and Asia saying their top working capital priority is liquidity preservation. The list of priorities for all firms in the survey was topped by three concerns: Mitigating counterparty risk from banks, suppliers and vendors; guarding against future funding disruptions by maximising liquidity; and protecting cash balances from market fluctuations by focusing on capital preservation in their short-term investments. Sources: http://www.greenwich.com/ ; http://www.rbs.co.uk/corporate/insight/g4/perspectives/working-capital.ashx
SWIFT has set out to support research into Global Transaction Banking with the launch of the Swift Institute, based at its Brussels campus. The new institute will issue grants to support research conducted by academics and senior industry professionals.
SWIFT board chairman Yawar Shah said, "SWIFT is stepping up to the requests of the Banking Industry, especially from the Leaders of the Global Transaction Banking Businesses, to foster research in this important area to assist with thought leadership on key strategic matters. It is a limited but important initiative for SWIFT in its role as a global neutral trusted third party." Subjects to be covered by the Institute include payments, clearing and settlement, cash management, trade financeTrust and Securities. The first research projects to be funded will cover three areas: RMB internationalisation; Financial supply chain management and Banking inclusion The Institute's output will include white papers, presentations and conference sessions, including at SWIFT's annual Sibos conference, which in 2012 will be held in Osaka, Japan (28 October 28 - 2 November 2012). Seven industry figures have been appointed to the Institute's advisory council, including Shah and SWIFT CEO Lázaro Campos . The other are:
BAFT-IFSA has updated its trade finance definitions, which offer standard ways of describing trade finance transactions. More details are at BAFT-IFSA, but the definitions can be downloaded below. BAFT-IFSA welcomes input on thse definitions!
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July 2018
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