2014 | World Finance

Never dull at Lloyd’s of London: 1688 to present

Posted on March 13, 2014March 13, 2014 by Ashton Wenborn

For such a venerable and pioneering financial institution, it is somewhat surprising that insurance market Lloyd’s of London is still looked at with considerable suspicion by many within the global business community. Despite a long and successful history, the scandals that hit towards the end of the 1980s – and the ensuing losses of colossal proportions to policyholders – have meant that Lloyd’s has struggled to recapture the lustre that it once held.

However, perhaps now is time that global investors, and particularly those in the US, look at Lloyds with renewed interest. A marketplace known for insuring almost anything has undergone the necessary reforms to ensure that policyholders are suitably protected, but also allows for the sorts of returns and investments not possible elsewhere.

Not many of the world’s most prestigious financial institutions can claim to emerge from such humble beginnings as a coffee shop, but that is exactly where the world’s oldest insurance market first developed in London. In 1688, in the back rooms of Lloyd’s Coffee House, a market formed that would dominate the insurance world for centuries.

Originally focused on the shipping industry, with merchant ships being insured by many of the coffee house’s customers. It moved from Lloyd’s Coffee House to new premises at the Royal Exchange on Cornhill in 1774, where it perfected the art of people pooling – and therefore spreading – risk, and subsequently became the primary place for insuring against all sorts of events.

Defining the structure
Lloyd’s is in a unique position in that it is not itself a corporation, but instead considered a market by UK law. Lloyd’s itself does not underwrite policies, but it acts as the market where individual market makers known as ‘Names’ offer to underwrite many types of policy, offering unlimited liability, meaning their entire wealth could be seized in the event of a claim.

‘Names’ are essentially the underwriters at Lloyd’s, and can include internal Lloyd’s members and external investors. General insurance and reinsurance are covered at Lloyd’s, with underwriters coming together to form syndicate funds that then offer policies to clients. Investing in a syndicate at Lloyd’s is unlike buying a normal security. Instead, investors are made Members of the syndicate for a one-year period, known as the ‘Lloyd’s Annual Venture’, and the syndicate would then be dissolved at the end of that period.

Lloyd’s of London timeline

1688

Humble beginnings in the back of Lloyd’s Coffee House

1774

Moves to new premises at Royal Exchange on Cornhill

1871

Lloyd’s Act passed into government

1980s

Scandal swirls among accusations of fraud and incompetence

2000s

Reputation repair: Lloyd’s starts to make a comeback

The syndicate is then re-formed the next year, often having the same members as before. The Council of Lloyd’s manages the market, which is responsible for supervising the activities going on. These activities are made up of two distinct groups: the Members that provide capital and insurance agents or brokers that underwrite the risks and act on behalf of the Members.

Known for taking on pretty much any insurance policy, a vast number of bizarre things have been secured through the Lloyd’s market. These have included world-famous food critic Egon Ronay insuring his taste buds for $400,000 in 1957.

This was surpassed in 2009 when Costa Coffee took out a £10m policy against the prospect of their chief coffee taster, Gennaro Pelliccia, losing his sense of taste. 20th Century Fox insured actress Betty Grable’s legs for $1m each in the 1940s due to her huge popularity, while Australian cricketer Merv Hughes insured his trademark moustache for $370,000. Perhaps one of the highest profile policies was the one Irish dancer Michael Flatley took out for his legs in 2000, worth a staggering $47m.

With its iconic building, Lloyd’s also forms a distinct part of London’s Square Mile. Designed in the late 1970s by architect Richard Rogers, it is notable for looking as though it has been constructed inside out, with lifts and ducts found on the exterior of the building. Finished in 1986, the Lloyd’s building signified the dominance of the market during that period, but perhaps also represents the extravagance of the period.

Beginning of the trouble
Lloyd’s was formerly recognised in British law after the 1871 Lloyd’s Act, while the subsequent 1911 Act clarified the market’s objectives, which were to promote the interests of members and provide market information. By the 1970s, concerns arose around the tax structure of the UK’s financial markets, resulting in sweeping reforms to many sectors.

Lloyd’s was affected by the increase of earned income tax to 83 percent, resulting in syndicates preferring to make small underwriting losses in return for larger investment profits. Syndicates also began moving offshore, creating a situation that would later cause a great deal of controversy. At the start of the 1980s, Lloyd’s governing Council undertook plans to overhaul its regulatory framework, which would then become the Lloyd’s Act of 1982.

Lloyd’s of London still carries a negative reputation in the US, where many investors were badly burnt by their experiences of before

Designed to give the external Names, who were not involved on a day-to-day basis at Lloyd’s, a greater say in the running of the business, it also saw ownership of the managing agents of the Lloyd’s syndicates separated from the insurance broking firms. The hope was that this would mean an elimination of conflicts of interest between the syndicates and the brokers.

The reputation and integrity of Lloyd’s took a catastrophic hit in the 1980s as a result of the asbestos scandal. In the US, surprisingly large settlements on asbestos and pollution (APH) policies led to huge claims. A number of US states accused Lloyd’s of large-scale fraud, particularly the apparent withholding of knowledge regarding the level of asbestos and pollution claims. Lloyd’s was accused of encouraging investors to take on liabilities even though the market knew that colossal claims dating back decades were being made.

US regulators subsequently charged Lloyd’s and its associates with fraud and the selling of unregistered securities. This included Ian Posgate, one of Lloyd’s leading underwriters, who was charged with taking money from investors as part of a clandestine plan to buy a Swiss bank; a charge he was later acquitted of.

The asbestos claims were hard to predict because they affected workers many decades before. For example, a factory worker from the 1960s that was exposed to asbestos may have only developed health issues decades later, resulting in his suing his employer for compensation. The employer would then claim for insurance on a policy drawn up twenty years beforehand, before the real risks associated with asbestos were known. The ultimate result was the bankruptcy of thousands of investors in Lloyd’s syndicates as a result of the unforeseen risks.

Archaic accounting
As syndicates last a year and were accounted for separately, despite their continuing nature, there would be numerous separate incarnations of the syndicate. Liabilities could be carried over each year because of the way profits and losses were accounted, resulting in current syndicate members having to pick up the bill for policies written many years previously. Many holders felt this was an unfair system and had not been properly explained before investing.

Perhaps one of the most controversial factors of the scandal is the policy dubbed ‘recruit to dilute’, where some Lloyd’s officials were said to have deliberately sought new Names in advance of the forthcoming asbestos claims. This was reportedly done in the full knowledge that there was an impending wave of claims over asbestos. In the subsequent court cases over the losses, claims of ‘recruit to dilute’ were rejected, although the judge said that the Names at Lloyd’s that had lost their money were “the innocent victims… of staggering incompetence.”

As the world continues to experience ever-more uncertain political and environmental events, an insurance market such as Lloyd’s is the perfect place to secure against the worst possible outcomes

The result of all these issues was that many Names that were exposed to the asbestos claims lost vast sums of money, and in many cases were declared bankrupt as a result of the unlimited liability of the policies. In the aftermath, new Names at Lloyd’s that joined after 1994 did so with limited liability. Financial requirements for underwriting were also reformed, with checks made to ensure there were enough liquid assets available to back any losses.

Obviously acting as an insurance underwriter will always carry a good deal of risk, but the policies employed by many at Lloyd’s during this period clearly didn’t offer the necessary protections to those they had signed up.

While Lloyd’s has rebounded since its catastrophic period in the early 1990s, it has begun to face increased competition from newer markets elsewhere. However, the flexibility offered at Lloyd’s puts it in a unique position, with all manner of eventualities being offered for insurance. As the world continues to experience ever-more uncertain political and environmental events, an insurance market such as Lloyd’s is the perfect place to secure against the worst possible outcomes.

Lloyd’s of London still carries a negative reputation in the US, where many investors were badly burnt by their experiences of before. However, in light of the banking crisis that saw the market’s namesake in the UK partly nationalised, Lloyd’s – and insurance in general – is seen as much safer bet than traditional banking investments. A renewed focus on assessing risk has also meant that Lloyd’s is a much more secure place to put money than it was many years ago.

Speaking to the Economist in 2012, Rob Childs, of Lloyd’s syndicate Hiscox, said that attitudes to Lloyd’s had changed over the last 20 years, in contrast to those towards its namesake. “If you were at a dinner party and someone asked where you worked, you’d be happy if people thought Lloyd’s was a bank. Now, 20 years later, it’s the reverse.”

Such an old and experienced marketplace has played an integral part of London’s financial market, as well as helping to develop the global insurance industry that we see today. Tradition still plays an important part in the day-to-day activities at Lloyd’s, with business conducted in person and brokers queuing to do business with underwriters. While it may not be the risky place it once was, there is still the diverse range of insurance activities that the typical insurance houses wouldn’t dream of offering.

Strange items insured by Lloyd’s of London

From Bruce Springsteen to Michael Flatley, Lloyd’s of London really did live up to its reputation of being an ‘insure almost anything’ market. Here are some of the strangest ‘items’ to be covered by one of their policies.

Harvey Lowe’s hands, 1932-1945, $150,000

Betty Grable’s Legs, 1940s, $2m

Ken Dodd’s teeth, 1967-1992, $7.4m

Merv Hughes’ Moustache, 1985-1994

Bruce Springsteen’s voice, 1980s, $6m

Michael Flatley’s legs, 2000-present, $47m

Indonesia no longer ‘fragile’ insists deputy finance minister

Posted on March 13, 2014 by Ashton Wenborn

Indonesia’s Deputy Finance Minister Bambang Brodjonegoro has told an investor conference in Jakarta that Indonesia should no longer be perceived as ‘fragile’ after a year of reparative fiscal policy. Brojonegoro was referring to a Morgan Stanley report published last year in which the Indonesia was included in a group of struggling emerging economies dubbed the “fragile five”.

“It is not just because I work for the government but because the latest economic indicators have showed significant improvement,” he told investors at an even organised by Fitch in the capital, according to the FT.

Other countries included in Morgan Stanley’s “fragile five” have not recovered as fast as Indonesia, in part because they did not respond as fast

According to Morgan Stanley, the “fragile five” economies – Brazil, India, Indonesia, Turkey and South Africa – all suffer from “high and rising current account deficits that make them more dependent on foreign capital flow”. They were therefore the worst hit countries when the American Federal Reserve started tapering its fiscal policies.

The deputy minister’s comments come after a year of aggressive action by the Indonesian central bank, in which it abandoned attempts to artificially hold up the rupiah, and instead allowed it to float. This led to a depreciation of close to 14 percent between May 2013 and February 2014, which in turn made Indonesian exports more competitive in the international market.

During this time, Indonesia’s current account deficit had stood at an alarming 4.4 percent of the GDP- over $10bn. It has since dropped to around $4bn, or two percent of GDP. Because of the favourable conditions, in December the country registered it’s highest trade surplus in over two years as merchandise exports rose by over 10.3 percent from the same time the previous year.

Other countries included in Morgan Stanley’s “fragile five” have not recovered as fast as Indonesia, in part because they did not respond as fast. Indonesia also raised interest rates more gradually than its counterparts, which combined with the natural currency devaluation led to an increase of 5.7 percent of the GDP in the fourth quarter.

Investors have also responded positively; the stock market is rallying, and the rupiah is no longer struggling against the dollar, having risen close to seven percent so far this year. Yields on 10-year government bonds are also performing well, having come down to eight percent from highs of 9.2 last summer.

Cryptic crypto: is Bitcoin escaping tax liabilities?

Posted on March 13, 2014March 13, 2014 by Ashton Wenborn

“If you mow your neighbour’s lawn, it doesn’t matter if he pays you $20 in cash or $20 worth of Bitcoins (or $20 worth of tomatoes for that matter), you are still legally required to report that as income. When using Bitcoin for payment, the taxing authorities may be less likely to be aware of the payments, but try to mow 10,000 neighbour’s lawns and not report the income,” read a somewhat suspect note of caution on the Bitcoin wiki earlier in the year. This, it would seem, is representative of a penchant for tax avoidance among the cryptocurrency community, who believe their illegitimate dealings in this space are masked by anonymity.

Some might say the age of the island retreat has passed and in its stead has come the safe haven that is the cryptocurrency, which has attracted a wave of new users whose intentions lie not only in subverting fiat currency, but in evading the tax authorities.

An unknown quantity
A sense of obscurity, which first arose with the birth of the Bitcoin five years ago, is something that has served to complicate the ways in which cryptocurrencies are understood, and it is this that has riled debate concerning how it should be taxed.

“This is not a new compliance problem by any stretch; it’s really the same one you have with cash, and virtual currency is very similar to cash inasmuch as it’s incredibly difficult for the IRS to track,” says the Director of Tax Issues at the US Government Accountability Office (GAO), James White. “We just don’t know the true extent of the compliance problem. We’ve found that the data out there isn’t very good, especially on the nature of virtual currency transactions. Sure, you can get some information about the total volume of transactions, but whether those transactions are taxable and what jurisdiction they’re coming from, that’s a lot harder to identify.”

According to peer-to-peer-network-generated statistics on Blockchain, over 98 million Bitcoin transactions were recorded as of January 17, although the log offers little to no indication of how many taxable events may well have occurred in this time. It is this ambiguity that has seen many label cryptocurrency as a means to a criminal end.

However, contrary to popular opinion, cryptocurrency transactions are far from anonymous, and do in fact leave a trail of data in their wake, especially on various centralised services such as exchanges and wallets. Although not all codes can be traced to their source, a lot of information can be dissected with the appropriate technical tools and knowhow. Granted, Bitcoin transaction records, or ‘block chains’, do present a few complications, namely for those tracking the actual individual involved as opposed to an IP address, but what is quite clear is that they are far more transparent than cash.

What is a cryptocurrency?
For this reason, the actual scale of non-compliance among cryptocurrency users should be considered secondary to the essential task of understanding exactly how it is they should be taxed once they are traced. The problem need not be any larger than cash, provided an agreement can be reached on the specific tax liabilities that apply to the phenomenon.

“The tax authorities have been playing a wait-and-see game on this question for quite some time. Only now, following 12 months of rapid growth in the market (approximately $10bn today) are they trying to determine if they can slot digital currencies into pre-existing categories with ready-made tax regimes,” says Richard Asquith, Head of Tax at TMF Group. “Initially, tax authorities labelled virtual currencies as vouchers, however, this is now changing as it is clear they are a store of wealth in their own right and their values can fluctuate. Consequently there is growing pressure for them to be re-categorised as private currency. The closest ‘real world’ example is gold, in particular gold sovereigns, which is used for both short-term trading and longer term investment and as a hedge against sovereign currencies/equities trading.”

For all intents and purposes, cryptocurrencies are subject to much the same tax liabilities as any other asset, or currency for that matter. However, the issue here is not one of tax itself, but rather one of uncertainty; and an uncertainty that will continue to confound users and authorities alike for as long as the IRS and authorities like them neglect to pin down and properly address what a cryptocurrency is.

“It’s very difficult right now in the US to develop a good estimate of whether there is much in the way of tax revenue being lost, and this is partly why we recommend the IRS puts up informal guidance on the matter,” says White. “Because there is so much speculation out there, we feel it is important for the IRS to be out in public saying something on the matter.”

Taxable gains lost through cryptocurrency transactions are often a product of misunderstanding as opposed to any deliberate attempt to evade authorities, which serves to underline the importance of putting an official framework in place. “If taxpayers using virtual currencies turn to the internet for tax help, they may find misinformation in the absence of clear guidance from the IRS. For example, when we performed a simple internet search for information on taxation of Bitcoin transactions, we found a number of websites, wikis, and blogs that provided differing opinions on the tax treatment of Bitcoins, including some that could lead taxpayers to believe that transacting in virtual currencies relieves them of their responsibilities to report and pay taxes,” reads the GAO’s Virtual Economies and Currencies report.

For this reason, authorities must seek to instil a system that makes clear cryptocurrencies’ taxable liabilities. “A global definition and understanding of what constitutes a virtual currency is almost certainly required,” says Asquith. “The problem is who would put this together. The European Commission or OECD would be a good start. However, as with other related questions (e.g. how do we tax companies with global operations?), countries still have sovereign authority, so would not necessarily by bound by any international standard.”

Tax indecision
In December, Norway’s government deemed Bitcoin unworthy of the conventional currency tag and opted instead to treat it as an asset, given that it’s not tied to any centralised government agency. Elsewhere, Singapore’s Inland Revenue Authority recently decided to tax Bitcoin under the goods and services bracket, whereas both Slovenian and German governments have pledged to crack down on related tax issues, though the system by which this is enforced is yet to be decided upon.

This same sense of ambiguity has worked in the favour of Bitcoin these past 12 months

This same sense of ambiguity has worked in the favour of Bitcoin these past 12 months, as individuals across the globe have clamoured to get on board with what remains the world’s most unregulated and valuable currency. For those unfamiliar with the events of this past year (see Fig. 1), a single Bitcoin was worth as little as $13.50 at the onset of 2013, and by November had reached a peak of $1,200. Put mildly, Bitcoin is gaining momentum, and some suspect it could easily be worth as much as $100,000 as it moves into the mainstream in the coming months and years.

The key question going forward should be whether cryptocurrencies are labelled as a currency, or an alternative financial instrument of some sort. This question, though seemingly trivial, will come to determine how entities such as Bitcoin are taxed and, more importantly, at what rate. The decision ultimately boils down to whether cryptocurrencies should be subject to income tax or capital gains tax, and with the former being much higher than the latter, it’s quite clear which option proponents of the currency will be rooting for.

Mounting concerns
It is only after clear guidelines have been set out by authorities that questions can then be asked of the extent to which users are manipulating the system. “I think it is fast becoming a concern with the 2013 appreciation in the value of Bitcoin,” says Asquith. “This has put it on the radars of tax authorities around the world. They see it as a potential source of new revenues and are anxious to exploit this in the wake of the financial crisis and ballooning government deficits. The tax authorities also want to help the new currencies flourish, especially if they do emerge as an acceptable alternative payment platform. This means giving clear tax guidance to the market players so that they can plan their businesses and grow.”

By design, cryptocurrencies such as Bitcoin were not intended to be anonymous but rather decentralised, and the perpetuation of anything else is merely a misunderstanding on the part of ill-informed sources. While the currency’s paper-thin regulatory bounds appear to have worked in its favour in recent months, for the phenomenon to be more readily accepted by authorities across the globe and for its to continue to grow, users must be prepared to embrace the appropriate tax implications.

There is no doubt that cryptocurrencies such as Bitcoin could come to be seen as a currency in their own right by authorities, but before that happens, they must put to paper exactly how they are liable to tax, so as to avoid it being seen merely as the tax havens of the digital era.

A clash that’s losing cash: Thai economy slows down

Posted on March 12, 2014 by Ashton Wenborn

Thailand has cut a key interest rate for the first time this year in order to bolster its economy after political unrest and on-going outflows from emerging markets have curbed local demand and hurt tourism.

The Bank of Thailand cut its one-day bond repurchase rate by a quarter of a percentage point to two percent, after monetary policy committee members agreed to lower the rate as of March 12.

“Prolonged political uncertainties will continue to impede the recovery of private consumption and investment. Our monetary policy has some scope to ease, in order to lend more support to the economy and ensure continuous financial accommodation,” said assistant governor Paiboon Kittisrikangwan in a statement.

The move comes at a time when emerging markets, particularly those in Asia, are experiencing outflows and falling production as their economic growth continues to slow down. A recent purchasing managers index by HSBC revealed that China’s factory activity shrank again in February as output and new orders fell to an all-new low, reinforcing concerns of a slowdown in the world’s second largest economy.

[P]olitical instability has taken a toll on economic growth and the central bank must act

In comparison, Thai consumer confidence fell to its lowest in more than 12 years in February as anti-government protests proceeded for the fourth month running. Fitch Ratings and Moody’s Investors Service last week warned about risks to the nation’s creditworthiness if the political gridlock continues.

“Although monetary policy can’t solve the government’s issues, political instability has taken a toll on economic growth and the central bank must act,” said Matthew Circosta, an economist at Moody’s Analytics.

“What Thailand needs now is lower rates to boost other sectors in the economy, including consumption and business investment.”

Following the recent committee move, as well as another decrease back in November 2013, the Thai interest rate is currently at its lowest since December 2012. In addition, the monetary authority said in a statement that it sees Thailand’s economic growth this year at less than three percent.

Thailand’s GDP rose 0.6 percent in the last quarter of 2013 – the weakest expansion since the first quarter of 2012 – lowering the state planning agency’s GDP growth forecast for this year to three – four percent from a range of four – five percent.

Is Arctic drilling worth the risk?

Posted on March 12, 2014March 26, 2014 by Ashton Wenborn

Tucked away among the Arctic’s ever-shifting jags of ice, hidden from the naked eye, are billions upon billions of dollars in black gold. The Arctic landscape, spanning the Barents to the Beaufort Sea and beyond, is home to a reported 30 percent of the world’s undiscovered natural gas reserves and 13 percent of its oil. Whoever conquers it will lay claim to 1,669 trillion cubic feet of natural gas and 90 billion barrels of oil – almost three times the annual global consumption.

Arctic treasures

1,669tn

Cubic feet of natural gas

90bn

Barrels of oil

Much of the prospective total, according to the US Geological Survey, sits offshore and is up for the taking, provided that those with suitably high ambitions come equipped with the necessary tools, know-how and – most importantly – resources to do so. Although the region accounts for as little as six percent of the Earth’s surface, it accounts for a disproportionately large amount of its resources, and it is this supposed abundance of hydrocarbons that has seen energy companies clamour for the rights to the region’s many opportunities.

“It is only in the last five years that hydrocarbon development has actually been contemplated as a possibility, principally due to technological and navigational advances,” says Trevor Slack, Senior Analyst at risk analysis company Maplecroft. “To varying degrees, Russia, Canada, the US, Norway and Greenland have all increased exploration and development activity on their relevant portions of the Arctic continental shelf.”

The majority of the Arctic countries have granted energy companies licenses to explore offshore reserves, however, the exploration phase is only a fraction of the overall effort required to reap the region’s riches. The difficulties companies face while working in the region can perhaps best be seen in the case of Royal Dutch Shell and the crisis that befell the Kulluk drilling rig late last year.

“What is failure but a bump on the road to triumph?” asked the company on its website soon after the 266ft barge ran aground off the Alaskan coast: circumstances that later incurred an impairment charge of $200m.

The failed expedition constitutes only a slither of the oil giant’s overall Arctic spending, which has so far amassed upwards of $5bn and yielded very little in the way of returns. Despite having introduced an armada of 20 support vessels, chartered well over a thousand dedicated flights, and exhausted $1bn on the project through the last year alone, the Anglo-Dutch powerhouse is yet to complete a single well in the region.

While these circumstances could well be considered a failure of sorts, they could just as easily be seen as par for the course, as the extraction of Arctic oil and gas ranks among the most expensive business opportunities in the world.

“Oil spill risks, high extraction costs, doubts over the amount of commercially recoverable reserves, and a precedent of cost overruns and delays combine to raise questions about the commercial viability of some proposed Arctic projects,” reads a Greenpeace report into Arctic exploration risks. “The drilling conditions facing oil companies operating in the Arctic are some of the most challenging on Earth.”

Risk and reward
The challenges of tapping the Arctic’s resources are quite plain to see, these being a harsh climate, underdeveloped infrastructure, long project cycles, spill containment and recovery risks, and conflicting sovereignty claims, to name but a few. All things considered, the complications have caused some to question whether the investment is actually worth the costs, whether they be financial or environmental.

Total is the first major oil company to publicly denounce offshore exploration in the Arctic, with the company’s CEO Christophe de Margerie expressing fears about the potential damages of a spill: “Oil on Greenland would be a disaster,” he told the Financial Times. “A leak would do too much damage to the image of the company.”

Total’s stance on the matter is very much the exception, however, with various competitors such as ExxonMobil, Rosneft, Eni, Statoil and, of course, Shell, having committed a great deal of time and money to the Arctic endeavour.

Arctic drilling is no walk in the sunshine. Total CEO Christophe de Margerie is one of few oil leaders to give it a wide berth, deeming the risk of oil spills too high

Despite previous problems, Shell hopes to resume its work in the Arctic at some point this year, with CFO Simon Henry believing the region to be the “most attractive single opportunity for the future,” as stated in The Telegraph.

However, the company will be subject to far closer scrutiny than before in light of its previous failings. Shell’s return to the Arctic – however delayed – will be watched by environmentalists, whose concerns for the surrounding environment need not be explained, as well as industry rivals, who will be keen to know whether or not the
region’s treasures can be extracted.

Exploration obstacles
Although Shell appears quite intent on exploiting the Arctic’s natural resources, a US appeals court has recently ruled that the Alaskan government acted illegally in granting Shell exploration rights to Arctic waters controlled by the US, which has, in effect, curbed the company’s oil ambitions further still.

The extraction site was sold for $2.66bn in 2008, of which $2.1bn was paid for by Shell, and has since been hotly contested by local and environmental groups, who claim the consequences were ill conceived and its environmental impact sorely underplayed.

Another major player whose progress has been hindered by development costs and other such obstacles is Norway’s Statoil, which late last year expressed concerns about the challenges of exploring and extracting Arctic hydrocarbon reserves.

“Logistical difficulties, regulatory hurdles, jurisdictional tensions, environmental opposition and above all extremely inhospitable climatic conditions will ensure that oil and gas activity in the region remains problematic, complex and expensive,” says Slack.

Many believe the inadequate infrastructure and tumultuous weather conditions, combined with the falling price of oil and gas, to be the perfect storm when it comes to
Arctic exploration

“Cost is probably the most important factor, with Statoil estimating that the cost of drilling one oil well in the Arctic could be as much as $500m. This is likely to be prohibitive for most companies in the current climate, with some analysts predicting that the price of crude could drop in the medium term.”

Statoil’s Exploration Chief Tim Dodson spoke at a climate change conference last year about some of the issues facing oil companies in the Arctic. “We don’t envisage production from several of these areas before 2030 at the earliest; more likely 2040, probably not until 2050,” he said. “I think what we have to realise is that the challenges our industry faces in the Arctic are at least as significant as we thought they were just a couple of years back, but they’re not insurmountable.”

Edinburgh-based Cairn Energy, meanwhile, has announced that, regardless of having spent over $1bn in the region, it is deprioritising its Greenland operations after not having made a single commercial find as of yet.

Many believe the inadequate infrastructure and tumultuous weather conditions, combined with the falling price of oil and gas, to be the perfect storm when it comes to Arctic exploration. These circumstances mean that short-term financial benefits can only be marginal at best, until stratospheric sums of capital are poured into developing the region.

Charlie Kronick, Senior Climate Advisor at Greenpeace UK, is sceptical. “[It] is impossible to drill safely for oil in the ice covered waters of the Arctic – the potential impacts on local livelihoods and biodiversity are uncostable. It would be literally impossible – for both technical and environmental reasons – to clean up after the inevitable spill, while the level of climate change that would result from successful (in economic terms) drilling there would be catastrophic.”

A report conducted by Lloyd’s and Chatham House found that investment in the Arctic could reach $100bn by 2022, as companies scramble to gain a foothold. “Business activity in the Arctic region is undeniably increasing, and the impact of climate change means that this is likely to grow significantly in the future. But as new opportunities open up, decisions on exploiting them need to be made on the basis of as full an understanding of the risks as possible,” said Richard Ward, Chief Executive at Lloyd’s.

At present, any areas of the Arctic that are unrepresented are being hotly contested by the bordering countries. Regardless, it is crucial that businesses granted permission to work in the region align their goals with those of local governments, communities and the environment, as the territory proceeds to transform. In addition, those partaking in Arctic exploration should put in place strict measures to avoid any environmental disasters, and have procedures in place should the worst case scenario occur.

“The businesses which will succeed will be those which take their responsibilities to the region’s communities and environment seriously, working with other stakeholders to manage the wide range of Arctic risks and ensuring that future development is sustainable,” says Ward.

The Battle for Ownership

The Arctic Circle’s surrounding seas are, according to the 2008 United States Geological Survey, home to about 20 percent of the world’s undiscovered oil and natural gas resources. Ownership of the region has been an ongoing issue for the best part of a century, with Canada first extending its maritime boundaries in 1925, shortly followed by Russia in 1926.

Since then an array of peculiar tactics have been used to assert ownership of the offshore continental shelves which could be stowing away masses of lucrative fuel – from Canada sending Inuit families to the High Arctic in what has been described as the use of ‘human flagpoles’, to Russia sending a submarine to the ocean bed of the North Pole to plant its national flag.

The Arctic Circle borders with eight countries: Canada, Iceland, Denmark/Greenland, Norway, Sweden, Finland, Russia, and the US, and current EEZ boundaries (exclusive economic zones that determine the limits of a country’s exploration rights) already account for possession of the majority of the region, with the disputed area being primarily the North Pole and the continental shelves which surround it.

Only five of the eight countries dispute this area. The responsibility for which continental shelf belongs to which country – if any at all – lies with the United Nations Convention on the Law of the Sea (UNCLOS), an agreement set up by United Nations to determine activity within international waters.

Under rules instigated by UNCLOS, countries can only apply for an extended continental shelf after 10 years of signing up to the Convention. Norway made its extension application in 2006, Russia in 2007, Canada in 2013, Denmark will submit this year, and the US is unable to do so as it has not signed up to UNCLOS. Each country is fighting for ownership by ‘proving’ to the Convention – usually via land mapping – that it is the closest natural neighbour to the disputed areas.

Canada

Despite submitting only a preliminary claim in 2013, Canada says it has more to add, including outlining the North Pole as part of its legal territory, with Foreign Affairs Minister John Baird saying Canada needs more time to complete its scientific research.

Canada has the northernmost settlement, Alert, Nunavut, home to a Canadian Forces station and has spent $200m on icebreakers, helicopters, scientists and submarines to acquire the relevant data. It is currently in a long-running dispute with the US over the boundaries of the Beaufort Sea but has so far drilled 90 wells there, and has further experience in the Mackenzie Delta region.

Russia

Russia already owns more than half of the Arctic’s total resources, and in 2007 it filed a claim that includes the continental shelf under the North Pole, as well as the Lomonosov Ridge, as an extension of the Siberian continental shelf. In the same year it also sent mini-submarines to plant its national flag on the seabed, 14,000ft below sea level.

In retaliation to Canada’s assertion it would stake claim to the North Pole, in late 2013 President Putin ordered his leadership to increase its military presence in the Arctic as a point of priority, and has built the world’s most expensive ice-breaker, the ’50 years of Victory’ (pictured) for further exploration.

Denmark/Greenland

Denmark will file a claim in 2014, declaring it the legal owner of the Great Belt, the Little Belt, and the Danish part of the Sound. As Greenland falls under Danish sovereignty, it will claim the Lomonosov Ridge falls within Danish territory and has the closest coastline to the North Pole. It has spent the last 10 years garnering scientific data in an effort to expand its continental shelf status.

Despite being a part of Denmark, Greenland has been self-governing for 300 years and could use the development of its oil industry to gain full independence from Denmark. It has formed relationships with Cairn Energy, Shell and Statoil as part of this process.

Norway

In 2006, Norway filed a claim to extend its EEZ in three areas, the Barents Sea, the Western Nansen Basin and the ‘Banana Hole’ in the Norwegian Sea, and states that it will make an additional submission once it has finished mapping its continental shelf.

In 2010 Norway won a long-running dispute with Russia over ownership of the Barents Sea, with Norway recently acquiring its twelfth production licence, with more acreage becoming available in 2013-2014. Norway has arguably the best infrastructure in place for Arctic drilling, with Statoil operating the world’s most northerly LNG production plant near Hammerfest.

US

The US has not ratified UNCLOS and therefore isn’t eligible to file a claim. Regardless, the US Coast Guard has sent a team to map the sea floor of Alaska in order to determine its continental shelf. The fact it has not ratified the UN agreement is perhaps the biggest cloud hanging over the dispute, as the US may not recognise any conclusions made by UNCLOS, which could lead to widespread conflict.

With oil exploration already taking place in North Alaska, notably in Prudhoe Bay (pictured), it already has the infrastructure to drill in such conditions. It is estimated that 65 percent of undiscovered oil lies on the North American side of the Arctic.

Saddam Hussein tops list of 5 biggest bank heists

Posted on March 12, 2014 by Ashton Wenborn

Over the last century banks have been broken into in all manner of ways – from the elaborate to the bizarre – and vast sums of money have been stolen.

Dangerous and mysterious, the popularity of classic caper movies and books proves that they have well and truly entered the public consciousness. Here we look back at some of the biggest, most iconic, most damaging robberies in history.

1. Central Bank of Iraq ($1bn, 2003)

What is by far the largest bank robbery in history was not perpetrated by a normal off-the-street criminal. In fact, in an audacious move, nearly $1bn was stolen from Iraq’s Central Bank by its very own dictator.

Saddam Hussein, anticipating that US bombing would begin the very next day, sent his son Qusay to the bank with a handwritten note ordering that the money was withdrawn.

US troops later found approximately $650m in Saddam’s opulent palace, but the rest was never found. With Saddam’s execution and Qusay’s death in a fire fight with US troops, the remaining $350m may never be found.

2. Dar Es Salaam Bank ($282m, 2007)

July 11, 2007, and managers at the Dar Es Salaam Bank in Baghdad enter the vault for a normal morning check. To their surprise, and overnight, the bank’s guards had laid bare the bank’s coffers, taking $282m.

The heist was a classic inside job according to officials, who said the guards must have had links with the militia to escape Baghdad without being stopped at a checkpoint. It was not clear why the bank had so much cash on hand, but most of the money has since been recovered.

3. Banco Central ($71.6m, 2005)

The Banco Central Heist in Fortaleza in Brazil is a heist so elaborate, it probably deserves its own film. Three months before the burglary, a gang of criminals rented an empty house in the centre of Fortaleza, just two blocks away from the bank. Over the next few weeks, and under the pretence that the building was a plant shop, the burglars excavated a 78m (256ft) tunnel to the bank’s vault.

On the final weekend, they broke through the reinforced concrete and evaded the security systems to make off with $71.6m. So far, authorities have only recovered $3.8m of the notes.

4. United California Bank ($30m in 1972)

On March 24, 1972, a group of seven men from Ohio broke into a branch of the United California Bank in Laguna Niguel, gaining access to the safety deposit vault. Inside they managed to loot what was, at the time, a world record amount at approximately $30m (worth $100m today), but due to the undeclared nature of safety deposit boxes the true value was never ascertained.

The theft was executed perfectly, but a few months later the gang performed a similar crime back in Ohio. The burglaries were linked by the FBI and the gang soon arrested.

5. Bank of America ($1.6m, 1998)

In 1998 an ambitious plan to rob the Bank of America’s World Trade Centre branch went off without a hitch, but blunders by the perpetrators after the event quickly led to their capture. Struggling mobster Ralph Guarino orchestrated the plan by convincing a friend who worked in the building to give him access to it.

The money was seized by three gunmen, including Guarino, from couriers delivering a fresh supply of cash to the bank. The FBI quickly tracked Guarino and his team down, who had become a major target of other New York gangs looking for a slice of the haul. In light of this, Guarino elected to become an FBI informant rather than settle for jail time.

QIB sprearheads innovation in Islamic banking products

Posted on March 12, 2014 by Ashton Wenborn

A select few constituents of the Islamic banking industry have recently come to be considered equal and even superior at certain aspects to their conventional banking counterparts, due to a more expansive range of products and services. Leading industry players in particular have committed a great deal of time and resources to develop Islamic banking products that add value to their offerings, not least of which being Qatar Islamic Bank (QIB), which has set itself apart from the competition in this field.

First established in 1982, QIB is the first Islamic Bank in Qatar, and among the first ones globally. Today, QIB holds 35 percent of the country’s burgeoning Islamic sector, as well as nine percent of the overall banking market. The institution’s capital, as of the end of 2013, amounted to QR 2.36bn with assets of QR 77.4bn, and the bank will continue to spearhead progressive developments in this space provided its strategy remains relatively unchanged with regards to product innovation.

A new hedging mechanism
One of the most recent innovative Islamic banking products developed by QIB is a highly flexible sharia-compliant legal framework developed for the purpose of executing a wide range of sharia-compliant hedging transactions.

The mechanism is underpinned by a Wa’ad (promise) and a commodity trading structure, requiring QIB and a trading counter party to jointly sign master terms and conditions along with two master undertakings where each counter party undertakes to ‘purchase’ sharia-compliant commodities from each other under diagonally opposite conditions, along with an agency agreement where QIB is appointed to act as agent to buy or sell commodities on behalf of the trading counter party depending on which undertaking is exercised.

One of the most recent innovative products developed by QIB is a highly flexible sharia-compliant legal framework

The innovative platform can be used for hedging QIBs various market exposures and to structure innovative hedging solutions primarily for its corporate and wholesale clients. QIB will always hedge itself when offering client products in order to maintain a market neutral trading position.

The hedging mechanism is extremely flexible and will therefore be used to develop a diversified range of sharia-compliant risk management products, which in turn can be used to swap or vary exposures across all relevant asset classes such as currencies, profit rates, equities and commodities.

The mechanism was used to provide a sharia-compliant profit rate hedge for a project finance deal. The Islamic hedge was the first of its kind in Qatar. The hedge was linked to the Islamic portion of a $500m financing provided by QIB and a consortium of local Islamic and conventional banks to a major local corporate for the construction of a strategic national infrastructure project, a deal which was concluded in Q3 of 2013. QIBs hedging mechanism was selected as the basis for providing the Islamic hedge, and was used by all the Islamic banks involved in the finance deal due to its robustness and flexibility.

QIB plans to further develop the products in 2014 to be able to offer innovative structured investment solutions to eligible counter parties.

Innovative products
The implementation of cutting edge Islamic banking products and services has long formed an integral part of QIBs business strategy. As a result, the bank boasts one of the most complete product portfolios not just in Qatar, but in the world of Islamic banking, spanning from plain vanilla corporate financing, project finance, syndications, transactional banking, Takaful to personal finance, investments, and a variety of other banking products and services to meet the needs of the bank’s segmented client base both in corporate and personal banking.

This long standing focus on product innovation and portfolio expansion forms part of QIBs mission to be seen as a customer centric institution by those in the industry and the wider banking public. However, it would appear that the strategy also brings with it far greater profit bearing potential, with last year’s profit, equating to QR1.34bn and a growth rate of 7.6 percent. As is made clear in the case of QIB, product innovation is essential for the wider Islamic banking community if it is to boost its competitiveness further still and be considered equal in stature to its more traditional western counterparts.

Corporación América project to resolve ‘Chile Axis bottleneck’

Posted on March 12, 2014 by Ashton Wenborn

The Corredor Bioceanico Aconcagua project, known as the CBA, is an Argentine private initiative charged with the construction and implementation of a state-of-the-art high-load-capacity railway network linking the Chilean Pacific ports with the Argentine, Uruguayan an Brazilian ports and hubs, which, on completion, will cement a new level of physical and commercial integration between the Southern Cone countries and the continent.

The initiative, presented by the Argentine holding Corporación América, aims to resolve the Mercosur – Chile Axis bottleneck – with the construction of a 205km multimodal rail corridor that includes a 52km base tunnel under the Andes. This new terrestrial pass will not only operate all year round, but it will also make significant savings in terms of costs and transit times.

The transit system, when in its final phase will carry up to 77 million tonnes of cargo per year, ranging from containers to trucks, will improve the crossing itself, and will also bolster the vast network of roads, rails and ports on both sides of the Andes.

Spanning a vast region of growth
The network is made up of thousands of kilometres of road, water and rail tracks, which connect Brazil and Argentina’s most productive regions with Chile’s access to the Pacific Ocean. The footprint of this network spans three million square kilometres, home to 126 million people and accountable for 70 percent of the region’s GDP generation.

With this innovative approach, the integration of Mercosur (Argentina, Brazil, Uruguay and Paraguay) will, improve competitiveness and general welfare locally, regionally and globally. Chile will also be substantially improved, given that the CBA eliminates the current bottleneck in land transit across the Argentine-Chile border.

Argentina and Chile share one of the world’s longest land borders, however, the uncompromising terrain means that existing terrestrial passes are far from ideal. Today, as much as 70 percent of the land freight that passes the Andes through Chile and Argentina does so via the Cristo Redentor Pass (CRP), which remains unreliable at best due to altitude and weather conditions.

The CBA Project

250km

Multimodal rail corridor

77m

Tonnes of cargo per year

10 YRS

stage 1 construction schedule

In addition to lengthy closures, the CRP is near to total capacity saturation (at five million tonnes of cargo per year) and boasts very little opportunity for expansion. Argentine and Chilean governments have been working to improve the CRP or CR Pass – both in terms of hardware and software – but optimistic projections are aiming to expand capacity up to no more than seven million tonnes per year.

The geography of the region allows for little in the way of expansion for the current system. As a consequence, 80 percent of the cargo that passes between the two bands of the Southern Cone travel by sea, even in instances where these routes are longer and more expensive.

The multimodal rail system has been implemented as a result of six years worth of study, and the finished product’s high load capacity, at 24 million tonnes per year at stage one and 77 million tonnes by stage three, along with its strategic construction should allow for a 365 days a year uninterrupted service. The electric railway, which spans 205 km from Los Andes to Luján de Cuyo, in the same gauge of the Chilean and Argentinean railway networks will open new possible route combinations to trade, allowing each operator to design the optimal route with a dramatic increase in delivery certainty.

Aside from increased efficiency and regional competitiveness, the system offers a number of advantages over existing infrastructural links. The project’s construction in three stages allows investment recovery to be consistent with demand, seriously reducing risks. The system’s multi-modal capacity ensures the project is made far more flexible than the existing road system, creating synergies and efficiency allowing several possible combinations; and mainly, increased economic efficiency through arrival certainty and quicker crossing times (four hours at stage one and two and half hours at stage three compared with the current 12 hour cross). There is also lower energy consumption all round.

Well structured scheduling
The construction schedule for stage one is expected to span 10 years, and involves the build-out of the base tunnel and critical path, which in turn defines the length of the works. The construction design of the tunnel features four excavation fronts, which will be almost entirely excavated with specific tunnel boring machines (TBM).

The lead-up to this point, however, has been a long a complex process, and one that has required no small measure of co-operation and collaboration on the part of various authorities and institutions.

Argentina and Chile share one of the world’s longest land borders, however, the uncompromising terrain means that existing terrestrial passes are far from ideal

The two private initiatives were simultaneously presented to the Ministry of Public Works of Chile and the Ministry of Federal Planning Argentina in January 2008, and the project was declared of Public Interest to Chile and Argentina in August and September 2008 respectively.

In March 2009 the Feasibility Study (phase one) was presented to both governments and in October the two countries signed the Bilateral Agreement and the Additional Protocol of Maipú, in effect creating the bi-national entity for bidding and regulation of the CBA project.

In July 2011, the Final Project (phase two) was delivered to the bi-national entity, along with the delivery of phase two studies, and an audience was held with the President of Argentina, Cristina Fernández and Chile’s Sebastian Piñera.

After the delivery of the technical proposal to the binational entity in July 2011, a project review period was undertaken by both states and in March 2012 the presidents of Argentina and Chile began feasibility tests for the project, and started developing the basis for the bidding process. In April 2012, 160 comments on the technical proposal were delivered to the proponent and initiator, and incorporated into its overall make up.

During this six-month review period, several joint meetings were conducted, which together served to deepen the discussion about the proposed project (geological studies, base tunnel design, tunnel safety, tariff analysis and willingness to pay by CBA users, demand study complementation, and a legal feasibility study).

An innovative business model
The CBA project in its entirety is innovative on several counts; namely that it is the first time a private consortium will present a project of this kind to the public sector. This “private approach” comprises a 10-year construction planning line and a 50-year operation concession within a binational legal and political framework.

CBA timeline

2008

Project is declared of Public Interest to Chile and Argentina

2009

Two countries sign Bilateral Agreement and the Additional Protocol of Maipú

2011

Phase two proposal delivered

2012

Feasibility tests begin

In the proposed Business Model and Guarantee Scheme, the private parties will assume the risks of their capital investment while the Argentine and Chilean States offer certain guarantees and contingent risks to make clear their commitment in facilitating the long-term financing required of this project.

Argentine holding Corporación América has formed an international consortium to implement and finalise related feasibility studies. Together with Corporación América, this group includes Empresas Navieras of Chile, Mitsubishi Corporation of Japan, Geodata SpA of Italy and Contreras Hermanos from Argentina. The incentives outlined in the CBA business model are designed to enhance the long-term concession scheme for both existing and future consortium members.

The design of this financing structure is based on a shared risk model and guarantee system, which is in turn based on successful experiences in the region with the backing of multilateral credit organisations (MCOs), and is focused on easing and simplifying the risks shared between Chile and Argentina.

Coupled with the PPP scheme the private initiative will open new opportunities for tackling mega projects in the private sector. The approach, designed from a private design and planning team perspective, puts new opportunities on the table to optimise key aspects of mega infrastructure initiatives.

For one, there it creates an incentive for the private sector to propose and design new mega infrastructure projects so as to ease infrastructural bottlenecks, and there is certainly more conceptual freedom in the planning and construction space. There are also incentives for stakeholders to optimise the long-term success and efficiency of the system, while the project’s financing guarantees minimal fiscal risk for the state, and cuts the overall costs of the project.

No matter the means by which it is accomplished, the Bioceánico Aconcagua project aims to afford goods travelling through Chile and Argentina a far more efficient route through the Andes and greater commercial ties than ever before. The upshot is that not only the trade between Chile and Argentina will no doubt rise, but the trade between the countries of the region as well.

Perhaps the greatest physical and commercial void to be broached by CBA is the Bioceanic factor, cutting down shipping costs and times for Brazilian and Argentine goods seeking Chilean ports and Asian markets, and Chilean and Asian exports aimed at the Mercosur commercial hubs and ports.

However, what is key about the project is the financial terms and conditions that underpin its development, as they represent the sheer scale of what can be achieved if private and public parties work to settle differences and minimise risk.

Wall Street faces fixed income slump, but is it all bad news?

Posted on March 12, 2014 by Ashton Wenborn

Worrying signs that Wall Street’s largest investment banks are set for another period of cut backs could be imminent with the announcement of disappointing first quarter revenues for fixed income divisions.

It is thought that revenues could be down by as much as 25 percent when first quarter results are revealed next month, leading to a series of staff cuts at banks, including Citigroup, JPMorgan Chase and Credit Suisse.

One firm not looking concerned about fixed income is Morgan Stanley

Recently Citigroup and JPMorgan pre-empted the poor results by stating they would likely see revenues drop considerably.

Citigroup’s finance chief John Gerspach told reporters it would likely see a drop by a “high mid-teens” percentage. Last week also saw revenues at the fixed income division of boutique firm Jeffries Group slump 17 percent, signalling a trend in the rest of the industry that results were set to be disappointing.

The news will see revenues fall for the fourth consecutive first quarter of the year, at a time that is traditionally the most lucrative for investment banks. According to sources that spoke to the Financial Times, at least two of five biggest fixed income divisions will axe a large number of jobs as a result of the poor performance.

Citigroup last year saw trading of roughly $13.1bn in fixed incomes, currencies and commodities, a figure that is unlikely to be repeated this year. JPMorgan made $15.5bn from the same side of the business.

Both firms are expected to put more of their focus over the coming year on equity trades, as they move away from their disappointing fixed income businesses.

One firm not looking concerned about fixed income is Morgan Stanley. CEO James Gorman told Fox Business Network that it makes up a small part of their business, so wouldn’t seriously harm its operations.

“We’ve been criticised a lot about our fixed-income business the last couple of years. And as I tell folks, the bad news is it’s only 12 percent of Morgan Stanley. The good news is it’s only 12 percent of Morgan Stanley.

“That fixed-income franchise actually has significant upside from where it’s been in the last couple of years as we’ve retooled it. So I’m much less worried about fixed income than maybe most folks are.”

Top 5 most expensive cities

Posted on March 12, 2014March 26, 2018 by Ashton Wenborn

Singapore

10 years ago Singapore ranked 18th, however, a strong currency, sky-high utility bills and lofty car ownership fees have together bumped up the city’s prices by quite extraordinary degrees. Singapore also plays host to one of the widest wealth gaps in the world as well as an average annual per capita income of some $50,000.

Paris

The city’s 20 percent sales tax and notoriously expensive goods and services mean that the French capital is still one of the most financially demanding places to live in the world. To compound the cost of living further still, the average price of a centrally located apartment comes to over $13,600 per sq m.

Oslo

Oslo has ranked amongst the most expensive cities worldwide for some time now. Although the Norwegian capital’s house prices fall short of its major rivals, the price of common goods is above and beyond most – the city’s university recommends that students keep a minimum of NOK10,000 ($1674) to cover basic expenses.

Zurich

Although taxes are famously low, the price of insurance, services and common goods is significantly higher than most of its European counterparts. Due to excessive property prices the vast majority of the city’s inhabitants choose to rent accommodation, and the average individual spends near 16 percent of their salary on housing and energy combined.

Sydney

Sydney is the most expensive city in Australia, and indeed one of the most expensive worldwide in terms of property prices – the average house here will set you back a cool $700,000. In addition to stratospheric house prices, the currency’s gain ahead of the dollar has proceeded to push up the price of goods and services further still.

Acting CEO to drive innovation and growth at Qatar First Bank

Posted on March 11, 2014March 10, 2014 by Ashton Wenborn

Islamic finance has gathered momentum and gained quite an extraordinary reputation these past few years, and is now a mainstay of the global financial system, thanks in part to the work of those leading its many sharia-compliant constituents. First among the regions to have benefited is the GCC, which has seen a remarkable rise in Islamic banking of late and has come to represent a key focal point for the industry going forward.

Since Islamic banking entered its ‘modern phase’ a little over three decades ago, it has undergone numerous fundamental changes to its makeup, in addition to having overcome the many and diverse challenges posed to it by the international financial community.

Qatar First Bank’s newly appointed Acting CEO, Ahmad Meshari, has overseen the development of Islamic finance in Qatar. “After demonstrating its resilience to economic downturns, Islamic finance has gained global interest with non-Muslim countries like Britain looking at ways to tap into this emerging market. In Qatar, many initiatives were undertaken to ensure proper regulation and encourage the introduction of innovative retail products to allow this niche sector evolve into a profitable oriented industry,” said Meshari to Investvine. “Islamic finance still has a lot of potential for growth. According to a study undertaken by Ernst & Young, it is expected to cross the milestone of $2trn [worldwide] by 2014.”

Meshari’s proficiency in navigating the region’s complex financial landscape is due to 30 years of experience in financial services and his capacity to conquer the obstacles that have arisen throughout his career.

Meshari’s proficiency in navigating the region’s complex financial landscape is due to 30 years of experience in
financial services

Meshari’s first steps in the industry were taken in 1982, studying Business Administration at Kuwait University and specialising in banking and finance at the same time working as a public relations officer for the Kuwaiti government. Meshari progressed to commercial and administrative manager for Meshwar Al-Kuwait Commission Agent, of which he was also the co-owner, where his business administration training was employed to full effect.

Meshari later returned to the Kuwaiti government in 1988 and assumed the role of loan officer, participating in preparing the annual budget, setting criteria for loan applications, coordinating the timely collection of payments and generally putting to practice his penchant for financial affairs.

His experience in dealing with these matters would remain with him, as he went on to open his own convenience store in Ottawa in 1993, and manage the day-to-day operations, whether they were financial planning, procurement or selling. It was a mere four years before he was awarded an MBA and soon after crossed the Atlantic to join Qatar Islamic Bank as a relationship manager.

Climbing the ladder
Meshari’s beginnings in corporate banking saw him combine the attributes he’d honed on the job previously, as his experience dealing with clients and financial prowess were put to use when identifying prominent clients for the bank. After four years in the role, he began a new tenure as contracting and real estate department manager for the firm. With this responsibility would come a portfolio worth QAR 2.8bn, as well as a raft of new responsibilities.

He would move up the ladder again in 2004, as he took on a role as an executive manager and assumed responsibility for a portfolio worth QAR 6.5bn, as well as for the division’s strategy, business plan and goals.

It was from this point that onlookers began to take Meshari’s achievements seriously, and he became sought-after as a top talent in corporate Islamic banking. Following a year-long stint at Sharjah Islamic Bank as head of corporate banking and senior vice president, Qatar Islamic Bank rehired him in 2008, and he was appointed to the positions of assistant general manager and head of corporate banking.

It was on his return trip to Qatar Islamic Bank, and a short two years after his promotion to general manager in 2008, that he would finally be appointed acting CEO, go on to lead the firm’s transformation and promote a performance-driven culture from the top down. After having acted out his three-year strategic plan and identified a number of new market segments and value propositions, Meshari stepped down in 2013 and acted instead as deputy chief executive to focus on developing a business strategy and extending the bank’s market share.

The firm is continually scoping out
investment opportunities

Meshari’s experience in financial services is far from confined to his work with Qatar Islamic Bank. Quite the contrary, he is a Fellow at the Arab Academy for Banking and Financial Services and a Certified Lender of Business Banking since 2003, appointed by the US Institute of Certified Bankers.

New position
Meshari’s valuable contribution to the world of Islamic banking looks on course to continue with his recent appointment as Qatar First Bank’s (QFB) new Acting CEO, a position he will no doubt relish given his experience in the market and proven ability to identify emerging market opportunities.

Established in 2009 and formerly known as Qatar First Investment Bank (QFB) ranks among the region’s most enterprising sharia-compliant financial institutions and offers a comprehensive suite of financial services and products. With fully paid up authorised capital of QAR 2bn ($550m), QFB is well positioned to negotiate the burgeoning Islamic finance market in the wider MENA region, and having appointed Meshari as Acting CEO, the firm’s prospects look bright.

Regulated by the QFC Regulatory Authority (QFCRA) and ISO 27001 certified, QFB offers services spanning principal investments, asset management, corporate and finance, and recently introduced commercial banking services on a personal and wholesale basis.

The bank is entirely unique in Qatar, in that it’s simultaneously independent and central to the market, providing clients and counterparties with access to one of the region’s deepest pools of capital. Underpinned by Meshari’s expertise in the sector, QFB adopts an investment strategy that centres on sector and geographical diversification, and targets the sectors it considers to be key drivers of economic change, these being energy, financial services, industrials, real estate and healthcare.

Among the most impressive contributions to these sectors is a $111m investment in the healthcare sector – a 20 percent stake in Memorial Health Care Group in Turkey; and a 4.78 percent stake in UAE-based Al Noor Medical Company. Both investments, as with a great many others, performed strongly, Memorial Healthcare in particular, having registered a CAGR of 52 percent from 2010-13. Another of the firm’s many impressive investments can be seen in the industrial sector, with the acquisition of a 71.3 percent stake in Emirates National Factory for Plastic Industries (ENPI), which after 3.4 years QFB exited and generated an internal rate of return of 31 percent.

The firm is continually scoping out investment opportunities in and beyond the aforementioned sectors (see Fig. 1), and invests in businesses that maximise shareholder value through robust growth and significant capital appreciation. QFB’s investment track record is proof of the bank’s success, and since its inception the bank has invested $579m in 18 transactions spanning the GCC, broader MENA and Turkey, managing to generate profits annually and successfully exiting four investments and one partial exit thus far.

Not least of QFB’s achievements is its strong financial record these past few years. The bank’s earnings per share rose 45 percent from 2.48 cents in 2010 to 3.61 cents in 2012, and its net income also exhibited 45 percent growth through the same period, amounting to $31.1m in 2012. Owners’ equity was up 2.4 percent through the same period, to $465m, and a progressive dividend policy for shareholders has seen the bank distribute five percent, six percent and seven percent of paid up capital through 2010, 2011 and 2012 respectively.

Under Meshari’s leadership, the bank has set in place an ambitious plan for the future, and is hoping to soon list its shares on the Qatar Exchange, which would reaffirm its stature as a formidable sharia-compliant financial institution. QFB will no doubt continue to build upon its achievements thus far under Meshari’s watch and expand further still on its MENA footprint. With the new Acting CEO’s eye for financial opportunities and keen understanding of the marketplace, QFB is on course to reap a far greater share of the market and spearhead growth in Islamic finance.

Grupo Hermes develops Mexico’s cultural infrastructure

Posted on March 11, 2014 by Ashton Wenborn

PPPs have long been proven an efficient and sustainable way of financing public services and projects. Governments the world over have resorted to embarking on these partnerships with private institutions as a viable alternative to financing costly infrastructure, and to deal with the ongoing costs of running large projects.

According to the International Project Finance Association (IPFA), “in many countries the financing requirements of current and prospective infrastructure needs far outstrip available resources.” For the Mexican government, PPPs have long since been a key tool to finance cultural infrastructure in particular, with a huge degree of success.

According to the World Bank, the financial crisis that afflicted global markets between 2008 and 2011 served to fuel interest in PPPs. “Facing constraints on public resources and fiscal space, while recognising the importance of investment in infrastructure to help their economies grow, governments are increasingly turning to the private sectors as an alternative additional source of funding to meet the funding gap,” reads the World Bank’s Infrastructure Resource Centre.

Mexico has certainly not been the exception, and though the country continues to see strong growth, other setbacks have imposed restrictions of the public purse. Focusing on basic needs of the people and the economy has always been the nation’s policy. Schemes such as PPPs allow its to keep this focus, while financing key infrastructure projects. The Gran Museo del Mundo Maya, is one such success story.

Celebrating heritage
The museum, located in Mérida, Yucatán, celebrates Mayan culture. The Yucatán peninsula of southern Mexico was a Mayan stronghold and as such the ancient culture is a fundamental influence in the region today. In fact, Yucatán is one of the tourism epicentres of Central America, as visitors flock to the peninsula to visit Mayan architectural relics, left over from over a thousand years ago. In many ways, Mayan civilisation lives on in the modern inhabitants of Yucatán.

The Gran Museo del Mundo Maya

2013

Grand opening

800 Pieces on display

$58.3m

Grupo Hermes expenditure

The Gran Museo del Mundo Maya was conceived as a platform where visitors can experience and witness Mayan culture and its legacy. It is also a ground-breaking project for the Yucatán province, who have been financing its tourism infrastructure projects exclusively by PPPs since 2011. The museum project was the first of its kind in the region and will serve as a template for future enterprises.

These schemes are a form of joint work that require even greater acceptance in financial culture of the country and in the next few years, it will be refined and will enjoy greater popularity. As for the construction of infrastructure in Mexico, the history of multiple or combined participation in project financing is very recent, and is the reason why this will need to work to achieve greater momentum.

When the government lacks resources to carry out works that require substantial investment, these kind of schemes come in use. The Gran Museo del Mundo Maya was developed in partnership with the Inter-American Investment Corporation (IIC), who provided a loan of $7.4m to develop and outfit the museum and its exhibits, and well as the upkeep of the facility.

Opening its doors in September 2013, it is the home to over 800 pieces, from textiles to religious artefacts. It also contains a large cinematic projection room. It is the museum’s architecture and design that truly make it a memorable enterprise.

Developed by Grupo Hermes, it boasts an intricate tower structure covered in a colourful steel frame resembling local knitting patterns. It is a bold project that required 12 months of solid construction work to go up. Grupo Hermes has been the local government’s main partner in this PPP, and the company has already collected a number of Mexican and international accolades. The work marks a milestone as it is the first museum built with this kind of advantageous scheme.

Successful implementation
Similar partnerships could be on the cards in the future. Public policies actually achieving a greater impact for the benefit of the population will require joint investments with the aim of providing not only more but mainly high quality service, and this will need to go to PPP systems, and support a situation of restricted economy.

According to the IPFA, when projects are developed as PPPs “there is evidence of better quality in design and construction than under traditional procurement.” This is because when a PPP is negotiated it “focuses on the whole life cost of the project, not simply on its initial construction cost. It identifies the long-term cost and assesses the sustainability of the project.”

Grupo Hermes has also been the ideal partnership for this enterprise… Without such a partnership it is unlikely that the local Yucatán government would have been able to develop
a museum to this high
standard and quality

For the Yucatán government, the partnership could not have been better. The museum is already a hit, and laid the foundations for similar enterprises. The best plan to build more PPP schemes in Yucatán will definitely be to follow the example of the optimal performance of the work with which the state currently has the Great Museum of the Mayan World, thus being the first of its kind in the state as the importance of the work done.

Grupo Hermes has also been the ideal partnership for this enterprise. Since it won the concession in 2011 – after an international bidding process – the company has committed over $58.3m, and will continue to manage the museum for the next 20 years. Without such a partnership it is unlikely that the local Yucatán government would have been able to develop a museum to this high standard and quality.

While many other countries have looked to the PPP model in order to develop crucial infrastructure projects such as this, the care Grupo Hermes has dedicated to the development of the museum is unique to this project.

The building was developed with 4A Arquitectos – a Merida-based architectural firm – as it was important for Grupo Hermes to invest in local talent and labour. To that effect the group has estimated that the museum will generate close to 1,500 direct jobs and 3,100 indirect ones. Out of the construction workers alone, one in three had Mayan origins.

The museum is already a landmark for Yucatán and Mexico, which will attract international and national tourists eager to know more about the Mayan culture and heritage. Without a doubt, it is both a cultural milestone and an economic asset for the development of the state.

It has attracted visitors from around Mexico and beyond, and has been lauded as the “greatest cultural asset of the century” by the Yucatán Compass.

Crédito Real: helping lesser earners and SMEs in Mexico

Posted on March 11, 2014March 10, 2014 by Ashton Wenborn

Although a fair few of Mexico’s macroeconomic indicators have fallen short of neighbouring nations such as Brazil and Peru of late, this is not to say that the nation is any worse equipped to embark upon an impressive spell of growth in the near future. On the contrary, recent government reforms have improved the prospects of low and middle-income sectors as well as SMEs as they find themselves subject to far more favourable conditions than before.

Far from confined to government intervention, however, a number of alternative financial institutions have taken steps to bolster the prospects of what were previously underserved – though no less crucial – components of the Mexican economy. After a string of positive reforms and a newfound focus on SMEs, Mexico now boasts a promising business climate.

Whereas Mexico’s conventional banking institutions have failed to reach many of Mexico’s lesser earners and SMEs with their inadequate branch networks, alternative institutions such as Crédito Real have put in the infrastructure to advance economic growth ahead of their conventional banking counterparts.

“Our loans are offered to these underserved segments of the population through key relationships with our distributors, established strategic alliances, and through the group loan promoters and financial advisors who service our small business loans,” says Jonathan Rangel, the company’s Investor Relations Officer. By providing an alternative means of financial service reinforced by ethics and reputation, Crédito Real strives in all it does to improve the quality of life across its target demographic and incorporate innovation into its products wherever possible.

“The purpose of Crédito Real is really to serve the underserved segments of Mexico, which here account for a large percentage of the overall population, primarily in the low and middle-income segments”, says the company’s CFO, Lorena Cardenas. “For the past 20 years, our unique products and distribution have really served to distinguish us in the financial sector here in Mexico and have opened up new opportunities to the country’s underserved individuals.”

[R]ecent government reforms have improved the prospects of low and middle-income sectors as well as SMEs

“Overall, Crédito Real offers a diversified platform of credit products with a unique distribution strategy, which is hard to replicate and represents a competitive advantage,” says Rangel.

Credit where it’s due
The company was first founded in 1993, at which time it introduced durable goods loans, which were loans made to individual consumers to finance the acquisition of “white line goods”, such as home and kitchen appliances, electronics, furniture, flooring and tiles.

“Granting loans to the low and middle-income sectors is really our core business and we are totally devoted to these customers. Whereas most of the large Mexican banks have been unable to establish a distribution framework capable of reaching the low and middle-income segments of the population, we have developed close ties with numerous third parties in reaching this demographic.

“The first product we introduced was durable goods loans in 1993, which are made through select third-party retailers for whom we provide financing programmes, to date this product represents nearly 11 percent of our current loan portfolio. In 2004 and 2007 respectively we successfully introduced payroll loans and group loans which today represent 82 percent of our loan book. Finally, in 2012 we launched small business loans and used car loans which now represent seven percent of our loan portfolio.

It is important to clarify that we are not a bank and we do not receive deposits, most of our funding comes from the debt capital markets where we are very active,” says Rangel. In 1995 the company issued debt for the first time in the Mexican market, and in 2010 went on to the international markets, issuing $210m of international notes, with a maturity of five years. Rangel continues: “Currently, our sources of funding are ample and diversified, consisting of credit lines and notes in the local and international markets. Our debt profile during the third quarter of 2013 was composed 35 percent of an international bond, 33 percent of local debt and 32 percent of bank credit lines.”

The clarity and specificity of the company’s business model has seen Crédito Real really maximise its growth and returns over the past five years in particular. The company’s loan portfolio over this period has increased at a compound annual growth rate of 30 percent, and the company’s return-on-equity has exhibited gains of over 20 percent through the same period.

The clarity and specificity of the company’s business model has seen Crédito Real really maximise its growth and returns over the past five years

“This growth has been sustained by a strict monitoring of our loans, allowing the non-performing loan ratio to be at two percent and below, highlighting the solid quality of assets. Also, the strategic alliances and the networks established with our distributors and promoters have contributed to our sustained growth,” says Rangel.

Becoming a public company
Although the company’s strategy and product portfolio has proved to be a resounding success, this is not to say that Crédito Real is an institution which rests on its laurels. “In fact, in 2012 we introduced two new products: small business loans and used car loans. We already have a diversified business platform, but we are open to new products that can help us to better serve our customers. We are also open to opportunities for inorganic growth in Mexico and other countries in Latin America,” says Rangel.

Another of Crédito Real’s recent improvements came in 2012 when the firm decided to issue an IPO and become a public company. Despite the inevitable challenges that come with more stakeholders and the resulting transformation of the firm’s internal dynamics, Crédito Real has gone on to exhibit impressive growth since. “Becoming a public company was something very positive for us; we had strict internal controls and good corporate governance practices in place; however, with our IPO we further enhanced internal controls and enriched our corporate governance practices with independent board members. The whole process brought positive lessons for the management team.

“As far as the original founding members are concerned, they continue to commit to Crédito Real’s long-term success by accepting new partners that strengthen Crédito Real’s capitalisation in order to foster sustainable growth,” says Rangel.

Underserved market
“Despite the progress achieved by Mexico through the years on all fronts, easy access to credit and the financial system still remains open only to a highly sophisticated segment of the population and it has been one of the most challenging goals when aiming to bring wealth and quality services to the vast majority of Mexicans,” says Rangel.

“Traditional banking institutions have managed to evolve and create a very robust financial system with best-in-class rules and regulations, however, its access has been selective and has been kept at arm’s length. We still perceive a strong market potential in Mexico; according to figures from Banco de Mexico, the level of credit penetration is close to 3.5 percent in our country and is still low compared to other countries in Latin America.”

The middle and low-income segments of the population are believed to represent as much as 79 percent of Mexico’s total population

The middle and low-income segments of the population are believed to represent as much as 79 percent of Mexico’s total population, so there clearly exists a huge opportunity for companies such as Crédito Real to capitalise on. Although it will take quite some time and investment to tap into the country’s vast potential, the company remains open to opportunities in countries further afield, although for the time being Mexico remains the firm’s principal focus.

Mexico has recently been made subject of a few changes with respect to its financial system, which together place a far greater emphasis on benefiting SMEs and low and middle-income individuals. “In general, we perceive the financial reform in Mexico as something positive for the sector and for the country’s economy. The main elements of the reform are improvement in the repossession process, increase of credit availability, and higher incentives for lending to small and medium businesses,” says Rangel. The reforms, especially those with regards to SMEs, are in keeping with Crédito Real’s strategy in that both recognise SMEs to be integral in spurring national GDP growth and broader economic development. “Crédito Real represents a success story that has spanned the last 20 years, and we expect a very successful future given that we’re well positioned to take advantage of Mexico’s momentum and profitable growth pattern,” says Cardenas.

Provided that more companies such as Crédito Real recognise the opportunities to be had amid Mexico’s burgeoning low and middle-income segments, the economy will be afforded a stronger footing from which to thrive in the near future. As credit is made more readily available to the nation’s lesser paid, and incentives for SMEs are improved upon, Mexico’s macroeconomic figures are likely to see an upturn in the coming months and years ahead.

Jim Ovia: Zenith leads Nigerian change

Posted on March 11, 2014September 20, 2017 by Ashton Wenborn

Nigeria, little over two decades ago, was in short supply of the resources and infrastructure necessary to keep pace with the rapid technological and economic change in much of the developed world. Opportunities were limited and, as a consequence, business impetus was lacking, save for a select few individuals who sought to capitalise on what were then just pockets of opportunity.

An economic overhaul and the ensuing market liberalisation in the early 1990s brought with it a wave of entrepreneurs, among them the Zenith Bank founder, Jim Ovia, who sought to inspire progressive change in what was then a sorely underdeveloped business climate. Skip forward to the present day and the country ranks alongside some of the world’s best-performing emerging markets, thanks to men like Ovia, whose actions have underpinned the many positive changes to Nigeria’s economic environment, particularly in the banking industry, where he applied his acumen and entrepreneurial resilience to positively impact the entire system. He stepped down as GMD/CEO after two decades of a very successful career that stands out as a study in leadership, change management and strategy. He has since gone on to explore new opportunities and embrace new challenges. World Finance looks back on Ovia’s career and the ways in which he has changed Nigeria’s economic and management thinking for the better.

From clerk to CEO
Ovia began his career in 1973 working as a Barclays Bank (now Union Bank) clerk. It was there that he was introduced to an industry he would later come to play a significant role in transforming. He obtained a B.Sc in Business Administration (MBA) from Southern University, Louisiana (1977) and went on to earn a master’s degree in Business Administration from the University of Louisiana in 1979. He is also an Alumnus of Harvard Business School (OPM).

Zenith Bank total assets:

Ngn 215.2bn

2004

Ngn 2.4trn

2009

One of the most crucial developments in Ovia’s early career, and one that would shape his business philosophy, was at Baton Rouge Bank and Trust Company while working part-time in 1977, where he gained experience in the use of computers. This stint, though seemingly inconsequential, sparked an appetite for technology and the realisation that it would signal a brighter future for his homeland.

Following a good few years of valuable experience in the banking industry, Ovia decided to establish a bank; one that would later turn into a global brand and a dominant player in Nigeria. Ovia was promptly granted a banking license to bring his vision to fruition, and on July 16, 1990 he and a select few others opened shop and began a revolution in the country’s overly conservative and inefficient banking industry.

Talking about his hands-on experience with Forbes Africa, he said: “I’ve worked as everything, from a junior clerical officer in a bank to a middle management trainee. I really did work my way up the ladder. I had enjoyed banking as a profession right from the outset… I worked 16 hours a day and I enjoyed every minute of it.”

In an interview with CNBC, Ovia said: “Stepping down from Zenith Bank was a very big blessing for me really, because it afforded me the opportunity to do so many other things that I couldn’t possibly do when I was CEO. Having run the bank for 20 years, really, in Africa, is quite a long time to be in one institution.” The entrepreneur’s contributions to the country’s wider development have not let up since.

Ovia began to make his contributions to the development of banking in Nigeria more pronounced when he founded Zenith Bank in 1990. Nigeria’s banking system prior to the advent of the Ovia-led Zenith Bank was characterised by queues, and lots of them, as the country’s 100 million-strong population (at the time), customarily crowded the insides of Nigeria’s precious few, ill-equipped and thinly spread banks. Ovia’s first move, therefore, was to bring ATMs to Nigeria, effectively bypassing the human traffic that clogged so many banking halls and doing away with the over-the-counter culture that reigned. “When we started Zenith in 1990, it was extremely difficult, as the necessary resources and infrastructure to do businesses, particularly banking, were not in place. There were no ATMs, no mobile phones and ICT was a rarely known concept in the business space,” he told Forbes.

Zenith Bank has greatly impacted banking (see bar chart) in Nigeria, lifting the sector from the era of over-conservatism to one of healthy conflict and dynamism, characterised by a culture of excellence and global best practices. This has been achieved through a combination of the power of vision and a skilful union of banking expertise and cutting-edge technology to create products and services that meet and anticipate customers’ expectations.

The bank blazed the trail toward digital banking in the country, scoring several firsts in the process through the deployment of ICT infrastructure to create innovative products that meet the needs of its teeming customers. The bank is demonstrably a leader in the deployment of the various channels of banking technology.

The person behind this revolution, Jim Ovia, is a man who sees far into the future and takes steps, leveraging on his excellent acuity and calculated-risk-taking skills, to crystallise any benefits from existing and future opportunities. Zenith, which by balance sheet size and other positive financials has shaped and is shaping certain critical aspects of developments in the sub-sector, is in sheer entrepreneurial energy a bank without equal, and one which has taken after its progenitor.

Going public
The achievements of Zenith Bank highlight Jim Ovia as an accomplished banker and erudite manager of human and material resources. His capacity for leadership and eye for growth opportunities is evident in Zenith’s performance and progression on a number of parameters. During his 20 years of service as CEO, the bank witnessed tremendous growth in shareholders’ funds, from the NGN 20m minimum paid-up capital in 1990 to NGN 335bn as at December 31, 2009.

In the two decades under Ovia, the economy witnessed a wide variety of economic peaks and troughs, from heady growth to global financial crises, and Ovia led the Zenith Bank Group to demonstrate resilience irrespective of business cycles, with a strategic focus and conservative business model that has become a classical benchmark. Under Ovia’s watch, Zenith Bank went public in June 2004 and was listed on the Nigeria Stock Exchange on October 21 2004, following a highly successful IPO. The bank’s shares are freely traded on the London Stock Exchange following a listing of $850m worth of its shares at $6.80 each in a major step aimed at improving liquidity in the stock through global depository receipts.

The bank’s total assets through June 2004 to March 2009 exhibited gains of 939 percent (NGN 215.2bn to NGN 2.4trn), shareholder funds saw a 2,061 percent increase (NGN 15.6bn to NGN 338.7bn), and total deposits expanded by 830 percent (NGN 131bn to NGN 1.2trn).

Not content with spearheading changes in management, service delivery and customer service, Ovia deployed a robust IT infrastructure and a range of digital products in an effort to bring technology to the fore of Nigerian banking.

His success in deploying a digital infrastructure ignited the interest to have him replicate the same at the national and not-for-profit levels. This led him to huge involvement in ICT-related endeavours including but not limited to his being the Chairman of the Nigerian Software Development Initiative (NSDI), Chairman of the National Information Technology Advisory Council [NITAC], and a member of the Honorary International Investor Council and the Digital Bridge Institute (DBI).

Furthermore, with over 350 branches and business offices nationwide, Zenith Bank is present in all the state capitals, the Federal Capital Territory (FCT) and numerous major cities and towns in Nigeria. The bank also maintains a strong presence along the west African coast, with wholly owned subsidiaries in Accra, Ghana (Zenith Bank, Ghana) and Freetown, Sierra Leone (Zenith Bank, Sierra Leone), as well as in Europe through Zenith Bank UK and Asia through a representative office in Beijing. This is in addition to a representative office in Johannesburg (see pie charts).

The bank is seen as an institution with incredibly high standards, not just on a national level but an international one. Testimony to Ovia’s leadership qualities are a succession of excellent ratings from local and international agencies, which were given in the final full year of his service at Zenith. Standard and Poor’s rated the bank BB-, which is the highest ever rating assigned to a Nigerian bank, and Fitch Ratings awarded an AA- (national). Agusto & Co., Nigeria’s foremost rating agency, for the ninth consecutive year in 2009, rated Zenith Bank AAA, stating, “The bank is a financial institution of impeccable financial condition and overwhelming capacity to meet obligations as and when they fall due.”

In January 2009, the bank was adjudged to be the ‘Most Customer-focused Bank in Nigeria’ according to a survey conducted by KPMG. The survey, which focused predominantly on corporate customers of banks, including companies in a variety of sectors, found that customers were most satisfied with the services offered by
Zenith Bank.

Impressive performance parameters such as these are an eloquent indication of Ovia’s rare penchant for banking and his unflinching ability to mitigate existing inefficiencies in Nigeria’s testing business climate.

Technology and philanthropy
Ovia’s proficiency for business away from banking was reasserted thanks to his foray into telecommunications with Visafone Nigeria. Again, it is to the credit of his business acumen and strategic know-how that Visafone subscribers hit a base of one million within six months of operations and boasted an active service usage across 12 states.

Ovia continues to play a leading role in the digital empowerment of Nigerian youths and is known to have pledged a great deal of support, financial and otherwise, to the backing of numerous philanthropic causes throughout his career and the pursuit, which is often rooted in technology, takes up a large chunk of his life to this day.

He has also donated a great deal of internet-enabled tools to youths in all tiers of the Nigerian education system, in addition to setting up various philanthropic organisations. He believes that by empowering Nigerian youths with technology, they will be granted access to essential tools that will help them on their way to any number of professions down the line.

In keeping with Ovia’s commitment to matters of technology, he is also the proprietor of the University of Information and Communication Technology in Delta State. Moreover, Ovia is the founder of the ICT Foundation for Youth Empowerment, which focuses on improving the socioeconomic welfare of Nigerian youths by encouraging them to embrace information and communication technology as part of their career and personal development.

“This will provide an opportunity for our future leaders. It is a mission I’m thrilled to drive, as it is a great investment in the future of my country. The first thing you learn in business is to make profit. However, how you choose to spend the profits is just as important. Philanthropy is important to me, as I derive more joy from spending mine this way. You need to give back, reach out to the larger society and less privileged,” he told Forbes.

Ovia’s focus on philanthropic causes can also be seen in the various NGOs he has contributed to, not least of which being his membership of the Tsunami Disaster Relief Committee and his position as co-ordinator of the Nigerians United To Save Niger Republic. He is also the founder and Chairman of Mankind United to Support Total Education (MUSTE), a philanthropic organisation focused on providing scholarships for low-income segments of the population. Through the MUSTE project, a select few beneficiaries have gone on to become qualified medical doctors, lawyers and engineers.

Lasting legacy
Although dispositions of this sort were becoming more common in the region, Ovia’s understanding of the need to give back to society was not, and he continues to express a keen interest and head impressive developments in the field of CSR and philanthropy to this very day.

In light of his impressive achievements in national and social development, the President of Nigeria made Ovia a Member of the Order of the Federal Republic in November 2000, and upgraded him to Commander of The Order of Niger in 2011 as a result of his consistent record of positive impact on his country. His other awards include the Zik Award for professional leadership in April 1999 and the honorary degree of Doctor of Science in Finance from the Lagos State University in October 2005.

“I think Nigeria is a country of tremendous opportunity and of infinite possibilities,” said Ovia to CNBC. “We have a lot of young people here, who are very talented, very well educated, who are ready to embrace technology and embrace whatever the world is doing.” Following on from Zenith’s technological prowess, Ovia hopes to demonstrate alternative channels through which technology can play a role in spurring development for Nigerian business and the country’s population at large.

An attempt to deconstruct Ovia’s achievements is a near impossible task. So great has been his contribution in turning Nigeria from bust to boom that not enough can be said of the man’s corporate and social work in a place that he was not only brought up in but later came to redefine. What can be said with some degree of certainty, however, is that Ovia’s influence in both corporate and social terms have impacted Nigeria positively on several fronts.

“We’ll need nuclear”: Lady Barbara Judge on the future of global energy | Video

Posted on March 10, 2014 by Ashton Wenborn

Nuclear power is one of the most controversial forms of energy, but it also has many merits. Lady Barbara Judge, one of the leading experts on atomic energy and the former Chairman of the UK Atomic Energy Authority, talks about just how important the energy form is, what role it plays in the global energy mix, and whether Kiev protests will spark a nuclear renaissance

World Finance: Well Lady Judge, let’s start with looking at the global energy mix, and what part does nuclear play?

Lady Barbara Judge: I believe strongly that nuclear has a role to play in the global energy mix. All countries need a bouquet of energy sources. They need oil, they need gas, they need renewable, but they definitely need nuclear, because nuclear is a base load source of energy, it goes 24/7, it goes not only when the wind is not blowing and the sun is not showing, you can have nuclear energy and it’s a very moderate price and it doesn’t gyrate. So it clearly has a place alongside other energy sources.

World Finance: Well what does nuclear energy mean for Europe?

Lady Barbara Judge: Oh I think it’s very important. No country should be relying on other countries for their energy, because all sorts of things happen. When energy has to cross national boundaries, you in your country have to worry about what’s happening in some other country. If you build a nuclear power plant in your own country, you can build it as big or as many as you want. So you have energy security, and energy independence. And one more thing: Europe is very concerned about climate change, and as we all know, nuclear does not emit carbon. So it answers all those three questions; energy security, energy independence, and climate change.

All countries need a bouquet of energy sources

World Finance: Well obviously you’ve come today to speak at the Caspian Corridor conference, so what does atomic energy mean for this region?

Lady Barbara Judge: Well it’s an interesting region, because it’s all part of the former Soviet Union, and the Soviet Union has been building and using nuclear power for a very long time. They didn’t stop, as some other countries do. And I think at this point they’re considering, many of these countries, whether they build new nuclear, whether they build small modular reactors, or whether they rely on gas.

World Finance: Well Kazakhstan is the world’s dominant uranium producer. Why is the country so well positioned to be home to a nuclear fuel bank?

Lady Barbara Judge: First of all it has a lot of uranium, and after all uranium is what’s used for nuclear fuel, and second of all it’s a huge country with a small population, so you can do a lot of things in that empty land with the uranium that’s not dangerous, that people aren’t worried about, and that makes money for the population.

World Finance: Well following on from Fukushima in Japan, Germany halted its nuclear program. Do you think this was an overreaction?

Lady Barbara Judge: Oh totally. What’s happening in Germany is really amazing. You know that right after Fukushima Mrs. Merkel lost one election on one small conservative district, and the reaction was tremendous. So what’s happening now, the Germans are buying gas from Europe, they’re burning cheap, nasty American coal and their own coal, they’re buying nuclear from power plants in France but just along the German border, they’re burning as I say this coal, so they’re increasing their emissions, and the price of energy is going up. It ticks every wrong box, and the thing about it is, the Germans really know that. And so even the Green Party is getting a little backlash for putting the consumer in a position where the power is costing more all the time.

What’s happening in Germany is really amazing

World Finance: Could nuclear power disenfranchise us from energy monopolies?

Lady Barbara Judge: The more sources of energy you have, the better off a country is. So if nuclear has a big place as a base load energy, then you won’t have to rely so much on gas or oil, where the monopolies are at the moment.

World Finance: Well the UK has invested heavily in wind farms and hydro, so do you think we should invest in nuclear when we have committed so heavily to renewables?

Lady Barbara Judge: Absolutely, renewables do not take the place of nuclear. Indeed, renewables don’t take the place of any base load energy. As I mentioned to you, it only works when the sun shines and the wind blows, and if you’re in Scotland, that’s the example I always use, and you come home one night and it’s dark, and it’s cold, and it’s still, and you turn on the lights; no lights. So until we have good battery storage and a way to transport renewables, we’ll need nuclear.

World Finance: On a grassroots level now, and can nuclear plants create as many jobs?

Lady Barbara Judge: Oh, more jobs. In actual fact, nuclear power plants are big infrastructure projects, so they require a lot of jobs to build them, and a lot of jobs to run them. Whereas renewables do create jobs when you build them, but it doesn’t take very many people to run them. A good example is in Dounreay. In Dounreay, in our country in Scotland, we are now decommissioning that power plant, and we’re going to be on budget and on time. And the people that are most unhappy about that are the people that live around Dounreay, because they know that when the Dounreay power plant is closed, they lose jobs, their schools will go down, their cultural events will go down, all that infrastructure money which is there for the power plant will be gone. And so, interesting enough, even though Scotland is against building nuclear, the people who live around nuclear plants, they want them because they know what benefits they bring.

[R]enewables do not take the place of nuclear

World Finance: Well both Russia and Ukraine has established nuclear facilities. How have the protests in Kiev upset the supply chain, and what are the potential ramifications of the situation?

Lady Barbara Judge: Well everybody’s worried about it. Everybody’s worried about the supply of Russian gas, which not only went to the Ukraine, but to a lot of Europe. And if there’s a problem between the Russians and the Ukranians, and the Russians pull the plug as they did some years ago, it will concern the whole of Europe. In actual fact, when Russia pulled the plug on the Ukraine a number of years ago, that’s what actually started the nuclear renaissance in Europe, because we realised that we shouldn’t be dependent on any other country for our own energy.

World Finance: Lady Judge, thank you.

Lady Barbara Judge: Such a pleasure, thank you very much.