ESBG keeps a close eye on prudential treatment of crypto assets

On 30 September 2022, ESBG responded to the second public consultation of the Basel Committee on Banking Supervision (BCBS) on the prudential treatment of banks' crypto asset exposures, which is built on the proposals in the first consultation issued in June 2021.

The basic structure of the proposal in the first consultation is maintained, with crypto assets divided into two broad groups: Group 1 includes those that are eligible for treatment under the existing Basel Framework with some modifications. Group 2, on the other hand, includes unbacked crypto asset and stable coins with ineffective stabilisation mechanisms, which are subject to a new conservative prudential treatment.

In the response to the second consultation in 2022, we advocated for the removal of the technological risk add-on from the proposed prudential framework.

The first reason for this would be the principle of technological neutrality. The regulation should focus on regulating the services but not the applicable technology in order not to prevent the adoption of a specific technology and to neither prefer nor prejudice a specific business model or service provider. Secondly, technological risk already exists in all asset classes. If persistent technological risks are detected, the supervisor could require actions for their mitigation or apply a Pillar 2 Requirement (P2R) surcharge. Finally, a common surcharge of capital would reduce institutions’ incentives to mitigate inherent risk.

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OCTOBER 2022 | TOPICS: Prudential, Supervision and Resolution | Public Consultation | Crypto Assests | Basel Framework | Technology Neutrality

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Joint letter to Commissioner McGuiness on the EFRAG consultation regarding its first set of draft ESRSs

News

October 5, 2022

On 27 September, the ESBG, together with the European Banking Federation (EBF), the European Association of Co-operative Banks (EACB), Insurance Europe, Accountancy Europe, Business Europe and European Issuers, has submitted a joint industry letter to Commissioner Mairead McGuinness regarding the European Financial Reporting Advisory Group (EFRAG) public consultation on its first set of draft European Sustainability Reporting Standards (ESRS).

In the letter, ESBG strongly emphasized the necessity to phase-in the submission of the disclosure requirements from EFRAG to the Commission. In this respect, it is considered that EFRAG should deliver a limited set of crucial ESRS by November 2022. After this, EFRAG and the Commission should agree on a detailed plan to deliver the rest of the first set of standards and all the other deliverables required by the Corporate Sustainability Reporting Directive (CSRD). All these will constitute the minimum requirements to be delivered within the pre-set deadlines by the Commission.

Download the Joint Letter

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End Term Evaluation of the Scale2Save Programme

Scale2Save Campaign

Micro savings, maximum impact.

Abridged report July 2022

End Term Evaluation of the Scale2Save Programme

Scale2Save Programme created a lasting Legacy:
1.3 million more low-income women, farmers and youth are financially included on the African continent

1.3

MILLION

The World Savings and Retail Banking Institute (WSBI) and the Mastercard Foundation engaged Genesis
Analytics to conduct the end-term evaluation of the Scale2Save programme

The purpose of the evaluation was to provide lessons learnt against key learning questions of the programme related to the supply-side.:

  • How does the institutional model affect the ability to offer low balance savings accounts (LBSAs)?
  • What impact has the programme had on partner Financial Service Providers (FSPs)?
  • How has the Scale2Save programme contributed to the ecosystem?
  • What has been the value of partnerships in the delivery of LBSAs under the Scale2Save programme?
  • What is the combination of supply-side and demand-side drivers that emerge for LBSAs?
  • What factors impeded the ability of partner FSPs in the provision of LBSAs during the Scale2Save programme?
  • What factors influence the sustainability of LBSAs developed under the Scale2Save programme
  • Learnings from the evaluation will be used to inform future efforts of increasing demand and supply for low balance savings accounts and for broader ecosystem learning.


The programme
helped FSPs to
overcome obstacles
that would have
been prohibitive
without the
Scale2Save
team’s constant
support.

Download the Abridged Report

Download

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EVENT

News

25 OCTOBER

HYBRID EVENT

REGISTRATIONS

Promoting financial education among women and highlighting the need to focus a few more efforts in improving female financial literacy. This is the aim of the upcoming ESBG event “My World, My Knowledge, My Future: A Female Approach To Financial Education”.

Studies show that women are less likely to be financially literate than men – especially when it comes to investing. Men are statistically more likely to take risks, but also research their activities and understand what they are doing. A basis in financial education is key to our future success in saving, investing, and growing wealth in a safe environment – calculating the risk and understanding what could go wrong, or right.
Empowering consumers – in particular women, who are less engaged than men – with the knowledge to make sound financial decisions and build a better future is important in an era of low savings rates, pandemic recovery and an ever-changing digital world. Every day we find new challenges and face new risks, and we need to be armed with up-to-date information and simple knowledge how to navigate through the financial world.

Join us and be part of a pivotal debate on topics like :

• How can financial institutions raise awareness among women of the risks and responsibilities when investing?
• What can school curricula do to engage more girls in money topics?
• Where can financial institutions improve their financial education plans to appeal to a female audience?
• What can policy makers do to provide support when targeting this group?

SPEAKERS & PANELLISTS

Mairead McGuinness

EU Commissioner for Financial Services and
Capital Markets Union

Keynote Speaker

Petra Hielkema

Chairperson of the European Insurance and
Occupational Pensions Authority (EIOPA) 

Panellist

Dominique Goursolle Nouhaud

President ESBG and
National Federation of Savings Banks

Keynote Speaker

Verena Ross

Chairperson, European Securities and
Markets Autorithy ( ESMA)

Keynote Speaker


Ellen Bramness Arvidsson

Executive Director, Finance Norway

Panellist

Magdalena Brier

Chief Executive Officer, Profuturo

Panellist


Ann Cairns

Executive Vice Chair
Mastercard

Panellist

Gabriele Semmelrock-Werzer

President, Austrian Savings Banks Association

Panellist


Karolin Schriever

Executive Board Member
DSGV

Panellist

Prof. Dr. Bettina Fuhrmann

Vienna University of Economics and Business

Panellist


Weselina Angelow

Programme Director on
Scale2Save

Speaker

Michelle Schonenberger

Advisor at European Savings and Retail Banking Group – ESBG

Speaker


Jacki Davis

Moderator


related


Different Strokes for Different Folks

Scale2Save Campaign

Micro savings, maximum impact.

A Customer Onboarding Comparative Analysis

At its inception in 2016, the Scale2Save Program (referred to as the Program in this report) set out to acquire one million customers through 10 innovative projects across the six countries of Kenya, Uganda, Nigeria, Cote D’Ivoire, Senegal and Morocco.

All 10 projects were uniquely defined by a product/service mix that targeted diverse sectors and market segments of the local economies – ranging from micro, small and medium enterprise (MSMEs) to agriculture to micro-insurance.

As the Program is wrapping up, this publication looks at the strategic operations and tactics applied by the Scale2Save partners in East and West Africa to acquire customers.

An attempt is also made to analyse the quality and impact of the level of effortand investment made, evidently at varying degrees, against the outcomes that were delivered, particularly regarding the experience a customer gets through that first touchpoint

Objective of the Case Study

This case study sets out, ab initio, to validate the dynamic nature of customer targeting and acquisition, and the varying degrees of success that accompany each tactical approach. While not in doubt that in effect, a combination of tactics would ordinarily be desirable to achieve the expected outcomes, it is safe to assume that one or two dominant tactics tend to carry the greatest burden of the customer acquisition drive for any product or service.

Download the Comparative Analysis

September 2022

Download

related


Savings and Retail Banking in Africa 2022

Scale2Save Campaign

Micro savings, maximum impact.

New 2022: WSBI survey of Financial Inclusion for micro, small and medium-sized enterprises

Scale2Save WSBI’s programme for financial inclusion, launches today its Savings and Retail Banking in Africa 2022 report. This time, WSBI puts the focus on the state of the focus is on the financial inclusion for micro, small and medium-sized enterprises (MSMEs).
The Savings and Retail Banking in Africa research series aims to help improve access to financial services for financially disadvantaged people in Africa.
The 2022 edition is based upon research conducted with WSBI members in up to 34 countries on the African continent. It was produced in collaboration with FinMark Trust under the Scale2Save programme.
The report targets financial institutions, regulators and donors who deploy financial inclusion initiatives to develop the MSME sector in Africa.

Why the reports foundings are crucial ?

It highlights :
· How national strategies favour financial inclusion of MSMEs
· What services FSPs are offering to MSME
· How FSPs contribute to a successful MSME sector
· How financial services enable access to clean energy
· Supporting MSMEs as bank agents, and
· What impedes better financial inclusion of MSMEs

The report concludes with specific recommendations for regulators and policymakers, financial service providers and market facilitators.

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Bank Asia Agent Banking: An Initiative to Reach the Unreached People for Better Financial Inclusion in Bangladesh

By Jakirul Islam, Senior Vice President in Bank Asia Limited

A number of banks have emerged with several technology driven innovative banking solutions to accelerate the national financial inclusion drive under prudent directives and support from the central bank (Bangladesh Bank) in Bangladesh. Bank Asia pioneered Agent Banking in 2014 for rural financial inclusion under the auspices of Bangladesh Bank. The bank is extending full range of banking services to the last mile citizens across the country.

Bank Asia’s Agent Banking with a vast network of more than 5000 agent outlets is reaching more than 5.1 million customers across 64 districts in Bangladesh. Bank Asia, alone represents more than 45% of total female customers in Agent Banking. It serves more than 2.0 million social safety net (SSN) beneficiaries through its Agent Banking.

Bank Asia’s agent outlets doubled over the past three years and it added more than 3.0 million customers over the past years of pandemic. It partnered with a2i to expand agent network through Union Digital Centre (UDC) and Bangladesh Post Office (BPO) under PPP model.

 

  • Bank Asia owns more than 26% of total agent banking outlets across the industry
  • 62% of its total agent banking customers are women.
  • The agent banking pioneer ranked top in customer acquisition. More than 90% customers of its agent banking fall under the rural geography.
  • Bank Asia is the only bank in Bangladesh who received grants from the Gates Foundation and MetLife Foundation to address the gender gap and financial health within the Low & moderate income group people.

Bank Asia’s unique ‘micro-branch ‘model to make the rural economy more vibrant

Bank Asia adopted its pioneering ‘micro-branch’ model in agent banking. Recently it expanded a sizeable network for its invention of ‘rural micro-merchant’ towards building a complete digital banking ecosystem for the rural economy. Agent banking, in contrast to other branchless banking, is largely driven by an exclusive specialized agent model. This could be due to initial investment requirements to set up an outlet: An outlet in agent banking is exclusive for Bank Asia and distinctly branded by various permanent marketing collaterals and point-of-sale materials (PoSMs). This requires 10-15 times higher investment than is needed for a typical mobile financial service (MFS) agent outlet. This model focuses on the three stakeholders bank itself, banking agents and customers.

In accordance with the central bank guidelines bank must maintain a minimum ratio of 3:1 for rural and urban agent banking outlets. Bank should prefer remote rural areas, chars, islands and other geographical areas with limited accessibility for establishing new agent banking outlets where there is no bank branch or agent point within  a proximity of one kilometre (with an exception of agent on UDC).

Bank Asia has 3 categories of agent outlets 1. Individual 2. Union Digital Centre (UDC) 3. E-Post centres by Bangladesh Post Office. Individual outlets are run by the individual entrepreneurs whereas UDCs and e-post centres are run by the designated entrepreneurs assigned by the Local Government Division (LGD) and Bangladesh Post Office.

Bank has defined a fees, charges and commission structure for the agent banking services. Agents earn from the commission set by the bank for each services category.

Key customer value proposition     

#1 providing banking access to the last-mile citizen

  • Bank Asia has an agent outlet network of more than 5000 across the country. Approximately 80% of them are located in rural areas. Bank Asia reports that more than 5.0 million clients transact through its agent outlet network, which accounts for approximately 34% of the total market share among 29 players. Unbanked customers can open bank accounts at the agent outlets and make peer-to-peer transfers to other bank accounts and pay their utility bills including passport fees and other variety of payments. Currently, a significant proportion of Bangladeshis still don’t have access to mobile phones, while agent banking offering bio-metric based digital banking services without mobile phones or any device ownership dependency at customers end.
  • The reliance on agent networks has its challenges as the provider must principally control quality and service. However, Bank Asia’s management strategy pivots on its careful selection of agents. They are primarily small business owners, fresh entrepreneurs and other institutional agents (like Union Digital Centre under a2i and e-post centers of Bangladesh Post Office) in rural areas. This allows Bank Asia to focus on their ability to manage their liquidity, community standing, trust, and operating hours. Bank Asia’s agents are also required to invest approximately BDT 0.5 million, which builds ownership and motivates them to keep customers happy.

 #2 Greater convenience, ease of use and cost effective

  • Rural customers can access Bank Asia agent outlets with greater ease when compared to a bank branch and other financial service outlets. Rural customers need to travel a maximum distance of no longer than two kilometres to reach a Bank Asia agent outlet, who provide the added advantage of operating beyond typical banking hours.
  • Compared to USSD or mobile phone based financial services where simple cash-in transactions can require seven to eight menu screens and entering two to three number sequences, Bank Asia agent banking to run on bio-metric fingerprint and facial recognition system without any dependence of mobile phones at user end.
  • Agent banking fees and charges are also affordable. It offers Free of Charge (FOC) cash withdrawal in compare to the alternatives in the market for OTC withdrawal from the mobile wallets which charges 1.80% (i.e. BDT20 per thousand as per market practice) of the withdrawal amount.

#3 Building trust in digital platforms

  • Cybersecurity is a burning issue across the regions and Bangladesh isn’t an exception. In 2017, country’s mobile payments industry faced a huge challenge with the rise of ‘digital hundi’ due to some anomalies in customer KYC. Given that customer trust of digital platforms, and in particular financial transactions is already low, incidents like this do not bode well. And payment solution providers, who are relatively new supply-side actors in the financial services space, cannot afford any reputational risks.
  • Bank Asia has invested in a multi-tier security system that is compliant with latest regulations and global standards for branchless banking. As an added security measure, Bank Asia uses bio-metric authentication through m-POS to confirm all transactions at an agent outlet. Customer KYC is also cross-checked with the Election Commission (EC) NID database. Bank Asia also introduced a robotics technology for inward remittance disbursement through its agent banking. This robotics technology has significantly minimized the human error and faster the process of disbursement.

#4 Capturing the mass-market; leveraging key use-cases

The last decade in Bangladesh has seen substantial progress in terms of key underlying drivers for digitising financial services, such as more reliable internet connectivity and increased smartphone penetration. The market is supported by favourable demographics, such as a relatively youthful population and increasing income levels, with the growing middle-class segment. However, while banking agent networks exist and are growing in Bangladesh.

A number of use cases which have differentiated Bank Asia Agent Banking from other alternatives in the market. Bank Asia has been focusing on the low and moderate income group people with a vision of greater financial inclusion through social safety net payments, inward remittance disbursement and loans for rural micro-entrepreneurs. The agent banking pioneer has already made noteworthy contribution through these use cases. Both inward remittance and loan disbursement through Agent Banking experienced a significant growth over the past two years of pandemic.

Lessons learned

  • Almost 50% customers are women in agent banking, however only around 2-3% agents are women. Female customers feel more comfortable to deal with a female agent.
  • Bank faces difficulties in finding suitable women agents who can meet the application criteria.
  • Agent outlets may act as center of excellence for providing complete digital banking services (payments, purchase, transfer, savings and credit) to the rural citizens of the country.
  • Public-private partnerships with Union Digital Centers by a2i under the ICT Division and Bangladesh Post Office helped to achieve some quick wins in customer acquisition and agent network expansion.
  • Partnerships with government entities facilitate more prospective businesses for the bank within digital space.
  • Agent banking is more cost-effective than any other digital financial services in Bangladesh. Higher transaction limit, cost and bio-metric security were the top three factors for users’ preference of agent banking over MFS.
  • The range of service offering from agent banking is greater than mobile financial services (MFS) channel. Agent banking extends full range of banking services to the last mile citizens whereas MFS do serve only digital payments without any savings and loans products.

Transitioning customers from OTC money transfer to financial wellness

In Bangladesh, the OTC trend is very similar to other Asian mobile/e-money markets, such as Pakistan, Myanmar, Vietnam and Cambodia, where OTC transactions made up the vast majority of transactions and served as a significant accelerator in each market.

However, we should keep it in our mind that MFS agents offering Cash in and Cash out (CICO), money transfer and bill payments services do not essentially create access to formal savings, credit and insurance for the last mile deprived people.

Bank Asia Agent Banking has been serving the rural citizens through a right set of value chain ‘Payments, Purchase, Transfer, Savings and Credits”

related


New taxes on banks can affect economic growth

In the current context of high inflation and economic slowdown, and with the possibility of a recession in the horizon, it is more important than ever that savings and retail banks preserve their solvency. In this respect, the recent decision in some EU countries to impose new windfall taxes on the banking sector will further reduce the latter’s lending capacity to corporates and individuals.

BRUSSELS, 6 September 2022 – European savings and retail banks played a very relevant role during the Covid-19 pandemic, contributing to sustain businesses and families during lockdown periods and beyond, while closely cooperating with the authorities to avoid a credit crunch. They have also been publicly recognised in many jurisdictions as a relevant part of the solution to the post-pandemic economic recovery.

While the effects of the Covid-19 pandemics are still being felt, the EU economy is now facing a new crisis arising from supply chain shortages and the war in Ukraine, in which savings and retail banks continue to support their customers and economic activities in general. Even further, they are actively contributing to helping Next Generation EU funds reach the real economy, by providing additional funding through their extended network of branches covering the whole EU territory and through their expertise in risk assessment.

In the current context of high inflation and economic slowdown, and with the possibility of a recession in the horizon, it is more important than ever that savings and retail banks preserve their solvency. In this respect, the recent decision in some EU countries to impose new windfall taxes on the banking sector will further reduce the latter’s lending capacity to corporates and individuals.  These sectorial taxes are discriminatory and unjustified, as the expected increase in interest rates is unlikely to lead to extraordinary profits in the banking sector (they can even decrease if NPLs start to grow). In fact, marginally higher rates simply represent the return to a normal situation after many years of very low profitability due to the negative interest rate environment, which, in turn, has also negatively affected returns to shareholders. These new taxes have also placed financial institutions in a difficult situation with their supervisors, as the requirement of not transferring their cost to customers goes against EU legislation (“EBA Guidelines on Loan Origination” state that loan pricing should include all the costs supported by banks, including taxes).

A tax on the banking sector may also undermine the social work undertaken by savings and retail banks. Social responsibility is a core value of our members; towards their clients, employees, communities, and the environment. In this context, policy makers should carefully consider the negative impact of taxation on banking foundations which have historically been involved in investing in local communities, fighting poverty, and helping those who are the most vulnerable in society.

The EU financial sector already contributes significantly to EU national budgets under the current tax framework, and it is ESBG’s view that what is needed in these uncertain times is a strong and competitive retail banking sector in Europe that continues to fulfil its key function as credit provider to companies (especially SMEs) and families alike. Therefore, any measure that can weaken the recovery of the EU economy should be carefully considered.

Finally, we are also warning against the risk of a fragmented EU tax system and calling for more tax harmonisation across EU countries. Additional taxation at national level is detrimental to a level playing field by distorting competition within the EU internal market. A particular source of distortion arises from shadow banking activity (e.g.: hedge funds) and other non-bank financial players (e.g.: big techs or credit cooperatives) which generally remain outside the scope of windfall taxes applied to the banking sector. For this reason, we believe that uncoordinated national initiatives in the field of taxation should be avoided at all costs in order to provide the necessary conditions for a fair and even distribution of financial services to European citizens and companies; especially SMEs.

 

Press contact:

Leticia Lozano, Senior Communications Adviser

leticialozano@wsbi-esbg.org

Tel. +32 2211 1196

related


What constitutes a viable business model for small scale savings?

Scale2Save Campaign

Micro savings, maximum impact.

Problems of high poverty rates and financial exclusion in sub-Saharan Africa, the correlation between them, and low formal savings rates, remain a major concern.

The market potential of various low-income segments to save is poorly understood by many formal financial service providers (FSPs). Customer and potential customer needs – and how much they can and/or wish to afford to pay to meet those needs – are inadequately reflected in FSP’s business models, customer interfaces and interactions. The resulting poor customer experience gives rise to very high incidences of dormancy and inactivity in account usage. This represents a significant drain on bank costs and undermines potentially sustainable business cases in delivering accessible financial services to these segments.

Why reading this new learning paper ?

This paper highlights 3 different business models for small scale savings including key revenues and costs drivers developed by Centenary Bank in Uganda, Lapo Microfinance Bank in Nigeria and Advans Microfinance Bank in Ivory Coast

Download the Learning Paper

related


New taxes on banks can affect economic growth

In the current context of high inflation and economic slowdown, and with the possibility of a recession in the horizon, it is more important than ever that savings and retail banks preserve their solvency. In this respect, the recent decision in some EU countries to impose new windfall taxes on the banking sector will further reduce the latter’s lending capacity to corporates and individuals.  

The European Savings and Retail Banking Group (ESBG) considers that what is needed in these uncertain times is a strong and competitive retail banking sector.

 

BRUSSELS, 6 September 2022 – European savings and retail banks played a very relevant role during the Covid-19 pandemic, contributing to sustain businesses and families during lockdown periods and beyond, while closely cooperating with the authorities to avoid a credit crunch. They have also been publicly recognised in many jurisdictions as a relevant part of the solution to the post-pandemic economic recovery.

While the effects of the Covid-19 pandemics are still being felt, the EU economy is now facing a new crisis arising from supply chain shortages and the war in Ukraine, in which savings and retail banks continue to support their customers and economic activities in general. Even further, they are actively contributing to helping Next Generation EU funds reach the real economy, by providing additional funding through their extended network of branches covering the whole EU territory and through their expertise in risk assessment.

In the current context of high inflation and economic slowdown, and with the possibility of a recession in the horizon, it is more important than ever that savings and retail banks preserve their solvency. In this respect, the recent decision in some EU countries to impose new windfall taxes on the banking sector will further reduce the latter’s lending capacity to corporates and individuals.  These sectorial taxes are discriminatory and unjustified, as the expected increase in interest rates is unlikely to lead to extraordinary profits in the banking sector (they can even decrease if NPLs start to grow). In fact, marginally higher rates simply represent the return to a normal situation after many years of very low profitability due to the negative interest rate environment, which, in turn, has also negatively affected returns to shareholders. These new taxes have also placed financial institutions in a difficult situation with their supervisors, as the requirement of not transferring their cost to customers goes against EU legislation (“EBA Guidelines on Loan Origination” state that loan pricing should include all the costs supported by banks, including taxes).

A tax on the banking sector may also undermine the social work undertaken by savings and retail banks. Social responsibility is a core value of our members; towards their clients, employees, communities, and the environment. In this context, policy makers should carefully consider the negative impact of taxation on banking foundations which have historically been involved in investing in local communities, fighting poverty, and helping those who are the most vulnerable in society.

The EU financial sector already contributes significantly to EU national budgets under the current tax framework, and it is ESBG’s view that what is needed in these uncertain times is a strong and competitive retail banking sector in Europe that continues to fulfil its key function as credit provider to companies (especially SMEs) and families alike. Therefore, any measure that can weaken the recovery of the EU economy should be carefully considered.

Finally, we are also warning against the risk of a fragmented EU tax system and calling for more tax harmonisation across EU countries. Additional taxation at national level is detrimental to a level playing field by distorting competition within the EU internal market. A particular source of distortion arises from shadow banking activity (e.g.: hedge funds) and other non-bank financial players (e.g.: big techs or credit cooperatives) which generally remain outside the scope of windfall taxes applied to the banking sector. For this reason, we believe that uncoordinated national initiatives in the field of taxation should be avoided at all costs in order to provide the necessary conditions for a fair and even distribution of financial services to European citizens and companies; especially SMEs.