Author: itsupport

A bright future for Bulgarian banking sector

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The Bulgarian banking system may be experiencing a period of relative strength, but this has not always been the case. In 1996, many of the country’s commercial banks had a negative aggregate net worth and low liquidity – due, in part, to challenges relating to Bulgaria’s transition from a centrally planned economy to a more open one. Policies imposed since then have addressed these problems, greatly improving bank capitalisation.

The COVID-19 pandemic has taught us to be more united and overcome hard times together

Today, Bulgaria’s economy is in a much more favourable position, benefitting greatly from EU membership while its banks sit on stable ground. One of those banks, Postbank, boasts nearly 30 years among the leaders of the country’s banking market and has been a driving force for innovation in recent years. The institution has a strategic place in Bulgaria’s retail and corporate banking sectors, managing one of the best-developed branch networks and modern alternative banking channels in the country.

Further, the bank is one of the market leaders regarding the issuance of credit and debit cards, housing and consumer lending, savings products, and financial products for small and large international companies in Bulgaria. World Finance spoke to the CEO and chairperson of the management board, Petia Dimitrova, about the bank’s recent activity and its plans for the future.

 

What is your overview of the Bulgarian banking sector last year, and what are your expectations for 2020?
Last year was very successful for the Bulgarian banking sector. Once again, Postbank showed excellent results and was an industry leader by many measures. The successful merger with Piraeus Bank Bulgaria – carried out in a record time of just four months – ranked us third in the country by deposits and credit portfolio for the end of the year.

The projections for 2020 are really dynamic. Given the ongoing coronavirus crisis, I believe the Bulgarian banking system is prepared, with all banks having posted good results in terms of stability and managing risk. One thing is certain: the COVID-19 pandemic has taught us to be more united (even from a distance) and overcome hard times together, becoming wiser and stronger in the process. During the recent state of emergency in Bulgaria, Postbank was among the first banks to respond, offering packages of measures in support of our clients. As a leading lender with great achievements and ambitions in the area of digitalisation, we implemented the Bank@Home campaign, which encourages consumers to stay at home and use Postbank’s already extensive digital channels to protect themselves and the bank’s employees.

 

What is the key factor behind Postbank’s success?
The primary factor is our employees, who are at the core of everything we do. Since its establishment, Postbank has been investing lots of resources and effort into creating the best consumer experience for its clients and shaping the best possible workplace for its employees.

To provide leading services to our clients, we have opened pioneering generation offices where customers can easily and comfortably use banking services, consult with experts and find the optimal solutions for their long-term plans. We intend to gradually renovate our entire branch network in the country over the next several years.

 

Can you elaborate on Postbank’s plans for 2020?
We will certainly introduce more innovations, products and digital solutions so that our clients can choose from a large range of services. Our main focus will remain the development of the bank’s digital instruments, as this is part of our strategy for optimal consumer experience. We will also focus on taking an individual approach to each client, as there is a concrete personalised solution for every need.

In 2020, we will maintain our strategic partnerships with various organisations in Bulgaria to contribute to the development of the community. For instance, we will continue our joint programme with global entrepreneurship organisation Endeavor to provide comprehensive support to businesses seeking to scale up their operations. Another priority will be our continued partnership with SoftUni (one of the most innovative universities in Bulgaria), where we are building the digital skills of future professionals by helping them realise their projects and providing them with opportunities for career development in our company.

Our team has always set itself lofty goals and managed to surpass them. This is possible because we can rely on a united team, numerous partners, rich experience and a long-term vision for development.

Looking towards the future of participation banking

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The first private financial institution to provide Islamic banking services in Turkey was established in 1984, and began its activities the following year. By 1999, the number of Islamic finance institutions had grown substantially and were included in the scope of the country’s Banking Law. In 2005, these institutions took their current name of ‘participation banks’.

At the time of writing, there are 53 banks active in Turkey: six participation banks, 34 conventional banks, and 13 development and investment banks. Ziraat Participation Bank, the first public participation bank, started operating in 2015.

At Ziraat Participation Bank, known in Turkey as Ziraat Katlim Bank, our mission is to become a participation bank that understands the expectations and needs of our customers in the best way possible, offering reliable solutions and value propositions through the most appropriate channels. We also believe in the importance of carrying out our activities with world-class levels of sustainable profitability and efficiency – showing an awareness of the ethics and principles of participation banking – while facilitating access to financial services focused on customer satisfaction.

Our vision is to become a global, reputable and leading participation bank that strengthens participation banking not only in Turkey, but also in the wider region, consistently generating value and offering customers more at every stage of their financial journey.

 

A partner in business
The banking system is built on two basic functional pillars: accepting deposits and lending funds. Participation banks and conventional banks diverge in their methods of performing these two basic functions. Participation banks base their deposit collections on a partnership, lending the funds collected from their customers to other customers who need financing within the framework of the participation banking principles. The profit generated from these loans is then distributed to the fundholders based on the terms and conditions of partnership agreed to while making a deposit.

Because the profit generated isn’t known at the outset, fundholders aren’t guaranteed any profit margin. In the conventional banking system, however, there is a set interest yield for the deposits collected from customers at the beginning of their transactions. Conventional banks use other financial instruments with interest yields to utilise these funds and guarantee that they will provide the determined interest yield to their customers at the end of maturity.

As for loan operations, consider them under two headings: cash loans and non-cash loans. Cash loan transactions in participation banks are based on the financing of their customers’ purchases of tradable goods or services, or are carried out based on a joint undertaking of the related purchase. The key point here is that the customer is not provided with non-tradable finance.

In the financing provided to the customer, the financing rate for the repayment maturity determined at the beginning of the transaction constitutes the profit amount to be generated by the participation bank over the relevant maturity period. In addition, in profit-loss partnership transactions, the profit obtained within the framework of the partnership is also shared and added to the bank’s profit. Cash loan transactions in conventional banks are based on the issuance of a certain interest rate according to customer needs. The loan does not have to be for the purposes of purchasing tradable goods or services – it is collected together with the related loan interest over the predefined maturity.

With non-cash loans, participation banks can perform all non-cash financing transactions in accordance with the principles of Islamic banking. The only difference from conventional banks is that participation banks do not carry out any transactions that violate those principles.

As is the case for conventional banks, participation banks in Turkey are subject to the Banking Law. Moreover, participation banks carry out all of their banking activities in line with the principles of Islamic banking while complying with the national Sharia board. While each participation bank has its own advisory board, the Participation Banks Association of Turkey operates a Central Advisory Board, which acts as a supreme board. These structural and procedural differences in banking transactions are what distinguish participation banks from conventional banks.

 

Raising the flag
With a history dating back 35 years, participation banking in Turkey has played an increasingly important role in the finance industry in recent years. The share of participation banks in terms of total banking assets grew eight percent year on year in 2018, and 19 percent in 2019. Ziraat Participation Bank’s share in the market also grows day by day: as of year-end 2019, our total assets grew 64 percent, cash loans grew 63 percent and total funds grew 68 percent from the previous year.

The upward trend of participation banking is expected to continue in parallel with the potential clients we reach. And with recent advances in technology driving improvements in communications tools and information sharing, Ziraat Participation Bank can now reach a wider audience, demonstrate the benefits of participation banking over conventional banking and promote our activities more effectively.

One of our key missions at Ziraat Participation Bank is to listen to the needs of our clients and develop appropriate solutions based on the principles of participation banking. In this context, we have introduced various firsts to the participation banking industry in Turkey. Through the joint investments model, we launched a capital-partnership-based financial product – the first of its kind in the sector – and introduced the first project-based partnership model outside the construction sector.

We have developed mobile applications that enable participation banking customers to digitally manage their financing facilities. We have also taken a more active role in fundraising activities by enabling the involvement of participation accounts with maturities shorter than one month with the investment wakala product. With these and similar solutions, we have brought a wave of innovation to the sector, encouraging other players to develop pioneering products tailored to the needs of their clients.

Driven by Ziraat Participation Bank’s approach of playing an effective role in the development of the sector, we aim to enhance client satisfaction through the financial services we provide and, as a result, make a considerable contribution to the market share of participation banking.

 

The road ahead
According to 2019 year-end data, the share of participation banking in the larger banking industry in Turkey grew by 25 percent to reach 8.4 percent in total funds, by eight percent to reach 5.5 percent in fund facilities, and by 19 percent to hit 6.3 percent in assets. While motivating, these figures also show that we have a long way to go. Participation banking’s goal is to reach an asset size market share of 15 percent by 2025.

We have numerous leverages that stand to provide an advantage if managed properly, including increasing awareness of participation banking, clients’ preference for interest-free banking products, the presence of a large, previously untapped base of banking clients, the existing potential of non-participation banking clients in Turkey, the growing prevalence of participation banking in parallel with increasing trade with other Islamic states and the associated demand for Islamic banking products, and the potential for participation banking to develop alternative products tailored to the market’s needs. All of these factors are expected to play a crucial role in increasing the efficiency of the sector.

Operating in a sector of continuously increasing competition necessitates keeping up with changes and predicting developments. It’s a time-consuming endeavour to adapt traditional practices to today’s needs. As such, having good human capital that is open to development is crucial. It’s also essential that human resources investments continue to ensure sustainable development.

Another important aspect is to adapt technological advancements for use in the sector. This shows the significance of the in-house development of globally feasible technology applications. Utilising an artificial-intelligence-based system to catalogue customer feedback, identify priority needs, and develop and launch products to meet those needs would provide a remarkable contribution to our development as a bank.

Participation banks more broadly will continue to lay the foundations of systems that will facilitate clients’ access to banking services, meeting their needs in the most rapid, lean manner and enhancing service quality in general. Turkey benefits from a significant population of well-educated young people, which will be its greatest asset in overcoming any challenges.

As a member of the Ziraat Finance Group – one of Turkey’s oldest financial institutions, with 156 years of experience – Ziraat Participation Bank will continue to leverage its rich history, drawing strength from the past even as we look forward to greater success in the future. We strive to continually expand the reach of our value proposition, first across Turkey and the wider region, and then the entire world.

Creating a stable future

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Last year, Mexico’s National Commission of the Retirement Savings System approved a proposal to make the most important changes to the Mexican pension system since the sweeping reforms of 1997. Under the new scheme, pension plans will become more flexible, allowing for greater investment diversification and, hopefully, greater returns for recipients. The system now takes into account one of the most sophisticated trends in asset management regarding pension funds, which maximises the replacement rate (the percentage of an individual’s last expected wage paid out by a pension programme) rather than asset returns.

The new scheme aligns a number of different factors – including contribution rate, retirement age and wage growth – with asset and risk allocation, adjusting these throughout the individual’s working life. This brings all the advantages of long-term investing together to create a smoother and more efficient investment cycle.

Since the inception of Mexico’s pension scheme, the investment regime has evolved from featuring portfolios containing only bonds to a highly diversified system that contains everything from bonds to alternative assets, both in local and international markets. Efficient use of these diversification tools has been key to meeting our fiduciary responsibility and, of course, to maximising the pensions of our customers, which is the main target of the scheme.

 

Think smart
Afore XXI Banorte’s investment capabilities helped to ease the transition process, allowing us to design one of the more diversified and sophisticated glidepaths in the system. A glidepath is the mechanism through which investment profiles automatically move a client’s pension pot towards more secure investments as they get closer to retirement age. The company is the only retirement fund administrator in the Mexican system that has gained all the approval licences from the national regulator. This means we boast a wider investment universe than our competitors, offering traditional assets and alternatives, as well as different investment vehicles like mandates (both private and public), futures, forwards and options.

Our investment philosophy is based on the benefits of diversification, and this is reflected throughout our glidepath design. With our proprietary capital market assumptions, the optimisation process considers a wide range of scenarios that result in the best risk-adjusted portfolios and de-risking profile, giving us an optimal replacement rate for our clients. This reflects our various investment capabilities, licences and our commitment to the customer.

During the creation of the glidepath, we integrated principles of responsible investment into our strategy. We are a signatory of the UN Principles for Responsible Investment and have committed to transparency regarding our environmental, social and corporate governance (ESG) standards.

 

Retiring in a better world
We are currently moving from the awareness phase of our ESG process to the integration phase, which contains a holistic philosophy that assesses issues like climate change, the local community and the corporate practices of the issuers we work with. This change of stance is hugely significant and signals that we are making progress. In 2019, our investment team launched more than 300 questionnaires to companies that were part of our investment portfolio, with the intention of learning more about their ESG standards. Now, we are including external managers from public and private markets, as well as international and local managers, in these questionnaires.

This approach has proved to be groundbreaking in local markets because it was the first time a local pension fund was asking such questions of its partners. Part of our task was to make our managers and the companies in our portfolios aware that our fiduciary responsibility extends beyond providing a favourable replacement rate, but also includes creating a better environment in which to retire.

Our fiduciary responsibility extends beyond providing a favourable replacement rate, but also includes creating a better environment in which to retire

The integration of these principles represented a major overhaul in the investment process because it meant that not only returns were considered when approving an investment strategy, but also the impact on the environment, society and the relevant governance criteria. As for external managers, we have created a scoring process to evaluate both their performance against their peers and their performance in terms of ESG factors. In this way, we are able to favour the strategies and managers that prioritise ESG in their investment process.

Last year, Afore XXI Banorte became the first Mexican pension fund to adopt the Code of Ethics and Standards of Professional Conduct formulated by the CFA Institute, the world’s largest association of investment professionals. This meant it adopted the highest standards of ethics, education and professional excellence in portfolio management. By implementing these initiatives, Afore XXI Banorte has set a new standard for the pension fund system in Mexico.

A digital strategy
Our efforts to evolve are not only related to the investment process. Technology is at the core of our value chain and operations, so this year we started our digital transformation process through the Afore Digital initiative. Our main target is to continue transforming the way we approach our business operations and strategy using digital technology.

Most importantly, we understand that the use of digital channels will enhance the experience of our customers and create a closer connection and an improved service. Afore Digital is leveraging digital technologies in both infrastructure and applications to increase our business capabilities, boost efficiency, improve our ability to use information, bolster information security and reduce costs. COVID-19 has accelerated this transformation, and we have fast-tracked and broadened our omnichannel capabilities by making more services available digitally to reduce the need for our customers to visit our branches. We are confident that we are on our way to becoming a data-driven organisation capable of designing a better customer experience, while also becoming more agile, efficient, competitive and profitable.

A major difficulty for the pension fund industry is that it offers an intangible product that does not solve any immediate problems; in fact, it actively reduces the client’s income in the short-term. That’s why our marketing strategy highlights that we not only offer the best place for our clients’ money to grow, but also that, by investing with us, they are having a positive impact on our world and society.

We are fully committed to our customers because our main goal is to deliver what our clients need at the precise moment they need it. We listen closely to their feedback through our 10 contact channels, which we will increase across the coming year. This allows us to be available 24 hours a day, wherever our clients are located. The use of digital platforms allows us to identify our customers’ interests and habits in a very precise way, letting us provide the right advice as they make their way towards retirement.

In addition, we are developing a loyalty programme that will allow our customers to capitalise on their pension fund every day. This, like all our products and services, is guided by our strategy of enhancing the customer experience and constantly striving to improve. We want our customers to take control of their future, safe in the knowledge that we are on hand to assist them throughout their working life. Making retirement savings accessible to the customer will always be at the heart of our strategy.

Spain’s unemployment rate rises to 15.33 percent

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Spain’s unemployment rate rose to 15.33 percent in the second quarter of 2020, according to data released by the National Statistics Institute on 28 July. This means that joblessness in the country is now at its highest level in two years.

Experts fear that the situation will only get worse. According to OECD forecasts, unemployment in Spain could surge to 22 percent by the end of 2020, if there is not a second wave of infections. However, if there is a second wave, as many as 25.5 percent of Spanish workers could face unemployment, which would make its labour market one of the worst-hit in Europe.

The recent data still does not show the full extent of the unemployment crisis. Tens of thousands of companies in Spain have signed their employees up to the country’s furlough scheme, but these workers are not considered unemployed in the survey. The National Institute of Statistics has also decided to exclude from the data over a million people recently made unemployed. This was on the grounds that they don’t fit the technical criteria for unemployment, which includes actively job-seeking.

Spain is among the countries worst affected by the coronavirus pandemic. According to data released on 24 July, it has so far recorded over 270,000 cases and more than 28,000 deaths. Its already-vulnerable economy has also taken a battering. This is partly because the country implemented one of the strictest lockdowns in Europe, which brought economic activity to a halt. What’s more, the tourism sector – which contributes to about 14.3 percent of GDP – was crippled by global travel restrictions.

However, long before the pandemic began, Spain was grappling with high unemployment, inherited from the sovereign debt crisis almost a decade ago. In the first quarter of the year, unemployment in Spain stood at 14.41 percent – more than double the EU average.

Investment in a small yet ambitious nation

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The Commonwealth of Dominica is one of a group of islands forming the eastern boundary of the Caribbean Sea as it meets the Atlantic Ocean. Nicknamed the Nature Isle of the Caribbean, the country is famed for its biodiversity and boasts the Morne Trois Pitons National Park, which is the Eastern Caribbean’s first UNESCO World Heritage Site. The park is home to the second-largest boiling lake on Earth, as well as heavily protected rainforests, rare fauna and marine life.

The island garnered international recognition for its recovery efforts in the wake of Hurricane Maria, which damaged 90 percent of Dominica’s housing in 2017. Thanks to funds from the country’s Citizenship by Investment (CBI) Programme, the island resolved to “build back better” and has since reached levels of development that exceeded all expectations.

 

Investing in resilience
Dominica’s CBI Programme has earned the top spot in the CBI Index for the last three years. In exchange for a significant investment in the country, well-vetted applicants and their eligible dependents can obtain citizenship of the lush island nation in around three months. The programme offers two routes to citizenship: applicants can make a direct contribution of at least $100,000 to the government’s Economic Diversification Fund, or invest in pre-approved real estate valued at a minimum of $200,000. Direct contributions are used to support Dominica’s economic development and have positively impacted all aspects of life on the island, financing both public and private sector projects.

As well as being instrumental to the country’s recovery efforts, CBI is the driving force behind Dominica’s goal of becoming the world’s first climate-resilient nation. Part of this mission has been Prime Minister Roosevelt Skerrit’s Housing Revolution scheme, which aims to build more than 5,000 homes using climate-resilient structures that are designed to withstand hurricanes and earthquakes. Another aspect of the scheme has been the repair of healthcare centres and hospitals, as well as the construction of a new, climate-resilient smart hospital.

Dominica’s determination to become a world leader in sustainability and the fight against climate change – bolstered by its long-standing, harmonious relationship with nature – owes much to the interest that CBI has garnered across the globe. Yet it is not just the country’s native population that has benefitted from CBI: for participants in the programme, the advantages of holding
Dominican citizenship are numerous.

 

Rewards and returns
With Dominican citizenship comes unfettered access to a country that has gained recognition from the Financial Times’ fDi Intelligence division as a top leisure destination for wellness and ecotourism. Although there is no requirement that CBI investors reside on or visit the island in order to gain citizenship, for eco-conscious investors, Dominica is the perfect country in which to live and raise a family. A magnet for tourists searching for a holiday off the beaten track, Dominica is home to many luxury, climate-conscious resorts – shares of which can be purchased under the real estate arm of the country’s CBI Programme. These shares can be sold within three to five years of purchase (depending on the buyer) and promise lucrative returns. Additionally, new economic citizens will find they are able to expand their travel horizons and business opportunities. That’s because Dominicans can travel to 140 destinations worldwide without the need to obtain a visa.

Family reunification is an important feature of the island’s CBI Programme and, accordingly, applicants can add dependents to their citizenship application. Dominica encourages the inclusion of a spouse, children under the age of 30, parents and grandparents. Children aged 18 to 30 must generally show they are in full-time attendance at an institution of higher learning and are fully supported by the main applicant.

For family members planning to undertake higher education, Dominica provides access to excellent educational institutions where English is taught as the first language. The country’s membership of the Commonwealth of Nations grants further education opportunities. In the UK, for example, Dominican citizens are eligible for various scholarships at master’s and PhD level.

For those seeking to broaden their global presence, relocate to a beautiful country or simply make a difference to a small yet ambitious nation, Dominica’s CBI Programme is an ideal solution that is just one investment away.

How Macau is developing diversified industries for sustainable economic development

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The national development strategy of the Guangdong-Hong Kong-Macau Greater Bay Area states that Macau must link up with China’s broader national strategy and promote a moderately diversified development of the economy, focusing on ‘one platform, one centre, one base’. The purpose of diversified economic development is to maintain a moderately balanced industrial structure, cultivate new pillar industries and drivers of economic growth, and promote the sustainable development of Macau’s society and economy.

Since the start of the year, a novel coronavirus has raged around the world, forcing major countries to go into lockdown, economic activities to suddenly halt, social confidence to weaken and the global economy to fall into recession. Notably, the price of oil has fallen and US stock markets have slumped, hitting their emergency circuit breakers several times in a short period and triggering financial turmoil. In response, Macau has developed an economic and industrial strategy of moderate diversification to help the country tackle the crisis and achieve sustainable development.

 

Branching out
Since reuniting with mainland China, the Government of the Macau Special Administrative Region (MSAR Government) has fully administrated the ‘one country, two systems’ constitutional principle as mandated by law. Macau’s economy has developed rapidly, displaying abundant social wealth and recording one of the highest GDP per capita in the world (see Fig 1), all while maintaining social harmony and general prosperity.

 

As one of the world’s most open economies, Macau has established stable business relations with 120-plus countries and regions. It is a member of 30 international economic organisations and adheres to more than 100 international conventions and multilateral treaties. International assets and liabilities account for more than 80 percent of Macau’s total bank assets, and business-operating standards are in line with international norms. What’s more, Macau’s investment and business procedures are simple, encompassing a low tax system and the free flow of capital. The MSAR Government also has close ties with Portuguese-speaking countries and many overseas Chinese.

However, as a typical microeconomy, Macau’s economic structure is fragile and relies heavily on the gaming industry, which makes economic growth highly volatile, reduces the city-state’s capacity to respond to challenges and risks, and delivers weaker growth momentum. In early 2020, as the COVID-19 pandemic took hold, socioeconomic life in Macau was almost completely shut down, forcing the gaming industry to engage in an unprecedented 15-day closure in February. As of mid-March, around 80 percent of Macau’s casino tables were back in action, albeit with social distancing restrictions in place. Nevertheless, gross gaming revenue in Q1 2020 was MOP 30.48bn ($3.82bn), a 60 percent decrease from the same period in 2019, according to Macau’s Statistics and Census Service (DSEC).

As a tourism hub, Macau is a free market economy and frequently engages in economic exchanges with surrounding and Portuguese-speaking countries. It has been greatly affected by the coronavirus pandemic and the resulting global economic recession, which highlights the urgency and necessity of developing a moderately diversified economy. As such, Macau needs to make greater efforts to cultivate diversified industries and promote sustainable economic development.

In recent years, the MSAR Government has made steady economic development and orderly structural adjustment a priority in its policy address. It has focused on supporting the growth of industries such as tourism, exhibitions and conventions, culture, entertainment and traditional Chinese medicine. In conjunction with the Belt and Road Initiative and the economic outline for the Greater Bay Area, the government also intends to broaden the scope of the region’s financial industry and emphasise the development of specialised finance. It will provide support in terms of talent, systems and laws to assist the finance industry, helping it to cooperate with the mainland and surrounding areas, as well as create value in the disciplines of financial leasing, wealth management and asset management.

 

A specialised service
The development of a specialised finance industry is the most realistic way for Macau to achieve moderate economic diversification within the framework of the government’s strategy. Developing such an industry requires three steps, the first of which is to leverage unique advantages. Based on a national strategy of creating a service platform for commerce and trade cooperation between China and Portuguese-speaking countries, Macau will leverage a platform economy to promote the development of specialised finance.

The second step is to focus on specialised industries. Macau will emphasise its advantages and develop distinctive financial services – notably, finance leasing and wealth management – with neighbouring financial centres. The third is to serve specialised areas. Macau will serve the western part of the Pan-Pearl River Delta, Portuguese-speaking countries and countries along the Belt and Road route, playing a different role to other financial cities by facilitating coordinated regional development.

Developing specialised finance also focuses on three sectors. The first involves the development of industrial sectors, including financial leasing, wealth management, online banking and green finance. The second concerns the establishment of a service platform and the strengthening of the financial features of the existing Sino-Portuguese business cooperation service platform. It will endeavour to promote the mutual benefits and synergies inherent within Sino-Portuguese financial capital, focusing on the construction of the Sino-Portuguese renminbi clearing centre and the expansion of the Sino-Portuguese cooperative development fund. The third is to cultivate trading market sectors, including bond markets, commodity markets and financial derivatives markets.

ICBC (Macau), the largest locally registered bank in Macau, is the main local credit issuer in the region, maintaining a leading position in terms of channel layout and financial technology. The bank, one of the most localised institutions in the ICBC Group, displays robust operational performance and plays an important role in sustaining Macau’s long-term prosperity and stability through economic diversification. In March 2018, the MSAR Government signed a memorandum of cooperation with ICBC Group to promote the development of Macau’s specialised finance system. In December 2019, on the 20th anniversary of Macau’s return to China, the MSAR Government awarded ICBC (Macau) the Medal of Merit (Industry and Commerce) for the outstanding professional services it has provided to the public.

 

New markets
At the beginning of 2020, ICBC Macau Branch opened, making ICBC Group the first dual-licenced financial institution in Macau. In this context, the capabilities of banking services and businesses will be greatly increased moving forward. Further, the government has granted ICBC Group a local licence for financial leasing, giving the bank a comparative advantage and great development potential in terms of specialised finance and diversification.

With a focus on integrating into the Greater Bay Area, expanding in Portuguese-speaking countries and extending to countries along the Belt and Road route, ICBC (Macau) will develop a specialised finance industry to better serve local markets and enhance its support for larger enterprises in their aims to go global. Meanwhile, in support of Macau’s commitment to the Greater Bay Area and the Belt and Road Initiative, the bank will enhance the positioning of its Sino-Portuguese asset platform to promote the balanced business development of assets and liabilities. This should also help to steadily increase profits, enabling us to become an important platform that connects domestic customers, funds, products and markets with those overseas.

In March 2018, we launched our Sino-Portuguese asset platform, collectively undertaking nearly 20 projects in the Portuguese language worth $3bn. Through the establishment of Macau’s first financial asset exchange, the bank issued $500m worth of 10-year US-denominated subordinated notes in September 2019. The offering was substantially oversubscribed, with more than 130 sophisticated institutional investors from 16 countries applying – the largest bond offering in the international market by a locally registered bank.

In October 2019, the subordinated notes were listed on the Macau Financial Asset Exchange, further enriching the trading products of the Macau bond market. What’s more, the Central Government of the People’s Republic of China issued sovereign bonds in Macau for the first time. As the deputy underwriter and the placing bank, ICBC (Macau) completed the initial issuance in Macau, shouldering the responsibility to promote the development of specialised finance.

In the face of the COVID-19 pandemic, the bank will continue to actively cooperate with the government to implement economic support policies and meet the needs of SMEs by introducing various financial relief measures to restore social confidence and stabilise the local economy. Then, once the pandemic has passed and life begins to return to normality, ICBC (Macau) will be ready to support the economic recovery.

Shifting the focus towards sustainable finance

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With the public gaining awareness of the social and environmental problems facing the planet, sustainability issues have moved into the mainstream. There are plenty of news stories about the increase in extreme weather, plastic pollution and people living without food or basic sanitation. Sustainability is the intersection of the triple bottom line, known as the three Ps: people, planet and profit. This business concept focuses on growing the economy while also taking into account the needs of the environment and society.

Humanity has been operating out of balance with the natural world for decades, placing economic growth ahead of environmental and social costs. Individuals, businesses and governments are starting to realise that we need to radically change this. An economy cannot thrive without a healthy planet or people. Most recently, the coronavirus crisis has demonstrated this quite dramatically.

 

A global effort
Solving environmental and social problems is no longer the purview of non-governmental organisations and governments alone. The finance sector plays a crucial role in economic growth. It controls the flow of money and can direct capital to companies that understand and manage their sustainability issues well, or are developing business models to solve the global challenges that society faces.

Banks finance the real economy and have the opportunity to contribute to a more sustainable world. How money is used today determines the world we will live in for decades to come. The UN’s 17 Sustainable Development Goals outline the challenges that must be overcome by 2030. The funding gap that needs to be bridged in order to achieve these goals is estimated to be $2.5trn a year. Put another way, this is a multitrillion-dollar opportunity to invest in companies that are providing sustainable solutions.

Businesses can help create conditions that push sustainable finance into the mainstream. For example, they can meet the growing demand for socially responsible products and services. The Global Sustainable Investment Alliance reports that sustainable investing grew 34 percent in the two years to 2018, reaching $30.7trn (see Fig 1). And the appetite for sustainable investing is not limited to Millennials: the 2019 Schroders Global Investor Study found that Generation X is the most likely to consider sustainability factors when selecting an investment product.

Similarly, investors and rating agencies are increasingly integrating sustainability into their analyses. Through the UN Principles for Responsible Investment, more than 2,200 investors with $80trn of assets under management have committed to integrating environmental, social and governance (ESG) factors into their investment decisions. Likewise, 19 credit agencies have committed to integrating ESG factors into their ratings.

At the same time, regulators are implementing policies and requirements for sustainable finance. Requirements already exist for non-financial disclosures, and this is only set to increase. As countries develop their strategies in line with their commitments to the Paris Agreement, the finance industry will have to adapt. The European Commission’s action plan on sustainable finance is a bold initiative to redirect capital towards a greener European economy; there is global coordination backing up these efforts. In October 2019, the EU, alongside 10 countries outside the bloc, launched the International Platform on Sustainable Finance, which aims to provide cohesion and promote integrated markets for global sustainable finance.

Governmental initiatives are not the only thing encouraging companies to operate more sustainably. Increasingly, employees want to work for businesses that place sustainability at the heart of their culture and values. Additionally, consumers are more aware of the role financial institutions have in working towards a sustainable future, and so they expect companies to reduce their environmental impact. Some social movements are galvanising people around the world to demand action from political and business leaders.

 

Get your priorities straight
The topic of sustainability is broad and can be confusing. Given the role of the finance sector and expectations from stakeholders, banks should consider the risks and opportunities sustainability brings to their business. This helps define what sustainability means to them specifically.

The first step is to prioritise. A common framework for helping companies decide what is important to them is a materiality assessment. Engaging with internal and external stakeholders – including employees, shareholders, clients, regulators and experts – is a useful way to bring these perspectives together. Topics that are identified as highly important to the company and society can then be used as the basis for developing a corporate strategy and guiding implementation. The materiality assessment should look at how a company’s activities can be improved by integrating ESG into all decisions.

A successful sustainability plan needs to be embedded in a company’s overall business strategy. Without this alignment, it is difficult to realise value and grasp opportunities. At VP Bank, we have a unique ownership structure comprising three long-term anchor shareholders that provide solid foundations. This core characteristic has supported the bank’s long-standing commitment to the principle of sustainable action. For many years, the bank has implemented measures including using renewable energy, reducing waste, supporting art and philanthropy, and offering an ESG mandate.

Building on our history of support for sustainable initiatives, VP Bank has developed its sustainability goals in line with its Strategy 2025, which was announced in March 2020. An extensive stakeholder engagement process helped us define our material topics and shape the plan accordingly.

Our ambition is to grow our business while creating a positive impact. We will do this by offering our clients sustainable solutions through our Investing for Change initiative. This includes integrating ESG into our investment decision process and aiming to create a net positive impact through our offering. We have developed a methodology based on the understanding that sustainability is much more than the mere exclusion of companies from an investor’s portfolio: the aim is to use sustainability indicators to identify opportunities as well as risks. In addition to growing our assets under management in sustainable investments, we also integrate sustainability into our business operations.

 

The right game plan
Our sustainability plan sets out what we want to achieve by 2025, but we do not yet have a clear path to reach these goals. Still, we are working with stakeholders and partners to develop the right solutions. In our business activities, we are committed to achieving carbon-neutral operations and improving gender diversity across our workforce. Meanwhile, in our product offering, we will integrate ESG issues into the investment process and grow our assets under management in sustainable investment solutions.

Sustainable investing is simply good business. Integrating ESG into the investment decision process allows investors to understand how sustainability poses risks or opportunities to long-term value creation. This means identifying attractive investments in pursuit of financial returns. Even with the supportive conditions that stakeholders are providing, there are some challenges to scaling up. These include a lack of consistent and comparable data and the need for common standards and definitions. These are not insurmountable problems: for instance, we expect that increasing disclosure requirements will lead to improvements in data quality, which will result in better comparability and more robust ESG ratings.

One of the misconceptions surrounding sustainable investing is the view that there is a trade-off between returns and doing the right thing. This myth has been debunked by many studies. A meta-analysis of 2,000 studies published in the Journal of Sustainable Finance and Investment found that, in 90 percent of cases, integrating ESG led to the same level of performance or outperformance of the benchmark. This holds true even during times of crisis: the Financial Times reported in April that ESG leaders had outperformed the benchmark rate in Europe, Japan and the US since the start of 2020.

Another misconception that has been debunked is that this is a short-lived fad. Sustainability and sustainable investment make good business sense and will continue to grow – the demand is there, as demonstrated by the rate of inflows. Stakeholder groups are creating an environment that will propel the industry forward.

Sustainable investing is simply intelligent investing where sustainability factors are integrated into the decision-making process. Capital flows are directed towards solving solutions to global challenges while generating returns. ‘Investing for change’ is VP Bank’s motto; we know the future is determined by how we invest today.

World Finance Wealth Management Awards 2019

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With investor needs evolving towards a more digital experience, the wealth management industry has undergone a transformation in recent times. There has been a push towards an analytics-based approach to product and service offerings, leveraging client data to provide a personalised experience.

Wealth management firms are increasingly adopting a distributed agile approach to help transform customer experience. In a competitive market, wealth management firms need to be able to act on client demands more rapidly, fostering a more collaborative culture within the industry with a strong focus on service.

Remaining at the top of this industry requires constant attention and dedication to the needs of clients and these awards recognise the very highest standard of professional care shown by the recipients.

 

World Finance Wealth Management Awards 2019

Best Wealth Management Providers

Andorra
VallBanc Wealth

Argentina
Andes Wealth Management

Armenia
Unibank Privé

Austria
Liechtensteinishche Landesbanken ( Osterrich AG )

Bahamas
Scotia Wealth Management

Belgium
Indosuez Wealth Management

Bermuda
Argus Wealth Management

Brazil
BTG Pactual

Canada
Canaccord Genuity

France
BNP Paribas Banque Privée

Germany
Hauck & Aufhauser

Ghana
The Royal Bank

Greece
Hellenic Asset Management

Hong Kong
BNP Paribas Wealth Management

Hungary
Concorde

India
Doha Bank

Italy
BNL BNP Paribas

Kuwait

NBK Capital

Lithuania
INVL

Luxembourg
Indosuez Wealth Management

Malaysia
Maybank

Mauritius
MCB Private Banking

Netherlands
Wealth Management Partners

Nigeria
Standard Bank Wealth and Investment

Norway
Pareto Wealth Management

Oman
Bank Muscat

Philippines
Bank of the Philippine Islands

Portugal
Santander Totta

Qatar
Qatar National Bank

Saudi Arabia
SABB

Singapore
EFG Bank Singapore

South Africa
Old Mutual Limited

Spain
Santander

Sweden
Carnegie

Switzerland
BNP Paribas Wealth Management

Taiwan
King’s Town Bank

Thailand
Bangkok Bank

United Arab Emirates
First Abu Dhabi Bank

United States
BNY Mellon Wealth Management

Vietnam
Prestige Wealth Management

Best Multi-Client Family Office, Liechtenstein
Kaiser Partner

Best Real Estate Investment Company
SFO Group

 

Banking Awards 2018

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The past decade has seen the banking sector make moves towards a stable future following a long period of significant upheaval caused by the financial crisis. What beckons is a new era with the focus now on sustainability and technological reinvention in order to keep up with the pace of change within the sector.

Banking Guide 2018

The landscape is markedly different from that of 2008. Regulatory reform has been key in redefining the operating environment and the success stories have been for those willing to treat this new regulatory system as an opportunity to stand out from the crowd.

The restoration of trust has reawakened confidence in the sector and the outlook now is perhaps one of cautious optimism.

However, the sector is still weathering the winds of change. Technology-focused start-ups have proven themselves significant disruptors in the market by providing innovative alternatives to the services traditionally offered by banks.

Perhaps more significantly, cryptocurrencies have contested the fundamental concept of money, becoming a legitimate asset in a tremendously short space of time. Banks have been forced to re-think how they operate today so that they are prepared for a future that includes working with new systems and new technologies.

Through steady strategic investment and acquisition banks are now re-evaluating the future role that they will play in the economy by turning enemies into allies.

The great technology roll-out is thanks in part to the gradual development of open banking as the new standard. Application programming interfaces (APIs) will make it possible for banks to offer certain tools and data packages to third parties, and these will define the relationships banks develop in 2018 and beyond.

The 2018 World Finance Banking Awards have sought to identify the banks that have successfully held their nerve during a period of uncertainty and are now preparing tools to last them for the foreseeable future and beyond. Congratulations to all of our winners.

 

World Finance Banking Awards 2018

Best Banking Groups

Azerbaijan PASHA Bank
Brunei Baiduri Bank
Dominican Republic Banreservas
France Crédit Mutuel
Bolivia Banco Mercantil Santa Cruz
Cyprus Eurobank
Egypt AAIB
Ghana Zenith Bank (Ghana)
Jordan Jordan Islamic Bank
Lebanon Bankmed
Malaysia Maybank
South Korea Woori Bank
Kenya Kenya Commercial Bank
Macau ICBC (Macau)
Nigeria Guaranty Trust Bank
Turkey Akbank

Best Investment Banks

Bahrain SICO
Brazil BTG Pactual
Canada RBC
Chile BTG Pactual
Colombia BTG Pactual
Dominican Republic Banreservas
France BNP Paribas CIB
Germany Deutsche Bank
Italy Mediobanca
Jordan Arab Bank
Kuwait Boubyan Bank
Nigeria Coronation Merchant Bank
Oman Bank Muscat
Qatar Qatar National Bank
RussiaVTB Capital
Saudi Arabia SaudiMed
Turkey Akbank
UAE First Abu Dhabi Bank
Vietnam MB Securities

Best Private Banks

Austria Bankhaus Spängler
Bahrain Ahli United Bank
Belgium BNP Paribas Fortis
Canada BMO Private Banking
Chile Inversiones Security
Czech Republic Česká Spořitelna
France BNP Paribas Banque Privée
Greece Eurobank
Italy BNL-BNP Paribas
Liechtenstein Kaiser Partner
Monaco CMB
Nigeria First Bank of Nigeria
Peru BBVA Continental
Sweden SEB
UAE First Abu Dhabi Bank

Best Commercial Banks

Azerbaijan PASHA Bank
Belgium BNP Paribas Fortis
Dominican Republic Banreservas
Hungary ING
Bahrain Ahli United Bank
Canada BMO Bank of Montreal
Germany Commerzbank
Italy BNL Gruppo BNP Paribas
Kuwait National Bank of Kuwait
Myanmar KBZ
Portugal ActivoBank
Sri Lanka Sampath Bank
Macau Banco Nacional Ultramarino
Nigeria Zenith Bank
Saudi Arabia Alawwal Bank
US Bank of the West
Vietnam SCB

Best Retail Banks

Angola Banco de Fomento
Egypt Commercial International Bank
Lebanon Bankmed
Bulgaria Postbank
Dominican Republic Banreservas
Greece Eurobank
Malaysia Maybank
Netherlands ABN AMRO
Portugal Santander Totta
Saudi Arabia Arab National Bank
Turkey Garanti Bank
Nigeria Guaranty Trust Bank
Qatar Qatar National Bank
Sri Lanka Sampath Bank
UAE Union National Bank

Best Sustainable Banks

Australia Westpac
India Bandhan
New Zealand Kiwibank
Switzerland Bank Sarasin
Canada Vancity
Netherlands Triodos Bank
Nigeria Access Bank
US Bank of America

Most Innovative Banks

Africa Wema Bank
Asia Hana Bank
Australasia Macquarie Bank
Europe Monzo
Latin America and the Caribbean CIBC FirstCaribbean
Middle East Gulf Bank
North America CIBC

World Finance Islamic Finance Awards 2018

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Heading into 2017, expectations surrounding the global economy were bleak. The fear was that the surprise political outcomes in the US and UK would send markets on a path fraught with unpredictable fluctuations. Ironically, the one thing that no one predicted occurred: relative stability.

With much of the world’s focus on the US and UK, significant results in Islamic finance were critically overlooked by many. Total sukuk issuance volume rose to $97.9bn in 2017, an increase of 45 percent from the previous year. According to S&P Global’s most recent Global Sukuk Market Outlook report, this performance has created good liquidity conditions in Gulf Cooperation Council (GCC) countries, where the majority of sukuk assets are held, as well as in emerging Islamic finance sectors elsewhere. While growth in sukuk issuance is expected to slow in 2018 as governments rein in their budgets, the next few years will be filled with promise and challenge in equal measure. Geopolitical instability and the persistently low price of oil will make long-term success a difficult goal that only the strongest players in the industry will be able to achieve.

The 2018 World Finance Islamic Finance Awards celebrate the most successful operators in the sector, both in the GCC and abroad. With as many risks as opportunities on the horizon, identifying the best in Islamic finance is now more pertinent than ever. The ethical finance model is in ever-growing demand, and the winners of this year’s awards have set themselves up to capitalise on significant interest from new and unlikely sources.

 

Mixed expectations
If current trends continue, Islamic finance is expected to become an even greater force in the world than it already is. According to the fifth edition of the Islamic Finance Development Report, released in December 2017, growth in Islamic finance has not come to a standstill despite a broad economic slowdown in GCC countries. The report, which was compiled by business intelligence company Thomson Reuters and the Islamic Corp for the Development of the Private Sector (ICD), indicated that as more investors seek sustainable and ethical investments, Islamic finance is receiving greater attention from a larger variety of sources. Based on the report’s findings, the global Islamic finance industry will reach a total global asset volume of at least $3.8trn by 2022, representing an annual growth rate of 9.5 percent.

“The data make it clear that the industry is continuing to grow and develop despite the slowdown,” said Mustafa Adil, Head of Islamic Finance at Thomson Reuters, at the release of the report. “It is evident that Islamic finance can serve as a strategic tool for policymakers to cope with the slowdown, especially in the Middle East. This can be seen in the many steps taken by governments and regulatory authorities, such as introducing new regulations for the Islamic finance sector, raising awareness of the industry among potential market players through hosting seminars, or building a roadmap to plot development of the overall industry.”

 

A critical point
Still, the consequences of the economic slowdown will not go entirely unfelt. The dramatic surge in sukuk bonds issued during 2017 is unlikely to be repeated in 2018, thanks, in part, to the persistently low price of oil. While the situation is nowhere near as dire as it was in 2016 when the price of oil crashed dramatically, the weakening that occurred has had a lingering effect on GCC countries.

The other challenges facing the region are the boycotts still surrounding Qatar. Launched in June 2017, the wide-reaching embargo by Saudi Arabia, the UAE, Egypt and Bahrain has affected businesses and institutions including Qatar Airways and the Al Jazeera news network. With the spat still ongoing and unlikely to be resolved any time soon, the closure of political and business channels will impact economic sentiment surrounding the region. It is impossible to predict how this will pan out, which is enough to worry any investor.

While Islamic finance has the potential to reach significant heights in the future, the next 18 months will be critical for businesses that operate in this space. The operators that will succeed are the ones with a broader vision than their competitors.

 

Going international
One area where Islamic finance has tremendous scope to grow is in regions beyond the GCC. The benefits of a country opening the door to Islamic finance can be clearly seen in the UK, which was the first western nation to issue a sovereign sukuk. It is now the West’s number one centre for Islamic finance, according to TheCityUK’s 2017 Global trends in Islamic finance and the UK market report. At the time of publication, the report stated that 65 sukuk, worth a total of $48bn, had been listed on the London Stock Exchange.

While the UK’s potential for Islamic finance is well known, Africa has also been highlighted as a location ripe with opportunity. S&P Global published an analyst note in August 2017, pointing out that Africa lagged well behind the rest of the world in terms of sukuk issuances despite presenting tremendous potential; a mere $2bn has been issued by only a small number of African governments.

The appeal of Islamic finance models in Africa exists on multiple levels, S&P Global posited. Much of Africa is in need of an infrastructure overhaul, and so the continent’s many development opportunities present a wealth of potentially lucrative investments. Given that sukuks need to be tied to tangible assets, these kinds of investments are a perfect fit for many of the projects that need to be undertaken. Additionally, these kinds of projects are appealing to investors. African investments offer a welcome opportunity to diversify portfolios significantly, making demand for private sector sukuk issuances in the region highly possible in the relatively near future.

However, there are challenges to be overcome before this can happen. S&P Global stated it only expects a few nations to take advantage of this opportunity due to the complexity of sukuk products. Often, there is not the structural, legal or taxation framework in place to facilitate a sukuk issuance, slowing down many potential investors’ entry into the market.

Despite these challenges, progress is being made: the ICD, which is the largest Sharia-compliant multilateral development bank in the world, has made significant efforts towards making Islamic financing models in Africa possible. The technical support of the ICD facilitated the sukuk issuances made between 2014 and 2015 in Senegal and Côte d’Ivoire, with more cooperation like this expected in the future. If the momentum to overcome these (admittedly large) technical hurdles remains, Africa could soon be nipping at the heels of London in terms of world-leading Islamic finance centres.

Between the challenges in the GCC and opportunities presented in Africa, the Islamic finance sector is in a difficult position, but one that can be successfully navigated by deft operators in order to unlock the industry’s great potential. With Islamic finance continuing a march of success in many markets and seeing greater competition, only the best
will remain successful. The World Finance Islamic Finance Awards 2018 recognise the businesses that will be ready to meet the tremendous opportunities that lie ahead with determination and focus.

 

World Finance Islamic Finance Awards 2018

Best Islamic Bank

Algeria
Banque Al Baraka D’Algerie

Bahrain
Al Baraka Islamic Bank

Bangladesh
Shahjalal Islami Bank

Brunei
Tabung Amanah Islam Brunei

Egypt
Al Baraka Bank Egypt

Indonesia
Bank Muamalat

Jordan
Jordan Islamic Bank

Kazakhstan
Al Hilal Bank

Kuwait
Kuwait International Bank

Lebanon
Al Baraka Bank Lebanon

Malaysia
Maybank Islamic

Nigeria
Jaiz Bank

Oman
Bank Nizwa

Pakistan
Habib Bank

Palestine
Arab Islamic Bank

Qatar
Qatar Islamic Bank

Saudi Arabia
Alinma Bank

Turkey
Al Baraka Turk Participation Bank

UAE
Abu Dhabi Islamic Bank

UK
Al Rayan Bank

US
Bank of Whittier

 

Global recognitions

Islamic Banking Chairman of the Year
Sheikh Mohammed Al-Jarrah Al-Sabah, Chairman at Kuwait International Bank

Business Leadership and Outstanding Contribution to Islamic Finance
Musa Shihadeh, Vice Chairman and General Manager at Jordan Islamic Bank

Islamic Banker of the Year
Mohammad Nasr Abdeen, CEO at Union National Bank

Best Islamic Insurance Company
Tawuniya

Most Innovative Islamic Finance Solutions
Al Wifaq Finance Company

Best Islamic Home Finance Programme, Middle East
Safwa Islamic Bank

Best Islamic Investment Banking Services
The Investor for Securities

Best Islamic Wealth Management Company
Saudi Kuwaiti Finance House

Best Islamic Home Financier, USA
Guidance Residential

Sukuk Deal of the Year
Al Baraka Turk Participation Bank, First Exchange-Listed Tier1 Sukuk

Best Islamic Trade and Project Finance Provider
Kuwait Finance House

Best Islamic Asset Management Company
Sidra Capital

Best Islamic Banking and Finance Software Solutions
Temenos Group

Best Core Banking Systems Implementer, Middle East
Masaref Business and Systems Consultancy

Best Islamic Banking and Finance Law Firm, Africa
MMC Africa Law

Best Department Store Chain, Africa
Aswak Assalam

Insuring in the Ring of Fire

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The Philippines might not, at first glance, seem like an obvious location for an insurance company; the nation has a population of 100 million, but only offers a modestly sized market of $1.5bn of gross underwritten premiums. Its geographic location places it directly within the Pacific’s Ring of Fire, the earthquake hotspot of the world. On average, 20 major storms hit the country every year. Between the country’s underdeveloped infrastructure and limited purchasing power, placing risk within the Philippines is a challenge.

But this difficult environment is exactly what has disciplined Standard Insurance to develop its successful underwriting capabilities. World Finance had the opportunity to speak to John B Echauz, President and CEO of Standard Insurance, and Leticia C Tendero, Director/Investor Relations, about what has driven the company to its current strength and what its plans are for the future.

 

Challenging environment
In the short term, 2015 proved to be a good year for the non-life insurance sector in the Philippines. While there was heightened competition among industry players, the country was spared a major catastrophic event.

When it comes to the Philippines, however, there is always the potential for the unexpected. Echauz said the tough environment has turned Standard Insurance into an organisation that can make unique contributions to, and compete in, the global property and casualty industry.

“To be able to offer high-quality, catastrophe-responsive insurance to our customers, we adhere to a robust risk-selection process, augmented by the use of our digital catastrophe risk modelling system that combines geographic information system and hazard mapping technology”, he said.

To work in such a challenging environment, insurers need to come up with innovative solutions to stay competitive. One area Standard Insurance focuses on is automotive cover, which presents its own regional challenges. “Inadequate infrastructure in the form of a limited road network that causes heavy traffic and minimal flood control systems can result in a high level of motorcar collision and flood losses”, explained Echauz.

Between the country’s underdeveloped infrastructure and limited purchasing power, placing risk within the Philippines is a challenge

The automotive industry is a growing one in the Philippines, with sales regularly exceeding expectations. According to a joint report released by the Chamber of Automotive Manufacturers of the Philippines and Truck Manufacturers Association, automotive sales for the month of June 2016 posted a 36 percent increase from the same month last year. Overall, the sector reported 27 percent year-on-year growth.

Echauz said managing the claims that accompany these new vehicles on the road is important. “Aside from reducing claims frequency by interventions that seek to improve our customers’ driving behaviour, we reduce claims expense by maintaining a facility that restores some vehicles previously declared as total losses and recycles others for spare parts.”

Standard Insurance’s Technical Training Centre (TTC) is a four building, six-hectare state-of-the-art complex used for the refurbishment and resale of vehicles previously declared to be total losses. The facility can also dismantle and sell parts from vehicles declared as total losses. The TTC can currently repair an average of 30 units per month. These refurbished units are now being sold to employees under a lease-to-own package at preferential terms. Eventually, the cars will be sold on the open market, making TTC a loss-recovery and claims reduction centre that will increase income from salvage recoveries.

This is one of the ways Standard Insurance is leading the local industry. “Being one of the country’s largest motorcar insurers, our company has developed the ability to process a large number of policies and claims annually”, Echauz continued. “Our cost per transaction is quite competitive vis-à-vis global comparables.”

 

Technology innovation
For a national insurance company in a market growing as quickly as the Philippines, making sure infrastructure is in place to meet the needs of clients is important. Tendero explained Standard Insurance is working on innovative IT systems to support its staff and customers.

“Since 2009, we have been developing and maintaining a proprietary general insurance IT system called iINSURE, the core of which was patterned after a system we inherited from Zurich Insurance Group when we acquired its Philippine operations in the early 2000s”, Echauz said. “Contemporary, flexible and affordably built in-house, iINSURE provides us the ability to meet the existing and future needs of our customers. Our all-digital business, our nationwide claims servicing processes, our automated motorcar adjustment system, our telematics product and our integrated digital work environment for our associates are possible because of iINSURE.”

Important systems like this are in place because of the growing impact Millennials are having on the insurance industry; they are now part of the growing middle class in the Philippines, particularly those involved in the business process outsourcing (BPO) industry. They are becoming increasingly connected and slowly changing the way insurers sell their products and manage claims.

Engaging Millennials in the non-life insurance sector has so far proved a challenge, with many shunning traditional distribution channels such as face-to-face transactions. Instead, insurers are realising simple, affordable and on-demand products are the best way to get people engaged in their insurance. It’s a change the insurance industry will have to make worldwide in order to stay relevant.

Standard Insurance has recently fully implemented another innovative IT solution: to ensure accurate and uniform repair estimates at the speed the internet has taught us to expect, Standard Insurance developed the Responsive Appraiser of Photo Inspection Data (RAPID) system. It is a tablet-based, point-and-click solution for in-house motor adjusters. RAPID’s use has resulted in claims being processed within two hours, with a target turnaround time of 24 hours, nationwide. The use of RAPID has led to fewer customer complaints, higher customer satisfaction and savings of between five and 10 percent, thanks to the reduction in errors.

 

Global marketplace
While the Philippines is certainly prone to natural hazards, the country, its people and its industry have always bounced back from adversity. “It is this environment that has led Standard Insurance to carefully make conservative investments in insurance property. It continues to carry out selective underwriting with a focus on maintaining and developing a spread of risk, thus sustaining profitable growth. Avoiding a huge single loss is very important, so monitoring the amount of risk undertaken to limit exposure is key”, Tendero stressed.

Aside from strategically selecting risks, equally important is having a reinsurance capacity that adequately covers the company’s portfolio. A reinsurance panel that is financially strong and can immediately respond during worst-case scenarios, or when most needed, keeps the company running well. Hence, prior to renewal of treaties, the Reinsurance Team reviews Standard Insurance’s existing and expected insurance portfolio vis-à-vis reinsurance support needed. The team also carries out studies of possible catastrophic events and their worst-case scenarios in relation to its portfolio so proper and sufficient reinsurance structure and capacities are set in place.

These are important attributes to have as competition between Filipino insurers intensifies thanks to aggressive marketing promotions and diving rates in some sectors. As the leading automotive insurer in the country, Standard Insurance has been focusing on proper underwriting and intelligent pricing.

Standard Insurance has also been changing its processes to remain competitive. For associates working with the company, Standard Insurance is set to implement the Digital Integrated System Platform, which is designed to eliminate all the remaining manual processes within the company. The information will be available to all associates at any time, and will reduce the amount of paper used across the company.

 

Future prospects
Between developing its domestic systems and maintaining disciplined risk management, Standard Insurance continues to better position itself to do business on an international scale. The company has been recognised globally for its excellence in insurance service and innovations in meeting the evolving and growing demands of the industry. It has been accorded a National Scale Claims Paying Ability rating of A- and an International Scale, US-dollar denominated Claims Paying Ability of BB-, both with stable outlooks.

Echauz said these high-quality international standards have positioned the company to operate more effectively on a global scale. “Our business process outsourcing subsidiary, Insurance Support Services International Corp, taps the Philippines’ large pool of English-speaking educated professionals to provide customer service, claims processing and other insurance-related services on an outsourced basis to US and Australian insurance companies”, he explained. “The Philippine BPO industry is expected to generate revenues of USD25bn, employ 1.4 million people and account for six percent of GDP in 2016.”

Between all this, the company is in an excellent position for growth. “Our company is excited about growing domestically and also about participating more and more on the global stage”, said Echauz. “We are a cooperative partner of a giant Swiss insurer, a BPO partner to a dominant Australian pet health insurer, a BPO partner to a large US insurance IT system provider and a partner to a leading Japanese software company that specialises in recycled motorcar spare parts.

“The possibility of acquiring a foreign insurer, improving it using our technology and substantially increasing its operational capabilities out of the Philippines has, for us, suddenly become conceivable.”

A new chapter for Filipino non-life insurance

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Based on the latest report by the National Statistical Coordination Board (NSCB), the Philippine economy posted a 7.8 percent GDP growth in the first quarter of 2013, up from the previous year’s 6.6 percent, mainly driven by the strong performance of manufacturing and construction, backed up by financial intermediation and trade – the highest so far under the predsent administration. Once considered the ‘sick man of Asia’, The Philippines is now one of the fastest growing economies in Southeast Asia.

The Philippines recently received its first investment-grading from Fitch and Standard & Poor’s – a vote of confidence for the Philippine economy relative to the global market. Its central bank governor has also been consistently recognised as one of the world’s best for the past five years.

Locally, growth is driven by a strong BPO secotr and IT outsourcing, with Filipinos having the competitive advantages of English fluency and a bent towards customer service. Globally, the Filipino migrant worker contributes to the Philippine economy with a continued flow of remittances. The latter continues to fortify dollar reserves and helps shield the Philippine peso from the severe currency fluctuations that have affected other Asian economies. With a strong domestic economy and a growing middle class, the Philippines appears to have come into its own.

 

Non-life insurance risks
The Philippine insurance industry, specifically the non-life sector, is on the threshold of what could be a completely new era. The changing landscape, relative to insurance risks and regulations, has certainly evolved.

In the past, the basic risks of the industry were more or less predictable, relative to the natural weather conditions of the country (especially for property insurance lines) as well as the inherent Filipino culture or lifestyle (specifically for motorcar insurance lines) – two of the major lines in the industry. The non-life insurance industry is now faced with a number of challenging conditions, as follows.

The Philippines may always be catastrophe-prone. Its proximity to the storm-spawning Pacific Ocean results in about 26 strong typhoonscrossing its area of responsibility every year. With a collection of earthquake faults such as the Philippine Fault System in the north, the Verde Passage-Sibuyan Sea fault in the south and the Manila Trench in the west, it is also earthquake-prone. As part of the Pacific Ring of Fire, it is home to at least 23 active volcanoes.For the year 2011, the United Nations cited us as the world leader in natural disasters (33 calamities).

However, global climate changes have made the Philippines especially vulnerable to weather-related risks. As global temperatures continue to rise, we expect our typhoons to increase in number and in strength and our rainfall patterns to be even more unpredictable. Super typhoons now vists our southern island group of Minanao – something unheard of before the year 2000.

As the 455mm of rainfall in a 24-hour period that caused massive flooding in Metro Manila (Typhoon Ketsana in 2009) is still only a quarter of the world record (1870mm in La Reunion Island, the Indian Ocean in 1966), surely the worst is yet to come.

Global warning phenomena have seemingly resulted in strong earthquakes in a number of countries. Based on a study conducted by Standard Insurance Co. (Philippines), a strong earthquake with a magnitude of seven, with its epicentre within the Marikina Valley Fault System (MVFS, a fault that transects Metro Manila from the Sierra Madre mountains northeast of Marikina and along the western coastline of Laguna Bay and ending at the Tagaytay Ridge(, is very unlikely and will not occur within the coming 50 years. Said assessment is based on the fact that the 1863 earthquake, with a magnitude of 6.5, came from the MVFS and the return period is thought to be from 200 to 400 years.

The non-life insurance industry is also highly competitive, with 81 non-life insurance companies competing for only around PHP41.3bn in 2011, with the top-10 non-life insurance companiesaccounting for close to 70 percent of the premiums. As a result, smaller playershad to resort to unhealthy underwriting practices(or none at all), which drove rates to unprofitable levels, just to get a share of the market from the insurance leaders. The evolving regulatory scenario has exacerbated the situation for these smaller players.

The Philippine population’s purchasing power is also relatively weak and disposable income is small. National penetration of both life and non-life insurance is barely one percent.

 

Coping with challenges
The industry has learned to adapt to these new realities, facing them squarely, developing innovative methods of showing resilience during these times. More importantly, the commitment to the insuring public, as well as to the Philippine economic development, has come to the fore.

The industry recognises the vulnerability of the Philippines to natural catastrophes and has implemented several initiatives.

  • The Insurance Commission of the Philippines (IC) has mandated the industry to offer the Acts of Nature cover (formerly referred to as Acts of God) at tariff rates and commissions.
  • The IC has mandated a minimum fuve percent reinsurance coverfor property catastrophe (earthquake, typhoon and flood), based on totalaccumulated and total sum insured per insurance company.
  • The Philippine Insurers and Reinsurers Association (PIRA) supports the move of the Asian DevelopmentBank (ADB) to set up the catastrophe pool, initially within the country, and then eventually within the wider region. This ‘CAT pool’ will initially cover earthquake damages for middle-class residential risks and small-and medium-sized businesses.

 

In the meantime, Standard Insurance has been successful in adapting to the evolving non-life insurance landscape. The company has developed a total insurance structure that has been well in place and which has earned a solid reputation for dependability during the years’ weather-related catastrophes. In fact, this insurance system, and the structure of the company, has demonstrated a good track recordof managin catastrophe-related losses, underpinned and supported by comoprehensive risk modelling software and reinsurance protection from highly rated reinsurers, grounded on stringent risk underwriting, as well as visible and extensive infrastructure, which includes the most extensive nationwide network of car dealer business partners and the country’s largest and most capable claims and technical adjustment team.

In addition, the company undertakes/updates comprehensiveearthquake studies to assess its risk exposures and proper reinsurance cover.

  • The non-life insurance industry has downsized through the years. From the original 90 non-life insurance companies in 2007 (which include composite companies), it has gone down to 71 as of August 2013.
  • The Philippine non-life insurance industry is expected to consolidate further. President Benigno Aquino III has just signed a new law, which steadily increases the capital requirements for local insurers. Currently a highly competitive and corwded market, 81 non-life insurance companies compete for premiums in a relatively small market. Based on the latest list of certificates of authority – or ‘licenses to operate’ – released by the Philippine Insurance Commission for the years 2013 to 2014, the number of non-life insurance companies is presently down to 71. The top 10 local insurers, who enjoy the lion’s share of 70 percent of direct premiums, will soon contend with foreign entrants when the market opens up in 2015.
  • A direct benefactor of greater disposable income, the industry’s growth rides on waves of residential and car purchases. With fire and motor insurance premiums accounting for close to 70 percent of local property and casulaty premiums, this sector has grown 15 percent sincelast year. Strong construction growth for the residential and commercial sectors, the aggressive expansion of Japanese and Korean car branddealerships and cheap credit drives consumer purchases further.
  • Other growth drivers for the industry are expected to come from many developments in other industries that help drive insurance demand: the construction, BPO sector and IT outsourcing, as well as education, energy, aviation, transportation and tourism.
  • To address the low penetration rate of the industry, micro-insurance, including casualty insurance for migrant workers, is now being given its rightful importance – an initiative that will hopefully educate the less fortunate on the importance of insurance.

 

Still, opportunity and crisis exists side-by-side in daily Philippine life. Life for the non-life insurance industry has never been more challenging and exciting.

 

 

New routes to a better world and health for all

Posted on by itsupport

EXPO 2020 Izmir will be a major step forward in solving the health challenges the world faces today. EXPO 2020 Izmir aims to increase awareness of health among individuals and signpost healthy living habits in different countries. It will demonstrate best practices and innovative approaches to health issues. Izmir plans to bring together people, organisations, and companies to work for a healthier world.

The world deserves a healthier future
Health is one of the most important issues in mankind’s history. Today, developing and developed countries alike are both confronted by diverse challenges on healthcare. Izmir dreams of a world where everyone can receive high-quality healthcare services. With EXPO 2020, Izmir wants to be the platform that brings together all countries to share problems, as well as solutions, for a healthier world.

EXPO 2020 Izmir is designed to assist in the worldwide battle against health challenges and help make life better for the people of all countries. Specifically, it will draw on what we believe is Turkey’s remarkable experience in creating high-quality modern health services for its people in recent years.

Turkey is already sharing its vision on world health with other countries through international aid and relief efforts.Through EXPO 2020 Izmir, Turkey plans to share its experience and learn from others.

How will Izmir 2020 improve health?
EXPO 2020 Izmir will be designed to bring together people, organisations, companies, and systems from across the world, harnessing their energies to serve the common goal of ‘Health for All’ for humanity.

EXPO 2020 Izmir will focus on best practice, innovation, and areas of success in healthcare. The aim will be to show what has been achieved in healthcare globally and how those achievements can be rolled out to others. Izmir plans to put particular stress on innovation and practicality. Izmir’s ‘Health for All’ vision can be turned into reality by implementing four sub-themes for both individuals and society:
– ‘Healthy Living’ is the key to improving the living standards and prolonging lives
of individuals;
– A focus on ‘Public Health and Education’ will permit the effective and equitable use of healthcare resources;
– ‘Innovation’ will provide solutions for current and future health issues;
– ‘Care and Collaboration’ will bring together all involved to act upon global challenges.

The perfect site for EXPO
Izmir has been a world famous city for health for centuries. Izmir’s Asklepion was the world’s first ever mental health hospital and the school of many famous doctors.

Throughout the centuries, Izmir has provided health and healing to its people and its visitors with its medical centres, thermal springs and curative waters. Today, healthy living continues to be a tradition in Izmir.

Citizens of Izmir love exercising and prefer a light, olive oilbased cuisine. Izmir is also a very relaxed and a safe city despite being Turkey’s third-biggest economical force.

Nowadays, Izmir has many health projects underway, in order to be the international health centre of its region in the future.

Izmir possesses all the qualities needed to be the host for EXPO. It is only a three-hour distance by air from almost 50 countries and is located next to the sea, containing many unique historical and tourist sites. Izmir is offering Inciraltı, one of its most beautiful localities, for EXPO. Inciraltı lies by the seashore. It is full of natural wonders and it is easy to reach. Zaha Hadid, winner of the Pritzker Architecture Prize, will design Izmir’s EXPO site.

A land of sunshine
Since the very earliest times, the Izmir region has been blessed with a unique combination of resources: dazzling natural beauty, gracious cities and fine buildings, a healthy and talented population, and consequently a thriving economy with a high level of prosperity.

Now, Izmir would like to share these blessings with the whole world in an EXPO 2020 that will help future generations enjoy better and healthier lives. Good health should come before everything else in life. Today, modern medicine and healthy living make it possible to free people from age-old scourges which have blighted countless lives down the ages. Izmir invites you to join it in the sunshine of EXPO 2020 Izmir, building a better life for humanity in all countries.

Izmir believe in EXPO
Turkey’s government, the people of Izmir and the whole country pledge their full support for Izmir’s EXPO 2020 candidacy. Izmir is ready to do all that is required to make its dream of ‘Health for All’ into a reality.

Thai hopes to redefine globalisation

Posted on by itsupport

Ayutthaya, the chosen site for Thailand’s bid for World Expo 2020, is a city of balance. For over 400 years, Ayutthaya, the capital city of Thailand at the time, was a thriving commercial port and a diplomatic crossroad, where Thailand first welcomed visitors from around the world. Today, it is a modern hub of agriculture and industry, connected to the rest of the country through convenient transportation networks, and is located only 45 minutes by car from Bangkok. Bangkok is an ever-growing city, strategically located at the centre of the ASEAN region and is already well known as a centre of business and commerce, as well as a world-famous destination for tourists. With world-class hospitality and facilities, Bangkok, Ayutthaya and Thailand are in a position to welcome the 37 million visitors expected to attend the Expo.

Thongchai Sridama, Acting President of the Thailand Convention and Exhibition Bureau (TCEB), says that “the Royal Thai Government has highlighted its support for the ‘Expo 2020 Ayutthaya Thailand’ by granting Thailand’s bid as a priority under the National Agenda. The Prime Minister’s office oversees TCEB and is working together with the public and private sectors to facilitate and promote Thailand’s bid to host the expo as an integral part of our national strategy to support the country’s fast-growing business events industry by hosting global mega events.”

The chosen theme for Expo 2020 Ayutthaya Thailand is “redefine globalisation: balanced life, sustainable living”. In a world where globalisation is currently defined as a wave of consumerism and materialism, ‘more’ is seen as being ‘better’. This idea has resulted in a culture of over-consumption, has created gaps throughout the world, and is therefore the basis for many of the world’s current problems. Thailand believes in the need to create a dialogue, to invite the world to redefine globalisation together for a better and more balanced future for everyone.

Wisdom and balance
Thailand’s subthemes are: ‘revive local wisdoms for human well being’, ‘reunite connections for seamless harmony’, ‘rethink creativity for utmost happiness’, and ‘reform life’s values for global solidarity’. These subthemes are meant to inspire new ideas, encourage new ways of thinking, and to be stepping stones for new actions to drive real, tangible changes for the better.

Traditional wisdom and balance also play a key part in the development of Thailand’s master plan for Expo 2020 Ayutthaya. In today’s globalised world, using space as efficiently as possible has become key to city development plans. This has created ‘cities of objects’ around the world, where there are buildings after buildings after buildings. At Expo 2020, Thailand aims to create a ‘city of space’, focusing on the importance of communal areas in which people can come together to share ideas and reconnect with one another. Expo 2020 Ayutthaya aims to leave a lasting impression on the country, the region and the world, by redefining globalisation into the sharing of ideas that will create balance and sustainability in the long term.

For more information: www.thailandexpo2020.com

Pistiolis – Triantafyllos & Associates: New legislation will provide an incentive for FDI

Posted on by itsupport

Pistiolis-Triantafyllos & Associates law firm has one of the most dynamic and business-oriented corporate employment and labour law practices in Greece. We represent national and international corporations, and we make it our business to keep up with the ever-changing complexities of employment law, so corporations can focus on running their business.

Employment law is one of the most rapidly changing areas of our legal system. Against a backdrop of new legislation, regulations and reported cases, maintaining best practice is a real challenge.

Our firm’s goal is to provide immediate and pragmatic advice, regardless of where the issues arise; adopt a cost-effective approach aimed at helping our clients achieve results; and create the right framework for good employee relationships. We work side-by-side with corporations and business executives to implement the necessary methodology in respect to reducing labour costs and establishing efficient employment relationships.
We focus on understanding market needs; relating to large-scale restructurings, mergers and acquisitions, redundancies, business transfers and collective disputes; and the establishment of employee benefits and incentives.

Now more than ever corporations in Greece possess the tools and the know-how to reduce the labour cost. Day-by-day we regain the trust of both markets and investors.

An uncompetitive environment
Employment law in Greece is probably the most regulated employment framework – in terms of legislation – in the world. The legislative restrictions, in the creation, function and termination of the employment relationship led to a very cumbersome and therefore often problematic relationship.

This complex regulation was founded upon the idea that the employer-employee relationship is unequal. However this can only partially justify the multiplicity of regulations, which posed serious problems and large economic costs in doing business in Greece.

As a result, Greece had (until recent legislative developments) a key competitive disadvantage, which beyond anything else created an unattractive investment environment. It was widely accepted that services and products in Greece were expensive. The above fact, combined with the lack of innovation, turned away any possible investors.

The restrictions on the number of redundancies, the increased trade union freedoms and the high wages of employees are just some of the Greek peculiarities which caused intense scepticism in both domestic and foreign investors.

Thus the last few years’ corporations and their representatives required radical changes in employment law from the Greek government in order for Greece to attract investment and productive orientation.

Employment law previously
Beyond the national safety net which determines the minimum salary rates, in our country the minimum salary levels in each industry sector are being set beyond the level of agreement between employer and employee, and more often they are determined by industry trade and employers’ organisations – so these limits have been increased unnecessarily.

In addition, Greek legislation covers provisions for employment at weekends, off premises, in case of overtime, and more. Therefore, besides their legal or contractual salary, employees are entitled to an incremental increase if they provide labour in these circumstances.

The condition of four lay-offs each month for companies employing up to 200 employees and up to two percent for companies employing more than 200 was considered very restrictive by market experts.

Employment law today
Nevertheless, the recent labour legislation developments constitute a unique opportunity to change what was – until recently – an insufficient environment.

Throughout this year the legal framework has changed rapidly in order to meet the national and international investing requirements. The employment relationship has become more flexible and less cost-effective.

The so called Exceptional Company Collective Agreement, a contract between the management of the company and the company’s labour union, is a recent introduction to our legal system. In such an agreement the contractual parties could consent on salaries lower than those regulated by any sectoral collective agreements, but not less than the National General Labour Collective Agreement. Recently under consideration is the possibility for even lower salaries. It could be considered as a useful tool to decrease the labour cost.

In addition to this, and according to the terms of the new legislation, the right of the employer to conclude a single agreement or accumulatively successive fixed-term agreements (maximum three), has been increased from two to three years.

Moreover, Greek legislation allows a probationary employment period of 12 months for indefinite employment-term contracts, instead of the two months that was previously allowed. Within that period, a company is entitled to dismiss the employee without a compensation payment.

Furthermore, in case of collective dismissals, the total number of dismissed employees per month has been increased to six employees for companies employing 20 to 50 persons and up to five percent of the total number of employees and up to 30 employees for companies employing more than 150 people.

Finally, an employment agreement of an indefinite term can be terminated at any time without notice. In this instance the law provides the standard severance payment based on the years of service within the company (1-24 salaries).

However the severance payment could be half of the above in case of prior notice. Prior notice period is also based on the years of service within the company. Under the new legislation the prior notice period has been decreased to the maximum of six months instead of the maximum of 24 months.

Currently we face a rather hostile economic environment and the legal professionals specialising in employment law must provide effective solutions to ensure the viability or profitability of the investment. Now more than ever we possess the tools and the know-how for such a task. Day-by-day we regain the trust of both markets and investors. It has been a good start so far, but we still have a long way ahead.