Dual approach for technology implementation

Kishore Kumar SansiMD and CEO, Vijaya Bank

www.bankingfrontiers.com

Vol. 15 No. 2 June 2016 `75

Pages 64

From cash to cashless

YES Bank’s DIGICAL strategy

Federal Bank retail loans

Banking in the Gulf

Banking Frontiers June 2016 3

June 2016 - Vol. 15 No. 2

Group Publisher : Babu Nair

Group Editor : Manoj Agrawal

Editor : N. Mohan

Editorial

Brian Pereira, Mehul Dani, Ravi Lalwani,

Surekha Galagoda, Mohammed Irshad,

V. Raghuraman

Research Editors

Prof Venugopal Iyengar, V. Babu,

Ratnakar Deole, W.A. Wijewardena,

Sanchit Gogia, K.C. Shashidhar,

L.S. Subramanian

Marketing

Zahid Siddique, Aaswad Deshpande,

Gautam Ratan, Sunny Rajendra H.,

Jayesh Bhanushali, Ian Rodrigues,

Ashwani Seli (Delhi)

Events & Operations

Ashish Verma, Saaniya Naik,

Gautam Magare, Shirish Joshi,

Stalin Saldhana, Wilhelm Singh,

Pramod Jadhav, Amit Gupta,

Bharat Solanki

Design

Somnath Roy Choudhury

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The New Bankruptcy Code

The Insolvency and Bankruptcy Bill, which became a law in May 2016, is

considered a transformational legislation that is expected to specifically

help in resolving issues relating to winding up of insolvent companies

and lowering NPAs of the banks. Our insolvency law had remained outdated and

unreformed as a result of which rehabilitation or winding up of companies had

become a time-consuming and laborious process. Until now, it took more than

4 years to resolve a case of bankruptcy. With the new law, it becomes possible

to have time-bound settlement of insolvency, faster turnaround of businesses

and creation of structured information about serial defaulters.

The new law is expected to help India move up in the World Bank’s ease of

doing business index from the current 136 among 189 countries.

How does it help banks? The law will compel corporate borrowers to avoid

defaults so that they can continue to be in control of their business. Borrowers

will lose control of the corporate entity they own as soon as the process of

insolvency is initiated under the new regime. This is bound to force them not

to default in the first place. Banks will also be able to have a strong say in

issues relating to recovery. Credit rating agency Moody’s Investors Service

has pointed out to this fact but maintained that the existing infrastructure may

hamper the proceedings to some extent. Moody’s has said the new law can

reduce threshold for creditors to invoke the insolvency resolution process and

introduce third-party insolvency professionals as intermediaries to oversee the

process, replacing the debtor’s existing management and operate the company

as a going concern upon initiation of the process. One important aspect is the

limit on the duration of process to maximum of 270 days, after which a company

will be automatically liquidated.

However, will this really help cut down the current NPAs? May not. But the

law is indeed a preventive mechanism to contain future NPAs. Besides, it may

also lead to creation of a framework to transform the ‘failed entrepreneurs’ into

an asset as like in the developed countries, the government can itself initiate

measures to identify the causes of the failure and lead them back into success.

That way there would be little or no recurrences of bad loans and the term

‘wilful defaulter’ that evokes public ire at the sheer helplessness of the entire

banking system to act may cease to exist over a period of time.

Editor’s BlogN. MohanMobile : 9322895820Email : mohan@bankingfrontiers.com

Banking Frontiers June 2016 5

Conference Calendar

Global Risk Leadership Conference

- Asia-Pacific

1-4 August 2016, Bali

The MasterCard Global Risk Leadership Conference offers a thought-provoking and informative forum to learn about the latest tools and techniques for minimizing fraud risk

18th International Conference on Islamic

Banking, Finance and Commerce

4-5 August, Vancouver

The conference aims to bring together academic scientists, researchers and research scholars to exchange and share their experiences and research results on all aspects of Islamic banking, finance and commerce

DRF PaymentsEd 2016 Forum

8-10 August 2016, Charlotte, NC

The Forum is the payments industry’s only event focused solely on educational and networking opportunities

Corporate Fraud Conclave 2016

10 August 2016, New Delhi

Delegates will discuss and on the

mechanism for preventing and combating frauds more effectively and economically

2nd International Conference on Cyber

Security 2016

13-14 August 2016, Kota, India

The conference serves as a platform for researchers and practitioners to present, discuss, and exchange ideas that address real-world problems with cyber security

Operational Risk: Strategy, Capital

Calculation and Modelling

16-17 August 2016, Sydney

A two-day workshop designed to provide attendees with guidance on how to manage operational risk with the changing regulatory environment

2nd Annual Blockchain Conference

17 August 2016, New York

The conference theme is blockchain beyond crypto currency. It will discuss why large banks, tech giants, governments and start-ups are getting involved in this technology

Gartner Security & Risk Management

Summit

22-23 August 2016, Sydney

The summit will provide details of the proven practices and strategies that one needs to maintain cost-effective security and risk programs to support digital business and drive enterprise success

Bancassurance Masterclass 2016

24-25 August 2016, Kuala Lumpur

The event is designed to provide a complete guide to setting up, planning and executing a successful Bancassurance department and strategy

BankTech Asia 2016

24-25 August 2016, Jakarta

This is a banking technology conference with scope for networking with key industry influencers and decision makers, recognizing leading-edge products and solutions and discussing best practice strategies

OpRisk Asia

24-25 August 2016, Singapore

The annual gathering of operational risk professionals from across the Asia Pacific region offers an unmatched opportunity to learn about and discuss a wide diversity of operational hazards

18th International Conference on

Finance, Banking and Insurance 25-26 August 2016, London

The conference will bring together leading academic scientists, researchers and research scholars to discuss all aspects of finance, banking and insurance

Customer engagement - Mobilizing

Retail

29-31 August 2016, Chicago

This Mobile Payments Conference will highlight the many new mobile commerce platforms, services, solutions and standards that continue to enter this exploding market

6 Banking Frontiers June 2016

Project Pipeline

RBI wants web gateway solutionThe Reserve Bank of India is planning to implement an appliance based secure web gateway solution and replace its proxy solution. It has invited proposals from service providers to supply, install, operationalize, maintain and support the solution. RBI wants the solution to be designed for secure proxy and active content caching services. The solution shall include: web proxy caching,

web content filtering, URL filtering, anti-malware, anti-virus, internal exceptions, enterprise policies, application layer filtering, Layer 7 application control features, network-based configuration, AAA (Authentication, Authorization and Accounting), real-time monitoring, real-time web filtering, search term filtering and forced safe search capabilities, reporting module, BYOD and Remote filtering features.

PNB looks for HRMS for RRBsPunjab National Bank is looking to implement HRMS at the bank’s five RRBs. It has invited proposals from service providers for the same. The five RRBs are Madhya Bihar Gramin Bank, Patna, Haryana Gramin Bank, Rohtak, Himachal Pradesh Gramin Bank, Mandi, Punjab Gramin Bank, Kapurthala and Sarva UP Gramin Bank, Meerut. The RRBs are fully computerized and networked. The bank wants the HRMS to fully automate the whole HR activity processes in these banks. It should be a centralized online system with instant updation of information by the users of the different offices of the bank so that updated data is available and maintained. The system is to be used for manpower planning, training, appraisal and performance, promotions, payroll process, PF, loans, online submission of leave application etc.

NISM wants to set up data circuitsNational Institute of Securities Markets, a public trust set up by Sebi has invited proposals to set up data circuits. NISM has six schools of excellence for imparting professionalized education in securities markets. The selected service providers will have to set up wired data circuits (a few are point to point data circuits while the others are internet leased lines). The circuits can be standard leased lines or MPLS. It requires 7 circuits at SEBI Data Center in BKC, Mumbai, Data Center, NISM Campus at the Patalganga Industrial Area in Raigad district and Overseas Towers, Anna Salai, Chennai.

UBI wants litigation management systemUnited Bank of India is proposing to implement a litigation management system for monitoring all debt recovery tribunal/civil court/high court/ supreme court cases. The bank wants the system to be accessible across all its branches / offices across India and capable of handling at least 500 concurrent users at a time. The central server will be located at Kolkata. The system should be accessible through the bank’s existing WAN (MPLS). The solution should support input from app based mobile application. The bank will provide the necessary infrastructure, including hardware, operating system and database for the system. Installation, configuration and optimization for hardware, system software and application software will be the responsibility of the service provider as also the integration of this software with the bank’s CBS system Finacle and interface with internet / social media. The system will be located in Kolkata.

NIBM to have ISO certificationNational Institute of Bank Management is looking for a certifying body to help it secure ISO 9001:2015 certification. The institute is now in the process of implementing the standard for its development and delivery of advanced training to executives of banks. The institute conducts 150-180 training programs for banks in areas such as finance, HR, IT, international banking and finance, rural finance and development and strategic planning, marketing and control.

OBC to have DMS

Oriental Bank of Commerce is wanting to implement a document management system (DMS). The bank wants the system to support the complete digitization of documents used/ created by all the departments of the bank - account opening, loans, HR, marketing, board notes, treasury, trade finance and IT department. The bank has a CBS - Finacle - and it has CRisMAC as data entry and reporting tool, IMACS as the risk rating system, HRMS and loan origination system. The bank wants the selected service provider to supply, install, customize and maintain the required solutions, provide interfaces required to integrate the solution with other banking systems and applications, provide complete testing and required training to identified trainers and core users, provide hand-holding support during roll-out and design size the hardware required at DC and DR and at scanning centres. The bank will procure the hardware separately.

Banking Frontiers June 2016 7

BoB looking for anti-phishing serviceBank of Baroda is looking for a service provider to provide managed services for anti-phishing in the bank. The bank intends to engage a service provider for its internet banking site Baroda Connect in order to safeguard the interests of customers against phishing and other social engineering attacks. The service provider will be responsible for undertaking tasks including 24X7x365 monitoring for

phishing attacks, implementing all the measures as may be necessary from time to time to mitigate the evolving threats. The proposed system should function on a realtime basis and the service provider should implement tools for referrer log analysis of web servers and track hosting of phishing sites through implementation of watermark and other means.

Dena Bank to have EWIRMDena Bank is implementing enterprise wide integrated risk management architecture for conformity with Basel II and Basel III regulations. The bank has already taken several initiatives for strengthening its risk management practices and has formulated policy documents taking into account the business requirements / best international practices and the supervisory guidelines. The bank wants a service provider, who can offer a complete turnkey solution for an Enterprise Wide Integrated Risk Management (EWIRM) solution. This would envisage parameterization, historical data management, verifying data quality, migrating data, user acceptance testing, documentation, trainings, knowledge transfer and support. The solution/s offered should be web based, open platform and support data transfer and consolidation from both the networked and standalone systems either online or dial up. The proposed system should include credit risk management system, operational risk management system, market risk management system, risk-based supervision module and an integrated capital computation and reporting module for the advanced approaches under RBI guidelines on Basel II and Basel III.

NPCI wants to spruce up websiteThe National Payments Corporation of India is looking for an agency to revamp its corporate website and create IMPS/UPI and RuPay microsites. The main objective of this website would be to improve the electronic presence of NPCI for all the stakeholders. NPCI wants the website to be easy to navigate and should be properly secured from any untoward activity. The access to the contents should be logical and intuitive and information should be available in minimum number of clicks besides being able to integrate easy to use content management system for managing the overall content of the website. Besides, the agency should also undertake restructuring the existing content of the website to make it more user friendly so that information is easily accessible to the customers. Ultimately, the website will serve as the single repository for all information to be made available to the public. The corporate website of NPCI is currently hosted and managed by an outsourced agency. NPCI wants to get this hosted in-house in the data center with DR and backup solution in place.

SBI seeks integrator for UPI

State Bank of India is proposing to engage an agency to help it in the design, implementation and maintenance of the Unified Payment Interface, which the bank intends to launch immediately. The bank wants to continue with its pioneering position in ‘Next Generation Banking with a difference’ and enhance the value proposition for its retail customers. The bank recognizes that UPI will be one of the initiatives, which will provide a seamless transaction flow for the customers. The selected service provider will have to develop a mobile app for Android, IOS and Windows operating systems and integrate with existing mobile banking system of the bank and integration with the NPCI system for UPI. The bank intends to launch UPI within 45 days of award of the contract.

PNB to shift its DR sitePunjab National Bank wants to shift its DR site from the present location to a co-location site in Navi Mumbai and is looking for a service provider. The proposed co-location site should not only be meeting the bank’s current requirements but also should be expandable/scalable to consolidate other IT installations / co-location sites from a long term perspective. The proposed DC should also be meeting minimum tier 3 data center specifications.

Banking Frontiers June 2016 13

N E W S Regulators

Philip Lowe to be RBA governorPhilip Lowe will be the governor of Reserve Bank of Australia. A globally trained monetary policy specialist widely regarded as one of the best central bankers of his generation, he has been deputy governor of the Australian central bank since 2012. He takes over from the current governor Glenn Stevens in September. The decision comes as a major source of relief for both Stevens and the central bank’s

staff more generally as it continues a long-standing and internally-driven succession plan. After considering a candidate list drawn up by the Treasury, the government settled on Lowe in a decision that has widespread support among central bank watchers, experts and politicians.

Ilan Goldfajn to be governor of CBBIlan Goldfajn has been appointed as the next president of the Central Bank of Brazil. The country’s government nominated the MIT-trained economist in an effort to shore up investor confidence in Latin America’s largest economy. Goldfajn, currently chief economist for Itau Unibanco, Brazil’s largest private sector bank by assets, is an experienced hand. He was a director of the central bank from 2000 to 2003. Goldfajn succeeds Alexandre Tombini, during whose tenure inflation weighed on the economy and undercut the central bank’s credibility.

Kenya regulator warns against BitcoinCentral Bank of Kenya has warned against the adoption of digital currencies in the country. Governor Patrick Njoroge said Kenya currently does not have the necessary systems or regulatory framework in place to deal with the technology. Earlier, the central bank had said Bitcoin is a form of un-regulated digital currency that is not issued or guaranteed by any government or central bank. Domestic and international money transfer services in Kenya are regulated by the Central Bank of Kenya Act and other legislation. In this regard, no entity is currently licenced to offer money remittance services and products in Kenya using virtual currency such as Bitcoin.

Bangla bank officials may be involvedIt is possible that some officials of Bangladesh Bank may have been involved in the calculated theft of $81 million from its account with the New York Federal Reserve Bank, the head of a government-appointed panel investigating the cyber heist has told reporters. According to Mohammed Farashuddin, a former governor of the central bank and who is heading the panel, said earlier it was thought no one from Bangladesh Bank was involved, but now there is a small change. The panel had submitted its report to the finance minister. He refused to reveal the names. Farashuddin said the panel’s findings were different from a previous one that mainly held SWIFT responsible for the cyber heist. A group of cyber attackers broke into the computer systems of the central bank in February and issued instructions through the SWIFT network to transfer $951 million of its deposits held at the New York Federal Reserve Bank to accounts in the Philippines and Sri Lanka. The group had installed malware in systems at the bank’s Dhaka headquarters, which allowed them to spend several weeks spying upon the bank’s systems and processes.

Center to study RMB

Plastic notes may stick together

Bank of England has admitted that the new plastic bank notes due to be introduced in the country later this year are prone to stick together. Britain will introduce an updated £5 bank notes made of polymer plastic this September to replace the current paper notes. Plastic £10 and £20 notes are also going into circulation next year. Bank of England said the new notes will be tougher and more secure but they may clump together. The full design of the new £5 note, which is set to feature Sir Winston Churchill, will be unveiled this week. Novelist Jane Austen would be the face of the new £10 note while artist JMW Turner will appear on the new £20 note.

People’s Bank of China is partnering with Nanyang Technological University (NTU Singapore) to launch a new research center to study the demand and use of the renminbi (RMB) in international markets. The center will leverage the expertise in finance from NTU’s Nanyang Business School to train policymakers and finance executives in RMB policies and internationalization process. As an internationalized currency, the RMB will be able to offer a host of benefits to consumers, traders, banks, and businesses. The new Centre for RMB Internationalization Studies (CRIS) was launched in Beijing this morning. Prof Ravi Kumar, dean of Nanyang Business School, said the renminbi is now the world’s second most used currency for trade and services.

26 Banking Frontiers June 2016

N E W S Banking in the Gulf

Emirates NDB plans digital bankDubai’s largest bank Emirates NBD said it is investing AED500 million over the next three years towards digital innovation and multichannel transformation of its processes, products and services. The bank is also planning to launch UAE’s first digital bank targeted at millennials. The digital bank will offer customers the next generation of self-service money

management with useful tools and applications. Shayne Nelson, group CEO of Emirates NBD said the bank is making a commitment to the future with the digital transformation plan. The bank said its investment will focus on five key areas - end to end process transformation, smoother, faster and more responsive customer interface, omnichannel experience, fortification of cyber security and anti-fraud capabilities, and enhancement data management and analytics.

ADFG, GFH to start Islamic bankAbu Dhabi Financial Group (ADFG) and Bahrain’s GFH Financial Group are collaborating to set up an Islamic bank in Abu Dhabi’s new financial free zone with initial capital of $100 million. Privately-owned investment management firm ADFG and GFH have received preliminary approval to launch the bank at Abu Dhabi Global Market (ADGM), the second financial free zone in the United Arab Emirates. It will be the first new bank set up at the recently-launched ADGM. Jassim Al Seddiqi, chief executive of ADFG, said the bank will be opening very soon, it will be run as a commercial bank. ADFG had in December 2014 bought New Scotland Yard, the former headquarters of London’s Metropolitan Police for 370 million pounds.

Doha Bank may set up subsidiary in IndiaDoha Bank, which already has three branches in India, is planning to establish a wholly-owned subsidiary in the country. The bank wants to scale up its operations to tier I and tier II cities, including in Gujarat. Dr R. Seetharaman, chief executive of the bank, said the bank wants to scale its the present branch format up further to a subsidiary. Once a subsidiary is formed, then it can enhance its performance in tier I and tier II cities, he said after meeting of Qatari Businessmen Association’s (QBA) with Indian prime minister Narendra Modi. The rules (regarding WOS) issued by the Reserve Bank of India (RBI) in November 2013 could expand opportunities for international banks in India since they would have greater freedom to open branches and be able to participate more in the development of the country’s financial sector.

Emirates NDB partnering with UberDubai’s Emirates NBD is partnering with radio taxi service Uber, offering its cardholders free rides during the holy month of Ramadan. The bank said in a statement its cardholders will be privy to complimentary rides from Uber from 6 pm to 9 pm on the weekends (Thursday-Saturday) during the Holy Month. Additionally, new users registering on Uber’s app with their Emirates NBD debit or credit cards will receive two extra free rides that will be valid across Ramadan. Suvo Sarkar, senior executive vice president & group head – Retail Banking and Wealth Management, Emirates NBD, said the bank and Uber have successfully collaborated in the past to add great value to the residents of the UAE and they positive that this campaign will bring a lot of happiness to the bank’s customers.

OAB opts BPC’s SmartVistaOman Arab Bank has selected BPC Banking Technologies’ SmartVista suite for its payments business. SmartVista replaces the bank’s existing legacy platform ACI Worldwide’s Open2. The bank will be able to use SmartVista to manage its ATMs, comply with future standards for the introduction of EMV and provide card issuing and fraud prevention. The payments suite will be interfaced to the bank’s core banking software, Misys’ Equation, for conventional banking operations and Path Solutions’ iMAL for Islamic financing. In future, OAB will offer EMV compliant Visa card products as well as support local cards (Islamic) based on Visa Electron. The bank will also acquire AmEx cards for the first time.

Gulf Bank Kuwait adopts biometrics

Gulf Bank Kuwait has partnered with biometrics and identity assurance software company Daon to provide biometric authentication with its new mobile banking application. Daon’s IdentityX platform will enable Gulf Bank Kuwait’s customers to seamlessly authenticate using their face and fingerprint to quickly and easily assert their identity online across multiple channels. Daon’s IdentityX Platform provides fingerprint, face and voice recognition, along with other authentication factors, which will provide convenient, fast, secure authentication.

Banking Frontiers June 2016 27

Doha Bank CEO honouredDoha Bank’s CEO Dr R. See tharaman has been conferred with Green Economy Visionary Award at Union of Arab Bank’s International Banking Summit. The award is given for Seetharaman’s outstanding contribution towards environment friendly activities and thereby promoting green economies. He received the award from UAB chairman Mohammed Jarrah Al Sabah. Seetharaman

said Doha Bank has promoted paperless banking, internet banking, SMS banking, phone banking and ATM banking as well as online channels such as Doha Souq, e-remittances and online bill payments. It has launched Green Credit Card and Green Account. It also has a dedicated green banking website which integrates the bank’s initiatives in promoting environmental safety with the community by reaching out to both the public and private sectors, he said.

AMF pushes for setting regulationsArab Monetary Fund feels central banks in the region need to have a stronger role in setting regulations for the region’s Islamic banks. There is a need for more efforts to strengthen the supervisory and regulatory capacity of central banks, says AMF director general Abdulrahman Al Hamidy. He said regulators must press ahead with introducing new liquidity management tools including new tools to help banks hedge various risks. Regulators need to introduce new liquidity management tools and to work towards the strengthening of governance and the development of human and technical capacity in the industry. The lack of tools for Islamic banks to manage their short-term financial obligations still represents one of the most important challenges for the sector, and one which places a burden on policymakers and Islamic banks, he said.

New consumer card from Dubai Islamic BankThe department of economic development in Dubai and Dubai Islamic Bank, the largest Islamic bank in the country, announced the official launch of the first-ever Consumer Card in the UAE, a co-branded credit card dedicated to protect the rights of consumers and providing them with savings on their

daily purchases. The card is an addition to the partnerships being launched by the DED along with the private sector and to the ongoing efforts to enhance the shopping experience in Dubai and across the UAE. Developed and designed in line with the spending habits and distinct needs of consumers in the UAE, the Shariah-compliant card issued in partnership with Visa carries no hidden charges and has two variants, the Rewards Consumer Card and the Platinum Consumer Card, both offering varied benefits on purchases.

Bank Sohar launches new appMuscat’s Bank Sohar has launched a new mobile app for conventional as well as clients of Sohar Islamic. The app, which is available on both Android and iOS devices, features the latest in mobile banking technology with advanced security capabilities and an innovative self-registration system. The app also features modern and easy navigation in addition to a streamlined look, allowing customers to do banking in one minute and view account balance, transfer funds, pay utility bills, credit card payments and much more. The bank’s customers can self-register to start using it. Customers can easily monitor transactions in their accounts with real-time balance and mini statements. In addition, users will also be able to transfer funds between accounts within the bank as well as within the country. The app also allows users to pay their utility bills and make credit card payments.

Dubai bank launching website to assist newcomersThe Commercial Bank of Dubai is launching a dedicated website, movingtouae.ae, to provide information, tools, resources and services to assist newcomers to the UAE to settle in and identify solutions for their financial needs. The site will provide information on how to get started on the right financial path with sound financial advice. It will also contain articles, blogs and useful links to local services and directories that will assist newcomers to get settled. The bank said the aim is to simplify financial processes in the country for newcomers by providing a one-stop access for all the information they need, whether they are looking for a school, housing, health and medical services or simply knowing how to move around.

38 Banking Frontiers June 2016

Research Notes

Corporate debt supply to remain subduedMuted earnings growth, sluggish

private sector capex and an overall environment of low demand-high leverage are expected to keep overall corporate debt supply subdued, says a report by Bansi Madhavani, analyst, Credit & Market Research, India Ratings and Research (Ind-Ra). Spreads on investment-grade bonds are likely to be stable backed by a steady appetite and an overall lower supply. Any spread compression hereon is likely only on the back of a benign global environment, an enhanced risk appetite, improved growth prospects, along with an improvement in the state of corporates’ balance sheet.

In Ind-Ra’s assessment, commercial papers (CPs) worth `555.5 billion are due for redemption over the coming 6 months with 84% of them arising from the 3 sectors - financial services, financial institutions, and oil & gas. Ind-Ra’s first edition of Indian Corporate Debt Market Tracker highlights CP issuance trends

from January to April 2016 period.The appetite for corporate debt will

be driven by domestic investors. Bond market development is likely to remain restricted in the AA and above categories. Credit quality issues may keep the outlook

challenging for the issuers down the credit curve. Foreign portfolio investors are likely to focus on rate outlook and are unlikely to take a meaningful incremental exposure in corporate bonds..

mehul@bankingfrontiers.com

The elevated stress at public sector banks and the Insolvency and Bankruptcy

Code, 2016 are some of the positives for India’s corporate bond  market, believes rating agency Crisil. A raft of recent

developments such as a conducive macro-economic milieu, the imperatives of financing large infrastructure build-outs, favorable regulations and ongoing innovations in bond structures are all positives for India’s corporate bond market, says a report released at the rating agency’s 4th annual seminar in Mumbai on ‘Expanding India’s Corporate Bond Market’. 

A sharp fall in profitability has diminished the ability of public sector banks to generate capital from internal accrual , while weak operational performance, driven by a surfeit of NPAs, has made it difficult for them to raise money from the  capital market, says the report.

Then there are the imperatives of growth. Crisil estimates India will need ̀ 43 lakh crore ($650 billion) for infrastructure

build-out by 2020. Additionally, public sector banks need to raise `1.7 lakh crore ($25 billion) of tier 1 capital by 31 March 2019, to conform to Basel III regulations. Says Ashu Suyash, MD & CEO, Crisil: “Such constraints mean the corporate bond market has become crucial to India’s growth story. We believe a few more steps are necessary to attract investors and issuers. These include policy impetus for issuers to tap bond markets, and offering protection through innovative credit-enhancement mechanisms such as a bond guarantee fund, which will draw a larger set of issuers and investors.”

Innovations such as TReDS, REITs, and InvITs are already close to reality, and there is also a proposal to set up the Bond Guarantee Fund of India. The New Development Bank (BRICS Bank) can play also a supportive role.

Corporate bonds, not banks, to fund infra development

Banking Frontiers June 2016 39

N E W S SWIFT

New CEO for SWIFT IndiaSWIFT India Domestic Services, the Indian joint venture of SWIFT SCRL and top Indian banks, has a new CEO. Kiran Shetty has taken charge to head SWIFT India’s operations and business lines in the country. Shetty joins SWIFT India from Western Union, where he was MD and regional vice president, India and South Asia. He has more than 20 years of experience in the financial services industry with top Fortune 500 US companies. Shetty is a recipient of National Award

for E-Governance (driving financial inclusion), by the Indian government in 2016. Eddie Haddad, president of SWIFT India said Shetty brings with him substantial experience in the Indian financial sector. On his part, Shetty said SWIFT India has been achieving great milestones with a number of major banks and corporates going live on the network and there is much more to be done to help India fulfil the dream of complete digitization.

SWIFT may have to scale back operationsGottfried Leibbrandt, CEO of SWIFT SCRL, says SWIFT may be forced to scale back some of its operations to help pay for new security initiatives it is planning in the light of revelations that fraudsters are sending payment instructions over its network. He said the company would have to shrink and review its strategy. In February, hackers broke into Bank Bangladesh’s interface with SWIFT’s network and fraudulently transferred $81 million from the bank’s holdings in the Federal Reserve. While the fraudsters gave directives to transfer $951 million to fictitious accounts in the Philippines, most of the transactions were blocked but four went through, amounting to $81 million. Security experts believe the biggest weakness in the SWIFT system was users’ access points to the core network, since not all banks had strict security practices for safeguarding the keys to their SWIFT terminals.

Transfer requests were denied earlierIt has now come to light that hours before the Federal Reserve Bank of New York approved four fraudulent requests to send $81 million from a Bangladesh Bank account to cyber thieves, its branch blocked these requests because they lacked information required to transfer money. According to news reports, on the day of the theft in February, the New York Fed initially rejected 35 requests to transfer funds to various overseas accounts. The decision to later fulfil a handful of resubmitted requests raises questions about how no alerts were thrown up. The Fed had initially denied the transfer requests because they lacked proper formatting for the SWIFT messaging system, the network banks use for international financial transfers. They lacked the names of correspondent banks, which typically receive wired funds. The Fed rejected the requests, which came from the hackers. Later in the day, however, the cyber thieves resubmitted those 35 requests. On the second try, the messages had the proper formatting. The requests had been authenticated by SWIFT, the first line of defense against fraudulent wire transfers. Despite the technical compliance, the New York Fed rejected 30 of the requests a second time. But the Fed did approve five requests – for a total of $101 million. Later, one of those five transfers – a $20 million request – was reversed because of a misspelling.

RMB use goes up

North Korea link possible

Security firm Symantec says the hackers who stole $81 million from Bangladesh Bank have been linked to another cyber attack - on a bank in the Philippines - and also to the 2014 hack on Sony Pictures Entertainment. Symantec said it had identified three pieces of malware that were used in limited targeted attacks against financial institutions in Southeast Asia. It said the attackers were able to infiltrate the bank’s computers but there was no evidence of money being stolen. One of the malicious programs has been previously associated with a hacking group known as Lazarus, which has been linked to the devastating attack on Sony’s Hollywood studio in 2014. The U.S. government had blamed the hack on North Korea.

Recent SWIFT data shows that India’s use of RMB for payments in value with China and Hong Kong is on the rise, but the country still shows one of the lowest RMB adoption rates among Asian countries, ranked 38th worldwide. SWIFT said in April 2016, 3.8% of all payments made between India and China / Hong Kong were exchanged in RMB while this was only 0.2% in April 2014. Since 2014, the Chinese currency moved from position No 6 to No 4 for payments by value overtaking the Hong Kong dollar and the British pound. The US dollar, however, continues to lead the corridor with a share of almost 80%, followed by the Indian rupee (7.2%) and the euro (6.3%).

A typical scenario with most banks is that they have captured attention, demonstrated value, and won over new customers. Bringing them onboard which ideally shouldn’t be an obstacle, is.

A simplification strategy that is proving quite effective for banks and institutions is the integration of smart phone/tablet ID card reader functionality to capture primary data and insight both at the place of convenience of the customer, or at the branch as part of digital account opening.

According to Ajay Alex, practice head at Finesse, the onboarding solution from Finesse is an end-to-end, eKYC compliant, tablet based customer onboarding solution. Critical to customer onboarding pre-requisites and this comes with a robust de-duplication module. It is a comprehensive tablet based app that provides for ‘Green’ compliance with

cost efficiency.Finesse offers onboarding solutions which

digitally capture customer information and their photographs through smart phones and tablets, and pushes it through a series of workflow checks and verifications - audit, data entry, error correction, QA and warehousing.

Signature and biometrics is a unique feature that enables paperless compliance and faster customer

onboarding due to greater convenience. The de-duplication engine verifies customer information with those contained in official databases like UIDAI DB, RBI, Blacklist / White list, Credit rating Systems, etc, to establish customer identity.

Ajay signed off saying, “We strive for our clients to have operational excellence, enhance customer experience and improved revenues.”

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Finesse, the No 1 Trusted Systems Integrator of the region was declared winner of ‘The Enterprise Applications Integrator of the Year 2016’ at

The ICT Champions Awards 2016 held at St.Regis, Dubai. The Awards is an annual event by The Integrator, and Finesse is proud to be the consecutive recipient for the past three years. The event brought together the best of System Integrators, Service Providers, Distributors, Resellers and Vendors to recognize outstanding performances throughout the Middle East and Africa IT industry.

Finesse competed with many other companies for the award, whcih evaluated all the companie son project execution, financial performance, technology innovation, management quality, marketing strategy and market penetration. This assessment was complemented by how Finesse implemented solutions for their clients in the as presented in the nomination entry.

Sunil Paul, Co-founder and COO of Finesse said, “System Integration is our core area of expertise as part of our offerings and Finesse is very active with multiple complex projects, making us the No.1 most Trusted Software Integrators in the region. We are grateful to the VAR-MEA Group and The Integrator, the esteemed panel of judges and the Awards Committee for bestowing us with this Award. We look forward to maintaining and excelling in our endeavors of serving the region and beyond.”

FINESSE WINS ‘THE ENTERPRISE APPLICATIONS INTEGRATOR OF THE YEAR 2016’ AT THE ICT CHAMPIONS AWARDS 2016

FINESSE TECHNOLOGY ROADSHOW AT MUMBAI CREATES INTEREST AMONG BANKS AND OTHER VERTICALS

Finesse recently held a Technology Roadshow for our clients, partners and industry technology enthusiasts with half a day of solution presentations and demos on Tagetik, Qliksense and Salesforce. It was well attended by CFOs, CIOs and Heads of Finance and Planning from the Banking, Insurance, Manufacturing, Retail, Construction, Logistics, Food and Life Sciences verticals.

Experts from Salesforce, Qlik and Tagetik had the audiences glued till the end while they presented the features of these solutions, with extensive demos delivered by the respective product masters. They addressed the doubts, helped identify the key challenges faced by enterprises and discussed h o w t h e s e solutions can b e u s e d t o address them.

FINESSE BRINGS IN A FUTURISTIC APPROACH TO CUSTOMER ONBOARDING

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48 Banking Frontiers June 2016

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FCBA 2016 nomination forms releasedBanking Frontiers has uploaded the nomination form for FCBA 2016. To download it, see the ad on the right side of the website www.bankingfrontiers.com

Cooperative banks of all types - urban cooperative banks, district cooperative banks, mahila cooperative banks, employee cooperative banks, PACS and credit societies - are invited to send their nominations. The deadline for receiving the nominations is 1 August 2016. Apart from the normal award categories, the new ones this year include Best Branch Expansion, Best Card Initiative, Best Cash Automation, Best Vehicle Loan Achievement, Best Property Loan Achievement, Best ePayments, Best Mobile App, Best Financial Literacy and Best New Head Office. For any clarification, please contact your relationship manager: Bharat Solanki or Stalin Saldhana or Naresh Katiya.

Sponsors invited for FCBA 2016Banking Frontiers invites sponsors for FCBA 2016. The conference is expected to host 400-500 delegates from over 120 cooperative banks all across the country. The participating bankers will include chairmen, directors, CEOs, GMs, IT Heads, etc. Sponsorship options include knowledge presentation, knowledge workshop, panel discussion, product launch, case studies, interviews, stall, branding, etc. Stalls are available in 2 sizes: 3.2 sq mt and 4x2 sq mt. Raw space is also available for those sponsors who wish to set up customized stalls. Branding options include lunch, dinner, podium, lanyards, delegate kit, writing pads, delegate chairs, etc. All sponsorships are available on a first come first serve basis. Those companies that have cost effective products or services or solutions would be ideal sponsors at FCBA.

Parallel tracks at FCBA 2016For the first time in the history of FCBA, there will be three parallel tracks for the benefit of the bankers. The tracks are divided into 3 key areas: Regulator focused, Customer focused and Technology focused. These are the 3 main focus areas for any cooperative bank that wishes to grow its business and compete effecively the highly competitive scenario. With multiple bankers coming from most cooperative banks, each banker will be able to find a topic that is relevant to him/her.

The expo will open in the morning on 17 September and the conference will begin at 2 pm. The 3 parallel tracks will continue till lunch on the 2nd day, which will be followed by the plenary session. The whole program will conclude with the FCBA awards function on 18 September, followed by a gala dinner and entertainment.

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60 Banking Frontiers June 2016

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Lakshmi Vilas Bank launched its new e-lounge facility at West Mambalamin Chennai. The e-lounge provides facilities such as cash ad cheque deposits, withdrawals, internet banking, and pass book printing. Parthasarathi Mukherjee, MD & CEO of the bank, inaugurating the facility

Bank of Baroda won prizes in four categories under the All India RBI Rajbhasha Shield Competition for 2014-15. Mayank K. Mehta, ED, Ravi Kumar Arora, GM and Dr Jawahar Karnavat, DGM (Official Language) of the bank receiving the award from Dr Raghuram Rajan, governor

State Bank of India played host to senior commercial bankers from Egypt on a study tour on MSME units in India. The bankers with Anshula Kant, DMD & CFO of the bank, who explained to the bankers the unique history, legacy and evolution of SBI and the thrust given by the bank for the MSME sector

Paytm, whch is setting up a payments bank, has opted for Finacle as its CBS. Venkatramana Gosavi, VP and head - Growth Market, Infosys Finacle, and Shinjini Kumar, CEO, Paytm Payments Bank, at a press conference

People Track

PB Banking Frontiers June 2016 Banking Frontiers June 2016 61

Sanjiv Misra is chairman of Axis Bank

Sarvade to head IT arm of RBIThe Reserve Bank of India has appointed Nandkumar Sarvade as the head of its recently formed IT subsidiary. A retired IPS officer and an expert in bank fraud and terrorism cases, Sarvade is currently chief executive of Data Security Council of India. He had served CBI as an expert in bank frauds and terrorism cases. After retirement in 2008, he worked as an independent advisor for fraud detection and cyber security at ICICI Bank, Citi Bank and Ernst and Young till 2015. RBI

has set up a separate IT subsidiary to strengthen its cyber security preparedness in the wake of the recent Bangladesh’s central bank heist where cyber attackers stole $81 million allegedly by sending fraudulent payment instruction through SWIFT financial platform.

Axis Bank has appointed Sanjiv Misra as non-executive chairman and independent director for a period of five years. The bank has also promoted two senior executives - Rajiv Anand and Rajesh Dahiya - as EDs giving them seats on the board of directors. Misra had resigned as the bank’s non-executive chairman as a nominee of Special Undertaking of UTI (SUUTI) before being re-elected. The right of SUUTI, promoter of Axis Bank, to appoint the chairman and three directors on the board of bank stands rescinded after the amendments to Articles of Association. Now, the right to appoint these directors and chairman vests with shareholders of the bank. Misra, a career bureaucrat had served as

finance secretary. Prior to his elevation as EDs, Anand was the group executive and head-retail banking, while Dahiya was group executive and head-Corporate Centre.

New DMDs at SBI

State Bank of India has promoted 8 chief general managers

as deputy managing directors. Three CGMs who have already assumed their DMD roles are Prashant Kumar, who will be COO in the corporate office of the bank, where he will work as retail head, Badal Chandra Das, who will be head of audit and management inspection in Hyderabad office, and Venkat Nageswar, who will be in charge of SBI Global Market. The other five selected are Anuradha Rao (Personal Banking Business), Pallav Mohapatra (New Delhi Circle), Neeraj Vyas (Associates & Subsidiaries), Padmaja Chunduri and K.V. Haridas (from State Bank of Patiala). As many as 14 CGMs of SBI had appeared for the interview along with three CGMs, who are currently heading the associate banks of the SBI Group.

The bank is expected to see many retirements at the top level soon. Chairman Arundhati Bhattacharya, who got a three-year term is expected to demit office in September, while an MD, V.G. Kannan, will retire in June. M.G Vaidyan, DMD and head of the Stressed Assets Management Group, is due to retire in August.

Meanwhile, on the directives of the Reserve Bank of India, the bank has split the post of chief risk and credit officer into two separate posts - chief risk officer and chief credit officer. M.S. Shastri, who has so far been looking after risk management, has taken over as CRO, while Varsha Purandare, who was holding the post of chief risk and credit officer, will now on act as the CCO. The bank has also appointed Mrityunjay Mohapatra as the CIO. The post was lying vacant since N Jambunathan retired from on 31 March. These positions too are at the DMD level.

Chari, MD of SBMN.K. Chari is the new MD of State Bank of Mysore. He was DMD at State Bank of India. A postgraduate in commerce from Delhi University, he joined SBI as a probationary officer in September 1978. He served as the COO in National Banking Group, the retail branch network of the bank. He has also headed the mid corporate vertical of the bank. Prior to that, he was the CGM at the bank’s Chandigarh Circle, covering the four states of Jammu and Kashmir, Himachal Pradesh, Punjab,

Haryana and the Union Territory of Chandigarh with over 1,000 branches. He has also served as the MD of Nepal SBI Bank for four years from 2007.

Paytm appoints 2 Citi veteransTwo senior employees of Citibank are joining Paytm Payments Bank. Paytm has roped in Ruchita Taneja Aggarwal, director of treasury and trade solutions and Singapore head for regional product sale at Citi, and Priya Karnik from Citibank India. While Taneja Aggarwal will join the payments bank as head of banking operations, Karnik will be head of product development for banking operations. Paytm had earlier taken in Shinjini Kumar from PricewaterhouseCoopers, Vikas Purohit from Amazon, Kshitij Sanghi from McKinsey, Varun Khullar from ITC and Vipin Surelia from RBI as vice presidents.

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BMIO gets new name, structureThe Central Bank of Seychelles (CBS) announced that Bank of Muscat International Offshore (BMIO), which ceased operations in the country following termina-tion of its license and seized by CBS, will now operate as a new entity, called Al Salam Bank Seychelles, or ASBS. CBS said in a press state-ment that the management, con-trol and possession of the bank is back in the hands of the finan-cial institution. It said that this is in line with the rebranding of the

bank which is ongoing, in conformity with the wish of the new shareholders’ strat-egy, to allow the bank to trade under the Al Salam Bank group’s trademark in order to better position the bank both domestically and internationally. BMIO first regis-tered in Seychelles in July 2008 as a joint venture between BMI Bank in Bahrain and Seychelles-based Nouvobanq, each with 50% shareholding. Al Salam Bank came in as the new shareholder of BMIO after it acquired BMI Bahrain in 2014.Al Salam Bank Bahrain and the Seychelles Pension Fund (SPF) are now the new shareholders. SPF has purchased all the shares held by Nouvobanq. CBS took control of BMIO, following cessation of the latter’s foreign correspondent banking relationship.

Algeria to offer Islamic financeAlgeria is preparing to launch Islamic financial services. This is part of the country’s efforts to raise money after a sharp fall in oil earnings. According to a senior official of the Banks and Financial Institutions Association, the plan to offer Islamic finance products is part of wider reforms aimed at modernizing the underdeveloped bank-ing sector. Algeria’s outdated financial system has been a barrier to investment as the government seeks to diversify its economy away from oil and gas, which account for 60% of the state budget and 95% of the country’s revenue from exports. Algeria has been slowly emerging from decades of state-led centralized economic control after independence from France in 1962. The oil price drop has revived debate over how quickly to try to open up the economy. The Islamic finance plan comes as the country seeks to broaden its sources of funding.

ECOBank launches OMNIE C O B a n k G a m b i a h a s launched OMNI banking plat-form that facilitates easy trans-fer of money from different parts of the world. Josephine Anan-Ankomah, MD of the bank, said OMNI is not an experiment but was tried and

tested and is being successfully used in all the 36 countries across Africa where Ecobank is present. He said in 2014, the bank processed $4.4 billion of transactions on the platform. This increased by over a billion to $5.5billion in 2015, she said. She added that the product is a direct response to the numerous constructive feedback received from customers. OMNI is a secure electronic banking channel providing corporate clients with single access for transaction and reporting needs.

Kenya sets up tech platform

Mobile app uses fingerprint for recognition

Guaranty Trust Bank Kenya has intro-duced fingerprint recognition feature in an upgraded version of the bank’s mobile app. Customers will be now able to log onto their accounts by authenticating them-selves using their fingerprints through the Touch ID function on iOS devices. The bank has also introduced card services on the upgraded app, allowing access to all card services including check card bal-ances, pay and top-up cards, stop card pay-ments and generate card statements.

Kenya Bankers Association (KBA) has established a full-fledged payments tech-nology delivery services firm as part of a strategic effort to boost the banking sector’s interoperability and efficiency through affordable technology. Banks will now be provided with a go-to-market plat-form via the Kenya Interbank Transaction Switch (KITS), geared at harnessing dig-ital payment solutions for the local mar-ket. The firm, called Integrated Payments Service (IPSL), is a fully owned KBA sub-sidiary mandated to offer technology-based payment solutions to KBA member banks at subsidized rates. Founded under the Central Bank of Kenya’s National Payment System (NPS) guidelines, IPSL would interconnect all banks in Kenya.

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Banking Frontiers June 2016

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AMMB aims to be top bank in MalaysiaAMMB Holdings of Malaysia aims to be one of the top four banking groups in the country by 2020. It intends to focus on cards, transaction banking, markets and wealth management segments. The bank’s group CEO Datuk Sulaiman Mohammed Tahir said the bank’s focus would be on wealth, cards and merchants as well as CASA. With this focus, the bank should be able to achieve the revenue that it wants in the next four years, he added. AMMB, the sixth largest bank by market capitalization, did not dis-

close specific targets. Sulaiman said the group has no plans to go abroad for the time being as there are a lot of opportunities within the country, but noted that it does not preclude it from having partnerships and arrangements with foreign parties.

BDO ties up with Aozora Bank of JapanBDO Unibank of the Philippines has entered into a partnership with Aozora Bank, a Japanese commercial bank, to provide banking services for clients looking at the Philippines as a potential investment target. The collaboration will cover merger and acquisitions advisory and investment banking services. Aozora Bank president and chief executive officer Shinsuke Baba and BDO president and chief executive officer Nestor V. Tan signed the agreement for their respective institutions. Aozora Bank selected BDO given the bank’s strong foothold in the Philippine market. The alliance with BDO is the fifth business tie-up for the Japanese bank. It has alliances with Singapore’s OCBC, Indonesia’s PT Bank Central Asia TBK, Thailand’s Kasikombank Public Co, and Taiwan’s CTBC Financial Holdings Co.

MAS sets up AML unitThe Monetary Authority of Singapore (MAS) will set up dedicated departments to combat money laundering and strengthen enforcement. The regulator fears Singapore’s financial sector faces the risk of being used as a conduit for money laundering and terrorist financing activities. It said while it has in place a robust regime to protect the integrity of Singapore’s financial system, the increasing complexities of transnational flows necessitates heightened supervisory focus on combatting money laundering and other illicit financing activities. MAS will form a dedicated anti-money laundering department, as well as a dedicated supervisory team will be set up to monitor these risks and carry out onsite supervision of how financial institutions manage these risks. These functions used to be carried out by different departments in MAS. It will also centralise its enforcement functions under a new Enforcement Department.

Vietnam bank foils cyber theftTien Phong Bank of Vietnam claimed it has foiled a cyber theft attempt using the same software that helped in the $81 million cyber heist at the Bangladesh central bank. The bank had identified in late 2015 fraudulent messages purportedly sent by SWIFT requesting transfer of more than $1.1 million in funds. Officials at the bank caught the attempt before the transfer went through, and it did not cause any losses. It had no impact on the SWIFT system in particular and the transaction system between the bank and customers in general. The transfers were attempted using malware installed on an outside vendor’s software, which was used to connect the bank to the SWIFT messaging system.

Thailand bank to open China branch

Singapore banks adopting biometricsBanks in Singapore are adopting

biometric technology to improve customer services. They are using it to speed up the authentication process. Citibank is launching voice biometric verification for customers. DBS Bank and OCBC Bank too plan to implement voice biometric authentication. Citi has already implemented voice biometrics for consumer customers in Taiwan, with Singapore, Hong Kong and Australia to follow soon. Like a fingerprint, a voice pirnt is unique to each person. It be reverse engineered once stored. DBS expects the technology to reduce the time customers spend on authentication by between 20 and 40 seconds.

Thailand’s Siam Commercial Bank (SCB) plans to open its first branch in China in 2017 as it seeks to grow its nascent interna-tional portfolio to around 5% of total loans by 2025. Several Thai banks are seeking opportunities overseas in response to lim-ited growth potential at home due to the sluggish domestic economy that has led to slow loan growth and rising bad debts. SCB, Thailand’s third-largest lender, is also keen to expand in Indonesia, Vietnam and Myanmar, Kamalkant Agarwal, the head of interna-tional banking at SCB, said. The Chinese branch would target clients seeking to make foreign direct investment in Thailand, Cambodia, Laos, Myanmar and Vietnam.

Banking in SE Asia

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Banking Frontiers June 2016

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China allows foreign cardsChina has finally decided to allow foreign payment card companies to operate in the country. Its central bank, People’s Bank of China, has issued new rules in this regard. Both entities have been lobbying for more than a decade for direct access to China’s cards market, which is projected to become the world’s biggest by 2020. Bank card

consumer transactions have reached 55 trillion yuan in 2015, accounting for 48% of total social consumption. The market is dominated by state-run China UnionPay Co. The rules issued by the central bank and the China Banking Regulatory Commission require that applicants hold 1 billion yuan in registered capital in a local company, and also meet China’s national security and cyber security standards and be locally based.

StanChart may launch onshore private bank in ChinaStandard Chartered Bank may consider starting an onshore private bank in China. The bank may consider in 2017 what the market looks like and how the bank is executing on other priorities before taking a decision. The bank had put a lot of stress on private banking and wealth management as businesses to invest in. Standard Chartered would invest $250 million in a private banking system which would help automate processes in its 6 key markets.

OCBC proposes private bank in ChinaSingapore bank OCBC is proposing to have an onshore presence in China with a private banking unit. OCBC already has an onshore presence in China with branches in major Chinese cities, while its subsidiary Wing Hang China has a strong presence in Guangdong province. China’s growing population of millionaires and billionaires is a big draw for private banks despite obstacles such as a restricted currency regime and limited availability of financial products. An onshore presence for Bank of Singapore in China would mean it would be competing against Goldman Sachs and UBS on advising wealthy clients in the local market.

China Bank to set up brokerageChina Bank Capital Corporation (CBCC), the investment house of China Banking Corporation, is setting up a stock brokerage house and a special purpose corporation for its securitization transactions. The bank said it is looking to acquire and rebrand an existing stock brokerage and rename it China Bank Securities Corporation. As a wholly owned subsidiary, China Bank Securities will enable China Bank Capital to do IPOs and list these IPO shares in the PSE. Its clients will also stand to benefit as they will have access to the stock brokerage service for their equities-related transactions.

China banks face huge losses Chinese banks are facing a mammoth loss of RMB 8 trillion ($1.7 trillion), says French investment bank Societe Generale. This may translate into a situation where 60% of capital in China’s banks is at risk as authorities start the delicate and dangerous process of reining in the debt-bloated and unprofitable state-owned enterprises (SOEs). Societe Generale says this debt is accelerating. China’s overall non-financial debt grew by 15.2% in 2015 to RMB 167 trillion ($35 trillion) or almost 250% of gross domestic product (GDP). That is up from 230% of GDP the year before and the 130% it was 8 years ago before the global financial crisis hit. The problem is largely centred on China’s 150,000 or so SOEs.

Chinese banks top Forbes list

Xiaomi to start a bank

Chinese technology company Xiaomi is proposing to set up a bank. It is collaborating with Sichuan-based convenience store operator to set up a private bank in southwest China. With a registered capital of RMB3 billion ($450 million), Sichuan Hope Bank aims to target SMEs and online consumers and is expected to begin trading before year-end. Through its wholly owned subsidiary Sichuan Yinmi Technology, Xiaomi has a 29.5% stake in the bank. Animal feed firm New Hope Group has a 30% stake while retailer Hong qi owns 15%. Sichuan Hope Bank plans to rely on mobile internet technologies and an online-to-offline presence to serve SMEs, individual consumers, and agriculture-related business.

Chinese banks continue to be the largest corporations on earth. According to Forbes Global 2000, Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China held onto their ranks as the world’s most powerful companies in 2015. In contrast, US banks like JPMorgan Chase, Wells Fargo, Bank of America and Citigroup are behind China’s state-sponsored banks. JPMorgan supplanted Bank of China as the world’s fourth-largest bank. Wells Fargo, Bank of America and Citigroup were among the industry’s best performers, gaining ground on European, Asian and South American competitors. The biggest mover in the industry was BNP Paribas, which rose 344 spots in the Forbes Global 2000 to #24. Australian and Brazilian banks were the biggest decliners.

Banking in China