Market Conduct

Consumer Protection Challenges

Catherine Simmons

Managing Director and Head of Government Affairs Asia Pacific

September 2014 Bali Indonesia

The Framework

oComprises a wide variety of activities and types of behaviors

oOutside main categories of risk such as market, credit, liquidity and operational risk

oRefers to risks attached to the way a firm and its staff conduct themselves

oGenerally agreed to incorporate customer treatment, staff remuneration and management of conflicts of interest

Thomson Reuters Conduct Risk Report 2013

Conduct Risk

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Present bias

Reference dependence and loss aversion

Regret and other emotion-driven preferences

Overconfidence

Over-extrapolation

Projection bias

Mental accounting and narrow bracketing

Framing, salience and limited attention

Decision-making rules of thumb

Persuasion and social influence

Bounded willpower

Bounded rationality

Key Ideas in Behavioral Economics

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UK FCA Occasional Paper 1 2013 Annex and Speech

Emerging Concepts

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Responsible Finance

Treating Customers

Fairly

Customer Charter

Impact on Company

Business Conduct that is:

Transparent

Prudent

Dependable

Citi Global Citizenship Report 2013

A Commitment to Responsible Finance

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How Do We Do Business

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Citi Code of Conduct 2013

Outcomes

Treatment

Commitment

Trust

We strive to create the best outcomes for our

clients, shareholders and communities with

financial solutions that are simple, creative and

responsible.

Treating our customers fairly and in a non-

discriminatory manner is deeply rooted in our core

principle of responsible finance

All of our products, services and programs reflect

our commitment to serving our customers with

fairness, transparency, prudence and

dependability.

We must fulfill this commitment by listening to our

customers, understanding their needs and offering

appropriate solutions so we can continue to earn

what matters most – their trust.

Conduct Risk Targeted Reviews

Business strategy

Conflicts of interest

Incentive-based compensation

New product approval

processes

Conduct Risk

Program

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Review processes governing approval of new

and their output to identify potential conduct

risks.

Reexamine incentive

compensation plans

through the lens of

conduct risk. Place an

emphasis on those plans

that might increase the

risk of mis-selling.

Pay attention to areas

that could give rise to

conflicts of interest.

Assess business plans and

strategy for forward-looking

indicators of conduct risk, such

as products with asymmetric

bargaining power, high profit

margins, and/or an imbalance of

the risk/return ratio.

Our Objectives

We seek to fairly represent our products and services and to communicate

with clients in a straightforward way that is jargon-free and transparent.

Lawyers, and/or compliance officers, review our advertising and marketing

materials to ensure they clearly and fairly represent the offer, satisfy any

product-specific disclosure and contractual demands, and comply with all

legal and regulatory requirements

In Japan, we have developed easy-to-read guides to account features and

fees to support credit card holders available on paper and digitally.

In the United States, our easy-to-read guide to account features and fees,

Plain Talk about Your Products, is part of account opening processes

Responsible Marketing

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Our Program

We look to provide financial opportunities, access, knowledge and

support for underserved communities and individuals worldwide.

We strive to treat our customers fairly and support them in times of

financial difficulty, as embodied in our commitment to Responsible

Finance.

The Citi Foundation donated $78 million in 87 countries, enabling 1.3

million people to make progress towards financial inclusion and economic

progress

Promoting Financial Inclusion and Economic Progress

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Financial Education The Indonesian Example

Activities

Full Financial Inclusion Access for individuals to appropriate financial products and services. This includes people

having the skills, knowledge and understanding to make best use of those products and services

Intermediate Outcomes

Final Outcome

Financial Capability

The ability to make informed judgments and effective decisions about the use and management of one’s money

Financial skills, knowledge, understanding, awareness of rights

BUSINESS RESPONSIBILITY : Responsible Advice to Customers & other Consumers

COMMUNITY RESPONSIBILITY : Support for Low Income | Disadvantages | Advocates | Practitioners

Save & Invest Wisely

Financial Education

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Save & Invest Wisely Publication | Seminar | Economic Outlooks |Financial Literacy Survey |

Educational website

1. Fin-Q Financial Literacy Survey

Indonesian Fin-Q Survey

• Between 7-14 October 2013, Citigroup’s Asia Pacific research partner conducted a total of

500 online interviews across Indonesia. This survey has been conducted on annual basis over the last 7 years

• In order to be eligible for the study, all respondents had to be over 18 years of age and have

either a bank account or own a major credit card.

• The questionnaire was administered via an online survey methodology. • The questionnaire consisted of over 80 questions and covered a range of topics related to

making smart financial decisions and having good financial habits.

• The average interview length was 29minutes.

• At the country level, the results of a sample size of N=500 are said to be accurate to within +/-4.5%, at the 95% confidence level.

Citi Fin-Q Survey (Oct 2013)

Citi Fin-Q Score Result Summary

Looking at the individual elements of the Citi Fin-Q Score revealed the following:

• The combined Citi Fin-Q Score for Indonesia was 60.7 (up 3pts) points out of a possible 100 points – this

represents the highest score since research started in 2007.

The overall results show that two-thirds of Indonesians (69%) have a Fin-Q Score of 50 or more.

• The demographic data show that males typically outscore females and that the average Fin-Q Score tends to

increase according to one’s age, income and retirement savings.

Only 36% make and stick to a monthly budget, a further 55% make a budget but don’t always stick to it

Only 56% believe they have enough insurance to protect both them and their families

Only 31% have a formal retirement plan and 9% have an up-to-date will

66% set aside or save some money every time they get paid

• 71% pay off their outstanding credit card balance in the average month

• 80% are somewhat/very satisfied with their current quality of life

• 89% are somewhat/very optimistic about their financial futures

Citi Fin-Q Survey (Oct 2013)

Comparison 2007 vs 2013

2007 • Indonesia’s Fin-Q score: 52.2 (out of 100)

• If they lost their jobs tomorrow, most

respondents said their savings would last them less than 11 weeks

• 6 out of 10 Indonesians do not plan for their retirement

• Less than 25% have a formal retirement plan

• 58% admitted an “average” understanding of personal financial management

Source: Citi Indonesia Fin-Q (Financial Quotient) Survey 2007

2013

• Indonesia’s Fin-Q score: 60.7 (out of 100)

• 52% of Indonesians think their savings would

last more than 3 months if they lost their job

• 74% of Indonesians express confidence with

their retirement savings

• 31% have formal retirement plan

• 65% feel they had a “good” or “very good”

understanding about money management and

personal finances

Source: Citi Indonesia Fin-Q (Financial Quotient) Survey 2013

2. MYWEALTH Educational Website

3. USE CREDIT WISELY Localized Credit Tools & Advice

10,000 booklets produced & distributed

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4. SEMINARS & EVENTS Outreach to Customers & Investors in collaboration with major

industry players

Citi Pension Fund Seminar 2012 The importance of risk management for pension funds was top of the agenda at the Citi Indonesia

pension fund seminar held on October 11th in Jakarta.

Citibank Financial Education Series A journalist class with the theme of “Opportunity and Investment for Indonesian Women” was held to

give a better understanding on a better financial management for women.

Citibank Financial Education Series Citi conducted the Financial Educations Series to help customers understand investor psychology as

well as alternative investments.

Citibank Financial Education Series – Journalist Class A journalist class with the theme of "Multiply and Protect your Wealth" was held to give a better

understanding on investment to the journalists

Citi Coaching Clinic for kids

Community Youth Education | Financial Capability | Microfinance

Committed to the economic empowerment

and financial inclusion of low-income

individuals , families and communities in the

areas where we work so that they can improve

their standard of living

Enterprise

Development

Youth Education and Livelihoods

Financial Capability and Asset Building

Microfinance

In each of our focus area,

we strive to partner with

organizations that

demonstrate a

commitment to

sustainability and

incorporate sound

environmental practices in

their programs

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Citi Foundation in Indonesia Focus Areas

• In 2013 , Donated USD 860,000

• Since 2004 has donated around USD 6 Million

1. Petualangan Agen Penny

Partner : Yayasan Mitra Mandiri dan Teater Koma

Partner Since 2007 (7 years)

Partnership Goals

• Financial education through theater showcase for school children

• Saving program for children of ages 6-14

• Awareness of Banking products

Key Beneficiaries: Students in urban and rural areas

Geographical Coverage

- Elementary School JABODETABEK Areas

Current Reach • 36.322 Students watched Agen Penny performances

• 6.595 Students started to save their money after watching Agen Penny show

• 390 SHOWS up to April 2013

• 432 SCHOOLs organized Agen Penny shows

• 455 CITIpeka Volunteer participated

• 2.160 TEACHERS accompanied students during Agen Penny

• 5.000 STUDENTS registered as follower on Agen Penny Facebook

• 10.400 COMIC given to several school library

• 74.600 VISIT Agen Penny website

Partnership Highlights

Financial Education Program for children of ages 6 – 14 (Elementary

School Grade 5 & 6 ) through a theater performance and comic book

Yayasan Mitra Mandiri Indonesia develop website www.agenpenny-id.com , social media and Agen Penny Facebook as communication and interactive media for the program in order to expand the coverage area of Agen Penny program

More than 74.600 visitors on Agen Penny

website

&

More than 5000 follower on Agen Penny social

media and Facebook.

Partner : Plan International & Prestasi Junior Indonesia

Partner Since 2012

Partnership Goals

• Contribute to increased economic security of targeted youth in

school and improve their employability through provision of the

financial education and entrepreneurship trainings

Key Beneficiaries: Students in lower income areas (Jawa Timur)

Geographical Coverage

- 10 Senior High School in Surabaya & Sidoarjo

Current Reach

• 4,008 students trained | 1,033 students maintain monthly

budgets for at least 3 months

• 968 students opened saving accounts | 889 students reported

increase in saving balance by 20%

• 10 student companies established | 200 students participated in

student companies program

Partnership Highlights

This program is to inspire students on entrepreneurship concept and

banking products | including to start a company

2. Urban Youth Financial Education

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Partner : UKM Center FEUI

Partner Since 2005

Partnership Goals

• To motivate and inspire micro entrepreneurs across Indonesia

in order help them grow, be an independent and increase their

economics scale

Key Beneficiaries:

• Micro entrepreneurs in rural areas with turnover < IDR 100

million/year or with nett income around IDR 3million/month

and having loan from LKM

Geographical Coverage

- All over Indonesia

Current Reach

• 4,403 participants

• 82 Winners from 2005 – 2012

• Involving more than 130 Citi volunteers

Partnership Highlights To leverage micro entrepreneur knowledge in business and financing

3. Citi Micro-entrepreneurship Awards (CMA)

4. Financial Education for the Poor

Partner : Lembaga Management Fakultas Ekonomi Universitas Indonesia

(LMFE-UI)

Partner Since 2007

Partnership Goals

• Expanding financial education curriculum for unprivileged society through Training

of Trainers (ToT)

Key Beneficiaries: People in urban and rural areas

Geographical Coverage

- All over Indonesia | 28 urban area

Current Reach

• Participants up to 600 people

• More than 300 organizations participated in ToT, they are:

• Koperasi | Lembaga Keuangan Mikro (BMT, Credit Union) | Lembaga Swadaya

Masyarakat | BPR (Bank Perkreditan Rakyat)

• Trainer (Dinas Kelautan dan Perikanan, Dinas Pertanian, Dinas Peternakan dan

Dinas Kehutanan)

Partnership Highlights Participants who have completed the training will directly go back to their

society-communities which are built by BPR, Koperasi, Lembaga Keuangan

Mikro non-bank as trainers

5. Housing-led : Financial Education Program

Partner : Habitat for Humanity

Partner Since 2012

Partnership Goals

• To help in making better house financing decisions

• To empower financially excluded 600 low-income families living in Jakarta and

Surabaya in making better financial decisions, particularly regarding their housing

goals.

• Delivered FE to beneficiaries in a financially sustainable manner by partnering

with PKK Dukuh Kupang Utara (in Surabaya) & Koperasi Yayasan Cinta Anak

Bangsa (in Jakarta)

Key Beneficiaries: From low-income families with children

Geographical Coverage

- Jakarta & Surabaya

Current Reach

• 350 participants in Jakarta | 250 participants in Surabaya

• Participants increased their level of financial knowledge & awareness

significantly in 4 areas: budgeting, savings, debt management and planning for

housing needs.

• Target individuals demonstrated at least one of the following skills and

attitudes: (i) budgeting and (ii) savings.

• Trained women actively involve in their household financial decisions

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Partner : Asosiasi Pusat Pengembangan Sumberdaya Wanita (PPSW)

Partner Since 2011

Partnership Goals

• Participants will acquire financial knowledge and practical skills on self-financing,

savings, loan management and financial independent in mature age

Key Beneficiaries:

Underprivileged mature women (above 40 years old) in urban & rural areas

Geographical Coverage

• 6 Provinces

• Aceh | Riau | Kalbar | Jawa barat | DKI | Banten

Current Reach

- more than 730 women graduated from the program

Partnership Highlights

Financial program for mature women (above 40 years) first in Indonesia

6. Financial Education for Mature Woman

Financial Education for Mature Women Training

ACEH RIAU JAKARTA

BANTEN JABAR KALBAR

• 6 Months Training to learn 6 financial Modules with 4 sessions per module for 2hours • Number of participants from batch 1 & 2 are 731 people (reach 120% from the original target of 600 people)

GRADUATION OF FINANCIAL EDUCATION OF MATURE

Last year, there are 731 successfully

graduated from the Financial Education

Program for Mature Women.

To be judge by their presence in class and

having financial planning

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Partner : Yayasan Ladang Media

Partner Since 2007

Partnership Goals

• Financial Education to all society

• Financial inspiration

Key Beneficiaries:

• For families, employees, college students, and SME including

individuals with personal financial problems

Geographical Coverage

• Across Indonesia 34 provinces | B-C segments

• Have approx. 4million viewers

Current Reach

• TVRI every Thursday at 07:30AM - 8:00AM

• website: 1,036,789 visitors

• facebook: 5,000 friends | facebook group: 2,478 likers

• Twitter: 2,911 followers

• Number of questions: 372 questions | Direct phone calls : 138

persons | Number of episode : 27 episodes

Partnership Highlights

Since 2007, this program is becoming source of information and

interactive TV program for all B – C segments viewers

7. UANG ANDA

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