Banks hope futuristic flagships can tempt new customers

By Lionel Laurent

VELIZY, France (Reuters) - Installation art, interactive walls and a robot doorman; the flagship branches of the world's top banks have come a long way from the iron grilles and potted plants of old.

To compete against online-only rivals and to attract a new generation of customers to branches, banks are installing sleek interiors and hi-tech gadgetry.

ATMs that read fingerprints, touch-screen desks to flick through your finances and videoconference units for expert advice are all on display at payments-technology firm Wincor Nixdorf's showroom in the Paris suburb of Velizy.

"Banks are investing a lot in their retail branches," said Steve Bousabata, head of Wincor's French banking services arm. "They want customers to come back."

The reason is clear: after years of relying on branches to drive retail revenue, European banks expect such networks to supply only 62 percent of sales by 2020 from today's average of 81 percent, according to Equinox Consulting.

Banks, especially those still nursing losses from the financial crisis, are under pressure to cut costs and are balancing the need to pare back branch networks by sprucing up select outlets.

But branches are still the first point of contact for many customers and are still the primary location for product sales like mortgages, new accounts and insurance, underlining the importance of upgrading them for a more tech-savvy generation.

The difficulty is knowing exactly what belongs in the branch of the future and what is better left behind.

"Are all the things we see in branches today going to be seen in branches tomorrow? I very much doubt that," said Mike Baxter, head of management consultancy Bain's Americas Financial Services practice.

"There's an awful lot of experimentation of stuff that turns out to be unsuccessful and uneconomic."

Flashy "bank of the future" branches mixing gadgetry with design similar to Apple's minimalist stores have been opened by BNP Paribas in Paris, Barclays in London and Deutsche Bank in Berlin - at an estimated cost of 5 million euros each.

They include lounge areas, giant interactive screens and other trimmings such as handbags for sale and pieces of art.

Gauging their success is tricky. BNP was willing to give data on its refurbished flagship branch near the Paris Opera - which three years ago was fitted with a wall covered in plants, iPads for customer use and a touch-screen desk - saying that footfall was up 40 percent and new clients up 25 percent.

Italy's Unicredit also said that footfall and new business were up at its newly revamped flagship branch in the Bulgarian capital of Sofia, which offers "welcoming scents" and a touch-screen wall. Visits are up by an average of 60 percent while loans and deposits have doubled, a spokeswoman said.

On the other hand, BNP has done away with some ideas that failed to click with consumers: it has scrapped the iPads and touch-screen desk in favour of an interactive wall.

Deutsche Bank and Barclays declined to give data on single branches.

More broadly, some 88 percent of bank executives view their flagship branches in main street areas as being "successful" in promoting brand awareness, according to a survey by Equinox.

ROBOT BANKERS

Beyond Europe, the experiments are even bolder.

In South Korea, where mobile banking has flourished faster than in the West, Hana Bank allows mobile users to transfer money to one another by physically "bumping" smartphones. Shinhan Bank has also introduced unmanned "smart" branch kiosks that communicate with handsets.

Commonwealth Bank of Australia is using a mobile app to drive mortgage sales by offering clients data on houses for sale, while BBVA's U.S. unit Compass is testing drive-through ATMs with videoconferencing.

Customers of the Washington D.C. branch of Carolina Premier Bank will soon find themselves face-to-face with a robot, which will greet visitors from November 15.

Although some of these advances may prove too gimmicky or not functional enough to catch on, long-distance banking via videoconference is seen as a way to reduce branch staffing without hurting service, though customers still prefer a physical point of contact somewhere along the line.

"Mortgage specialists sitting at headquarters, connecting via videoconference to the relationship manager; that works," said Bain's head of global retail banking, Dirk Vater.

"But bank-to-consumer, with people sitting on the sofa using Skype and Facetime, has not been adopted yet. It will eventually ... But not yet."

Increased ATM functionality as used by Citibank Asia and more secure biometric readers are also promising, he added.

The ultimate question of whether to scrap the branch entirely is one that is not being considered, consultants said.

The preference is for a "hub-and-spoke" model that pools resources in urban areas and reduces smaller, rural branches.

While this may lead to more ambitious flagship outlets, it can create gaps for new competitors to fill: France's Nickel, which offers a low-cost current account, is creating a branch network with the country's 27,000 tobacconists.

"Even in developed markets, the death of branches is somewhat exaggerated," Ernst & Young wrote in a 2012 report.

"We will see further evolution of the branch experience from something that looks like a local government office ...(to) a hybrid between coffee shop and technology store." (Additional reporting by Steve Slater in London, Tsvetelia Tsolova in Sofia, Jackie Range in Sydney and Douwe Miedema in Washington; Editing by Carmel Crimmins and Giles Elgood)

View the original article here

Banks hope futuristic flagships can tempt new customers

By Lionel Laurent

VELIZY, France (Reuters) - Installation art, interactive walls and a robot doorman; the flagship branches of the world's top banks have come a long way from the iron grilles and potted plants of old.

To compete against online-only rivals and to attract a new generation of customers to branches, banks are installing sleek interiors and hi-tech gadgetry.

ATMs that read fingerprints, touch-screen desks to flick through your finances and videoconference units for expert advice are all on display at payments-technology firm Wincor Nixdorf's showroom in the Paris suburb of Velizy.

"Banks are investing a lot in their retail branches," said Steve Bousabata, head of Wincor's French banking services arm. "They want customers to come back."

The reason is clear: after years of relying on branches to drive retail revenue, European banks expect such networks to supply only 62 percent of sales by 2020 from today's average of 81 percent, according to Equinox Consulting.

Banks, especially those still nursing losses from the financial crisis, are under pressure to cut costs and are balancing the need to pare back branch networks by sprucing up select outlets.

But branches are still the first point of contact for many customers and are still the primary location for product sales like mortgages, new accounts and insurance, underlining the importance of upgrading them for a more tech-savvy generation.

The difficulty is knowing exactly what belongs in the branch of the future and what is better left behind.

"Are all the things we see in branches today going to be seen in branches tomorrow? I very much doubt that," said Mike Baxter, head of management consultancy Bain's Americas Financial Services practice.

"There's an awful lot of experimentation of stuff that turns out to be unsuccessful and uneconomic."

Flashy "bank of the future" branches mixing gadgetry with design similar to Apple's minimalist stores have been opened by BNP Paribas in Paris, Barclays in London and Deutsche Bank in Berlin - at an estimated cost of 5 million euros each.

They include lounge areas, giant interactive screens and other trimmings such as handbags for sale and pieces of art.

Gauging their success is tricky. BNP was willing to give data on its refurbished flagship branch near the Paris Opera - which three years ago was fitted with a wall covered in plants, iPads for customer use and a touch-screen desk - saying that footfall was up 40 percent and new clients up 25 percent.

Italy's Unicredit also said that footfall and new business were up at its newly revamped flagship branch in the Bulgarian capital of Sofia, which offers "welcoming scents" and a touch-screen wall. Visits are up by an average of 60 percent while loans and deposits have doubled, a spokeswoman said.

On the other hand, BNP has done away with some ideas that failed to click with consumers: it has scrapped the iPads and touch-screen desk in favour of an interactive wall.

Deutsche Bank and Barclays declined to give data on single branches.

More broadly, some 88 percent of bank executives view their flagship branches in main street areas as being "successful" in promoting brand awareness, according to a survey by Equinox.

ROBOT BANKERS

Beyond Europe, the experiments are even bolder.

In South Korea, where mobile banking has flourished faster than in the West, Hana Bank allows mobile users to transfer money to one another by physically "bumping" smartphones. Shinhan Bank has also introduced unmanned "smart" branch kiosks that communicate with handsets.

Commonwealth Bank of Australia is using a mobile app to drive mortgage sales by offering clients data on houses for sale, while BBVA's U.S. unit Compass is testing drive-through ATMs with videoconferencing.

Customers of the Washington D.C. branch of Carolina Premier Bank will soon find themselves face-to-face with a robot, which will greet visitors from November 15.

Although some of these advances may prove too gimmicky or not functional enough to catch on, long-distance banking via videoconference is seen as a way to reduce branch staffing without hurting service, though customers still prefer a physical point of contact somewhere along the line.

"Mortgage specialists sitting at headquarters, connecting via videoconference to the relationship manager; that works," said Bain's head of global retail banking, Dirk Vater.

"But bank-to-consumer, with people sitting on the sofa using Skype and Facetime, has not been adopted yet. It will eventually ... But not yet."

Increased ATM functionality as used by Citibank Asia and more secure biometric readers are also promising, he added.

The ultimate question of whether to scrap the branch entirely is one that is not being considered, consultants said.

The preference is for a "hub-and-spoke" model that pools resources in urban areas and reduces smaller, rural branches.

While this may lead to more ambitious flagship outlets, it can create gaps for new competitors to fill: France's Nickel, which offers a low-cost current account, is creating a branch network with the country's 27,000 tobacconists.

"Even in developed markets, the death of branches is somewhat exaggerated," Ernst & Young wrote in a 2012 report.

"We will see further evolution of the branch experience from something that looks like a local government office ...(to) a hybrid between coffee shop and technology store." (Additional reporting by Steve Slater in London, Tsvetelia Tsolova in Sofia, Jackie Range in Sydney and Douwe Miedema in Washington; Editing by Carmel Crimmins and Giles Elgood)

View the original article here

Results of state-run banks fuel sector recovery hopes

By Swati Pandey

MUMBAI (Reuters) - India's second-biggest state lender Bank of Baroda Ltd posted a quarterly profit that topped analysts' expectations, sending its shares higher and stoking speculation that the bad loans weighing on big government banks may be easing.

Fourth-ranked Bank of India Ltd, while reporting earnings that missed estimates slightly, said its non-performing assets fell at the end of the September quarter from a year earlier. Its shares rose the most in six years.

State banks, with their high exposure to the power and infrastructure sectors, have been particularly hit by the country's economic slowdown. They are also typically more willing to ease repayment terms for struggling debtors.

Analysts say the better-than-expected earnings suggest that debt restructuring is bearing fruit and the banks' recovery efforts are gaining traction.

"The worst is behind us," Bank of Baroda Chairman S.S. Mundra told reporters after the results on Thursday. "The September quarter was the last of this bad cycle."

Bank of Baroda posted a 10.2 percent fall in July-September net profit to 11.68 billion rupees. Analysts, on average, had expected profit of 9.5 billion rupees, according to Starmine data.

The bank's non-performing assets rose to 1.86 percent of its total assets at the end of September from 0.82 percent a year earlier.

But Mundra said growth in non-performing loans will slow in the second half, helping to send the bank's shares up by more than 10 percent, their biggest gain in more than three years.

Over $20 billion of bad loans were weighing on the country's top 10 state banks as of March 31, according to Reuters calculations based on data from individual banks.

"Asset quality pressures will not increase. We will be able to maintain these levels or reduce," said Vijaylakshmi Iyer, chairwoman of Bank of India.

Bank of India said its September-quarter net profit more than doubled to 6.22 billion rupees. That compares with analyst expectations of 6.76 billion rupees.

Its non-performing assets fell to 1.85 percent of its total assets at the end of September from 2.04 percent a year earlier.

Shares in Bank of India rose more than 20 percent, their largest one-day gain since October 2007. At 0908 GMT, the benchmark index was down 0.1 percent.

The largest state lender, State Bank of India (SBI), which accounts for about a quarter of all loans and deposits, will report earnings on November 13. Punjab National Bank, the third-biggest, reports on November 8.

Punjab shares rose 8.9 percent and SBI was up 4.4 percent.

The fortunes of state banks have contrasted with those of private-sector peers ICICI Bank Ltd, HDFC Bank Ltd and Axis Bank Ltd. The banks each reported more than 20 percent profit growth after keeping their focus on consumer loans.

ICICI, India's biggest private-sector bank by assets, said a wider branch network and strong dealership connections will help the bank grow in the consumer segment.

GRAPHIC - India public vs private banks: http://link.reuters.com/tyw34v

NON-PERFORMING LOANS

Mid-sized state lenders are not faring as well as their bigger cousins.

Union Bank of India reported a 62 percent fall in quarterly profit as provisions nearly doubled and non-performing assets rose to 2.16 percent.

Indian Overseas Bank and Oriental Bank of Commerce Ltd each posted about a 16 percent decline in profit on a steep rise in non-performing loans.

Bank of Maharashtra Ltd reported a 72 percent decline in net profit while non-performing loans nearly doubled.

Non-performing loans as a percentage of total loans reached the highest in more than five years in June, at 4.3 percent. This has forced banks to set aside more money to cover them, reducing profits.

"The bigger banks are showing lower deterioration compared to mid-sized PSU banks," said Manish Ostwal, sector analyst at KR Choksey Shares & Securities. "They operate on stronger margins and can absorb the pressure in the short term. They also have a better ability to raise money in overseas markets."

(Additional reporting and writing by Prashant Mehra; Editing by Ryan Woo)

View the original article here

Six major central banks make currency swap accords permanent

By Leika Kihara

TOKYO (Reuters) - Six major central banks said on Thursday they would make their web of currency swap arrangements permanent as a "prudent liquidity backstop" in case of future global financial strains.

The Bank of Japan, U.S. Federal Reserve, the European Central Bank, the Bank of England and the central banks of Canada and Switzerland will convert their "temporary bilateral liquidity swap arrangements" into standing arrangements that "will remain in place until further notice".

"The existing temporary swap arrangements have helped to ease strains in financial markets and mitigate their effects on economic conditions," a coordinated statement from the central banks said. "The standing arrangements will continue to serve as a prudent liquidity backstop."

Currency swap lines were first introduced nearly six years ago in response to a global credit crunch that starved banks of liquidity and threatened to gum up the entire financial system.

They were an important part of the policy response to the 2007-2009 financial crisis, keeping a lid on funding costs which had spiralled due to fear over counter-party risk.

The arrangements were next due for review in February.

Speaking after the BOJ kept its massive stimulus programme in place, Governor Haruhiko Kuroda said the structure had helped bring stability to financial markets and the move to make it permanent did not denote any new alarm about liquidity.

"We decided to make them permanent to avoid uncertainty as they were due to expire next February," Kuroda told a news conference. "We have no plan to extend the swap arrangements beyond the six central banks."

(Writing by Mike Peacock; Editing by John Stonestreet)

View the original article here

Results of state-run banks fuel sector recovery hopes

By Swati Pandey

MUMBAI (Reuters) - India's second-biggest state lender Bank of Baroda Ltd posted a quarterly profit that topped analysts' expectations, sending its shares higher and stoking speculation that the bad loans weighing on big government banks may be easing.

Fourth-ranked Bank of India Ltd, while reporting earnings that missed estimates slightly, said its non-performing assets fell at the end of the September quarter from a year earlier. Its shares rose the most in six years.

State banks, with their high exposure to the power and infrastructure sectors, have been particularly hit by the country's economic slowdown. They are also typically more willing to ease repayment terms for struggling debtors.

Analysts say the better-than-expected earnings suggest that debt restructuring is bearing fruit and the banks' recovery efforts are gaining traction.

"The worst is behind us," Bank of Baroda Chairman S.S. Mundra told reporters after the results on Thursday. "The September quarter was the last of this bad cycle."

Bank of Baroda posted a 10.2 percent fall in July-September net profit to 11.68 billion rupees. Analysts, on average, had expected profit of 9.5 billion rupees, according to Starmine data.

The bank's non-performing assets rose to 1.86 percent of its total assets at the end of September from 0.82 percent a year earlier.

But Mundra said growth in non-performing loans will slow in the second half, helping to send the bank's shares up by more than 10 percent, their biggest gain in more than three years.

Over $20 billion of bad loans were weighing on the country's top 10 state banks as of March 31, according to Reuters calculations based on data from individual banks.

"Asset quality pressures will not increase. We will be able to maintain these levels or reduce," said Vijaylakshmi Iyer, chairwoman of Bank of India.

Bank of India said its September-quarter net profit more than doubled to 6.22 billion rupees. That compares with analyst expectations of 6.76 billion rupees.

Its non-performing assets fell to 1.85 percent of its total assets at the end of September from 2.04 percent a year earlier.

Shares in Bank of India rose more than 20 percent, their largest one-day gain since October 2007. At 0908 GMT, the benchmark index was down 0.1 percent.

The largest state lender, State Bank of India (SBI), which accounts for about a quarter of all loans and deposits, will report earnings on November 13. Punjab National Bank, the third-biggest, reports on November 8.

Punjab shares rose 8.9 percent and SBI was up 4.4 percent.

The fortunes of state banks have contrasted with those of private-sector peers ICICI Bank Ltd, HDFC Bank Ltd and Axis Bank Ltd. The banks each reported more than 20 percent profit growth after keeping their focus on consumer loans.

ICICI, India's biggest private-sector bank by assets, said a wider branch network and strong dealership connections will help the bank grow in the consumer segment.

GRAPHIC - India public vs private banks: http://link.reuters.com/tyw34v

NON-PERFORMING LOANS

Mid-sized state lenders are not faring as well as their bigger cousins.

Union Bank of India reported a 62 percent fall in quarterly profit as provisions nearly doubled and non-performing assets rose to 2.16 percent.

Indian Overseas Bank and Oriental Bank of Commerce Ltd each posted about a 16 percent decline in profit on a steep rise in non-performing loans.

Bank of Maharashtra Ltd reported a 72 percent decline in net profit while non-performing loans nearly doubled.

Non-performing loans as a percentage of total loans reached the highest in more than five years in June, at 4.3 percent. This has forced banks to set aside more money to cover them, reducing profits.

"The bigger banks are showing lower deterioration compared to mid-sized PSU banks," said Manish Ostwal, sector analyst at KR Choksey Shares & Securities. "They operate on stronger margins and can absorb the pressure in the short term. They also have a better ability to raise money in overseas markets."

(Additional reporting and writing by Prashant Mehra; Editing by Ryan Woo)

View the original article here

Sins of past, present and future haunt banks

By Steve Slater

LONDON (Reuters) - The cost to banks of cleaning up past misdeeds has soared over $100 billion and is leaving lenders running scared from areas that put them in potential danger of upsetting regulators.

This week alone, Deutsche Bank , UBS and Lloyds revealed mounting legal bills and Dutch agricultural specialist Rabobank became the latest lender to be fined in a global scandal over interest rate rigging with a $1.1 billion penalty.

Bankers fear that paying for the sins of the past and preventing future misdemeanours could be the biggest headache yet for an industry still trying to bulk up on capital and liquidity reserves in the wake of the 2007-09 financial crisis.

"This is a new world of regulation that has emerged post the financial crisis and I think the whole industry is struggling to catch up with it," Mike Rees, head of wholesale banking at Standard Chartered told Reuters.

"Everyone has focused on the liquidity standards and the capital standards, but I think the bigger cost for the industry will be about meeting the standards being required of us in terms of the code of conduct."

JPMorgan - which had emerged from the financial crisis as the poster child for good risk management - is close to a record $13 billion settlement with U.S. authorities over the mis-selling of mortgage-backed bonds.

That could take the cost of credit crisis and mortgage-related settlements by U.S. banks to almost $85 billion in the last four years, according to SNL Financial. European firms, mostly in Britain, have paid or set aside more than $40 billion to compensate customers or pay various fines.

Further penalties are expected to hurt profits for years to come and are encouraging banks to quit business lines and less-regulated countries to shield themselves from future risk.

"Banks have to stand back and say what's strategically important, where's the risk, what's the strategic value? And they have to make some choices," said a senior bank executive.

In many cases, businesses are not worth the cost of policing their potential risks.

HSBC has pulled out of a number of business areas and countries, including Panama and other Latin American countries, since being fined a record $1.9 billion by U.S. authorities last year over lax money laundering controls.

The British-headquartered bank, which is spending about $800 million more each year on compliance costs across its operations in 80 countries, retrenched from banking embassies and consulates this year, sending diplomats into a panic.

"It was almost a nightmare for us. If we hadn't found an alternative we were thinking about closing down our embassy," said John Belavu, deputy high commissioner for Papua New Guinea in London.

"We had been banking with them for the last 25 years ... it was a big shock for us. We were given six months to find alternative banking arrangements."

HSBC said the retrenchment was a commercial decision based on its review of all businesses since May 2011. Belavu said it didn't give him any further explanation, and his embassy is now with a smaller bank, after other big lenders shunned it.

SHOWER GEL AND MILLIONAIRES

Credit Suisse and Barclays have pulled out of dozens of less regulated private banking markets such as Belarus and Turkmenistan as the risk of fines outweighs the potential fees from banking rich clients.

With a global clampdown on tax evasion, Barclays has also shut down much of a profitable tax advisory business, which had drawn the ire of British politicians.

After halting the sale of U.S. student loans and exiting physical commodities trading in the face of increased regulatory scrutiny and rising compliance costs, JPMorgan is now reviewing a whole host of other business lines, including cutting services for about 500 foreign banks.

JPMorgan - which has increased annual spending on compliance and risk by $1 billion, including adding 4,000 staff in the area since last year - is also reviewing lending to pawn shops, payday lenders and some car dealers, according to a person familiar with the matter.

Britain's banks have warned that tough guidelines on preventing financial crime could see fewer pensions and investment products on offer for retail customers and make it unviable to provide trade finance for smaller firms.

Trade finance has a long list of potential "red flags" as business is screened for sanctions-busting goods or clients, or weapons of mass destruction. A side-effect of that is that all military shipments get bogged down in costly red tape.

Importing any amount of shower gel for soldiers requires one unnamed bank to get the approval of its reputational risk committee, according to a consultation document released by Britain's financial regulator in July.

"THE PEOPLE WILL SUFFER"

While there is a general admission among bankers that the industry played fast and loose with rules of conduct prior to the crisis there is also a fear the new zero tolerance regime will push some people and businesses out of the banking net and into the arms of criminals looking to make a quick buck.

Money transmissions, long seen as a weak link in the fight against money laundering and terror financing, are set to get more difficult and costly as big banks withdraw.

HSBC pulled back from the industry last year, and Barclays has this year closed accounts for most of about 100 money transmission firms it banked, putting it under fire from Somalis who had relied on those firms to send money home.

"The people will suffer, the economy will suffer and the security of the country will suffer," said Omar Abdinur, who left Somalia in 1989 and wires money from London to his mother, brothers and other relatives there every month. "Charges will go up and less money will go home."

Somalis living overseas send about $1.3 billion home a year, typically for schooling, medicine and food, and about 60 percent of households in the East African country rely on money transfers, according to Oxfam.

Bankers regret the impact their withdrawals are having but with their reputation and potentially huge fines on the line, they say hard choices are inevitable.

"Financial inclusion and de-risking are real challenges," John Paul Cusack, head of anti-money laundering compliance at UBS , said at a financial crime conference last month.

"Everyone is sympathetic to (the need for) financial inclusion, but we're more sympathetic to not being fined, so our first priority is to manage our risk."

(Additional reporting by Chijioke Ohuocha in Lagos. Editing by Carmel Crimmins and David Evans)

View the original article here

Sins of past, present and future haunt banks

By Steve Slater

LONDON (Reuters) - The cost to banks of cleaning up past misdeeds has soared over $100 billion and is leaving lenders running scared from areas that put them in potential danger of upsetting regulators.

This week alone, Deutsche Bank , UBS and Lloyds revealed mounting legal bills and Dutch agricultural specialist Rabobank became the latest lender to be fined in a global scandal over interest rate rigging with a $1.1 billion penalty.

Bankers fear that paying for the sins of the past and preventing future misdemeanours could be the biggest headache yet for an industry still trying to bulk up on capital and liquidity reserves in the wake of the 2007-09 financial crisis.

"This is a new world of regulation that has emerged post the financial crisis and I think the whole industry is struggling to catch up with it," Mike Rees, head of wholesale banking at Standard Chartered told Reuters.

"Everyone has focused on the liquidity standards and the capital standards, but I think the bigger cost for the industry will be about meeting the standards being required of us in terms of the code of conduct."

JPMorgan - which had emerged from the financial crisis as the poster child for good risk management - is close to a record $13 billion settlement with U.S. authorities over the mis-selling of mortgage-backed bonds.

That could take the cost of credit crisis and mortgage-related settlements by U.S. banks to almost $85 billion in the last four years, according to SNL Financial. European firms, mostly in Britain, have paid or set aside more than $40 billion to compensate customers or pay various fines.

Further penalties are expected to hurt profits for years to come and are encouraging banks to quit business lines and less-regulated countries to shield themselves from future risk.

"Banks have to stand back and say what's strategically important, where's the risk, what's the strategic value? And they have to make some choices," said a senior bank executive.

In many cases, businesses are not worth the cost of policing their potential risks.

HSBC has pulled out of a number of business areas and countries, including Panama and other Latin American countries, since being fined a record $1.9 billion by U.S. authorities last year over lax money laundering controls.

The British-headquartered bank, which is spending about $800 million more each year on compliance costs across its operations in 80 countries, retrenched from banking embassies and consulates this year, sending diplomats into a panic.

"It was almost a nightmare for us. If we hadn't found an alternative we were thinking about closing down our embassy," said John Belavu, deputy high commissioner for Papua New Guinea in London.

"We had been banking with them for the last 25 years ... it was a big shock for us. We were given six months to find alternative banking arrangements."

HSBC said the retrenchment was a commercial decision based on its review of all businesses since May 2011. Belavu said it didn't give him any further explanation, and his embassy is now with a smaller bank, after other big lenders shunned it.

SHOWER GEL AND MILLIONAIRES

Credit Suisse and Barclays have pulled out of dozens of less regulated private banking markets such as Belarus and Turkmenistan as the risk of fines outweighs the potential fees from banking rich clients.

With a global clampdown on tax evasion, Barclays has also shut down much of a profitable tax advisory business, which had drawn the ire of British politicians.

After halting the sale of U.S. student loans and exiting physical commodities trading in the face of increased regulatory scrutiny and rising compliance costs, JPMorgan is now reviewing a whole host of other business lines, including cutting services for about 500 foreign banks.

JPMorgan - which has increased annual spending on compliance and risk by $1 billion, including adding 4,000 staff in the area since last year - is also reviewing lending to pawn shops, payday lenders and some car dealers, according to a person familiar with the matter.

Britain's banks have warned that tough guidelines on preventing financial crime could see fewer pensions and investment products on offer for retail customers and make it unviable to provide trade finance for smaller firms.

Trade finance has a long list of potential "red flags" as business is screened for sanctions-busting goods or clients, or weapons of mass destruction. A side-effect of that is that all military shipments get bogged down in costly red tape.

Importing any amount of shower gel for soldiers requires one unnamed bank to get the approval of its reputational risk committee, according to a consultation document released by Britain's financial regulator in July.

"THE PEOPLE WILL SUFFER"

While there is a general admission among bankers that the industry played fast and loose with rules of conduct prior to the crisis there is also a fear the new zero tolerance regime will push some people and businesses out of the banking net and into the arms of criminals looking to make a quick buck.

Money transmissions, long seen as a weak link in the fight against money laundering and terror financing, are set to get more difficult and costly as big banks withdraw.

HSBC pulled back from the industry last year, and Barclays has this year closed accounts for most of about 100 money transmission firms it banked, putting it under fire from Somalis who had relied on those firms to send money home.

"The people will suffer, the economy will suffer and the security of the country will suffer," said Omar Abdinur, who left Somalia in 1989 and wires money from London to his mother, brothers and other relatives there every month. "Charges will go up and less money will go home."

Somalis living overseas send about $1.3 billion home a year, typically for schooling, medicine and food, and about 60 percent of households in the East African country rely on money transfers, according to Oxfam.

Bankers regret the impact their withdrawals are having but with their reputation and potentially huge fines on the line, they say hard choices are inevitable.

"Financial inclusion and de-risking are real challenges," John Paul Cusack, head of anti-money laundering compliance at UBS , said at a financial crime conference last month.

"Everyone is sympathetic to (the need for) financial inclusion, but we're more sympathetic to not being fined, so our first priority is to manage our risk."

(Additional reporting by Chijioke Ohuocha in Lagos. Editing by Carmel Crimmins and David Evans)

View the original article here

Indian banks' loans, deposits grow slower vs RBI's FY14 estimate

MUMBAI (Reuters) - Indian banks' loan and deposit growth continues to be slower in the current fiscal year compared with the Reserve Bank of India's (RBI) full-year projection, according to data released by the central bank.

Banks' loans grew about 10 percent to 57.94 trillion rupees, while deposits rose 11 percent to 75.09 trillion rupees from March 22 to October 18, data released on Wednesday showed, mainly due to the overall slowdown in GDP growth in Asia's third-largest economy.

The RBI projects loans to grow at 15 percent and deposits by 14 percent in the current fiscal year ending in March 2014.

(Reporting by Aditi Shah; Editing by Anupama Dwivedi)

View the original article here

Rupee falls; custodial banks buy dollars ahead of policy

Reuters Market Eye - The rupee falls on dollar buying by custodial banks ahead of the Reserve Bank of India's review on Tuesday. The rupee falls to 61.64/65, off 61.44 highs, versus last close at 61.46/47.

"Today's spot will be settled on Tuesday which is the policy day. So, we are seeing a spurt in buying interest by foreign banks," says dealer.

The Reserve Bank of India policy on Tuesday likely be the next trigger with any hike in the repo rate to negatively impact the INR.

Foreign funds extend buying in local stocks for a 15th session, being provisional buyers of $161.5 million on Thursday, exchange data showed.

The dollar struggled near a two-year low against the euro in early Asian trade on Friday, as strengthened expectations the U.S. Federal Reserve will maintain its asset purchases through early next year undermined the greenback.

A Reuters poll shows that investors raise long positions in Asia FX.

Technicals show USD/INR may see a relief rally.

(Reporting by Subhadip Sircar)

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China worries, European banks, earnings pressure world stocks; dollar, yen up

By Angela Moon

NEW YORK (Reuters) - Global equity markets fell on Wednesday on mixed corporate results and concerns that new scrutiny of euro zone banks could prove costly for its weaker members, while the U.S. dollar and the Japanese yen held small gains sparked by worries over Chinese monetary policy.

The dollar edged up from near two-year lows against the euro and an 8-1/2-month trough versus a major currency basket as investors sought the greenback's safety following a spike in China's short-term money market interest rates.

The yen was also in demand, with the dollar down 0.7 percent at 97.40 yen and the euro 0.9 percent weaker at 134.09 yen.

Wall Street opened lower following four straight days of record highs for the S&P 500. Mixed results from major U.S. companies, including equipment maker Caterpillar Inc, which sank nearly 6 percent in early trade, pulled stocks lower.

"With Caterpillar cutting its outlook for the year and concerns over China slowing against a backdrop of a market at a record, some people just decided to ring the cash register and take some profits," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.

He said the selling was "orderly" and indicates more a pause than nervousness on the part of investors.

European stocks recorded their sharpest falls in two weeks as the details of a new, year-long test of euro zone lenders by the bloc's central bank amplified anxiety about China and the recent rapid run-up in world equity markets.

The ECB wants to unearth any risks hidden in the banking system before supervision comes under its roof as part of a three-pronged "banking union" plan designed to avoid a repeat of the euro zone debt crisis.

The pan-European FTSEurofirst 300 fell 0.7 as Italian, Spanish and Portuguese markets, as well as banking stocks, all dropped.

Jan von Gerich, chief developed market strategist for Nordea, said that if done properly, the review should help the euro zone, but in the short term it could revive questions about its weaker members if public money is needed for bank repairs.

"The most interesting part will be what it says about Italy. Its banks haven't gone through the same kind of scrutiny as the ones in Spain or those in Greece, Ireland or Portugal - the smaller countries, too, whether Slovenia will need a bailout for example," he added.

MSCI's world equity index, which tracks shares in 45 countries, fell 0.7 percent.

On Wall Street, the Dow Jones industrial average was down 86.51 points, or 0.56 percent, at 15,381.15. The Standard & Poor's 500 Index was down 13.43 points, or 0.77 percent, at 1,741.24. The Nasdaq Composite Index was down 39.68 points, or 1.01 percent, at 3,889.88.

CHINESE WHISPERS

Concerns about soft U.S. jobs data for September, which appeared to rule out a cut in U.S monetary stimulus before next year and caused a plunge in the dollar, took a back seat as Chinese money market rates climbed to levels not seen since July. The People's Bank of China failed for a second day to inject cash.

Rising liquidity needs for Chinese corporate tax payment deadlines and worries about bad banking debt appeared partly responsible for the jump in short-term rates, analysts said.

The rate spike was short-lived but caused a market panic nevertheless, causing a scramble for safe-haven dollars and yen.

"The weight of a weak U.S. non-farm (payroll data released on Tuesday) is surpassed by rising risk aversion on concerns over China's money market. Profit-taking takes hold," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.

U.S. Treasuries yields fell to the lowest in three months after Tuesday's weaker-than-expected jobs data reinforced expectations that the Federal Reserve is unlikely to reduce the size of its bond purchase program in the near term.

Buying overnight helped yields fall further, with no large data releases scheduled on Wednesday. Benchmark 10-year Treasuries were up 8/32, the yield at 2.4836 percent.

In commodities trading, U.S. crude fell below $97 a barrel to its lowest since July, outpacing a smaller drop in Brent futures, pressured by ample supplies and expectations of a further inventory buildup in the United States, the world's top consumer.

U.S. crude fell $1.88 to $96.42 after earlier reaching $96.32, its lowest since July 1. Brent crude fell $1.39 to $108.58 a barrel after hitting a session high of $110.06.

(Additional reporting by Rodrigo Campos, Karen Brettell and Gertrude Chavez-Dreyfuss in New York and Alex Lawler in London; Editing by Dan Grebler)

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Chidambaram expects credit growth in public sector banks to be 'satisfactory' for rest of the year

New Delhi, Oct. 22 (ANI): Finance Minister P. Chidambaram on Tuesday said that the credit growth in public sector banks has been 'satisfactory', and added that he expected it to remain so, for the rest of the fiscal year.

"Credit growth has been satisfactory in the first quarter of this year - June 2013 over June 2012. Overall, credit growth has been 12.08 percent for the public sector banks. Anything that I say is only concerning the public sector banks. So, we think, that credit growth will be satisfactory for the remaining part of the year too," Chidambaram said.

Chidambaram also termed the rise in bad loans at banks as 'unacceptable', and said that he expected their Non-Performing Assets (NPAs) to come down when the pace of economic growth picks up.

"I have expressed my concern about the NPAs. NPAs is a function of the slowdown in the economy. NPAs have indeed increased, but, I want to point out that the tremendous improvement has taken place in the banking sector in the last 12 or 13 years," Chidambaram said while lauding the improvement in the banking sector in recent years.

A slowing economy has adversely affected the demand for credit and led to a rise in bad loans in banks of the country. Rising bad loans have made banks wary about lending, thus impeding the supply of domestic credit.

Net NPAs to net advances ratio of state-run lenders slipped to 1.8 percent at end-March 2013 from 1.5 percent a year earlier. (ANI)

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Chidambaram asks banks to go after 'big' loan defaulters

New Delhi, Oct 22 (IANS) Finance Minister P. Chidambaram Tuesday asked public sector banks to closely monitor big borrowers with loan amounts of over Rs.1 crore, who also constitute the bulk of the non-performing assets (NPA) of the lenders.

Talking to reporters after meeting heads of the public sector banks here, Chidambaram said growing cases of defaults among big borrowers were a matter of concern.

"It is a matter of concern that it is the big borrowers who are defaulting," the finance minister said.

Chidambaram said he has asked lenders to closely monitor top 30 NPA accounts in each zone of all the public sector banks.

Deteriorating asset quality, or rising NPA, is a big concern among the Indian banking sector. Gross NPAs of Indian banks are expected to reach 4.4 percent in the current financial year as compared to 3.4 percent in the previous year.

The finance minister said NPAs were rising due to difficult economic situation and the situation would improve with the pick up in growth.

Chidambaram advised banks to set up separate verticals dedicated to recover the bad loans that have been written off.

"Banks have been advised to empower or set apart an officer of senior rank, at least of general manager rank, to look at recovery, especially recovery from written-off accounts," he said.

The country's largest lender State Bank of India (SBI) has already set up a separate vertical for recovery of bad loans. The finance minister asked other government-run lenders to set up the dedicated entity in line with SBI.

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Rise in Indian banks' bad loans "unacceptable" - FM

NEW DELHI (Reuters) - The rise in bad loans at Indian banks is "unacceptable," the finance minister said, adding he expects their non-performing assets (NPAs) to come down when the pace of economic growth picks up.

Indian state-run banks' credit growth has been "satisfactory" and is expected to remain so for the rest of the fiscal year, while housing loans have shown a "very healthy" growth, P. Chidambaram told reporters on Tuesday.

A slowing economy has adversely affected the demand for credit and led to a rise in bad loans at Indian banks. Net NPAs to net advances ratio of state-run lenders slipped to 1.8 percent at end-March 2013 from 1.5 percent a year earlier.

Rising bad loans have made banks more wary in lending, impeding the supply of domestic credit.

(Reporting by Rajesh Kumar Singh; Editing by Malini Menon and Anand Basu)

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Banks may raise $1 bln-$2 bln from multilateral bodies - bankers

Reuters Market Eye - The Reserve Bank of India's move to allow banks to raise funds from global multilateral institutions can bring inflows of about $1 billion to $2 billion, two bankers say.

Private sector lenders would be the most likely to use the window, according to these bankers, who are involved in overseas fundraising at banks but who were not authorised to talk to the media.

"Given the country risk, currently raising funds for more than one-year tenure is proving to be expensive. This route may help obtain long-term funds. We may look at three-year loans," said one of the sources, who works at a private bank.

(Reporting by Archana Narayanan)

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Banks' loans, deposits grow slower so far vs RBI's FY14 estimate

MUMBAI (Reuters) - Banks' loan and deposit growth has been slower so far in the current fiscal year than the Reserve Bank of India's full-year projection, according to data released by the central bank.

Banks' loans grew about 11 percent to 58.46 trillion rupees, while deposits rose 12 percent to 75.64 trillion rupees from March 22 to October 4, data released on Tuesday showed, mainly due to the overall slowdown in GDP growth in Asia's third-largest economy.

The RBI projects loans to grow at 15 percent and deposits by 14 percent in the current fiscal year ending in March 2014.

Banks' investments in government securities rose 12 percent to 22.47 trillion rupees in the same period.

(Reporting by Suvashree Dey Choudhury; Editing by Prateek Chatterjee)

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