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With banks searching for sources of income and growth and the relationship of trust with their customers being redefined, pricing is a key issue in retail banking. Price-setting calculations for retail financial products can be quite complex and one crucial factor for success is the capacity to identify and collate all necessary information to take sound decisions on this basis. While the range of analytical options has grown considerably in recent years, the challenge banks are facing is to use them intelligently to develop client-oriented offers. To complement their pricing, banks also need convincing strategies to communicate the prices and value-propositions of their products.
Substituting bank lending has been a recurring theme in connection with corporate bond issuance during the last few years and explains part of the recent peaks. At first sight, corporate bond issuance in EMU’s periphery has kept up with EMU’s core countries. However, below the surface lies a strikingly different pattern that suggests that companies in the periphery receive much less support from bond markets.
For many months, a heated debate has raged across a variety of sectors on the question of which web-based payment technologies people are going to use in future when they go shopping. Not only players from the financial sector are intensively searching for an answer.
High investor demand is fuelling corporate bond issuance in the EU. Deleveraging in some countries and the fact that some banks are paying roughly the same or even higher rates for their refinancing than their customers no doubt has pushed corporate debt markets. But the main driver for the high issuance volumes seems to be investors’ search for yield in a low interest rate environment. As sovereign bonds are offering historically low yields, corporate bonds have turned into a significant investment alternative in the present market conditions. However, in an era of Knightian uncertainty and high liquidity, strong growth in corporate bond market calls for attention to potential overheating.
The rise of mobile and online payments opens up new opportunities, but of course also presents new risks for financial services providers. A lot of attention is currently paid to the (walled garden) strategies of new competitors such as Google, Apple or PayPal. They are increasingly putting out their feelers in segments outside of their own territory, e.g. the market for (mobile) payments. Those financial services providers who do not modernise their upstream and downstream value chains or subject them to the transformation process required for the digital network architecture could suffer painful losses over the medium term. Our paper draws four scenarios on how the market share of banks might develop in about three to five years’ time, with a particular focus on the European market.
The political dynamics in Europe have shifted against universal banks in recent months. This is a dangerous development that threatens the key role such banks play in modern economies and risks eliminating many of the advantages universal banks have to offer: in a “one-stop shop”, they provide their customers with a broad range of tailor-made services, higher volumes of credit and lower funding costs than narrower “specialist banks”. In addition, thanks to the diversification of their operations and the potential to leverage revenue and cost synergies, universal banks tend to be more stable than specialist banks. They also provide for diversity in bank business models and are better positioned to monitor the financial health of specific clients as well as to spot unsustainable risk accumulation across financial markets.
The GCC (Cooperation Council for the Arab States of the Gulf) countries stand a solid chance of succeeding in developing their financial markets and promoting their competitiveness. GCC countries progressed on this objective at different pace. A convincing joint strategy for developing markets and their integration as well as a continuation of the improvement of legal and regulatory framework conditions will be indispensable if the GCC and its main financial hubs want to narrow the gap with the top ranks of global financial centres.
Over a year ago the Swiss National Bank (SNB) took drastic action to halt the massive appreciation of the Swiss franc, by introducing an explicit floor of CHF 1.20 per euro. With its measure the SNB has sought to stem the huge tide of capital inflows. This policy may offer an interesting insight into the also increasingly unorthodox policies being pursued to address the crisis in the euro area.
For a long time it seemed that microfinance could accomplish social and financial goals simultaneously and without frictions. But following the international financial crisis and global recession, microfinance experienced its first serious setback starting in 2008. While initially it was assumed that the industry’s problems were triggered by the global crisis and the following recession, a consensus is now emerging that problems are rooted within the characteristics of the microfinance industry as they have developed over time. Problems emerged as some microfinance institutions expanded too quickly, rolled out new products or expanded into different markets without the required institutional capabilities and controls. In order to enter a sustainable growth path, client focus needs to be put back at the core of all operations. A new balance needs to be achieved between social and commercial objectives in microfinance.