International Private Banking Study 2015

My colleagues at the University of Zurich have just published their latest International Private Banking Study.

They have been conducting the study since 2005.

Have a look: International Private Banking Study 2015 – Uni Zurich

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It takes all the running bankers can do, just to keep in the same space

How do senior bankers stay on top of all the ever-increasing demands: new technologies, challenging regulations, cost-cutting projects, new business models, changing client demands, market swings, complex pricing models, transformation projects, not to mention competition?  Most senior bankers I know and work with are struggling with the “Red Queen race” from Lewis Carroll’s Though the Looking Glasswhere the Red Queen of Hearts says to Alice:

Now, here, you see, it takes all the running you can do, just to keep in the same place.

I speak with a lot of you and I hear and know the struggles of running faster and faster – just to stay in place. And it seems like someone keeps increasing the speed …

The Swiss Finance Institute offers programs for senior bankers to reflect on how to find the balance of all these challenges and get ahead of the curve with regard to the latest academic and best practices regarding most topics dealt with today by senior global bankers.

We are accepting applications for our International Bank Management Program (IBMP) which will be run from September 7 – 17, 2015 in Zurich. In this program, all of the major challenges will be addressed by an expert team of professors and practitioners – all experienced in working at top levels.

Bank executives registering and attending this years’ IBMP will receive a price reduction of 20 percent. Registration deadline is 10 August. Please refer to this post when corresponding with SFI to ensure your discount.

Be a pacesetter, not a tread-mill runner: Apply today to get fit!

International Bank Management Program

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20 Jahre SFI Advanced Executive Program – AEP2.0

20 Jahre Managementausbildung – SFI Advanced Executive Program – 1996 – 2015

Im Jahr 2015 feiert eines der Kernprogramme des Swiss Finance Institute – das SFI Advanced Executive Programm – sein 20-jähriges Bestehen. Seit seiner Lancierung im Jahr 1996 hat das SFI Advanced Executive Programms grossen Erfolg verzeichnet:

  • Ununterbrochene Durchführung des Programms seit 1996 mit gesamthaft mehr als 550 Teilnehmenden;
  • Erfolgreiche Durchführung von nicht weniger als 500 Kurstage;
  • Über 600 Gastreferenten unterrichteten mehr als 4´000 Unterrichtstunden.

Einige ausgewählte Eindrücke von Teilnehmenden untermauern diese Erfolgsgeschichte:

  • „Das AEP vermittelt einen breiten Einblick in die aktuellen Trends in der Finanzindustrie. Eine gute Mischung von namhaften Referenten aus wissenschaftlicher Theorie und Praxis, verbunden mit dem regelmässigen Gedankenaustausch unter den Teilnehmenden, ergab einen abwechslungsreichen und interessanten Lehrgang.“
  • „Als Leiter des Fachgebiets Handel mit einem „busy schedule“  ermöglichte mir das AEP eine ungestörte Weiterbildung in wichtigen Themen ausserhalb meiner Kernkompetenzen.  Die Dauer von 2.5 Kurstagen pro Monat erachte ich als ideal, um sich mit der nötigen Distanz zum Büroalltag in ein Thema zu vertiefen.“  
  • „Die Aktualität der ausgewählten Themen und ihr Praxisbezug waren beeindruckend. Ein gut bemessener Zeitrahmen ermöglichte lebhafte Diskussionen zwischen Referenten und Kursteilnehmenden.“
  • „Für mich persönlich war es bereichernd, mit Führungskräften zusammenzutreffen, die mit identischen Herausforderungen im Geschäftsalltag konfrontiert sind sowie eine ähnliche Offenheit und Wertschätzung in gesellschaftlichen Themen haben.“
  • „Das Advanced Executive Program hat mich auf den neusten Stand der bank- und finanzwirtschaftlichen Theorie und Praxis gebracht. Dabei hat mich der Erfahrungsaustausch mit Topreferenten sowie engagierten Teilnehmenden aus der Praxis gleichermassen begeistert.“

Im Rahmen der Feierlichkeiten zum 20. Programmjubiläum sind verschiedene Aktivitäten geplant:

WIN@AEP2.0: „Banking im Jahr 2030?“

Zur Feier des 20-jährigen Kursjubiläums lanciert das SFI einen Essay-Wettbewerb zu Trends und Entwicklungen zur Zukunft im Banking. Unter dem Leitthema „Banking im Jahr 2030“ sind Ideen, Anregungen und Auseinandersetzungen zur Zukunft im Banking gefragt.

Einordnung des Themas:
Vor dem Hintergrund der aktuellen Herausforderungen wie zunehmender Regulierung, Staatsverschuldung, zunehmender Volatilität und Unsicherheit, dem steigenden Stellenwert des Konsumentenschutzes, der demografischen Entwicklung (ältere Bevölkerung, Urbanisierung), neuartiger Zahlungssysteme, Weiterentwicklung des Kundenverhaltens und der Kundenbeziehung existieren in nahezu allen Banken und banknahen Institutionen Strategiepläne für das Jahr 2020. Dieser Wettbewerb soll jedoch darüberhinaus gehen und zielt auf eine fundierte Analyse ab, wie sich das Banking im Jahrzehnt nach der möglichen erfolgreichen Implementierung dieser Zukunftsstrategien gestaltet. Dies soll zu einen Anregungen zum strategischen Fokus wie auch Vorstellungen zum zukünftigen Kundenverhalten beinhalten.

Preisgeld:
Im Zug des 20-jährigen Jubiläums schreibt das SFI folgende Preiskategorien aus:

1.Platz: CHF 15‘000 als Kursgutschrift für die Teilnahme am AEP 2015
2.Platz: CHF 5‘000 als Kursgutschrift für die Teilnahme am AEP 2015
3.Platz: CHF 3‘500 als Kursgutschrift für die Teilnahme am AEP 2015

Umfang:
Das Essay soll in deutscher Sprache verfasst werden und maximal 6´000 Wörter umfassen. Die drei prämierten Arbeiten werden in gesonderter Form publiziert und einer breiten Öffentlichkeit zugänglich gemacht.

Einsendeschluss:
Der Einsendeschluss ist 15. Januar, per eMail an Michael Reichenecker. Bitte beachten Sie, dass Sie mit Ihrer Einsendung auch die Teilnehmebedingung zum Award akzeptieren.

Jury:
Die Jury wählt aus den Einsendungen die drei besten Texte aus. Bewertet werden Inhalt und den Stil der Essays nach einheitlichen Kriterien.
Die Mitglieder sind Vertreter des Swiss Finance Institute.  

Lecture@AEP2.0 –  „Treffen Sie aktuelle und ehemalige AEP Teilnehmer und erweitern Ihr Netzwerk“

AEP-Alumni sind eingeladen ausgewählte Module des aktuellen Lehrgangs im Rahmen einer Modulpräsentation zu besuchen. Hierbei stellen Referenten der jeweiligen Module aktuelle Entwicklungen und Trends im Rahmen einer kurzen Modulpräsentation vor. Anschliessend laden wir zum gemeinsamen Erfahrungsaustausch mit Teilnehmenden des aktuellen Kurses und Netzwerkpflege und –aufbau im Rahmen eines Apéro ein.

Die Lecture@AEP2.0 beginnt jeweils um 17:30 Uhr im SFI Campus at Bocken Estate in Horgen; der Apéro beginnt jeweils im ca. 18:30 Uhr.

Geplante Themen sind (provisorische Planung, Änderungen sind möglich):

  • Strategic Bank Management: 26. Februar 2015
  • Private Banking: 07. Mai 2015
  • Commercial Banking: 18. Juni 2015
  • Risk Management&Regulation: 22. Oktober 2015

Möchten Sie über die Feierlichkeiten zum 20-jährigen AEP Jubiläum auf dem Laufenden gehalten werden und persönliche Einladungen erhalten? Melden Sie sich bitten hier für den AEP2.0 Newsletter an.  

Training for Vietnamese Bank Directors

We are pleased to inform you that SFI has been selected by the Swiss State Secretariat for Economic Affairs (SECO) to provide a critical long-term development project designed to strengthen the banking sector in Vietnam. On behalf of the SECO, we will be providing a 5-pronged development program to the State Bank of Vietnam, senior management of Vietnamese state-owned banks as well as joint-stock enterprises. The duration of the program is 2014-2017. Over 80 senior level bankers from various backgrounds will be selected to participate in this exclusive program.

We will be providing the following developmental, training and consulting advice:

  • Fourteen 3-day training modules on a variety of bank management topics grouped under the following headings: Leadership, Core Banking, Risk Management, Strategic Business Orientation
  • E-learning programs on foundational topics such as mathematics, statistics and finance. We have developed over 100 hours of e-learning material and will provide participants virtual support throughout the program
  • Change Management Processes. This will include courses in change management as well as supervised company projects, learning journals and local content experts and firms taking part in banking courses to ensure knowledge to practice transfer
  • Train-the-Trainer. In order to provide a sustainable bank training, over 20 bank trainers will join the program to deepen their didactical as well as content expertise so that they can pass on the knowledge and experiences in subsequent courses
  • Analysis and Consulting. We will conduct a deep analysis of the learning goals, strategy, capabiliites and quality of the learning offerings of the State Bank of Vietnam. Additionally, we will provide recommendations for improvement, discuss their strategy for implementation as well as monitor the implementation process.

SFI has been developing bankers for over 25 years.

Please contact me if you have any questions or would like to learn how we can help support the development and training offerings of your bank or institution.

Optimizing banking business and operating models – from strategy to implementation

The banking sector in Switzerland – and worldwide – is undergoing the most radical changes it has ever experienced. New regulations, technologies, client expectations and economic environments are shaping the very ground we walk on. And, like the Red Queen in Alice in Wonderland, banks and bankers have to keep running faster and faster just to stay in the same place. The banks that are peeking around the corner, indeed planning with insight, understand these tectonic paradigm shifts and have put “change the bank” programs on Mach-6 tempo in place.

Banks will be more focussed, possibly smaller, and definitely less risky

As banks become more focused and decentralized, they tend to become smaller but also less risky. The correlations are clear. As we observe the role of banking supervisory authorities, for example in Switzerland, we even see this mandated in the case of UBS and Credit Suisse – to protect clients and investors. Many moan, but the change is unavoidable. In the past, banks were allowed to be more opportunistic regarding markets, client segments and product and service offerings. Today, banks are required to focus their resources more specifically to fewer markets, certain client segments with specific and more limited offerings for these clients – and they are being held accountable for it. This change process is hard work requiring tough decisions, not just on where you don’t want to be, but deliberate decisions on where you want to be in the future, and then taking all the necessary steps to get there. Less is more. Fewer is better. Banking will be less complex in the future. This will result in more efficient operations, higher profits and happier clients.

You can’t get back to “growth” without going through “relevance”

The “new normal” is that banks must acclimate to a low growth environment, especially in the developed world, for the foreseeable future – necessitating massive cost-cutting, often called “industrialization”, programs. Some banks are challenged to even make their cost of equity, much less show growth. The name of the game used to be growth and relevance. Today, the focus is more heavily focussed on relevance: knowing what you want to be, for whom and with which products and services and at what price. Most banks are so focused on the regulatory-stick that the growth- and profit-carrots are getting lost in the shuffle. New operating models with real cost cutting measures and outsourcing of non-USPs are desperately needed, but must be carefully undertaken as most one-offs creep back in less than 18 months.

Improve your technology … now

Improvements in technology across the board are needed to accommodate these new business and operating models. Because IT architectures, core banking software systems, management information systems (MIS) in most banks are only patchwork solutions, they can only be limited in their trustworthiness, effectiveness and efficiency. Everyone knows that a strong IT system is a must, but it seems that few banks are willing to deeply invest in this time of low growth. But this approach, this shortsightedness will be punished – if not by the markets, then by the supervisory authorities; doing the right thing and investing in systems will be rewarded. Whereas updating IT systems is the core of change, a focus on enhanced technology is also required. Straight-through processing, automated compliance mechanisms, digitalization of the business, all the way to the front. Client demand for apps, mobile banking, and the like is still in its infancy. The best banks will invest now to delight – and not just keep – their clients.

Have a clear roadmap

Despite the overwhelming ever-increasing regulatory changes and the reactive cost-cutting focus of target operating models, a clear, deliberate business model, {read: strategy!} is the driver of growth, profits and relevance. It has been – and will continue to be – a rough road for the next couple of years. One recent study by the University of Zürich shows, for example, that only 18 percent of all Swiss banks can be categorized as “over performers” with regard to the relationship between profitability and efficiency. Is your bank in the top fifth? Delivering outstanding profits and operating exceedingly efficiently? Chances are, you are probably in the other four fifths. Therefore, it is imperative to have a strong strategic plan and navigation system providing different perspectives of your planning and progress: a satellite view – showing the strategic and financial goals for your business; a traffic view – highlighting all the regulatory-traffic issues; a terrain view – a plan for the most efficient target operating model; and, perhaps most importantly, a hybrid – a view which pulls it all together in one coherent master plan.The best banks are doing this at all layers (front, middle, back office) across the factors of clients, technology, products and governance.

Is yours? What are you doing about it?

Bank Compliance: The Case for Automation

The size and purpose of government – and regulation – has been debated since centuries. On the one hand, we want markets, firms and individuals in these markets to act and move freely. On the other, we see that if we do not regulate behavior, people make decisions that might have detrimental effects on others, on firms and even markets.

Most agree that some regulation of banks is necessary. The challenge for banks is how to balance the seemingly ever-increasing number of compliance issues with the running of the bank. The costs are horrendously enormous, but the costs of not complying – as we witness through fine after fine on the big banks, are even greater (e.g., J.P Morgan’s $13 billion fine from last week) – not to mention reputation lost.

Number of Compliance Incidents to Level of Regulation

 

 

 

 

 

 

 

 

If we look to experiences in other industries such as health care, where compliance to safety rules can literally mean life or death, we learn that the number of incidents is a curvilinear function of the level of compliance required plus the importance placed by management on compliance issues. In firms where management places a high priority on compliance (the solid line), there are fewer compliance incidents than in firms where management has placed a lower priority (dotted line) on compliance and regulatory issues. Note that this holds true in the case of low or high degree of regulation and in fact, holds more true when there is a high degree of regulation as today.[1]

As the level of regulation has reached the far right of the graph, and will continue to do so over the next years, what can banks do in order to slow down the increase in compliance incidents? A) insure that management is a role model with regard to compliance; and B) automate compliance as much as possible.

Despite rumors to the contrary, client advisors will take on the responsibility for adhering to compliance issues when asked to do so by a legitimate authority.[2] Most bankers follow the rules, but controls are often lacking or inadequate. And unfortunately it only takes one «rogue trader» or incident to damage the reputation of the entire firm. Yet if management is not legitimate, nor compelled to follow regulation or compliance rules themselves, we need a back up solution that protects everyone: automation.

On the one hand, if automation of compliance undermines the fronts’ commitment and fosters dissatisfaction, it follows that it also limits innovation, since employees in formalized settings such as banks have little motivation to contribute to the complex non-routine tasks that constitute innovation. On the other hand, if we assume that work can be fulfilling, rather than a disutility, the increase in compliance can be experienced as a cooperative endeavor rather than an abrogation of individual autonomy – especially between client advisor and the client. If client advisors see at least some overlap between their personal goals and that of the firm as a whole, they might also welcome the potential contribution of a more automated compliance culture because it helps them be more efficient (e.g., letting client advisors only see the permissibly sellable products a “product rule engine“ set within the core banking system).[3]

By automating as many compliance functions as possible, banks can in effect totally avoid the whole discussion of whether their organizations are „enabling“ or „coercive“ with regard to compliance issues. By logical deduction, if compliance is fully automated, that enables client advisors to focus more time and thought into delivering on their clients needs and preferences rather than the growing administrative burden compliance places on them. And there are, again, the huge cost issues which are mitigated by automation.

From many other knowledge-intensive, innovative industries that are also under competitive pressure to improve sales, reduce costs, increase timeliness, improve quality (i.e., in banks equivalent to complying to regulation) and still delight clients, we learn that to create a compliance culture, first we need to change what people do, not how they think. Culture changes as a result. The old method of trying to get everyone on board and then act accordingly does not work – especially in a world where compliance issues grow according to Moore’s law – and most employees cannot fathom their reasoning. It is easier to get client advisors to act their way to a new way of thinking than for them to think their way to a new way of acting. And, again, their job as advisors and salespeople is made considerably easier by automating the vast majority of compliance.

Automation of compliance for the front has the following advantages for client advisors, team heads, and ultimately clients:

  • It makes it difficult to make mistakes, e.g., selling a product that is not authorized for a certain domicile or risk-profile, or not according to the asset allocation plans of the client;
  • It makes it simple to identify problems when they arise and when a mistake has occurred;
  • It makes it easy to report to auditors and regulatory authorities;
  • It makes it easy in the regular course of work to notify a manager or compliance officer about a mistake so everyone together can quickly decide how to handle it.

Clearly, banks must properly communicate what employees need to do and not do. Banks must enable their employees to perform successfully, building the carrot (automation + remuneration) and the stick (threat of penalties {remuneration} if they intentionally or repeatedly misbehave) into its processes. Automating compliance makes it simpler for them to perform, simpler to see mistakes, simple to resolve problems and simple to learn from it all. Everyone benefits: the bank, its employees, and mainly, clients.

 

[1] Cf. Katz-Navon, Tal, Naveh, E. + Stern, Z., 2005. Safety Climate inHealth Care Organizations: A Multidimensional Approach.. Academy of Management Journal,  Vol. 48, No. 6, pp. 1075-1089.

[2] CF. Tyler, T. 2011. Why People Cooperate: The Role of Social Motivations. Oxford: Princton University Press. ISBN: 978-0-691-14690-4.

[3] Cf. Adler, P. + Borys, S. 1996. Two Types of Bureaucracy: Enabling and Coercive. Administrative Sciences Quarterly, 41: 61-69.

At the Interface: Basel III, Client Delight + Gen Y

The majority of MBA students belong to the Generation called Gen Y, or the Millennials, the Net Generation, the First Digitals. This generation, generally defined as those born between 1976 and 1995, comprises the future leadership, management and workforce of corporations and organizations worldwide. Many young executives attend MBA programs with the hope and plan of pursuing a post-MBA career in finance – particularly, banking. Yet banks, indeed their underlying business models, unless going into a stage of paradigm paralysis, will undergo a paradigm shift in the next 10 years. Within that shift, banks need to delight clients in an unprecedented way. How will MBA graduates and Gen Y as a whole deal be affected – indeed affect – these changes?

Basel III will have a huge negative impact on banks. Tier 1 capital requirements will increase. Short-term liquidity requirements will increase. And there will be a gap in long-term funding. Closing these gaps will, logically, have a substantial impact on profitability. Additionally affecting the bottom line is of course the implementation of the the new systems: strategic planning, capital and risk strategy just to name a couple.  By McKinsey’s recent estimates, ROE will reduce on average by 4 % for European banks and 3% for US banks – a lot.  And what about the effects on personnel, on hiring, on growth and therefore on the level of service because of hiring freezes, threats of layoffs, and too many clients per client advisor.

On the flip side of this pressure is the ever increasing pressure for banks to do a better job with customer service. Call it client focus. Call it client centricity. I personally like to call it client delight – which is far above mere client satisfaction. Whatever they call it, it has to improve. Many of the major consulting firms regularly publish studies on the current and future status of banking. You know them. Deloitte. KPMG. McKinsey. And so forth. All talk about things like “client advisory excellence” and client delight and the fact that clients are global, savvy, sophisticated – and educated and increasingly demanding. The most recent KPMG / UNISG study shows, for example, that only 53% of the banks surveyed believe current client advice is sufficient to meet client’s changing needs in terms of rigorous assessment of financial profile, investment objectives, risk, and insightful investment ideas. 53 percent – barely the majority. Probably the scariest part about clients and the changing laws is the increase of transparency required by both sides, the law and by clients. Clients now can and should know what the bank is making off their money – and this naturally leads to some hefty discussions, and sometimes to clients changing banks.

Finally, there is Gen Y. Gen Y, the Millenials, the generation of new workforce that has been highly and diversly dicussed, watched, researched like no other. How will this generation, indeed our MBA graduates, deal with the changes facing the banks as employees? As clients? Will they find banking as interesting a career industry as previous generations with all of the expected forthcoming changes regarding both the banks themselves and their clients? Is there a fit? Is there a mismatch? How are banks adapting and planning now for the personnel (Gen Y in particular) and possible cultural changes going on right now and even more so in the next ten years? Whose responsibility is it? HR? The line? Strategy makers? Gen Yers themselves? What is the role of business schools such as the University of St. Gallen in these processes?

There is a lot of room for discusssion on all three areas and how they interface: new banking models resulting out of Basel III, what clients need today – and more importantly – tomorrow, and how the workforce will adapt to these changes.

What do you think?