NEWS & VIEWSEN

May 2018

The Voice of Savings and Retail Banking

G20 and locally focused banks:Good for sustainable societiesWSBI makes further progress on UFA 2020 pledge (see page 10)

Highlights of WSBI conference at G20 (see page 12)

Contents

NEWS & VIEWS

News and Views is published on a quarterly basis by WSBI-ESBG,in Brussels Belgium. It is distributed to individuals andorganisations from the financial sector in more than 80 countriesincluding all WSBI and ESBG members. An electronic copy of thiscopy of News and Views can also be found on the corporatewebsite www.wsbi-esbg.org

Responsible editor: Chris De Noose, WSBI-ESBG Managing DirectorEditors: James Pieper, Senior Communications Adviser andDirk Smet, Communications ManagerDesign & Layout: altera

World Savings and Retail Banking Institute | European Savings and Retail Banking Group aisblRue Marie-Thérèse, 11 | B-1000 BruxellesPhone + 32 2 211 11 11 | Fax + 32 2 211 11 99info@wsbi-esbg.org | www.wsbi-esbg.org

LEADERS

3 Local banking can bridge global economic divide

4 G20 Argentina helps amplify the savings, retail banking

message

6 Financial inclusion, economic and social development

FEATURE

10 WSBI makes further progress on UFA 2020 pledge

G20

12 Highlights: WSBI conference during G20 in Argentina

14 WSBI publishes positions for G20 decision makers

16 G20 Declaration

17 WSBI joins B20 task force for second straight year

18 G20 Argentina: Focus on future workforce and infrastructure

ESBG UPDATE

20 ESBG: 2017 year in review, what’s ahead in 2018

22 EU Commission FinTech Action Plan: A welcome next step

23 Commission action plan key milestone in EU sustainable

finance strategy

24 Workshop on Proportionality in Banking Regulation

25 Shedding light on proportionality

26 ESBG responds to EBA Pillar 2 framework review

27 ESBG: Streamlined resolution plan info provision process

welcomed

28 Locally focused banks critical to sustainable finance

29 Chris De Noose appointed EBIC chair

30 Human rights and finance

31 Retail and banking sectors: From shared challenges

to shared solutions?

WSBI UPDATE

32 WSBI: Moving forward in 2018

33 WSBI welcomes new member Bank Asia

34 First Workshop on Rural Financial Inclusion in Beijing

35 The viability of agri-finance – an Indian perspective

36 WSBI joins Asian financial cooperation organisation

37 WSBI holds LatAm, Caribbean regional group meeting

FINANCIAL INCLUSION

38 MTripleSW: WSBI, PostBank Uganda to boost financial

inclusion services in rural areas

39 MTripleSW: LAPO Microfinance Bank signs MoU with WSBI

to improve savings by women

40 Dormant bank accounts: inevitable, but not hopeless

41 MTripleSW: Merchant agent banking in Morocco

42 WSBI member showcase: Belarusbank

43 G20 and Rural Finance

INNOVATION HUB

46 WSBI Innovation Workshop: Part 2

48 Update: ‘Innovation Exchange’ videos

48 New ‘Innovation Insights’ page launched

EVENTS

49 Upcoming: 25th World Congress of Savings and Retail Banks

in New Delhi

51 African financial institutions transform via innovation

Upcoming events

n 22 May – Financial Education, quo vadis?, Brussels,Belgium

n 28 June – Retail Banking Conference, Brussels,Belgium

n 15-16 November– WSBI World Congress inNew Delhi, India

Local banking can bridge globaleconomic divide

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WSBI-ESBG MANAGING DIRECTOR CHRIS DE NOOSE ON NEEDFOR RIGHT POLICY

A rare event occurred in the Financial Times newspaper in

March. The global newspaper had published two pieces in

consecutive days on what they termed ‘community banks’ –

what we normally describe at WSBI-ESBG as locally focused

savings and retail banks.

Their analysis of locally focused banks, especially in Europe,

made clear that local communities and their civic leaders are

reaching into their toolbox for answers on how best spur

economic growth and address any market failures. That toolbox

includes locally focused savings and retail banks.

But as the global economy turns the corner, perhaps the more

pressing need is to address social inequalities. Why? Because

seemingly for the first time in decades, people are seeking ways

to narrow the gap between the gains made by the few in a

globalised world and the rest. That is why the need for community

banks is greater than ever. That was an important theme at this

year’s WSBI event during the G20 in Argentina, which we devote

plenty of coverage in this edition of News & Views. But it

doesn’t end there. The theme takes centre stage at the World

Congress in New Delhi in November, where WSBI members,

policymakers and stakeholders will tackle the subject head on.

“Community banks” are taking bold steps to connect more

closely to local people. Mindset change, greater use of

smartphone apps and new ways to use bank branches enable

Sparkassen, cajas, and locally focused retail and savings banks

around the world to be even closer to the households, local

businesses and public authorities they serve. Savings and retail

banks who are members of ESBG, for example, remain close to

the Mittelstand too, with €500 billion in SME loans on the

books, about a third of the market. In the United States,

community banks are a lifeline to SMEs, including 80 per cent

of farm loans coming from them. In Africa, Asia and Latin

America, the locally focused model there too has a big impact

on helping create micro enterprises and nourish them

throughout their lifespan. That’s not saturation or dominance

of a local market, as the FT implied, but rather the proof of an

effective tool that is much-needed. Community banks are a tool

that helps start up and expand job-creating SMEs, build

infrastructure like schools, bridges and hospitals, and weave

social cohesion through cultural programmes and worker training.

Beyond nuts and bolts banking, communities see the value

in local banks. Their oftentimes pioneering foundation work

accounts for $2 billion in annual contributions to local social

and cultural programmes in Europe and beyond. Large multi -

nationals, whether in banking or otherwise, in the name of

profit maximization, may turn to shedding jobs locally and pivot

activity offshore.

Policymakers can help the community bank model – which

includes locally savings and focused retail banks – to be even

closer to the customer and achieve its social aims. Through a

proportionate, tier-based approach – where our specific nature

is understood and acknowledged – community banks’ retail,

regional and responsible approach can still exist and help people

reach their dreams, no matter how big or small, from the

bottom up. If policy fails to do this, it will put a spanner in

works, widening the gap between the many communities

– rural or urban – and the fruits of globalisation.

WSBI-ESBG Managing Director Chris De Noose

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G20 Argentina helps amplifythe savings, retail banking message

WSBI PRESIDENT HEINRICH HAASIS GIVES IMPRESSIONSBUENOS AIRES MEETINGS

This year’s WSBI conference in Buenos Aires held in March gave us

an opportunity to share the link between the G20 Argentina

presidency, our members, and stakeholders alike.

The event also provided us a chance to showcase our global reach,

our local focus and purpose, which seems to always fit well with

overall G20 aims and themes. This year was no exception.

Hosted by Banco Nación of Argentina, we exchanged on global

regulatory frameworks among the 19 countries within the group

as well as the European Union. That is important because the G20

and its stakeholders shape global financial policy.

The one-day meeting also gave WSBI member a chance for sponsors,

namely CaixaBank of Spain, Banco Caja Social of Colombia, and

Sistema Fedecredito of El Salvador to highlight their commitment

to our banking model and the G20 process. WSBI shared with

G20 parties and stakeholders the WSBI Institutional Positionsto the G20, which outlined our stance on two main G20 themes:

“The Future of Work” and “Infrastructure for Development”.

During the conference, we heard constructive dialogue between

from WSBI-ESBG member banks with stakeholders and policy-

makers, which helped us piece together how the G20 themes fit

into our banking model. ESBG and Fundacion bancaria “la Caixa”

President Isidro Fainé delved deeper into some of the G20 themes

and the link between financial inclusion, economic and social

development. Diego Prieto Rivera, president of Banco Caja Social

in Colombia and president of the WSBI Latin America and

Caribbean Regional Group, provided a look at how our banking

model helps narrow the globalisation gap. The panel discussions

were rich in insight too.

IDB-WSBI collaboration

As part of our G20 work in Argentina, we collaborated with the

Inter-American Development Bank (IDB Group). Our relationship

with them is important and we hope that our collaboration will

expand as we look to do several concrete projects to promote

financial inclusion and MSME financing in the Latin America and

Caribbean region.

There are many areas where we would like to collaborate further,

including:

n Digitisation for ‘last mile’ financial inclusion.

n Data sharing to better serve micro and small businesses through

big data.

n Knowledge sharing by WSBI members on innovation &

digitisation with IDB Group

We hope the collaboration will also try to address WSBI members’

need for long-term financing.

We look forward to discussing next steps with IDB. WSBI members

from the Latin American region, many of whom attended the event

in Buenos Aires, are invited to identify their own specific needs for

which they could cooperate with the IDB Group. We understand

that the IDB Group does not start any work until there is a clearly

identified demand from our members.

Locally focused banking model:our overall position

Forming that bridge starts first with supporting the real economy.

WSBI members do this primarily through lending to small and

medium-sized businesses and private households. Second, locally

focused banks provide people with financial services, with in-depth

knowledge of local needs, local business activity, and local

authorities. Those locally driven banks take different shapes and

forms in different countries, and oftentimes have decentralised

structures. Thanks to their close proximity to customers, they are

perfectly placed to bring the global opportunities of a global

economy to the local level. In this way, locally focused banks

can manage risk on the ground while in an internationally

connected economy.

To make these puzzle pieces fit so that local economies and the

people who live and work in them thrive, the policymakers from the

G20 should take sufficient account of locally focused institutions.

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WSBI President Heinrich Haasis

They should keep in mind three areas:

First, boost access to traditional bank financing for SMEs. The most

logical and simple way for an SME to get financing is to get a credit

from a bank, rather than risking it on the global financial markets.

SMEs don’t have the time, nor the know-how to do this. Locally

focused banks are ideally placed to help. They know how local

businesses work and spend a lifetime doing it. It’s the basis for our

values: Retail, Regional and Responsible. WSBI members often say:

“Think and act at local level, cooperate at global level.”

Second, put in place targeted banking rules designed to take into

account a bank’s specific business model, size and risk – what is

often called the proportionality principle. A “one-size fits all

approach” doesn’t work. A proportionate approach does. If policy

fails to apply this “tier-based” approach, expect the gap to widen

between different groups – rural or urban – benefiting from the

fruits of globalisation.

Third, promote models of financial inclusion and financial education.

To bridge the globalisation “gap”, efforts must be made to boost

access to basic banking services and change hearts and minds so

people feel a want and need to access them. From their start in the

19th century, savings and retail banks have always used financial

education as a path to help people take control of their lives.

The very reason for their creation was to include the working classes

into the formal economy. To date, these “self-help” roots remain

part of our DNA. Financial education and financial inclusion can

only work if governments, citizens as well as banks like ours work

together. I can ensure you that the WSBI members are ready to do

their part.

WSBI and its members made clear to policymakers these three

points throughout the day. We think our efforts will pay dividends

both in the short term and longer term, creating the right policy

approach to help us be a part of the solution to build more

sustainable, growing and cohesive local economies within a

globalised world. That‘s something the world’s citizens crave.

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Learn more about the G20 eventat https://bit.ly/2E4hweF or byscanning this QR code.

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Financial inclusion, economic andsocial development

ESBG PRESIDENT FAINÉ ADDRESS TO WSBI G20 EVENT

ESBG President Isidro Fainé Casas addressed an audience ofmore than 400 stakeholders attending WSBI G20 conferencein Buenos Aires, 21 March. His remarks, translated fromSpanish, follow.

Dignitaries,

Dear Colleagues,

Ladies and Gentlemen,

It is indeed an honour for me to address you all at this conference

hosted by the World Savings and Retail Banking lnstitute – the WSBI –

within the framework of the G20, chaired by our host country,

Argentina, and in close collaboration with the lnter-American

Development Bank, the IDB.

Before starting my presentation, I would like to express my

gratitude, especially to the Banco de la Nación Argentina, and its

chairman, Javier González Fraga for hosting our conference today

in Buenos Aires, such a hospitable and universal city.

I would also like to highlight all the support Javier has given us to

organise this event, just one more example of your permanent

collaboration. Thank you very much for the involvement you have

shown in this common endeavour. An old proverb says: “If you want

to go quickly, walk alone, But if you want to go far, go together”.

The WSBI, as the representative of the community of banks

committed to economic and social sustainability, wants to go far,

as far as we can, along the path of inclusive social progress. That is

why we are pleased to be able to travel this road in the company

of public institutions. In this sense, the Argentine Presidency of the

G20 is excellent news that fills us with satisfaction and pride.

Moreover, it is an excellent opportunity for us, given that we wish

to contribute to the achievement of the G20 objectives by

advancing human development and the overall quality of life.

We are pleased to see that one of the main objectives the Argentine

Presidency established, and on which we all concur, is to promote

fair and sustainable development that creates opportunities for all

and that enables us to take advantage of the great economic

potential of Latin America and the Caribbean to advance towards

a powerful industrial development with the capacity to create

employment that will help us to eradicate, as much as possible,

social exclusion and poverty.

In the face of this noble and difficult challenge, the members of the

responsible international banking community cannot stand still.

That is why the WSBI has wanted to set up a “partnership with the

IDB”, whose objective is, in fact, to promote economic growth and

integration in Latin America and the Caribbean that is sustainable

in terms of the environment and socially, with the goal of achieving

a lasting reduction in poverty as well as the aim of advancing

towards greater social fairness.

The members of the World Savings and Retail Banking Institute fully

share these objectives, and we want to be a leading player, at an

international level, in the preparation of proposals, design of

initiatives, and execution of specific programmes.

We can contribute, through our organisation, by providing the

necessary credit capacity, to generate microcredits for families with

pressing needs and provide micro-entrepreneurs with credits that

allow them to create different kinds of businesses, such as grocery

stores, shoe shops and barbers, among others.

We can also provide commercial loans for SMEs, which help them

settle pending payments while enabling them to have a permanent

proximity to all our citizens, families, companies and institutions, be

they customers or not.

And we do all this by being permanently ready to collaborate with

them in both their more far reaching projects as well as their most

urgent needs. We can offer them our extensive team of experienced

professionals and our networks of branch offices and ATMs, which

offer all kinds of traditional services, as well as the most advanced

digital and mobile banking. Where possible, we wish to distinguish

ourselves with a high degree of excellence in quality of service and

personal treatment. I always say that the best “social work” we can

do in our companies starts with good personal treatment of all our

customers in every branch office and call centre.

In addition to the opportunities that are opened up with the

Argentine Presidency of the G20, there is another favourable factor

that we must take advantage of in order to continue advancing

towards our social development goals. I am referring to the

favourable environment for economic growth that we enjoy on an

international level: solid, extensive and balanced growth, although

not exempt from some endogenous and exogenous risks.

The remarkable global expansion that is expected over the next few

years will also favour all Latin America and the Caribbean, with a

somewhat slower, but relevant recovery. We estimate that the

growth in the region will approach 3% in 2019 and in some specific

countries it will easily surpass that figure.

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As far as Argentina is concerned, I believe that a window

of opportunity has clearly opened up, thanks to the

commitment to rigor, economic orthodoxy and legal

stability. I am convinced that this formula will lead you,

not only to successfully lead the G20 this year, but also

to inspire and disseminate a development model that will

promote a lasting productive economy, social sustainability

and financial inclusion to take advantage of the clear

opportunities afforded by this dynamic and promising

American continent – which is very dear to me.

Within the framework of the topics covered in this

Conference, I would like to present some reflections on

the economic and social value of retail banking, its

essence, its challenges but also its strengths and

opportunities. I believe that, in retail banking, everything

is based on three very clear principles:

n Mutual trust of all our stakeholders: customers, shareholders,

employees, suppliers, and institutions, both private and public;

n Excellence in the quality of the personalised service we offer; and

n The implementation of all the useful technological innovations

in the banking business, respecting the role and the value that

all our points of sale provide.

Technological transformations will continue at a fast pace and on

multiple fronts at the same time. We must prepare for them.

I would simply like to mention some fields that can, directly or

indirectly, affect the business models of banking: mobile telephony,

5G, cloud computing, blockchain, big data, social networks,

augmented reality, virtual reality, robotics, virtual assistants, and

above all, artificial and cognitive intelligence. lt is a list that, without

being exhaustive, overwhelms.

But there is a primordial premise: “without trust there is no

business”. And the trust of our customers is gained day by day,

continuously and particularly in the most difficult times by accepting

responsibility, understanding the customer’s situation and being

decisive in our decisions.

As you all know very well, our activity is developed on those

principles. As in any organisation, we direct ours towards the

achievement of certain objectives. For me, in our field, there are

four priority objectives that can be expressed in terms of:

1. The profit and loss account: we must be profitable to give

continuity to the company;

2. Market share: we must survive by growing while being efficient;

3. The right quality of service: (relentlessly seeking excellence to

provide a better valuable service for our customers); and

4. Social contribution: which beyond any doubt helps to improve

the social plights of our society.

I would like to add that these four goals should manifest themselves

in each of our actions. They are by no means easy to achieve.

They have never been easy. But the future that lies ahead holds a

series of particularly complicated challenges, which we will have to

face without any hesitation:

A. Defending the savings of our customers: for me, it is of utmost

importance that our customers are at ease when they entrust us

with their assets. Nowadays, with the international environment

of such low interest rates, we have to avoid the temptation of

taking reckless risks, either for us or for our customers. And I am

pleased to say that in Spain, after getting through the greatest

crisis in history, our clients have recovered, as you say here,

all their “dough”/money.

B. Fighting against financial exclusion and poverty. They will

continue to be very serious problems. lt is true that globalisation

and the technological revolution are positive forces for society,

but the speed of change gives rise to winners and losers

among countries, cities, neighbourhoods, trades, social groups,

generations, in other words among people. Many run the risk

of being left behind. Therefore, our social commitment and our

contribution to social cohesion will be just as necessary as in

the past or even more so. >

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ESBG President Isidro Fainé

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C. Another priority objective is to achieve a better banking regulation,

which involves rationalising the excessive regulatory burden.

Our aim is to attain a level playing field that promotes financial

systems that are both efficient and fair.

D. Lastly, taking advantage of our customer relationship model,as against other models based on disintermediation and/or

virtual technologies. This last challenge is key to the continuity

of retail banking.

As I have already pointed out, we are immersed in the greatest

technological revolution known to man. Boosted by the digital

transformation.

The change we are experiencing is exponential and global in scope.

I am sure it will continue at a dizzying pace in the future.

Retail banks have to compete with the “Fintechs” and “Bigtechs”,

the big technology companies that dominate the world information

market and that you all know very well.

I am convinced that we will overcome the challenge if we are able

to capitalise on our great strength, which is the trust our customers

place in us. lf each of our employees has a good relationship with

our customers and strengthens the human and professional bonds

with them, then we will be unbeatable in our banking profession.

This is precisely my experience and personal conviction after dealing

with customers for over 50 years.

I will continue talking about our strengths as socially responsible

retail banks. In my opinion, we have some very powerful points in

our favour going forward, in both the short and long term. I believe

there are sound reasons for optimism that will enable us to turn

challenges into opportunities.

I will now focus on three factors: 1. Profitability; 2. Business model;and 3. Mission.

1) With regard to the first, profitability, it is quite clear to me that

we have enough time ahead of us to generate profitable

business. I trust that we will be able to take advantage of it.

The reduction in the intermediation margin – whose causes are

well known by all – can be offset if we achieve critical mass that

lets us operate with lower costs and attain all the scale

economies.

I propose two mechanisms to increase scale:

n Agreements between financial institutions, and

n Agreements through concentrations that enable us to keep

our brands and our culture.

Apart from these scale economies, we must, in turn, generate

scope economies through a broader range of products and

services that we can offer our customers and that increase

revenues via fees and/or with companies from within and

outside the group. For example, the entire range of: insurance;

investment funds and services; pensions; stock exchange

operations; foreign trade or real estate information services.

2) The second strength that I would like to highlight has to do

with our unique business model, whose backbone is financial

inclusion.

Socially responsible retail banks are suppliers for those who live

in: rural or remote geographical areas; marginal neighbourhoods

of large cities; or for those who, because of their youth or on

the contrary, due to their advanced age, do not have access to

other types of banking entities; micro-entrepreneurs who cannot

present more guarantees than their own talent and enthusiasm.

We want to fight against financial exclusion and we know how

to do it, after many years of experience in this endeavour. We

know the best formulae to do it effectively, profitably for the

bank while adding value to customers that other entities

disregard.

I would like, if I may, to summarise my personal experience in

CaixaBank, with the creation of a new brand, Microbank in 2007

– a mini-bank within a bank – with hardly any structure, as if it

were just another service, but using the bank’s own network of

almost 5,000 branch offices, which allows it to cover every inch

of the country. 2017 was its 10th anniversary, 10 years of

experience.

I will now present a summary of its activity during this short

period: More than 4,000 million euros granted in credits; 1,400

million euros in business projects and 2,600 million euros in

family aid, with positive results from the first year and an average

annual profit of about 25 million euros.

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The recorded losses on overdue loans amounted to 4.25%,

a figure that, with the European lnvestment Fund grants, fell to

2.87% – an excellent result considering that all operations are

granted without guarantees.

As a result, Microbank’s delinquency ratio – which stood at

3.68% at the close of 2017 – has always ranged between half

and one third of the average for Spanish banks.

On the other hand, ESADE, the prestigious Business School in

Barcelona – which is managed by Jesuits – has estimated that

the financing undertaken by Microbank has contributed to the

creation of almost 200,000 jobs, not an insignificant figure,

especially if you take into account the financial crisis and the

destruction of jobs during that period in Spain.

I wanted to present this real case to you, one in which I have

been heavily committed to from the beginning, because I firmly

believe it is an effective way to achieve profitability, while

fighting against financial exclusion. Should you be interested in

knowing more about Microbank, I will be delighted to provide

you with the necessary contacts.

3) Moving on to the third strength I wish to highlight, it is, as I am

sure you will agree, the most decisive of all. I am referring to the

social commitment, which stands at the highest possible place:

the mission of our banks.

Our social commitment acts as a very powerful motivating force

for all our stakeholders: customers, shareholders, employees,

suppliers, and lnstitutions. lt is also the axis on which the

objectives and actions of our stakeholders are aligned. I would

like to remind you that our association – which includes both

the ESBG and the WSBI) – champions the 3 “Rs” banking model:

Retail, Regional or Rooted, and Responsible.

And it is precisely this last “R”, where our commitment to society

lies. This translates into one of the main sources of development

aid and equal opportunities among the most vulnerable groups.

As chairman of the ESBG, I am pleased to inform you that the

contribution to the Social Work of our European Associates is in

the order of 2 billion euros per year – without counting the

corporate taxes we pay.

These funds are devoted to social and cultural programmes,

medical research and study grants, the fight against child poverty

and the creation of jobs, personal attention to the elderly and

the sick, and the defence of cultural and historical-artistic

heritage among other activities.

This special sensitivity towards social problems, and our

involvement in the efforts to solve them, is what differentiates

all the entities gathered here today. We try, with our attitude and

our activities, to contribute to improving our reputation while·

emphasizing the important social function that we carry out. Of

which we should all feel very proud.

Before I wrap my speech up, I want to insist once again on the fact

that local banks and savings banks are always willing to support

those activities and initiatives, whether public or private, that pursue

human development and the improvement in the quality of life.

This commitment must be made known to public institutions and

should be included in such international debates and forums as

significant as the G20, held this year under the presidency of

Mr. Macri’s Government, which is the main reason we have

gathered today in Buenos Aires.

Finally, I would like to address you, members of such “meaningful”

organisations, using the values of the ESBG and the WSBI, and in

coherence with those values. I want to say that, in my opinion, the

time has come when we are all obliged to give of ourselves and

demonstrate to society and the authorities of each country, with

projects and facts that the solutions to our big problems exist and

they are within our reach. We just need to discover them and give

them life, life to continue offering all our fellow citizens: the hope

of a job; the opportunity of feeling useful; enough energy to forge

with their daily effort: a life of meaning; a family, and almost surely;

a more just and equal society. lf we do this, we will not only

accomplish the objectives of the G20, but we will also feel fulfilled

as professionals and as people.

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Learn more about the G20 event,download the speeches and newsstories at https://bit.ly/2E4hweFor by scanning this QR code.

WSBI makes further progresson UFA 2020 pledge

WSBI FIGURES IN-LINE WITH WORLD BANK FINDEX DATA SHOWINGFINANCIAL INCLUSION 'ON THE RISE' GLOBALLY

WSBI progress towards reaching its UFA2020 commitmenttook a further leap in 2017, the global association of savingsand retail banks said on 24 April.

Latest available data compiled by the Brussels-based institute point

to 234 million new clients as of 31 December 2017 from the UFA

commitment starting point set at year-end 2014. That means

WSBI's some 100 members had 1.674 billion clients as of year-end

2017. Relatedly, the number of new transaction accounts provided

by WSBI through 2017 stood at 2.457 billion, up 342 million based

on the end-of-2014 level.

Commenting on the progress made, WSBI President Heinrich Haasis

said: “It's another strong result from WSBI members who serve

customers in close to 80 countries. They have nearly met in 2017

their UFA 2020 goal of 1.7 billion customers and 400 million new

transaction accounts, which was foreseen to be reached by the end

of 2020.”

New Findex report shows global financialinclusion progress

The news comes as the World Bank Group updated in April its

FINDEX report, which showed financial inclusion is on the rise globally,

accelerated by mobile phones and the internet. An estimated

1.7 billion adults remain unbanked, down from 2 billion in 2014.

Nearly half of the world's “unbanked" live in seven developing

economies: Bangladesh, China, India, Indonesia, Mexico, Nigeria,

and Pakistan. The FINDEX data show that 56% of all unbanked

adults are women and that half of unbanked adults come from the

poorest 40 percent of households within their economy, the other

half from the richest 60 percent. The data was presented in April

at the IMF-World Bank Spring Meetings in Washington.

A closer look at WSBI data

The 2017 year-end update showed a slightly faster growth rate on

the client and account fronts as compared with WSBI data released

in 2016 and 2015. That's good news, as progress made for the

2015 and 2016 time periods had already exceeded UFA 2020

commitment projections both in terms of total numbers of

customers as well as transaction accounts.

WSBI in 2016 announced 136 million new clients were signed up

as of 31 December of that year from the UFA commitment 2014

year-end starting point. WSBI members had 1.57 billion clients as

of year-end 2016. Relatedly, the number of new transaction

accounts provided by WSBI through 2016 stood at 2.35 billion,

up 236 million based on the end-of-2014 benchmark. In 2015,

WSBI reported that clients reached by its members was 1.55 billion,

while transaction accounts grew to 2.33 billion for year-end 2015.

Haasis concluded: "Progress by WSBI

members has accelerated in 2017

compared with the past three

reporting periods. Our overall

progress is in-line with the FINDEX

data update. Like that data, WSBI

data and anecdotal research

gathered show innovation and

digitisation are forces driving efforts

to tackle the financial inclusion

challenge. Banking breakthroughs on

the digital front go beyond sign-up

of new clients and accounts, but also

can boost chances that people

actually use the accounts."

10 | News & Views MAY 2018

FEA

TUR

E

WSBI’s commitment to UFA 2020 Goal

WSBI is a member of the Coalition of Partners that support the

World Bank Group’s Universal Financial Access (UFA) 2020 Goal.

At its meeting in Washington, D.C., on 23 September 2015,

the WSBI General Assembly announced a new UFA 2020 numerical

commitment that aims to reach 1.7 billion clients and 400 million

new transaction accounts by the end of 2020, based on the current

membership. This pledge reinforces WSBI’s continued engagement

with its ‘Account for Everyone’ goal launched by the trade body in

2012, which it re-endorsed in 2015 at the World Bank spring

meetings. The UFA commitment also forms an integral part of the

Washington Declaration issued the day after during the 2015 WSBI

World Congress .

WSBI recognises that achieving universal financial access by 2020

requires a collective effort. The institute is honoured to be part of

the initial Coalition of Partners who have been invited to contribute

to this global cause.

WSBI's global reach

An international banking association, WSBI brings together savings

and retail banks from around 80 countries representing the interests

of approximately 6,000 banks in all continents. As at year-end 2014,

members served a baseline total of 1.3 billion customers, which

includes providing accounts for the poor worldwide. It remains fully

committed to the ‘Account for Everyone’ goal adopted by its

members in May 2012 when reaffirming a deep commitment to

financial inclusion set out in our Marrakech Declaration.FE

ATU

RE

Learn more about WSBI'scommitment to UFA 2020 byscanning this QR code or by goingto https://bit.ly/2Iea6eM

11 | News & Views MAY 2018

Highlights: WSBI Conference duringG20 in Argentina

G20 AND LOCALLY FOCUSED BANKS – GOOD FOR SUSTAINABLE SOCIETIES

More than 400 people attended a WSBI conference held on21 March in the context of the 2018 G20 Argentina presidency.Held at the Casa Central Banco de la Nación Argentina inBuenos Aires, it explored the important role locally focusedWSBI member banks have to play in the stability of thefinancial system at national and international levels.

Conference participants especially explored pressing issues for retail

banking in the framework of G20 Argentina Presidency priorities,

such as better regulation, financial inclusion, digitisation and

sustainable finance. The event also fostered a constructive dialogue

between industry and policy-makers, as well as discussions and

exchanges with like-minded organisations.

WSBI President Heinrich

Haasis set the stage for the

one-day event, providing a

welcoming address. He

noted: “The event hopes

for constructive dialogue to

occur between my

colleagues from WSBI-ESBG

member banks, along with

stakeholders and policy-

makers. The event also

gives us a chance to see

how some of the G20

themes from the Argentina

presidency fit into our

banking model.”

He also provided food for thought for policymakers when designing

policy that affects their banks. He urged that policy help boost

access to traditional bank financing for SMEs and put in place

targeted banking rules designed to take into account a bank’s

specific business model, size and risk, avoiding a “one-size fits

all approach”. He also stressed the need to promote models of

financial inclusion and financial education.

Diego Prieto Rivera, president of the WSBI Latin America and the

Caribbean Regional Group and president of Banco Caja Social,

Colombia, also addressed the audience in the Argentinian capital.

He noted that savings and retail banks in the Latin American and

Caribbean region have a deep desire to serve their communities

with financial solutions that support the real economy – households

and micro-, small- and medium-sized enterprises.

Locally focused banks can help close the “globalisation rift”,

he added, but to do so, it requires that regulation takes into account

their specific nature as well as local nuances within domestic

economies and financial systems. Regulation must also connect the

dots between developing economies and the global economy,

international capital markets and financial systems of developed

countries. He noted that the financial crisis was essentially a crisis

of the developed countries that had little influence on the financial

systems of developing countries, but much more their economies.

A consequence of the crisis was that foreign direct investment

dried up in many countries as the “flight to quality” took hold.

This complicated the work of the G20.

Isidro Fainé, president of

Fundación Bancaria “la

Caixa” in Spain, who also

serves as ESBG president,

provided a keynote address

on financial Inclusion,

economic and social

development. He explored

two G20 themes: the future

of the workforce and infra -

structure for development.

Financial inclusion, training

and education and skills

acquisition to address

workforce challenges are

important to WSBI members in the Americas, where some

130 million people now seek banking services from them.

Examples from the region include those from Peru member

FEPCMAC (Federacion Peruana de Cajas Municipales de Ahorro y

Crédito), BancoEstado in Chile, El Salvador’s Fedecrédito’s and

Banco Caja Social in Colombia, which are featured in a new WSBI

publication “Banking.Serving.Thriving.: The impact savings andretail banks make to boost the real economy while giving back tothe communities they serve in Latin America and the Caribbean.”

G20

12 | News & Views MAY 2018

See Mr. Fainé’s address starting on page six of thisedition of News & Views.

Javier Gonzalez Fraga, Chairman, Banco de la Nación Argentina .

Panel discussions

Dialogue among stakeholders began after opening addresses with

a breakdown of the G20 presidency and how it applies to Latin

America and the Caribbean region. Exchange took place between

Andrés Neumeyer, deputy general manager of economic research

under the Argentina G20 presidency; Business 20 Chair Daniel

Funes de Rioja; IDB Invest Chief Investment Officer Gema Sacristán

on behalf of IDB President Luis Alberto Moreno; and Banco de la

Nación Argentina Chairman Javier Gonzalez Fraga.

The first panel explored better regulation for better inclusion,

bringing together Diego Prieto Rivera as moderator with Gabriel

Bizama, G20 director for financial inclusion from the Argentinian

treasury ministry; Yolanda Cue López, deputy general director of

financial inclusion at Banco del Ahorro Nacional y Servicios

Financieros (BANSEFI); José Francisco Demichelis, senior financial

markets specialist at the Inter-American Development Bank, IDB

Group; and Lucas Llach, a vice president at Banco Central de la

República Argentina , the South American country’s central bank.

The second panel took a digital path, looking at how best to build

a financial business ecosystem in the digital age. IFC’s SME Finance

Forum CEO Matt Gamser led the discussion with panellists

that included Afluenta founder and CEO Alejandro Cosentino;

Above and Beyond (A&B) CTO and FINCONECTA/FINFORWARD’s

Mauricio Lorenzetti; Esteban Pérez Caldentey, chief of the financing

for development unit at the Economic Commission for Latin

America and the Caribbean (ECLAC); and Fedecrédito of El Salvador

President Armando Rosales.

Panel 3 focused on sustainable finance, with Silvia Pavoni,

economics editor of The Banker magazine moderating exchange

between Maria Paz Uribe Estrada, head of international banking at

Findeter in Colombia; CaixaBank International Relations Director

Joan Rosás, and Carlos Serrano, who leads business development

lead for the region at the International Finance Corporation,

World Bank Group.

Why the conference is important

Locally focused banks support the real economy, primarily through

lending to small- and medium-sized enterprises and private

households. They have the necessary in-depth market and customer

knowledge and the required customer proximity to combine security

and dynamism, reliability and competitiveness. They represent a

diversity of business models and market proximity via decentralised

structures. In this way, locally focused banks can provide an

effective and granular distribution of risks in an internationally

connected economy.

It is essential that the decisions and initiatives of the Argentine

presidency of the G20 take sufficient account of locally focused

institutions.

This primarily includes:

n strengthening access to traditional bank financing for small and

medium sized businesses;

n implementing targeted regulation, oriented towards a bank’s

business model, size and risk;

n promoting models of financial inclusion and financial education.

Providing a conference wrap up, WSBI Managing Director Chris De

Noose concluded: “I think that the conference allowed us to show

that WSBI and its members can be a force that helps make our

society more sustainable. I trust that we can continue this quest

going forward.”

13 | News & Views MAY 2018

G20

Learn more about the G20 event,download the speeches and newsstories at https://bit.ly/2E4hweF orby scanning this QR code.

WSBI publishes positions for G20decision makers

WELCOMES ARGENTINA FOCUS ON FUTURE OF WORKFORCE,INFRASTRUCTURE

WSBI released on 18 March its Institutional Positions to G20decision makers. The 16-page document follows closely thethemes of this year’s G20 Argentina presidency: the futureof the workforce, agrifinance and infrastructure.

Titled WSBI’s Institutional Position to G20 decision-makers: BuildingConsensus for Fair and Sustainable Development, it welcomes the

G20 Argentinian presidency call to continue the G20 German

presidency’s initiative to further strengthen the international

financial architecture and global financial safety net.

The G20 has highlighted risk associated with volatility, macro -

prudential measures and capital flow management tools, and

pinpoints seven policy areas of particular interest to WSBI, including

the appropriate regulation for better economic growth, the pressing

need for impact assessment, proportionate legislation and SME

financing and de-risking.

The future of work: unleashing people’spotential

Financial education was addressed in the WSBI paper as a way to

address the Argentinian presidency’s position on the importance of

providing citizens with tools and skills, empowering them to shape

their own futures. The association notes that financial education

should be a “continuous process that constantly adapts to the

changing social, financial and political context, and where several

actors from different sectors of society shall play a key role in

improving its efforts.”

Policymakers should build upon the experience of savings and retail

banks, including public banks, for the development of financial

inclusion policies, for the promotion of an entrepreneurial culture,

and to improve the access and the use of financial services by

vulnerable populations.

The WSBI position paper also flags policies needed to embrace the

opportunities and address the challenges presented by technology.

It also touches on promoting the development of inclusive finance

and contributing to the sustainability of inclusive finance. It also

looks at the need for developing digital skills, where it calls on policy

that ensures that everyone has the right skills for an increasingly

digital and globalised world, which is essential to promote inclusive

labour markets and spur innovation, productivity and growth.

Financial inclusion and financial education initiatives can also

indirectly empower citizens regarding their digital skills. The paper

outlines how financial inclusion needs to be viewed from a gender

perspective, especially for women. WSBI also sees need for greater

effort to include migrants in the formal banking system. The work

of development financial institutions also will be important in the

workforce development puzzle. WSBI sees the Inter-American

Development Bank Group (IDB Group) as a strong ally for WSBI and

its members in this area.

Infrastructure

WSBI agrees with the G20 approach to developing infrastructure

as an asset class, particularly by improving the instruments designed

to fund infrastructure projects. To ensure more investment, it calls

for ensuring a level playing field among finance providers for long-

term financing projects. WSBI added that in the area of blended

finance, WSBI welcomes and fosters public-private partnerships in

the framework of blended finance strategies. Working with

development funders via strategic partnerships – be it foundations,

development finance institutions, World Bank Group and actors

alike – forms the core of sustainability-minded banks.

Improving agri-finance to reach a sustainablefood future

On agri-finance, actions are needed to increase both public and

private investments in agriculture or agri-aligned sectors. Recent

innovations have also paved the way for several new and promising

delivery mechanisms for agri-products and services and are creating

important opportunities for the sector to grow. To be successful

these solutions need to be supported by governments through the

development of enabling regulatory frameworks and policies which

support climate resilience. Without access to finance, rural

smallholders are extremely limited in their ability to expand and

meet the rising demand for agriculture.

WSBI provides a laundry list within the paper of policy and measures

required to support agriculture, including the need to support the

availability of lines of credit through both public and private

financial institutions for smallholders, providing agricultural

information on insurance markets, and incentivise banks to extend

partial credit guarantees to farmers.

WSBI position paper shared at WSBI conferencein Buenos Aires

The paper complements outreach and advocacy efforts done in

March by WSBI. The association of savings and retail banks,

representing 6000 banks in 80 countries, also held a conference on

21 March in Buenos Aires on the sidelines of the G20 meetings.

G20

14 | News & Views MAY 2018

WSBI joins B20 task force for second straightyear

WSBI also takes part in G20 through B20 task force work. WSBI

received news recently that will be a member once more in the B20

Financing Growth & Infrastructure Taskforce under the new

Argentinian presidency, the second time it will take part in the body.

WSBI advocated to the B20 in 2017 its ‘better regulation and

evidence-based regulation’. Efforts paid off, as the G20 committed

at the Hamburg summit held last year that it would work to finalise

the Basel III framework without further significantly increasing

overall capital requirements across the banking sector, while

promoting a level playing field. It also supported the necessity to

analyse the effects of financial regulatory reforms and the

structured framework for post-implementation evaluation.

15 | News & Views MAY 2018

G20

Download the G20 InstitutionalPositions Paper athttps://bit.ly/2J4VvQH or byscanning the following QR code.

G20 Declaration

BUILDING CONSENSUS OF FAIR AND SUSTAINABLE DEVELOPMENT

WSBI released in March a declaration addressing policy themesoutlined by the G20 Argentina presidency. The declaration isbased on the document titled ‘WSBI Institutional positiontowards G20 decision-makers’ also published in March.

Leave nobody behind in the digital age

Economic research shows the benefits of globalized trade relations.

However, globalization also increases economic and social inequality,

since some people are more skilled and have access to better

resources and infrastructure than others have. The digital revolution

further exacerbates this inequality. Individuals, organizations or

companies without the required mindset; the necessary skills or

the indispensable financial and logistical resources are at risk to be

left behind.

An inclusive, fair and sustainable financial system that offers all

households and companies appropriate access to financial services

is a key element for the stability of the financial system and the

global economy. Locally focused financial institutions such as the

WSBI members can help bring a maximum of people in the financial

system. Indeed, WSBI members are close to their customers and

have a long-term perspective. They are ideally placed to help people

better navigate their financial future in an inter-connected world.

Same risks, same rules

In order for locally focused banks to cater to their clients’ needs in

an efficient way, banking regulation should take into account the

principle of proportionality. Efficient regulation needs to consider a

bank’s business model, size and risk profile. Currently, local banks

in particular are hampered by one-size-fits-all-regulation.

A much-needed framework for digitalized finance needs to create

the right environment for innovation in the financial sector and

protect both companies –incumbents as well as newcomers - and

customers. Regulators need to act on data protection, e-identity,

and cyber security, among others.

Strengthening access to traditional bankfinancing for small and medium-sizedbusinesses

The role of banks in fostering investment should be well recognized.

The capability of banks to fund investment should not be impacted by

the regulatory framework such as the rules on capital requirements

and liquidity. These rules increase significantly minimum capital

requirements for banking institutions, especially for smaller banks.

WSBI encourages regulators to design policies that could boost

bank lending for infrastructure projects and that involve SMEs.

In the developed and the developing world alike, SMEs are able to

rapidly transmit innovative solutions to the global economy.

Small and medium-sized enterprises representthe backbone of the world economy.

In order to remain competitive, SMEs absolutely need to have

unrestrained access to traditional bank financing. Bank financing is

not only the most accessible source of capital, but it guarantees the

SME also the competent advice of the financial adviser, especially

in the case of local banks. Indeed, local banks, such as the WSBI

members, are able to achieve an effective and granular distribution

of risks in an internationally connected economy.

Excessive regulation restricts the ability of banks to supply the real

economy with credit.

Promoting a policy framework for financialinclusion

Policy support is required to advance financial inclusion commitments

from all stakeholders involved. The goals must be to achieve a

stable, sustainable financial system, which offers appropriate access

to financial services for all households and businesses. This is the

key to sustainable, worldwide economic growth, which develops

from the bottom up and in which everyone can participate.

In this context, WSBI points to the far-reaching consequences of

de-risking. The most worrying aspect of de–risking is the fact that

citizens and businesses alike still need to make payments and if

traditional banking channels are no longer available, transactions

are likely to be forced into alternative channels, which may be less

well regulated.

In a certain way, de-risking represents a regulatory failure.

Financial education as a door-opener forinclusion in a globalized world.

Ensuring that everyone has the right skills for an increasingly digital

and globalized world is essential to promote inclusive labour

markets and spur innovation, productivity and growth.

WSBI particularly welcomes initiatives to enhance digital skills of

the youth, such as the digital opportunity initiative launched by the

European Commission, aimed at boosting digital skills on a cross-

border basis through internships.

WSBI also points to the importance of financial education for all

segments of the population: young people, employees but also

business starters. Financial institutions, public authorities and

non-governmental organizations should collaborate to make sure

citizens have access to objective and accessible information

throughout their life cycle.

G20

16 | News & Views MAY 2018

WSBI joins B20 task force for secondstraight year

FOCUS ON FINANCING GROWTH & INFRASTRUCTURE

WSBI received news earlier this year that it will be a memberonce more in the B20 Financing Growth & InfrastructureTaskforce under the Argentinian presidency.

This is the second time WSBI will take part in the body. WSBI

participated in the task force for the first time during the 2017

German presidency, where it advocated its “better regulation and

evidence-based regulation” to the B20.

Efforts paid off, as the G20 committed at the Hamburg summit

held last year that it would work to finalise the Basel III framework

without further significantly increasing overall capital requirements

across the banking sector, while promoting a level playing field.

It also supported the necessity to analyse the effects of financial

regulatory reforms and the structured framework for post-

implementation evaluation. WSBI looks forward to working

with other B20 working group members to develop policy

recommendations.

About B20 Task Forces

B20’s trademark is the development of consensus-based concrete

policy proposals from the private sector with the objective of

generating more and better jobs, sustained growth and

development. The process involves the constitution of taskforces

(TFs) of around 100 business representatives of the entire G20 and

invited countries. After a seven-month period of discussions,

the B20 will be ready to submit its policy recommendations to the

G20 leaders. B20 Argentina proposed the Financing Growth &

Infrastructure Task Force along with seven others.

Financing Growth & Infrastructure(From B20 website)

Infrastructure has long been recognized by G20 leaders as a

fundamental driver for economic growth. Physical and digital

connectivity ensures inclusive, safe, resilient and sustainable human

settlements. The last decades have witnessed an extraordinary

urban growth and the trend is expected to continue, but adequate

infrastructure and a reliable energy matrix allow regional economies

to flourish, while digital infrastructure and collaborative efforts

allow innovation to occur in every community, fostering investment

and trade.

But most importantly, infrastructure is essential to guarantee a good

quality of life and, ultimately, to sustain the social contract between

communities and the state. Estimates indicate that between 3-4%

of the global GDP needs to be invested each year in infrastructure

to achieve the growth goals and projections of G20 countries.

According to estimates, in some regions like Latin America,

investment needs may reach 8% per year as the infrastructure gap

includes electricity access and drinking water coverage for rural

populations.

Yet still an extremely insufficient ratio of the world’s financial funds

is directed towards long-term infrastructure investment. This has

been a staple of past B20 discussions, but more needs to be done

and clear milestones need to be set to measure success.

17 | News & Views MAY 2018

G20

Learn more about the B20 atwww.b20argentina.info or byscanning this QR code.

G20 Argentina: Focus on futureworkforce and infrastructure

SAVINGS AND RETAIL BANKS PLAY A ROLE ON BOTH THEMES

A closer look at G20 and its importancewith WSBI’s Aimée Suarez.

The globally connected world and economy

is complicated, sometimes turbulent and

increasingly leading to people calling for

change in how it is managed and how it

should better benefit society. People are

wriggling out of the 10-year aftermath of

the financial crisis, and pockets of growth

appear in most places, including Argentina, the host of this year’s

G20. Two themes for this year’s G20 are especially relevant.

G20 key themes: the future of work,infrastructure for development

The first key issue is the future of work. The Argentine G20

presidency has stated that technological

change sweeping the global economies has

huge potential to improve our lives and

economies. Policy responses are needed in

the wake of technological changes that

should not “engender exclusion” and

“social backlash”. The hope is that through

coordinated policy, governments can

prevent these negative effects. Education

and training will play a big part. The second

key issue is infrastructure for development.As organisers rightly note, infrastructure

is critical to development. Infrastructure

investment has knock-on effects that boosts growth and

productivity. They correctly point out that infrastructure provides

not only physical access – via roads, bridge, but also schools and

hospitals – for citizens to seize the promise of the future economy,

but also digital access in the form of high-speed internet access that

provides a boost to local economies.

So what role does WSBI and its 6,000 savings and retail banks

play to address these two themes? The answer is threefold. First,

G20 provides a forum for WSBI and its locally focused member

banks to showcase to policymakers and stakeholders what they do

and how they impact local communities – and local economies –

when living in a globally connected world. Second, G20 gives us a

chance to engage with its implementing partners like the IMF, FSB,

the World Bank, OECD and the United Nations to take part in

consultations related to new policy initiatives, principles and

guidelines managed by the G20 partners. Third, the two G20 key

topics just mentioned align well with what locally focused savings

and retail banks strive to do every day to build the future:

an inclusive future. That means inclusive growth where everyone can

taste and benefit from the fruits of globalisation. In many regions,

WSBI members are the only financial institutions that continue to

cater to the financial needs of households, SMEs and local authorities.

Future workforce needs financial inclusion,financial education, digital skills

As recent data show inequality widening between rich and poor in

many countries around the world, people are looking for new ways

to narrow that gap. There are solutions. To start with, it begins with

being able to be a part of society economically and financially.

Financial inclusionThe future of the workforce depends on key areas such as financial

inclusion, financial education, and workforce education and

training. First, financial inclusion is a pathway to banking services

and economic prosperity. Savings and retail

banks, governments and international

bodies place high importance to it. Being

financially included – and digitally included

– means people are also plugged into the

social aspects too. That means easier access

to benefits from government agencies and

improving prospects to establish a micro or

small enterprise. That’s why it is especially

important to find frameworks that help

move people into mainstream banking

services.

Financial and digital educationSecond, financial education and financial inclusion. WSBI and its

6000 member banks worldwide also place much weight on

financial literacy and financial education to help unleash people’s

productive potential. On financial education, it is important to

provide citizens with tools and skills, empowering them to shape

their own futures. Promoting financial education for all citizens

worldwide and continue to carry out a wide range of initiatives

aimed at not only preventing social and economic exclusion, but

also providing citizens with a better knowledge of financial issues,

enabling them to make informed choices and to gain the adequate

skills for full insertion into the labour market. Financial education

should be an endeavour of governments, consumer-organisations

and financial institutions alike and should be available to citizens

from “cradle to grave”.

Policy can also address the digital divide too. When people are

armed with the skills to tap into the “digital wave” sweeping over

industries – including banking – then society benefits.

18 | News & Views MAY 2018

Aimée Suarez

The future of theworkforce depends keyareas such as financial

inclusion, financialeducation, and

workforce educationand training.

G20

It is also important that banks “deliver” on the digital front and do

so while delivering to all segments of the population. With the right

support from policymakers, policy can help, not hinder digitally led

financial inclusion efforts. To be financially included, people need

to be digitally savvy too. The G20 Argentina Presidency puts

digitalisation high on the agenda, which shows a willingness to

explore possible effects on financial stability and financial inclusion.

What is clear is that when people lack the required skills and

knowledge, including on the digital front, the chances of becoming

economically excluded rise. A sound public policy framework can

help address these needs. Financially excluded citizens should be

given the chance to improve their training and knowledge through

programmes for financing their studies via micro credits.

Economic development, social development,SME financing

On economic development, we agree with the G20 that infrastructure

will play a big role. The G20 identifies a worldwide infrastructure

spending gap, which is projected until 2035 to be around US$5.5

trillion. To close that gap, mobilising private investment will help,

including long-term financing. Developing infrastructure, including

financial infrastructure and physical infrastructure – like mobile

networks – should be addressed.

Policymakers should keep in mind the need by banks in developing

countries for long-term financing. When that is achieved, banks can

fulfil their social role.

Policy support is also required to advance financial inclusion

commitments, in terms of policy guidance and incentives, to

promote and accelerate the building of social credit schemes.

Coordination should be enhanced at national level to make sure

that central banks, finance ministers and banking supervisors work

hand in hand with national authorities and bodies in charge of

non-financial areas.

The savings and retail banks are ideally placed to finance the

businesses that will help build the infrastructure needed. We see a

big role for more mature SMEs in this respect. A healthy micro-

business ecosystem is also needed to ensure a robust business fabric

in a community. We help micro- and small enterprises in the early

stages of creation, when no other bank is willing to place a bet.

They do this through decentralised credit

approval procedures and the fact that we

don’t focus on short-term profits, but long-

term relationships and community need as

our banks are an integral part of the local

economic fabric.

To help entrepreneurial spirits, however,

people need to have the right skills. The lack

of entrepreneurial skills, such as business skills

and financial literacy, can be a barrier to

success for potential entrepreneurs. WSBI

members undertake efforts to help through

financial education programmes, including for

youth. Empowering vulnerable groups via

financial education remains one of WSBI’s

priorities. As such, WSBI members also

undertake efforts to empower women.

Socially responsible savings and retail banks

have role to play to tackle growing inequality.

By keeping in mind the values under the three Rs – retail, regional,

responsible – we can tackle the great challenges ahead.

19 | News & Views MAY 2018

Learn more about the G20 event,download the WSBI G20 declarationand more at https://bit.ly/2E4hweFor by scanning this QR code.

G20

ESBG: 2017 year in review,what’s ahead in 2018Last year was marked by further change, perhaps most notably as

digitisation continued to shape our lives, Brexit moved forward and

global forces shaped our world. Change in the banking was in full

swing, as the digital wave continued while EU and global banking

legislation remained a heavy load to bear. The low interest rate policy

regime lingered. With this backdrop, we acted more than ever.

We shared our locally focused banking model with policymakers

and stakeholders, especially our case for proportionality. We pressed

on with our case for subsidiarity and aiming to end the low interest

rate policy. We continued to push for a fair outcome on Basel

reforms. ESBG helped savings and retail banks thrive, focus on

providing service to local communities and boost job-creating SMEs.

Prudential legislation

Prudential topics remain a lingering top policy priority at international

and EU levels. Towards the Basel Committee on Banking Supervision

(BCBS), ESBG – as well as EBIC – reiterated several times its position

in the context of “Basel IV”, underlining the importance of a good

and sensible agreement without undermining neither the IRB

models nor the standardised approach. ESBG remains highly active

in following the adoption of the Risk Reduction Measures package,

with specific attention to the resolution part.

European Supervisory Authorities

A notable action in 2017 was the ESBG reply to the European

Supervisory Authorities’ operations consultation – known as the

ESAs review. In our response, we highlighted the need to keep

the funding structure in line with the role of the authorities as

responsible for the public good and accountable to the legislator.

ESBG also pointed out some shortcomings about the functioning

of these authorities, accompanied with some constructive

suggestions in terms of governance, mandate and tools.

Proportionality: front and centre

Proportionality remains high on the agenda of ESBG and European

Union – including at global level – as illustrated by the recent

Financial Stability Institute report and the IMF work stream. ESBG

and sister association WSBI seek to convince regulators and

supervisors to apply it. The risk-reduction package is currently the

main vehicle in the European Union for this purpose. Efforts are

being made towards ironing out the proportionality concept in the

amendments to the proposal. Support from various sources –

academic, economic, political – is being sought on this concept in

the interest of the savings and retail banks model.

Capital Markets Union

The mid-term review of the Capital Markets Union initiative was

published on 8 June 2017. The review consists mainly of a stock-taking

exercise on achievements on prospectus review, securitisation,

venture capital and social entrepreneurship funds. ESBG continuously

reiterated the crucial role of the banking sector in this context and

participated in the industry-led initiative on SME feedback. ESBG

has also developed contacts and a position on sustainable finance,

which will fuel the reports expected from the Commission’s high-

level expert group on sustainable finance in the CMU context.

Action Plan on Consumer Financial Services

The action plan on consumer financial services is another pillar

of the European Commission’s plan for

improving cross-border consumer protection

and service quality. While being overall

positively assessed by ESBG, cross-border

e-identity checks, common credit worthiness

assessment standard, regulatory treatment

of FinTech, switching enlarged to retail

financial services products and quality

comparison websites are the areas where

ESBG has started reflecting upon and

sharing its preliminary thoughts through

contacts with the decision-makers – in

particular the Commission and interested

MEPs. On payments-related actions, ESBG

has responded to the Commission’s

consultation, indicating that there is no

need to expand the current cross-border

regulation to non-euro currencies.

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Charter for Responsible Business

The Charter for Responsible Business was updated this year.

It shows our commitment to socially responsible banking and

sustainable development with a ‘digital dimension’. A section

addresses the reality of digitisation, placing focus on client

protection, inclusion and tackling exclusion in multiple ways.

Digital change: Innovation move forward

The digital sphere affected banks in 2017. ESBG made considerable

efforts to help banks unleash digitally led innovation in their banking

business models through innovation events. We held innovation

workshops in Brussels and the business forum in Barcelona, which

brought members together to shape the future of 21st century

banking via best-practice exchange. ESBG experts work on several

digital work streams, supporting policy that fuels innovation

through a level-playing field and keeps in view customer protection.

Payments (PSD2 and RTS)

Payments was an important topic during 2017 as well. With the

PSD2 due to be transposed into national law in January 2018, the

industry was eager to get more clarity on the Regulatory Technical

Standard (RTS) on authentication and communication. Whilst the

initial proposed text from the EBA contained a clear ban against

screen-scraping, the Commission decided to introduce a fall-back

option based on screen-scraping. This led to strong reactions from

ESBG and the banking industry. Based on this, the Commission

introduced the possibility of an exemption from having to provide

the fall-back option subject to conditions. ESBG is involved in the

group to help set the criteria for those exemptions.

Cybersecurity

Last but not least, cybersecurity got increasing attention during

2017, and the Commission even dedicated a specific ‘cybersecurity

month’ to this topic. ESBG welcomed the Commission’s set

of measures to build strong cybersecurity in the European Union.

Achieving cybersecurity through prevention and deterrence, detection,

and last “remedy and repression” is the key determinant to a digital

society. Cybersecurity is high on the ESBG agenda for 2018.

Meetings with high-level EU policymakers,stakeholders and standard-setters

WSBI-ESBG held meetings this year with EU and international

institutions and policy makers. At European level, we met with EU

Commissioner Dombrovskis, responsible for Financial Stability,

Financial Services and Capital Markets Union (DG FISMA) as well as

Peter Kerstens, Co-Chair of the Taskforce on Financial Technology

(DG FISMA). A lot of interactions have taken place with Ralf Jacob

(DG FISMA) too. ESBG continued its dialogue with the European

Central Bank too. We held regular high-level and working-level

meetings, including one on 19 May with Sabine Lautenschläger.

We also met with Andrea Enria, Chair of the European Banking

Authority. We engaged European parliamentarians, oftentimes at

technical-level. In 2017, we became a Supporting Member of the

European Banking Institute (EBI) to help develop cross-EU academic

research on European banking regulation and supervision. By being

a Supporting Member, an ESBG representative serves on the EBI

Advisory Board.

Coming together: Events, communications,knowledge sharing

Communicating our positions requires the right tools, which

includes our website and social media. We improved them in 2017,

with the WSBI-ESBG website going through a second revision in the

last two years. The site is even easier to navigate and more

“searchable” while our social media presence expanded too.

Knowledge sharing flourished, with a full slate of events like our

Business Forum in September in Barcelona, which focused on “retail

banking reimagined.” Before then, bankers and policymakers

convened at the annual Retail Banking Conference in June to

explore proportionality and sustainable banking. EU Commissioner

Katainen headlined that policy-focused event. WSBI-ESBG held

workshops on innovation, SME financing in Europe, proportionality

and the history of financial education. The high-level G20

conference in Berlin shared our locally focused, retail banking model

at global level. The Innovation Conference in Brussels explored

digitisation and how members approach it. We look forward to a

full slate of high-impact events in 2018.

ESBG looks to continued support from members in 2018 as their

effort and commitment form the roots of our success.

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Learn more about ESBG atwww.wsbi-esbg.org/About-us/About-ESBGor by scanning this QR code.

EU Commission FinTech Action Plan:A welcome next step ESBG SEES NEED TO ENSURE A LEVEL PLAYING FIELD

Below is ESBG’s response to the EU Commission FinTechaction plan released on 8 March.

ESBG welcomed the EU Commission FinTech Action Plan, with

Managing Director Chris De Noose saying: “We are especially happy

to see a neutral definition of FinTech, ‘technology-enabled financial

innovation’, as many of our members are avid users of FinTech.”

On crowdfunding

Regarding the new crowdfunding proposal, crowdfunding and

peer-to-peer lending platforms should abide by the same legislative

measures as banks. What is therefore needed is a comprehensive

EU approach – treating platforms like regulatory trading venues or

payment institutions. This approach secures a level playing field,

enabling platforms to scale cross-border, and at the same time

securing reliability and trust through a proportionate and effective

risk management framework.

However, the Commission is in favour of developing a proper legal

framework for crowdfunding across the EU to ensure appropriate

investor and consumer protection. Potential areas of harmonisation

are platforms’ disclosure requirements, registration requirements

and investor protection rules. ESBG is concerned that this option as

the “opt-in” element will imply that there is no level playing field

among platforms. National platforms could gain a regulatory

advantage compared to cross-border platforms due to potential

less-demanding local regulations. Furthermore, a lack of reliability

in local platforms operating below ‘best practice’ standards could

have a negative contagion upon the trust in cross-border platforms.

Finally, existing regulations of credit institutions,

credit intermediators and investment firms

should be taken into account in order to reflect

the nature of the platforms different services

and nature.

Remaining action plan topics

With respect to the remaining topics of the

plan, ESBG supports the Commission initiative

to address identified regulatory gaps and will

contribute to the best of its ability in this

respect. To that end, ESBG would be interested

in nominating representatives to the expert

group to review the fitness of the EU financial

services regulatory framework as planned by

the Commission.

Savings and retail banks throughout the

European Union have taken great strides to acclimate themselves

to the digital transformation. The most recent development in this

ongoing process is distributed ledger technology. This topic greatly

interests us. We will endeavour to provide input in the planned

consultation and will follow Commission’s activities with great interest.

Lastly, ESBG is looking forward to the public-private cybersecurity

workshop planned for the second quarter of 2018. We see that

these types of activities are important in the realm of cybersecurity

because service providers must constantly adjust and refresh

measures designed to protect data to mirror the constantly evolving

technology and thus new threat profiles. Any potentially new

legislation should be assessed against the risk of altering the level

playing field, meaning that only some players should not be

required to invest disproportionately in order to counter the new

risks imposed on their supply chain.

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22 | News & Views MAY 2018

See the European CommissionFinTech action plan athttps://bit.ly/2HwsJqv or byscanning the following QR code.

Commission action plan key mile stonein EU sustainable finance strategy

LOCALLY FOCUSED RETAIL BANKS BEST PLACED TO SUPPORTTHE COMMISSION’S WORK

The following statement from ESBG responds to the 8 Marchrelease of the European Commission Sustainable FinanceAction Plan.

The European Commission’s long-awaited action plan on sustainable

finance published today is an important milestone in the EU strategy

to focus on green and social financing.

ESBG Managing Director Chris De Noose said: “Europe’s savings

and locally focused retail banks are best placed to support the

Commission’s work on sustainable finance. The first action on

developing an EU Taxonomy is particularly welcome. Having widely

accepted definitions should contribute towards improving the

general understanding of what can be considered as ‘green’. What

should be intended is to ultimately foster the financing of a green

economy in the regions and consequently boost jobs.”

ESBG members are concerned, however, about action 6 – integrating

sustainability in ratings and research. Integrating environmental,

social and governance (ESG) factors into disclosure requirements

should not place additional burden on savings and retail banks and

therefore restrict certain activities.

We value that the Commission is proceeding with ambition and

caution on green or social supporting factors. Those factors require

further discussion, and in much greater detail, within the expert

groups to see how best to proceed.

Expert groups: ESBG ready, willing

ESBG is most willing to contribute to expert groups which are being

set up by the Commission on different topics, in particular in order

to amend key directives – such as the revised Markets in Financial

Instruments Directive and the Insurance Distribution Directive – to

include sustainability factors in their rules. We will surely be willing

and able to submit input on sustainable finance gathered from our

members that policymakers should find highly valuable.

Background

Based on the High-Level Expert Group report released earlier this

year, and setting out priority action points to be carried out over

the next 18 months, the plan aims to:

n Reorient capital flows towards sustainable investment, in order

to achieve sustainable and inclusive growth;

n Manage financial risks stemming from climate change,

environmental degradation and social issues; and

n Foster transparency and long-termism in financial and economic

activity.

23 | News & Views MAY 2018

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See the ESBG position onsustainable finance athttps://bit.ly/2Gjkj9T or byscanning the QR code

See the European CommissionSustainable Finance Action Planat https://bit.ly/2tq0pE5 or byscanning this QR code.

Workshop on Proportionalityin Banking Regulation

VIEWING PROPORTIONALITY UNDER SCHOLARLY LENS

Policymakers, researchers, banking industrydebate need for principle

More than 100 participants took part on 7 March

in a conference called “Fostering a diversified

banking market through proportionality” in

Brussels. The European Banking Institute (EBI)

event on proportionality, co-organised by the

European Savings and Retail Banking Group

(ESBG) and the European Banking Federation

(EBF), was hosted at the Single Resolution Board

(SRB).

Divided into three sessions, the event focused on

reflections around the concept of proportionality

and the principle of proportionality in regulation

and supervision. These topics were discussed by

professors from several European universities and

research institutions as well as representatives

from the financial industry, supervisory authorities and policy -

makers.

The perspective of retail and savings banks was presented by ESBG

Managing Director Chris De Noose. “How could we ensure the

stability of EU banks whilst still making sure they had adequate

lending capabilities? The answer? Proportionality,” started his

opening remarks De Noose.

De Noose also emphasized that there is still more that should be

done so that Europe’s savings and locally-focused retail banks can

continue to be key players in ensuring that EU citizens have access

to finance. According to him, activities which do not pose a risk to

the financial system should not be subject to the same risk

reduction measures as those which could destabilise the system.

Ensuring the diversity of the banking systems and looking at the

social and sustainable role of a bank should also be taken into

consideration when discussing financial regulation measures.

Astrid Engel Thomas, head of the legal department at the Danish

local and savings banks’ association (LOPI), an ESBG member,

presented specific examples of challenges related to financial

regulation. She called for less administrative burden on local banks

and emphasized that “one size fits all” is not workable in practice.

This idea was also repeated by Markus Ferber, vice chair of the

Committee on Economic and Monetary Affairs at the European

Parliament. He added that same rules does not mean same efforts.

Although the rules applied to banks are the same, this does not

mean that the efforts required from them are the same.

The conference ended with a debate on proportionality in

supervision. Thomas Gstaedtner, in his role as the head of division

at the Directorate General Micro-Prudential Supervision II at the

European Central Bank, stated that there should be a combination

between prudential soundness and maintaining a level playing field.

Other speakers such as Isabelle Vaillant, director of regulation at

the European Banking Authority, stressed that supervision is still a

forward-looking territory to conquer and that transparency will be

crucial to achieving proportionality.

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See the speech by ESBG ManagingDirector Chris De Noose athttps://bit.ly/2pObA4g or byscanning this QR code.

More information about the eventat www.ebi-europa.eu

Shedding light on proportionality

ESBG’S DE NOOSE ADDRESSES EBI EVENT FROM SAVINGS &RETAIL BANK LENS.

Below are remarks from WSBI-ESBG Managing Director ChrisDe Noose to the EBI Workshop on Proportionality in BankingRegulation held on 7 March in Brussels.

It is important to shed light at this point in the public policy debate

on proportionality and banking rules from a savings and retail

perspective.

More than five years ago, in discussion with colleagues in the EBA

Banking Stakeholder Group, we decided that more was needed to

rebalance the choice made by the EU decision makers to apply the

Basel III framework in the same way to all banks. Financial institutions

were working hard to implement many complex regulations, and it

was clear that some banks should abide by a framework that

allowed them to continue their core

activities: the financing of Europe, mostly of

its households and SMEs.

But what could we do? How could we

ensure the stability of EU banks whilst still

making sure they had adequate lending

capabilities?

The answer? Proportionality. This long word,

which you will hear in nearly every sentence

today, was not very well known when the EBA BSG started its work.

It definitely existed; in the Basel Committee’s Core Principles, and

in the Treaty for the European Union, but it was not in the spotlight.

How times have changed! 18 months later, a detailed report was

issued by the EBA BSG which has been circulated widely among the

EU institutions, authorities and other stakeholders.

It has even been referenced in the excellent background paper

drafted by some of the EBI academics which will trigger the

discussion today. Titled “Stability, Flexibility and Proportionality:

Towards a two-tiered European Banking Law?”, this paper looks in

detail at the possibility of introducing a two-tiered banking system

in Europe as it is already the case in other parts of the world. Japan

and the United States are the examples quoted in this publication.

“Regulatory Relief”, as it is called in the US, is far more advanced

than the European proportionality principle.

The US Senate recently passed “regulatory relief” legislation for the

financial sector, which inter alia reduces the reporting, exempts

them from the Volcker rule, or from mandatory Dodd-Frank Act

stress testing. Europe is still progressing towards alleviating the

burden. Every single bank has to sift through every single EU text

to see what does – and perhaps more importantly does not – apply

to them. Let us take for example the current prudential and

resolution package which amounts to 595 pages for only the level 1,

which will become even thicker once the Risk Reduction Measures

package is adopted, or the MiFID 2 regulation, with its 1874 pages,

with the level 2 and 3 measures included. This burden must be

reduced, and quickly, before we find ourselves in a situation where

we cannot foster the growth of the EU economy and providing

more jobs to our citizens.

Proportionality will help us to ensure a brighter outlook on growing

our businesses. Proportionality is now being included in EU texts

such as the CRR II and CRD V, which will be discussed this morning.

There is a general consensus that it should also be included in the

ESAs regulations – the proposal was explicitly made to consider

proportionality in every impact assessment of the ESAs’ work.

Proportionality has been taken into account for disclosure, reporting

and remuneration, and a general definition

is being ironed out in the Parliament. But

there is still more that we should do so that

Europe’s savings and locally-focused retail

banks can continue to be key players in

ensuring that EU citizens have access to

finance. And this should not be limited to

the size of the institutions, as it is crucial to

capture the business models based in

particular on the following criteria:

n The first is to gauge the riskiness of a bank’s activities. Activities

which do not pose a risk to the financial system should not be

subject to the same risk reduction measures as those which

could destabilise the system.

n The second is to ensure the diversity of the banking system. It

has been proven that a diversified EU banking system reduced

the effects of the financial crisis and therefore should be

maintained.

n The third is to look at the social and sustainable role of a bank.

Look at how the bank operates within its town, its region.

Savings and retail banks have a commitment to their area to

provide access to finance, financial education, and support for

local infrastructure and green finance.

These tasks build a strong case that local banks should be supported

in their work and that proportionality is the best tool in the box to

achieve our goal.

I hope that the conference today will have lively discussions and

develop new ideas. Please, don’t be shy to ask your questions and

share with us your views. Thank you in advance to our panellists,

and many thanks to the SRB for providing us with this excellent

venue. Ladies and gentlemen, we hope that you will enjoy your day,

and that you will take with you our belief, and its concrete

implementation, in proportionality.

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How could we ensurethe stability of EU bankswhilst still making sure

they had adequatelending capabilities?

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ESBG responds to EBA Pillar 2framework review

COMMENTS ON SREP, IRRBB AND STRESS TESTING

ESBG responded in late January to the EBA consultation onthe review of its Pillar 2 framework for SREP, IRRBB and StressTest Guidelines.

Highlights from ESBG response

Consultation on common procedures and methodologiesfor SREP ESBG responded to the section on consultation on common

procedures and methodologies for SREP by saying the amendments

proposed by the EBA are going in the right direction, although

further alignments and clarifications will be necessary. ESBG also

noted that it would appreciate a more explicit explanation on the

interaction between supervisory and early intervention taking into

account the consistency requirements between the ICAAP/SREP,

the Pillar 2 guidance (P2G), the recovery requirements and the early

intervention. In ESBG’s opinion, the revised guideline, similarly to

other existing EBA guidelines, imposes a too wide range of operative

tasks to the management body.

It noted that the following provisions of the newly introduced Pillar

2 Capital Guidance need to be further clarified:

n consistency with Pillar 2 requirement (P2R),

n the relationship between P2G and limitations on distributions,

n the exact mechanics as to how buffer offsetting is supposed to work,

n how to determine the levels of P2R and P2G as well as the

scoring rules,

n how the results of supervisory stress tests are used to determine

P2G and provide more detailed, and

n quantitative explanations on the inclusion of stress test results

in P2G.

Regarding required capital composition of P2G, ESBG believes

the EBA does not have a mandate to specify a tightening of the

expected Level 1 requirements by means of guidelines.

On disclosure of P2G: ESBG argues it should up to the institution

to decide if it publishes it or not given that some institutions may

consider this information relevant for their investors. On re-designation

of systemic risk add-ons to the systemic risk buffer would impact

the maximum distributable amount (MDA) calculation, ESBG would

prefer that it be left to the judgement of the supervisory authority

to decide whether further MDA restrictions are necessary.

Consultation on the management of IRRBBRegarding consultation on the management of IRRBB, ESBG proposes

monitoring credit spread risk from non-trading book activities

(CSRBB) as a balance sheet risk measure apart from IRRBB, and only

related to tradable instruments.

26 | News & Views MAY 2018

Also, the EBA could be more specific when defining interest rate

sensitive loan commitments that should be included in the IRRBB

analysis. It argues that the EBA should provide a specific technical

guidance on how non-performing exposures (NPEs) should be

treated within the supervisory outlier test in order to obtain

comparable results across the industry and that the EBA should

clarify the guidelines regarding capital identification, calculation,

and allocation as well as governance.

Speaking of proportionality, ESBG believes less complex institutions

should be allowed to use simple and standardised stress tests with

less frequent calculations and reporting.

Consultation on Guidelines on institution’s stress testingESBG appreciates the focus on proportionality and finds it important

for this concept to be included in all aspects of the Guidelines.

With regard to stress test scenarios, ESBG is of the opinion that the

text could benefit from a clear recommendation to the competent

authorities to design and publish such scenarios.

It also notes the link between stressed risk factors and the risk

parameters: Institutions could benefit from the statistics on risk

parameters for a financial industry as whole broken down to

individual portfolios. In ESBG’s opinion, when assessing the

appropriate degree of severity of scenarios, institutions should also

compare them with the scenarios outlined in their reverse stress

testing, considering specific implications of the reverse stress test

design on the scenario plausibility. ESBG also stressed that assessing

planned capital requirements based on scenarios with extremely

low probability of occurrence should be avoided.

ESBG: Streamlined resolution planinfo provision process welcomed SAYS IN BRRD-RELATED EBA CONSULTATION RESPONSE

ESBG submitted in mid-December 2017 a response to the EBA’s

consultation on the provision of information for the purpose of

resolution plans under Article 11(3) of the bank recovery and

resolution directive (BRRD) . In its position paper, ESBG, in principle,

welcomes the EBA’s contribution to standardise the existing inquiry

standards/templates and the effort to streamline the process and

to establish the minimum set of reporting obligations as well as to

specify procedural and technical reporting requirements.

However, one should also bear in mind that the technical

implementation of regulatory reporting requirements triggers

complex project activity and needs adequate lead time. For ESBG

members, it is especially important to get planning on security

regarding the requirements and concrete reporting templates.

ESBG will closely follow the outcome of this consultation, and track

whether there was any take up by the EBA of the suggestions ESBG

made on the specific reporting templates.

27 | News & Views MAY 2018

Read the ESBG consultationresponse at https://bit.ly/2GlfUPDor by scanning the followingQR code.

See the full ESBG response athttps://bit.ly/2DnK06T or byscanning the following QR code.

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Locally focused banks critical tosustainable finance

ESBG RESPONDS TO REPORT FROM EU HIGH-LEVEL GROUPON SUSTAINABLE FINANCE

The following is a statement by ESBG on the report releasedon 31 January from the High-Level Expert Group on SustainableFinance.

The report brings to light the important role locally focused banks

play in Europe’s sustainable future. The group acknowledges that

the savings and retail banking model will be a catalyst for

sustainable investment on the ground. But there remain obstacles.

The paper includes calls from the group for more proportionality as

complex banking rules hamper our lending efforts. When this

principle is applied, local banks can provide more financing for

green projects, especially for SMEs, households and local

authorities. When proportionality is used, all banks can contribute

full throttle towards a sustainable future.

SMEs are a force the paper clearly notes. Some 92% of green

projects are carried out by SMEs according to one study. That means

financing SMEs’ green projects and the cooperation of local

banks/local public authorities/SMEs, via the issuance of loans

stemming from local savings, appears critical to allow the green

economy to grow sustainably and to provide jobs. Savings and retail

banks play a key role in financing the improvements in energy

efficiency – a low-hanging fruit – both in residential and commercial

buildings, as well as in equipment used by SMEs.

The report calls for expanding the Juncker Plan, especially the

continued commitment in the “green sector”.

Boosting the plan’s annual

investment funding by €170 billion

will help as long as the public and

private work well together. If it

they do, the transition to a

sustainable, low-carbon economy

is within reach.

The report also highlighted capital

requirements as an obstacle.

It is. Feedback from banking voices

contained in the paper indicated

that the current capital framework

is not sufficient for non-complex

banks. Our members see the Basel

III capital floor at 72.5 per cent

as being too high and will impede

our model’s ability to provide

sustainable finance, amongst other

daily activities. We welcomed the

debate on this point by the group on lowering the capital

requirements. Concerning the green supporting factor we support

very much that the High-Level Expert Group recommends the

Commission should indeed investigate whether there is a risk

differential justifying use of such a factor.

When discussing sustainability, its definition must be precise. It is

important to ensure that material ESG (environmental, social and

governance) factors are integrated into the national definitions on

sustainable finance. Definition of green and sustainable assets and

potential capital reliefs are needed too. Beyond the definition,

policymakers should also consider a wider range of banking

products included in the EU taxonomy, especially taking on board

green certificates of deposits. To conclude, savings and retail banks

should be more integrated in working groups as they have the

capacity to tap into their local network.

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Chris De Noose appointedEBIC chair

CHANGEOVER COMES AS COMMITTEE FOCUSES ON FULL SLATEOF INITIATIVES

Chris De Noose was appointed on 20 February as chairmanof the European Banking Industry Committee (EBIC).

He succeeds Wim Mijs, chief executive of the European Banking

Federation, who completed his one-year term for the committee.

Mijs has been appointed as EBIC vice-chair, replacing EBIC Vice-

Chairman Hervé Guider, managing director of the European

Association of Co-operative Banks (EACB), who also served a one-

year term. The overall secretariat of EBIC, which rotates along

with the chairmanship on an annual basis, is in the hands of

the European Association of Cooperative Banks (EACB) as of

20 February.

The annual changeover comes at a time when the committee is

focusing on initiatives in the areas of prudential regulation, banking

supervision, compliance related to Anti-Money Laundering (AML)

and Counter Terrorism Financing (CFT), as well as a number of

topics in the retail banking area such as consumer and mortgage

credit. The priorities for 2018 will remain the Risk Reduction

Measures Package, the ESAs review and the follow up to the Action

Plan on Consumer Financial Services.

About EBIC

Founded in 2004, EBIC is committed to providing the common

voice of the EU banking sector at large regarding EU financial

legislation initiatives and banking practices and to maintaining an

open and fruitful dialogue with the EU institutions and international

bodies. An advisory committee regularly called upon to provide

expertise in the field of financial services, EBIC provides a forum for

European banking industry representatives to: exchange views and

information on matters of common interest; ensure a representative

and coordinated industry view on issues of common interest

throughout the process of drafting, adopting, implementing and

enforcing EU-financial legislation; and provide advice to the

European institutions on initiatives, both at legislative and

implementing levels.

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Learn more about EBIC atwww.ebic.org.

25th World Congress ofSavings and Retail BankSustainable Retail Banking: Bringing the Promise of Globalisation Home

n 15-16 November 2018New Delhi, India

Learn more at www.wsbi-esbg.org/Events/WorldCongress_2018or by scanning this QR code

Human rights and finance

HIGHLIGHTS FROM EUROPEAN PARLIAMENT EVENT

Representatives of the European Savings and Retail Banking Group

(ESBG) attended on 22 February a conference “Human Rights and

Finance: Next Steps for EU Policy” which took place at the European

Parliament and was hosted by Green MEP Bas Eickhout.

The purpose of the conference was to launch a discussion on how

human rights can be more effectively embedded into the current

reflection of the High Level Expert Group on Sustainable Finance,

so that this results into concrete policy measures in the future.

The outset is that the European Commission has supported the

development of the United Nations Guiding Principles on Business

and Human Rights in different policy areas, such as in the

development of National Action Plans on Business and Human

Rights, but has not integrated them into the policy discussions on

sustainable finance.

CaixaBank, providing the views of a retail bank

The conference attracted members of the European Parliament,

representatives of trade unions, non-governmental organisations,

banking associations, research institutions and other stakeholders.

Angel Pes Guixa, Deputy Director of CaixaBank with responsibility

for sustainability and President of the Spanish Network of the

Global Compact, as well as member of the WSBI-ESBG Corporate

Social Responsibility and Sustainable Development Committee,

participated in one of the panels dedicated to the stakeholder

perspective on the future of human rights and financial regulation

in the EU.

As pointed out by non-governmental organisations, one of the

main issues acting as a deterrent to effectively embed human rights

in policy is the lack of judiciary ground that would keep financial

institutions and organisations accountable, transparent and

responsible. It was argued that a comprehensive, legally binding

but to a certain extent flexible framework could bring significant

changes in the financial industry.

Non-financial risks are extremely important forretail and savings banks

Difficulties of measuring human rights, defining human rights and

translating it into the interest for business were also among the

topics discussed during the conference. According to some

speakers, the struggle to convince business to comply with human

rights is often related to the fact, that this brings mostly non-

financial return. However, Pes Guixa provided the example of retail

and savings banks, emphasizing that very often, and due to their

business models, non-financial risks are even more important than

financial risks, as the loss of trust from the customers can

significantly damage the business.

Pes Guixa also reminded that financial inclusion plays an important

role in enhancing positive outcomes related to many aspects of

human rights and Sustainable Development Goals (SDGs). In this

respect, the example of the social bank MicroBank, leading micro credit

institution in Europe set up by CaixaBank in 2007, was highlighted.

Pes Guixa also added that the SDGs are the way forward, as they

provide the framework and the opportunity to boost human rights

and sustainable development.

Event conclusions: concrete steps to moveforward

A variety of concrete recommendations for EU policy making were

suggested during the event. A classification system to establish

market clarity on what is ‘sustainable’, price signals reflecting

positive and negative externalities, greater transparency on the

sustainability impact and processes of retail funds and an adequate

design and application of regulation in respect of banks depending

on their business models and size could certainly contribute to

enhancement of a sustainable system and create a framework to

address inequalities and trigger positive impact.

Conference panellists concluded that financial sector, non-

governmental organisations and most importantly policymakers

should continue working together in order to bring positive

changes. Amongst other conclusions, the UN Guiding Principles on

Business and Human Rights should constitute the authoritative

source of how human rights considerations should be mitigated by

actors in the financial sector.

Overall, human rights should be integrated in the core of future

policy and not be treated as an add-on. In this respect it was

claimed that they should be regarded as a cross-cutting matter and

they should be explicitly included in any future potential taxonomy

to be designed by policy makers. According to some participants,

a crucial step ensuring that financially material human right risks

are captured in financial regulation could be an omnibus legislative

proposal, which would incorporate financially material environmental,

social and governance issues into the duties of asset managers and

asset owners.

30 | News & Views MAY 2018

An extensive interview withAngel Pes Guixa is availableon the WSBI-ESBG website athttps://bit.ly/2sNhcjT or byscanning the following QR code.

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Retail and banking sectors: From sharedchallenges to shared solutions?

EXPERT NORBERT BIELEFELD EXPLAINS

In Europe both the retail sector and the banking sector at present

essentially pursue two-pronged strategies:

n A structural reduction in their cost basis, in order to notably

better sustain the competition of both existing and new players;

n The transformation of their business model, to adjust to and

remain relevant in a digitized world.

The retail and banking sectors, already routinely accused of over-

pricing, now face further wrath from public opinion and authorities

as the deployment of these strategies necessarily translates into

workforce adjustments. In parallel, relationships at industry level

between both sectors can be strained at times, notably in the

context of legislative initiatives (e.g. card interchange, security of

payment transactions).

Considering the magnitude of the challenges at stake, it is worth

wondering whether a different approach shouldn’t be attempted.

Indeed, the development of digitization will ultimately affect and

transform all society strata. Digitization can be defined as the mass

adoption of connected digital services by consumers, enterprises,

and governments, complemented by the (not always accompanying)

transformation of sourcing, manufacturing and production, delivery,

and the related processes. Digitization comes hand-in-hand with

the expectation of and growing demand for immediacy – in terms

of responses, transaction completion, and payment – and that

meeting such expectation and demand has, and will continue to

have, profound implications far beyond the systems and entities

striving to provide such immediacy. In parallel, digitization – mainly

due to the spread of mobile devices – enhances participation by all,

both at political and economic levels.

Hence the retail and banking sectors should be taking an ecosystem

approach – also integrating the consumer’s view – to the above

strategies. As highlighted by the 2017 World Economic Forum

study, titled Shaping the future of retail for consumer industries,mobile and digitization drive the emergence of a new consumer

equation, where the traditional cost, choice and convenience

dimensions are complemented by control and experience

requirements. The WEF study identifies eight disruptive technologies

with retail value chain applications, of which at least six – namely

Internet of Things, Artificial Intelligence/machine learning, robotics,

digital traceability, augmented reality/virtual reality, and blockchain

– are also relevant to the banking industry. As both sectors test and

pilot these technologies, it is fair to assume that “comparing notes”

and developing joint projects from an infrastructure-building,

cooperative perspective will foster benefits for both sectors.

The time window for engaging is however not infinite: most of the

a.m. disruptive technologies are expected to reach full readiness

within the next two to five years.

Closer to the payments space, in a mobile and digitized context the

consumer wants to be able to use the payment instrument he/she

chooses, for a payment transaction to be executed extremely fast,

in a secure way, and without friction. Both loyalty and credit (e.g.

instalment) functionalities, when required, have to be accessible in

the same smooth manner. This is why the retail sector should make

use of technical, non-competing standards and focus on its primary

mission (actually the same as banks’), i.e. serving consumers and

ensuring their loyalty. There are presently 2 opportunities to remove

pain points through standardization:

n All large players roll out and develop their own solution with

respect to “checkout” or “paybuttons”. But will these individual,

often single payment instrument approaches be sufficient to

meet ever more mobile consumers’ expectations for convenience

in an Open Banking environment? A cross-sectoral initiative to

develop – e.g. in the form of an API – a standardized payment

checkout capability, payment instrument-independent and usable

for both online and in-store purchases, should find traction.

n With more opportunities to make purchases “anytime,

anywhere”, consumers will also be looking for enhanced control

facilities, not only over their payment account balance, but at an

even more granular level, i.e. by budget lines and/or types of

retailers. Here again the answer resides in a standardized, API-

oriented solution that provides both the necessary information

to consumers and allows (in an Open Banking environment) to

share selected data with chosen retailers.

Both developments should equip European retailers and payment

service providers with better tools to compete in an environment

increasingly dominated by a few, global players.

Here again the time window to produce these standards is not

infinite. This is hardly the moment to engage in a wide-ranging

governance debate as to who should be tasked with these

standardization activities, but rather to look at which existing bodies

should be leveraged (albeit with some scope and profile

adjustments) to deliver. The existing European Payments Council,

European Cards Stakeholder Group and Nexo (the latter 2 already

bringing together key economy sectors) could be used to

respectively formulate business requirements and specifications

for the a.m. standards, developing the “paybutton” and “budget

control” APIs sketched above, and being tasked with the

mplementation of the resulting standards.

31 | News & Views MAY 2018

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WSBI: Moving forward in 2018

BUILDS ON SUCCESSES MADE THE YEAR PRIOR

As 2017 swiftly came to an end, we had witnessed a change of an

era. Global political forces continued to move towards more

populist-leaning politics. Economies shrugged off worries of the

crises and grew; but not always benefiting the whole of society.

High-tech breakthroughs reshaped how we live and how we bank.

Digital change: Innovation working for you

Change was seen most vividly in the digital sphere and in increased

regulation, and WSBI responded. The association redoubled its

efforts to help banks unleash digitally led innovation in their

banking business models through innovation events. From Bangkok

to Barcelona to Brussels, innovation workshops and fora brought

members together to shape the future of 21st century banking via

best-practice exchange. WSBI built out a dedicated WSBI Innovation& Digitisation Hub on its website and launched the InnovationExchange video series.

Case for proportionality marches on

We continued to advocate for proportionality, especially when

applied to prudential regulation like the finalisation of Basel III,

which concluded with an output floor at a level which will lead to

a significant increase in capital requirements. This also shed some

doubt on the future of internal models and the calibration of the

standardised approaches which are very conservative. The Basel

Committee plans on these fronts push things too far. Any reforms

that ratchet up these requirements greatly threaten our model.

WSBI General Assembly, Board and Conferencein Cape Town

The General Assembly and Board meetings, hosted by Postbank

South Africa, were a success. The WSBI 2018 work plan was

unveiled, with priorities for next year focused on strengthening the

profile and influence of WSBI advocacy activities on relevant G20

priority files, enhancing exchange of best practices in digitalisation

and innovation, pursuing the UFA 2020 goals, implementing the

WSBI-ESBG transformation plan and conducting various regional

projects. A conference following the statutory meetings focused on

financial inclusion, SME finance and digitisation. WSBI members

showed how change is happening.

WSBI 2020 Strategy: Member feedbackmattered

WSBI in 2018 looks to fine-tune its internal processes to deploy

better its newly crafted value proposition, based largely on a

member survey that we conducted this year. Thank you to all

members who responded. The WSBI General Assembly and Board

approved the strategy at the November Cape Town meetings.

WSBI Advisory Services: Building up brickby brick

WSBI Advisory Services celebrated their first birthday in 2017.

They landed project work with clients that included the WSBI

“Making Small Scale Savings Work” programme, EBRD, and the

Savings banks Foundation for International Cooperation, Botswana

Savings Bank and Tanzania Postal Bank. As your bank adapts to a

changing banking landscape, we hope you consider them for your

specific consultancy needs.

Change globally, change regionally

Our WSBI Regional Group in Asia continued to see great strides

made towards the Universal Financial Access goals. They tackled

areas like remittances and rural financial inclusion. At the APEC

Financial Inclusion Forum, they explored agri-finance and shared

experience in financial education. WSBI Asian members’ regional

outreach in 2017 paid off, with three new members in 2017 joining:

Bangladeshi banks IFIC Bank and Bank Asia as well as Chamber of

Thrift Banks from the Philippines.

Members in Africa there continued to address the pressing

challenge of “derisking”, whereby international players are ending

relationships with member banks in the region at a worrying rate.

Areas like remittances and financial inclusion continued to be points

of focus too. Newly created WSBI-led webinars have started,

as has the Making Small Scale Savings Work (MTripleSW) program.

A partner ship with Mastercard Foundation, MTripleSW recently

announced that WSBI members in Morocco and Kenya have

signed on.

In Latin America and Caribbean, members continued their focus on

the communities they serve, especially on the socio-economic front.

WSBI members weaving digital technology into financial inclusion

and financial education efforts showed big gains towards our

Universal Financial Access (UFA) 2020 aims.

In Europe, our sister organisation ESBG continued its work in top

strategic policy areas like proportionality. WSBI-ESBG welcomed

new member Postbanc of Romania, and we are working with other

European groups to become a member. Like in Europe, our U.S.

member ICBA advocated for proportionality via a two-tier approach

to banking rules. The vote in the U.S. Senate in March 2018 showed

how ICBA’s campaign for regulatory relief payed off. Our reception

during the October IMF/World Bank meetings in Washington was

an ideal forum for us to share that message.

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Sustainable banking: Bringing thepromise of globalisation home

The G20 remains a stage to show a globalised

world how our unique business model fits in,

and how the WSBI-ESBG Charter forResponsible Banking underpins what we do.

Relatedly, progress continues on our UFA 2020

goal. For 2018, access to finance will remain

a top priority.

Our model was proudly shared in Argentina atthis year’s G20 meeting. We continued to present

our case for better regulation, which our members

in the Latin American region are keen to share.

Working with B20 and Global Partnership for

Financial Inclusion buttresses our G20 advocacy

work. Our G20 institutional messages were well

received by high-level bodies.

The 2018 World Congress in New Delhi next

15-16 November, titled Sustainable RetailBanking: Bringing the Promise of GlobalisationHome, is already taking shape. The event gives

us a chance to persuade international decision

makers to take our model as a benchmark for

real economy banking. Our message to them:

craft rules meant for internationally complex

banks, but keep in mind the sensitivities of our

locally focused model.

Moving ahead in 2018

Working together, we can further unleash the

savings and retail banking model. That means

taking part in our activities and projects, sharing

successes among members, and demonstrating

each day our special role.

The WSBI secretariat remains ready to support

you and your institution to continue to thrive.

We look forward to a busy and change-driven

2018.

WSBI welcomes newmember Bank Asia TECHNOLOGY HELPS NEW BANGLADESHMEMBER SERVE 311,000 CUSTOMERSIN REAL TIME

WSBI welcomed in 2018 three new banks, including Bank

Asia from Bangladesh. They join more than 100 fellow

members from 80 countries all around the world who

make up WSBI membership.

Bank Asia started its journey in November 1999. At present

Bank Asia is conducting operations through 120 branches,

three subsidiaries, 133 ATM booths and three retail kiosks

with around 3000 employees. The bank also operates

five Islamic windows to ensure financial inclusion of

those sections of the society that remain excluded due

to religious reasons.

“Bank Asia joined WSBI to exchange knowledge and experience with other

financial institutions and migrate global best practices like financial inclusion,

digitisation initiatives, digital payment system and other technical issues in banking

along with guidelines regarding anti money laundering,” says Bank Asia’s President

and Managing Director Md. Arfan Ali.

Committed to Financial Inclusion

With an aim to serve the unbanked people Bank Asia is now operating EBEK (Ektee

Bari Ektee Khamar), a government project for the ultra-poor people of Bangladesh

focusing on reducing poverty level by 10% within 2021. Under the project, a total

number of 1.63 million beneficiaries have been served with a lending amount

of BDT. 24,544 million (around US$300 million). The bank has implemented

1,494 agent banking outlets all over the country to provide banking services to

geographically disperse rural poor segment of the society.

According to Md. Arfan Ali, Bank Asia’s aim is to transform Bank Asia to an “every

day” bank for a better tomorrow from the conventional brick and mortar model.

Innovation enables to reach previously unbanked people

“Technology has enabled us to serve more than 311,000 customers in real time

with biometric authentications. Customers get SMS alerts, receipts against any

transaction and instant notifications. The customers that were previously unbanked

and underserved, are now enjoying one stop banking services from our agent

points. Even the ready-made garments industry workers, school students,

smallholder farmers, social safety net beneficiaries and rural insurance holders are

also benefiting from our agent banking services. For this reason Bank Asia has

been collaborating with a number of national and international partners to

facilitate the financial inclusion activities,” explains Md. Arfan Ali.

33 | News & Views MAY 2018

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Bank Asia’s Presidentand Managing DirectorMd. Arfan Ali

First Workshop on Rural FinancialInclusion, Beijing, China

FOCUSED ON DELIVERING RURAL FINANCIAL INCLUSION SUSTAINABLY

The 1st Workshop on Rural Financial

Inclusion hosted by the Postal Savings

Bank of China (PSBC) gathered about

50 participants from the WSBI Asian

membership. Distinguished guests

included Chinese policy makers in

charge of financial inclusion,

academics and vice presidents of

largest Chinese commercial banks.

Postal Savings Bank of China explained

how the financial resources allocated

to rural areas are not proportionate to

the rising importance and contribution

of the rural economy to the national

economy and cannot keep pace with

the increasing financial needs in rural

areas with modernization of agriculture,

villages and farmers. The Chinese

government has put in place different

measures to address the gap, such as requesting banks to set up

rural financial inclusion departments to specialize in serving the

sector, building the credit rating system for the rural poor,

developing credit guarantee schemes. PSBC’s approach in financial

inclusion is labelled as “4D”: Deep (deepen the outreach),

Directed (focused groups), Dependent (collaborative), and Digital

Inclusive Finance.

The objective is to enable more rural outlets to offer credit business

and make sure that deposits from rural areas are used for rural

development. Capacity building for bank staff in rural outlets and

equip them with credit skills are also an absolute condition to

address the finance gap.

During the workshop, the participants from Bangladesh (Bank Asia),

Cambodia (Cambodia Post), Korea (Korea Post), the Philippines

(Aski), Sri Lanka (National Savings Bank) and Vietnam (LienViet

PostBank) participated in the discussion and in the exchange of

experiences in the field of financial inclusion, agent banking and

digital finance.

WeBank, the first online-only bank in China

The workshop was organized back to back with a study visit to

WeBank – the first Chinese online-only bank. WeBank received its

banking license in 2014 and uses Artificial Intelligence, blockchain,

“cloud” and “big data” in its customer and marketing approach.

More than 98 million users have been pre-approved, and the bank

has 31 million microloan customers.

WSBI and financial inclusion

Financial inclusion remains a strategic area for WSBI and its

members, including in Asia. However, too little resources are

dedicated to financial inclusion in rural areas. These rural areas

contribute more and more to national economies and the current

financial services offer struggles to keep up with the modernisation

of agriculture, villages and farmers. WSBI helps members address

that challenge.

34 | News & Views MAY 2018

Learn more about the workshopat https://bit.ly/2Ip6NOs or byscanning the following QR code.

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The viability of agri-finance –an Indian perspective

STATE BANK OF INDIA AGRI-BUSINESS HEAD TELLS MORE

State Bank of India Agri Business Unit Chief General ManagerS. Adikesavan explores agri-finance in India. The views arepersonal and do not reflect those of the bank.

If food security and sustainability of employment in the primary

sector are the objectives of development, agri-finance would

definitely occupy centre-stage in any discussion regarding these two

issues.

Agri-finance assumes added significance in the case of developing

countries where the farm sector and allied activities still provide

more than 50% of the total jobs in the economy. A thriving farm

sector supported by a formal credit delivery system is a sine qua

non for the stability of any developing country, especially in large

tracts of Asia, Africa and South America.

It is accepted that formalized credit delivery systems through the

bank and other institutional channels substantially reduce finance

costs for farmers and others engaged in allied activities like dairy,

poultry, fisheries and animal husbandry.

The Indian experience in farm credit has been quite instructive and

the Government sector banking system in the country has played a

major role in building up a mass-banking structure which has

helped, to a large extent, in enabling farmers access credit at

relatively lower costs. Regulatory intervention has also helped.

The following chart gives an overview of agricultural creditin India over the last 10 years.

All Indian banks, including those which are privately-owned,

are mandated by the Reserve Bank of India (India’s banking

regulator) to deploy 18 per cent of their total loans for agriculture.

There are penalties for non-achievement which makes it obligatory

for banks to put the shortfall amounts in low-yielding, state-

sponsored Rural Infrastructure Funds.

Even though there has been growth in absolute terms, agri-finance

has not been without its share of problems. The Indian farm sector

has become a hot potato recently with everyone acknowledging

that there is distress and problems galore across the board on

the fields, mainly triggered by lack of remunerative prices for

farm produce.

The Indian government has recognized this challenge and has

taken a series of steps to mitigate stress in the farm sector.

These initiatives have been led by the prime minister himself and in

the second week of February, Narendra Modi, outlined a four-point

agenda for agri reforms: reducing cultivation costs, ensuring

profitable prices, processing farm waste and creating non-farm

sources of income.

Of these, the first two are of immediate relevance. Cultivation costs

need to be reduced and for this, efficient water, fertilizer and

nutrient usage is the key. As more and more farmers understand

that modern methods of irrigation using drip and sprinklers are just

as efficient as traditional water-guzzling methods, the Indian farm

sector is likely to gain in costs. “More crop per drop” has found a

resonance among Indian farmers and this will enable them also not

to be at the mercy of the monsoons. Prime Minister

Modi has also announced that one of his

government’s targets was to see that 99 irrigation

schemes stuck for 25 to 30 years were completed

within fresh deadlines. About 50% of these would

be completed by this year. The government has

earmarked 80,000 crores (US$12.5 billion) for this,

he added.

In a sense, India is facing its 1991-moment in the

farm sector – 1991 being the year in which major

structural reforms were made in the Indian economy

– and indications are that new steps required to deal

with farm distress will be taken up on a war-footing.

Agriculture in India is a “State” subject (there are

29 States in the Indian Union) and therefore

greater coordination between the central and

state governments is required to put in place the

proposed reforms. >

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Rs. in Billions

14000

12000

10000

8000

6000

4000

2000

02008

3081

2009 2010 2011 2012 2013 2014 2015 2016 2017

37564633

50725833

6454

8921

9706

11731

12652

If costs are brought down, the next step will be to ensure that farmers

get remunerative prices soon after harvest. The government has a

scheme of minimum support prices for many agri-commodities but

at the implementation stage, there are practical difficulties. In the

process, many small and marginal farmers, who do not have

storage facilities or the ability to hold on to produce are forced to

sell in the market when prices are low, sometimes at a loss.

Creation of an efficient market structure and provision of storage

facilities are essential elements of the agriculture value chain that

will ensure that farming remains a viable and sustainable option.

It is indeed a fact that agriculture has not received public

investments over the last several years commensurate with its

requirement. The winds of apathy sown over the last nearly four

decades are being reaped now in the form of whirlwinds of protests

by the poor farmers, most of whom face extreme hardships.

The crisis in the farm sector has not yet hit mainstream India home

as total food grains production at about 273 million tonnes last year

and burgeoning surplus stocks have led to few consumers feeling

the pain that exists on India’s fields.

Agri-finance, per se, is not a major issue in India. In fact, it could be

even argued that the formal system of agricultural credit is a model

for developing countries with finance at very affordable costs being

provided to farmers across the country. Interest subsidies are

provided by the Indian government and some of the state

governments. In fact, the effective interest rate on farm loans

in some States is zero.

Marketing and storage/infrastructure facilities along with

modernization of farming practices (less use of water/efficient use

of fertilizers/nutrients) are indeed the enablers urgently required

in India.

To most perceptive observers, the time has come for a refocusing

of national attention on this most important sector of our economy.

It is heartening that the Modi government has committed itself to

this crucial area. In India, agriculture cries out for 1991-like overhauling.

36 | News & Views MAY 2018

WSBI joins Asian financialcooperation organisation

SEEKS MORE EXCHANGE WITH ASIAN FINANCIAL INSTITUTIONS THROUGHAFCA MEMBERSHIP

Seeking more exchange with Asian financial institutions, WSBI

joined in January the Asian Financial Cooperation Association

(AFCA), which unites financial institutions, financial industry

associations, relevant professional service agencies and financial

sector experts from Asian countries and regions.

AFCA is devoted to building an exchange and cooperation platform

for Asian financial institutions, strengthening exchanges among

regional financial organisations and financial resources integration,

jointly safeguarding regional financial stability, and supporting the

development of real economy in the region.

The association was established in May 2017 and is strongly

supported by the Chinese government and China Banking Association.

It promotes China’s One Belt and One Road initiative by seeking

financial connectivity in Eurasian countries.

As a member of AFCA, WSBI will gain more insights into banking

landscape in Asia, cross-border financial infrastructure and business

development opportunities. WSBI will also have access to AFCA’s

research, publications and contacts.

In 2018 AFCA will focus on the establishment of different working

committees and the organisation of a high-level forum for Asian

bankers. Launching a publication “Asian Financial Observation”

is also among the priorities for 2018. The publication will provide

the latest information on Asian finance and banking.

WSBI is sure its AFCA membership will extend its network and

knowledge in the Asian financial market, and will contribute to

AFCA’s mission of cooperation and experience exchange.

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WSBI holds LatAm, Caribbeanregional group meeting

ARGENTINA MEETING FOCUSES ON G20 MESSAGES

WSBI held on 22 March its XXIV

Annual Latin American and

Caribbean regional group (GRULAC),

one day after the G20-focused event

in Buenos Aires. The GRULAC

focused on its institutional agenda,

with WSBI President Heinrich Haasis

delivering the welcoming remarks.

WSBI Managing Director Chris De

Noose shared WSBI achievements

in the past 15 months and looked

at what’s ahead.

A chance for members to exchange

in current policy and industry issues,

GRULAC Chair Diego Prieto led

roundtable talks on G20 messages

given at the event the day prior,

with special emphasis on the Latin

American and Caribbean region.

The group also assessed progress made on the cooperation with

the IDB group and ways to deepen it. More specifically, three

common areas in which WSBI proposes to start working are:

1. Identification of obstacles and adaptation to regulations to

reduce asymmetries and legal uncertainties and create an

appropriate regulatory framework that encourages retail

banking in general and financial inclusion in particular.

2. Facilitate exchanges on innovation and digitisation issues to

promote best practices and experiences between WSBI and its

members, the IDB Group and WSBI Advisory Services on issues

related to retail banking, with an emphasis on financial inclusion.

In this context, we see the IDB Group ideally placed to support

the three-way exchange of knowledge among these institutions.

3. Develop a guarantee program to support MSME financing,

covering part of the possible losses of non-payment of

microcredits and loans, following the model of the European

Investment Fund and MicroBank.

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Learn more about GRULACat https://bit.ly/2zxbqSA or byscanning the following QR codeor by contacting by e-mailAimee.Suarez@wsbi-esbg.org

See GRULAC event page atwww.wsbi-esbg.org/Events/24TH-WSBI-GRULAC or byscanning this QR code.

MTripleSW: WSBI, PostBank Ugandato boost financial inclusion servicesin rural areas

PROJECT HAS MANY INNOVATIVE ELEMENTS

PostBank Uganda (PBU) and WSBI recently signed a Memorandum

of Understanding to scale up Village Savings and Loan Associations

(VSLA) business model in the East African country. Falling under

WSBI’s Making Small Scale Savings Work programme supported by

the Mastercard Foundation, the bank will look to financially include

at least 200,000 new small individual savers by 2020. Forty per cent

of new savers will be youth, while women will make up just over a

third. A quarter of new savers will be farmers.

PBU Managing Director Mr. Mukweli Stephen, said. “To reach our

goal we will need to improve access. That requires us to initially

select and pilot 480 agents, including five VSLA agents in the first year.

We foresee that figure growing to 1260 agents, including 15 VSLA

agents, during the scale up phase in subsequent years.”

PBU will build on the capacity of 20 already-mature VSLAs community

groups to serve customers as agents within communities through

already established linkages. Those mature VSLA group agents will

be selected from within the pilot areas. Selecting VSLA group

agents, who will come from selected communities, will be based

on maturity. That means VSLA group agents will be screened for

financial capacity and transaction history, commitment to

development and growth efforts, the PBU Group’s executive team’s

capabilities and history among other criteria guided by the Ugandan

central bank for agency compliance.

WSBI Managing Director Chris De Noose said: “PBU can now roll out

agency banking upon approval from the central bank. That is thanks

to the Financial Institutions (Amendment) Act, 2016 that was

passed by the Ugandan parliament to allow financial institutions to

provide agency banking, among others. Agency banking will be a

game changer, helping PBU acquire new customers, especially in

the rural hard to reach areas of the country.”

The Ugandan agency banking rules allow PBU to have full end-to-

end ownership of the distribution channel, which means the postal

bank no longer needs to rely on the Mobile Network Operators

outside of communication services. It also means a more competitive

banking landscape, where service quality will get a boost and

pricing more attractive for customers.

The project has many innovative elements too, including a youth

App to particularly address young savers and an e-recording tool

designed to help better understand financial and social behaviour

of VSLA members and whether products are suitable for small-scale

savers.

PBU’s Mr. Mukweli Stephen concluded: “WSBI support matters a

lot as we move towards our PBU inclusion strategy. Their support

will help us bring into the financial mainstream hundreds of

thousands of customers and transform many VSLA’s groups into

agents. That will help our country both now and in years to come.”

About VSLA’s: Village Savings and LoanAssociations

VSLAs are a way to give access to basic banking services for people

living in mostly poverty-stricken areas where financial institutions

oftentimes cannot reach. VSLA provide group of individuals in a

close geographic area a place to save their money and access to

lending products. They also serve as an entry point to formal

financial services.

The Making Small Scale Savings Work programme:at a glance

FIN

AN

CIA

L IN

CLU

SIO

N

38 | News & Views MAY 2018

Region: Africa

7 projects in Cote d’Ivoire, Kenya, Morocco,Nigeria, Senegal and Uganda

Value: $16 million

Goal 1 million unbanked people activelysaving in formal bank accounts

Aim: 7 innovative & viable business modelsfor small scale savings

Period: September 2016 - February 2022

Funder: MasterCard Foundation

MTripleSW: LAPO Microfinance Banksigns MoU with WSBI to improvesavings by women

WILL TAP INTO AGENT BANKING NETWORK, TEAM UP WITH NATIONALCOUNCIL FOR WOMEN SOCIETIES

Nigeria’s LAPO Microfinance Bank and WSBI recently signed a

Memorandum of Understanding to tackle low-income customers,

particularly women’s financial inclusion in Africa’s most populous

country.

Falling under WSBI’s Making Small Scale Savings Work programme

supported by the Mastercard Foundation, LAPO’s project, called

My Pikin and I, will use not only a mass-market, low-cost

microsavings-insurance product through agent networks to reach

women, but also team up with bodies such as the National Council

for Women Societies NCWS. LAPO’s savings and insurance bundle

is an innovative approach that will allow low-income families to save

up small portions of their income conveniently and flexibly in daily,

weekly or monthly cycles. It is designed to cater to their needs in

areas such as health coverage and their children’s education.

Kunle Shittu, LAPO’s Head of Corporate Communications & Branding,

said: “Set for launch in April, the project is unique because it

primarily targets economically productive parents, guardians and

women between the ages of 20-50 in the low-income bracket.

That requires us to think carefully about their specific needs and

how they prefer to engage with us to raise their desire to save.”

Nigerian women and financial inclusion

The work is important particularly for women in Nigeria as they face

exclusion in several areas of society and usually bear the brunt of

negative social and economic shifts. Some 28 million or about

56.2% adult women are either financially underserved or excluded,

according to the EFInA Access to Finance Service in Nigeria Survey

(2014). To help address this, “My Pikin and I” draws on research that

concludes that women as a homogenous group have specific tastes.

When they are lumped in with men as a group, data show women

fare worse. To address this, LAPO has designed a different approach

to communicate and deliver products to women. In fact, research

shows women respond better to peer-to-peer and “cluster-focused”

communication for consumer education and marketing efforts.

One example that reflects these factors is the planned low-balance

savings offerings that impact children. The child-focused products

are known to attract backing by women-only channels like NCWS

to help deliver the offering. LAPO’s women-focus products will be

distributed through its existing channels too, thereby aligning with

the bank’s product and channel strategy. As the project seeks to

deliver services through branchless banking channels such as

stationary and roving agents as well as mobile banking, it presents

the right fit and added boost to LAPO’s evolving channel approach.

WSBI Managing Director Chris De Noose said: “Financial inclusion

helps women beyond the savings account balance. Thanks to

LAPOs close-to-customer approach, those who normally look to the

informal sector can migrate more easily to the formal one. That

means gaining access to socio-economic safety nets such as loans,

healthcare and pensions. That access changes their lives.”

Tapping into LAPO’s agent banking network: The My Pikin and I

project is designed as a part of LAPO’s Agent Banking efforts, which

is at the centre of LAPO’s Alternative Delivery Channels Outlook.

The Agent Banking project which was first piloted in December

2016 is one of LAPOs strategic moves to take its presence closer to

the customer. The work has achieved major milestones since then,

recruiting 76 agents, 1900 customers and more than 9 million

Nigerian naira deposits mobilized. The project was fully launched

in August 2017 with over a thousand Agents across the country

within the first year.

LAPO’s Shittu concluded: “My Pikin and I will succeed because we

provide new ways to reach women based on research, data and

first-hand knowledge. We also tap into the Agent Banking model,

which works with viable businesses like supermarkets, post offices,

boutiques and bookshops as agents. Harnessing these channels

along with our branch network will improve our chances of success.”

About LAPO

With a base of over three million customers and more than 400

branches, LAPO Microfinance Bank is Nigeria’s largest Microfinance

Bank accounting for over 25% of the microfinance market share.

Known as a “pro-poor” organization, in its mission, LAPO seeks to

improve the lives of the population at the bottom of the pyramid

by providing life changing business capital in the form of loans that

has helped moved thousands of Nigerians out of poverty.

Established in the late 1980s as a Non-Governmental Organization

(NGO), LAPO MfB obtained in 2010 the approval of the Central

Bank of Nigeria to operate as a state microfinance bank. It was

granted approval in 2012 to operate as a national microfinance

bank. LAPO’s five-year strategic outlook to 2022 seeks to grow its

customer base to 8 million customers.

Learn more at: www.lapo-nigeria.org

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Dormant bank accounts: inevitable,but not hopeless

BIGGEST CHALLENGE OFTEN RELATED TO FINANCIAL INCLUSION

Insights from financial inclusion specialist Stephen Peachey,who presented at a recent WSBI webinar.

Dormancy remains an unavoidable part of savings mobilisation for

banks and their customers, says a noted expert working with WSBI

on financial inclusion efforts.

According to independent financial inclusion specialist Stephen

Peachey, who has worked on multiple projects for WSBI and has

been working in savings banking for more than 30 years, certain

levels of dormant accounts are a usual phenomenon in banking all

around the world. However, there are some basic rules that banks

can follow to reduce dormancy.

Dormancy means various things in financial services. For mobile

wallets it means no activity in the last three months, for regulators

– no activity in the last year or two, while for savings banking –

no activity in the last six months.

Dormant accounts are inevitable because not everyone can save

steadily throughout a year. However, those accounts do not bring

any value neither to banks nor to their customers. Accounts that

are sold but not used rarely make money, while accounts that are

emptied by bank charges are considered as a theft, in particular

among rural people. Mis-sold accounts that can never be used are

never forgiven, says Peachey.

“There are many ways savings banks can employ to tackle

dormancy. If a previously active account becomes quiet, the bank

should contact the customer – through digital messaging, for

example – to remind them of bank’s services,” he noted. “If the

current account does not meet the needs of the customer anymore,

the bank should offer a more suitable option without charging a

fee for it.”

Forgive fees, analyse customer data

If the customer wishes to use the account again, a nice gesture is

not to charge the customer for the months they were not using

their account. This would help to keep the customer and improve

relationship with them.

The financial inclusion specialist also advises to look into data that

banks have about their customers and their activities. Alternatively,

public data from different institutions or country data can also

be used to get more insights into the dormancy situation and

tendencies in the region.

The financial inclusion challenge

The biggest challenge of dormancy is often related to financial

inclusion. Global efforts to bank people all around the world and

to provide access to banking services result in worryingly high levels

of dormancy. Lack of financial education or basic instruction on how

to use banking services lead to opening new accounts never used.

Peachey calls on banks and

governments in emerging

markets to aim to sell accounts

better designed to stay active

in the long term.

Peachey concluded: “Accounts

that have not been used for

one year are almost all turning

permanently inactive. If the

account has not been used

for two years, it is reasonable

to close it if local regulation

allows such action. In many

cases such situation can be

avoided if banks take action

much earlier.”

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40 | News & Views MAY 2018

MTripleSW: Merchant agent banking in Morocco

WSBI MEMBER AL BARID BANK PILOT CONNECTS MERCHANT AGENTS WITHCUSTOMERS VIA MOBILE APP

By Celine Stevens, Programme Manager for WSBI’s MakingSmall Scale Savings Work progamme.

Agency banking took its first, tentative steps earlier this year in

Morocco following new regulations on agency banking enacted in

2017. I saw first-hand the potential for agency banking to improve

access to financial services after spending two days with Al Barid

Bank, the postal bank in Morocco, a partner financial institution in

the WSBI programme Making Small Scale Savings Work.

ABB had invited me to attend meetings to launch the agent

banking pilot in Ben Guerir, a small city of about 90,000 people and

a provincial capital in central Morocco. Ben Guerir is home to a

Moroccan Air Force base and two ABB branches.

ABB had its first merchant recruited for the pilot in this city. A small

grocery owner, the merchant represented the start of a bigger goal:

to sign up 5,000 new clients and 100 merchants in Ben Guerir. The

project aims to harness use of an app on local merchants’

smartphones that would enable ABB customers to make purchases,

to cash in/out, and to make other transactions – a technical first in

Morocco and for ABB. From the experience with this first “pilot”

merchant came plenty of “ah ha” moments.

During my visit, I met with the director of one of the ABB branches,

who demonstrated real local knowledge despite having only two

workers – one manager and one customer advisor. Even with slim

staff levels, there was that one merchant who had already agreed

to take part in the program. But it didn’t go off without a hitch.

At face value the merchant sign-up would seem rather simple. First,

candidate merchants must already have an account at ABB. Second,

they must be willing and able to load the ABB merchant app on

their smartphone to receive online payments. The app allows

merchants to connect wirelessly whenever a customer with the ABB

mobile app comes into the store. The store customer mobile app

“talks” to the merchant app either through a QR code or via SMS.

This, however, is easier said than done.

On the day of our visit, the candidate merchant received a team

from ABB headquarters and the local branch. Joining the group was

the branch customer advisor, whose computer was just uploaded

with software designed to track merchant agents who sign up for

the app.

Loading the app on the merchant’s smartphone proved a bit of a

challenge. It didn’t work the first time, so ABB took the smartphone

back to the branch and uploaded the app there. The problem was

solved simply by a better internet connection during upload. Lesson

learned: faster bandwidth required.

The merchant and the ABB people then returned to the merchant’s

grocery store to show him the new app and how it works.

But, even after training, the merchant remained unconvinced.

Security concerns popped into his head, especially if the smart -

phone was stolen or if he was to forget it somewhere. That’s where

the branch director had sway over him, that local touch that no one

from HQ would dare to attempt. The branch director explained that

the phone will have key, just like the door in his store. The merchant

was put at ease. Lesson learned: local knowledge counts.

Beyond that first merchant in Ben Guerir is a rather vast set of

merchants that ABB would like to pursue, including those working

in a big open-air market. On the customer side, the ABB team

would like to tap into the military community at the nearby base as

most of these people have an account with ABB. That requires

getting the word out to military personnel through targeted

marketing and word of mouth. ABB must make the case that the

ABB mobile app connects them to their families who are often not

living on or near the base.

Another benefit for the military personnel is savings. By adding a

savings product, the economies gained by sending money to family

members also using the app can be put aside for the future.

That’s a big selling point because most of a soldier’s salary is sent

to dependents. Families avoid high-fee wire transfer services.

That leads to savings, our main goal. Lesson learned: demonstrate

savings, the need to connect.

Beyond technical glitches faced when setting up the first merchant

agent, we know that access issues will still surface. Right now,

merchants need a Google account to download the app. Is that

enough? With apps come updates which will need to be thought

through as well before bringing the app project to scale.

An identity issue may be problematic on the customer side, too.

Not so much in Morocco, I’ve been told, but more so in other parts

of Africa because it is not always the phone owner who owns the

chip installed in the phone.

Data is another challenge: not necessarily how to harvest it but

what to DO with it. Will it help fine-tune agent and customer use

to get people to take up the offer? Will it help provide real savings

for customers?

Recruiting the first merchant is a big step but there is plenty of work

ahead. ABB aspires to scale up and eventually attract 5,000

merchants and 250,000 customers to its mobile accounts. Half of

these people are seen as opening savings accounts.

We are in the early days of this project, but if some of the initial

roll-out bumps can be smoothed over, the road ahead may well turn

out to be productive and profitable for clients and banks involved

in the Making Small Scale Savings Work programme.

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WSBI member showcase: Belarusbank

2017 RESULTS FOR FINANCIAL LITERACY EFFORTS, 2018 GLOBALMONEY WEEK

Belarusbank, as an active participant within the financial market

when it comes to financial literacy, continued in 2017 to act in

accordance with the Plan of Joint Actions of State Bodies andFinancial Market Participants to Increase Financial Literacy of thePopulation of the Republic of Belarus for 2013-2018. This activity

is one component of the bank’s corporate social responsibility policy.

In each division of the bank and the head office there are groups

focused on increasing financial literacy, and the bank’s initiatives in

this area cover all regions of the country. The bank’s financial literacy

groups cooperate with educational institutions and territorial social

service centres, enterprises and organizations, take part in all the

landmark events held in the regions.

The main areas of work on financial literacy are: thematic, mass,

training events, joint projects with the media and children’s

publications, active work with clients in the bank’s offices, as well

as at their place of work and study. For customers of the older

generation bank organized special schools of “golden age” with

the purpose of practical training in the use of self-service devices,

internet banking and involvement in the system of non-cash payments.

On the bank’s website there is a special section “Alphabet of the

financial literacy. Finance lessons” (https://belarusbank.by/ru/33139/

press/finansovaya-gramotnost). The call centre is actively present in

social networks. In the bank’s head office there is a Museum of

Savings Business Development, which organizes excursions and

interactive activities on financial literacy.

World Savings Day

The bank traditionally takes an active part in the celebration of the

International Children’s and Youth Global Finance Week and World

Savings Day. In the cooperation with Children and Youth Finance

International (CYFI), the bank was awarded a “Best Product for

Children and Youth 2016” nomination for the implementation of

the “Student’s Map” project.

In 2017, the bank completed a project of preparation and

publication of a book for children “The Alphabet of Financial

Literacy from Belarusbank” (https://belarusbank.by/site_ru/33212/

groszyk_full_opt.pdf), which was presented on 29 November 2017

in the National Library of the Republic of Belarus. During the

presentation bank transferred the books to all children’s libraries.

In 2017, ASB Belarusbank organized and held about 8,000 events

with the participation of more than 320,000 thousand people,

including more than 110,000 children and young people.

Global Money Week 2018: Bank holds450 events

Belarusbank actively supported in March the celebration of Global

Money Week 2018.

The bank had a special section on its website called “The vocabulary

of financial literacy. Finance Lessons”, with the GMW-2018 logo

uploaded and a virtual literature exhibition dedicated to the

celebration of the week. The bank also provided a link to access an

online blog contest.

In all regional cities of the country there was an academic challenge

for high school students. Called “Study. Save it. Earn” offered by

its “Platinum Owl” youth club. On all screens located in the bank’s

offices, the bank broadcast promotional videos about financial

literacy, as well as training videos on using Internet banking and

mobile banking.

About 450 different events were held across the country including

lessons, excursions, open days, competitions, seminars, trainings,

lectures and presentations. Some 54,000 children, pupils, students,

and young specialists took part. About 60% of the events were

held in rural areas and small and medium-sized settlements.

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42 | News & Views MAY 2018

G20 and Rural Finance

MAKING THE LINK

By Ian Radcliffe, Director, WSBI

This year’s WSBI positions to G20 policymakers made an effort to

address agricultural finance. The paper spelled out actions needed

to boost both public and private investments in agriculture or agri-

aligned sectors. It also highlighted the need for access to finance

for rural smallholders, who are extremely limited in their ability to

expand and meet the rising demand for agricultural food production.

For many in developing countries, access to finance starts by having

basic financial access. This is an important link. Why? Because in

developing countries, financial inclusion efforts are the lifeline

to financing in increasingly isolated rural areas, which lead to access

to financing. But borrowing is towards the end of a process.

There is much that needs to be done before that. In fact, it’s a three-

step process that WSBI works at every day through member savings

and retail banks: transaction account access, savings and then

borrowing.

Addressing the financial inclusion conundrum

More than 1.7 billion people lack a basic transaction account, with

a large chunk living in rural or agricultural areas. That’s common

knowledge among international organisations and national

governments. WSBI frames the financial inclusion conundrum through

the mantra: “usability, affordability, accessibility and sustainability”.

On access and usability points, there are a couple of forces at play.

First, proximity to financial services. That means touch points where

banks, bank branches, agent banking outlets or even locally led

savings groups are present. That’s not mentioning digital access

through basic mobile phones through telecoms networks all the

way to more sophisticated smart phones over the Internet. This is

especially problematic in rural areas.

The second factor is geolocation – where people live – rural versus

urban. Proximity can be defined as the distance between people

and bank access points. Banks struggle with this aspect a lot and it

can greatly affect account use too. The rule we found holds true

during our years of work particularly in Africa is that people will

walk a maximum two kilometres to get a spare dollar out of their

pocket and into savings.

Geolocation greatly influences financial inclusion as well. No doubt

the world’s rural populations are moving into cities at a rapid clip.

But the struggle to operate a bank presence in deep rural areas is

not a consequence of urbanization – although that obviously

exacerbates the problem. The main issue relates to topography and

how people cluster in these sparsely populated areas. These factors

lead to deep rural areas struggling to attract and retain bank

presence. The pattern is acute in Kenya, for example, where only

50 to 55 per cent of people can be reached by traditional branch

banks or agent network. Inhabitants of Kenya’s vast swaths of

farmland in the north are especially hit. That’s according to a study

by WSBI as part of its Doubling Savings Accounts programme

supported by the Bill and Melinda Gates Foundation. Taking place

from 2008 to 2016, that programme preceded the current Making

Small Scale Savings Work programme, a partnership between WSBI

and Mastercard Foundation to help boost financial access and

economic development in seven African countries. In Tanzania it’s

even more daunting, where the figure drops to around 25 per cent.

In Uganda it is somewhere in between. The situation in Africa is not

too different from other parts of the world, such as Mexico and

Vietnam. That’s the big argument to partner with mobile money

operators because they can reach out further and reduce costs.

Rural challenge: affordability and sustainabilityplay a role

In Africa, in many cases people have only one account. In deep rural

areas, it’s no different. As people in those areas rely on 50 to 60

cents a day based on purchasing power parity, the pressing question

is how a bank develops a business model that sustainably delivers

three to five business transactions per month, which is what they

are doing in the informal sector. When 50 per cent of adults are

unbanked in certain markets, there is huge upside if banks get the

model right and deploy it. Again, mobile banking can help fill a need.

Spike charts contained in a 2015 WSBI report on access to finance

in East Africa’s rural areas show urban markets served rather better.

In that part of the continent, we concluded that an active account

base of one million inhabitants is a pre-condition to form a viable

market for sustainable banking. Solutions have emerged, however,

and will continue to evolve. Governments, banks and other

stakeholders know this. People on the ground are profiting from

fresh approaches. >

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Step 1: Transactions. A needed first step?

As eluded to before, the financial inclusion equation is based on

people transacting money. They spend, they wire money, and they

pay bills. That could mean sending money to family, to pay school

fees, to pay taxes. People also receive money, among friends and

family and government transfer programmes.

Transactions done through basic transaction accounts have knock

on effects that prove attractive to any government treasury.

For policymakers, getting people banked and transacting opens up

low-cost, safe and efficient ways to provide individual transfer

payments to intended recipients. Often innovative and digitally

driven, government payments through transaction accounts are

relief to cash-strapped national budgets and better ensures transfers

aren’t “skimmed” by the informal sector.

Financial inclusion also helps governments get better control of the

economy. Control can translate to understanding better the money

supply and money flows. That includes better controls on money

laundering and terrorist financing. There is also macroeconomic

evidence to show that economies with deeper financial intermediation

tend to grow faster and reduce income inequality. For local people

in rural areas, like their counterparts in the city, the effects of

plugging into a transaction account are immediate. It removes the

fuss and muss around working within informal players, slashes

often-usurious transaction fees, and buries the threat of theft from

a cash-only lifestyle that includes stuffing bills and coins in a

mattress or in a box under the bed. The need for loan sharks

evaporates as account holders start to develop a relationship with

a bank.

Step 2: Pennies saved

People need to transact, to be sure, but they also have need to save.

Transaction accounts in hand, people begin to accumulate money.

No matter how small the amounts and scale, savings can and

will build up. One can save without an account to be sure,

but temptation can disrupt savings held at home.

A good example hit me during my trip to Indonesia a few years ago,

where traditional savings practices remain. While there, I struck up

a conversation, through an interpreter, with a lady in her home

situated in a slum in Semarang, Central Java, to learn about her

savings habits. She explained how a little clay pot – called locally a

Tabungan – holds all household savings. But it doesn’t work for her,

warning sullenly: “There’s a thief in the house: me”. It reaffirmed

that, Tabungan aside, there are plenty of good reasons on the

consumer side to migrate people to basic banking accounts.

Technology plays a big part in that migration. Kenya’s M-PESA,

which is not a bank, is a prime example.

Kenyans signing up to that service often have spare change on their

account that accumulates day to day, month to month by millions

of users. M-PESA has found a creative way to go beyond basic

transactions through partnerships that migrate customers from

transactions to savings and even loans. M-PESA does not provide

loans on its own, but teams up with a bank to do so.

Banking rules also shape how banks provide access to transaction

accounts and savings products. In West Africa, for example,

regulatory barriers on agency banking make it difficult for banks to

reach remote and rural areas. Banks there can deploy agency

banking through so-called "Intermediaire en Operations de

banque”. That has proven unprofitable and therefore unsustainable

for banks. A more viable solution has taken hold, however, via

microfinance institutions (MFI). MFIs have more flexibility to run out

agency banking solutions since MFI rules allow them to launch

agency banking solutions through agents/merchants, to the extent

that they have a strong management information systems.

What is important to remember once people get access to

transaction and savings – be it through a bank, savings group,

agent bank or a mobile operator – the financial world really begins

to open up.

Step 3: Savings to borrowing, and beyond

Everyone wants to borrow. That’s clear. So as savings build up, the

prospect of taking out a loan improves. Kenya again is on the front

foot with M-Shwari. Offered within M-PESA, it gives qualifying

customers a chance to borrow. Linked with regulated financial

institution Commercial Bank of Africa and mobile network operator

(MNO) Safaricom, M-Shwari meets a market need. It has proven its

worth in the market. Beyond lending is insurance, a financial option

that opens up when savings balances emerge and grow.

Dormancy: the quest to keep accounts active

One key to better financial access is making people use an account,

not just have an account. By use, our definition means transacting

at least once during a period of six months.

That definition seems easy enough to reach, but it isn’t. Case in

point is GSMA’s latest annual mobile money report, which shows

total and active mobile money accounts by their definition.

Compare the two figures, and it is striking that 75 per cent of

mobile money accounts are dormant.

Whether in the countryside or in the big city, addressing dormancy

starts with customer centricity. It’s the core way we deal with the

issue in our financial inclusion efforts. Financial education has a role

too, especially at European level, but less effective in the developing

world, according to some reports from the World Bank.

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The quest for customer centricity starts from the top – the

leadership of the bank. That’s according to a well-referenced set of

customer centricity pillars outlined by CGAP. The culture of the

organization and management must be customer focused.

As management guru Peter Drucker once said, “Culture eats

strategy for breakfast.”

Operations too need to focus on centricity. This pillar requires banks

to focus efforts towards the customer in the back office in areas

like compliance, human resources management, IT, marketing and

staff training. Another pillar rests on understanding the customer

exceptionally well. That means getting a grasp of their daily lives,

their needs at different stages of their lives as well as the day to

day. Empowering employees helps this pillar stand firm.

The fourth pillar is products and services. They have to be tailored

to customer lifestyle to tailor their experience every time they

interact with the bank – in-branch, online or mobile. Customer

experience can be improved based on insights harvested though

data and face-to-face contact. This pillar is also built on testing

products and services, along with delivery, scale and renewal of

them. The final pillar is value: creating and measuring it at customer,

firm and society levels.

Old ways work… to a point

Banks must understand how to extend account access, going

beyond time-honoured, culturally driven financial solutions like

ROSCAs (Rotating Savings and Credit Associations). They function

in rural communities by banding together people in groups of

around 20 to save up. Savings are shared and rotate evenly between

members. ASCAs (Accumulating Savings and Credit Associations)

are another option, where savings are shared and can be borrowed

unevenly by the members. These groups have been going on for

centuries, but can only achieve so much.

That’s why the formal banking system needs to step in. As G20

leaders spell out the need for agri-finance, WSBI continues to push

ahead until 2022 with our partnership with Mastercard Foundation

to address banking services including in rural areas. WSBI has

already signed memoranda of understanding wtih banks in Nigeria,

Uganda, Morocco and Kenya. If programme partner banks in the

seven African countries targeted can make inroads in the country -

side, expect those who work the fields and feed the continent to

have a more prosperous, more stable future.

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WSBI Innovation Workshop:Banking Disruption, Bank-TechCollaboration & Open Banking Part 2

WORKSHOP TACKLES BANKING DISRUPTION, COLLABORATION& OPEN BANKING

After the successful Innovation Workshop in November 2017,a delegation of banking experts from all around Europegathered in Brussels on 28 February for the second part ofthe WSBI Innovation Workshop dedicated to bankingdisruption, BigTech trends, collaboration and open banking.

Question tackled included: who are the main players; which trends

will impact banking; how should banks react in the mid to long

term as well as how to build meaningful collaborations to enhance

the customer experience and offering for consumers and SMEs.

On the agenda: platformisation, challengersand Big Tech trend s

The event was kicked off by Natalie Staniewicz, WSBI-ESBG, with a

summary of the previous innovation workshop’s conclusions and

Jalal Douame, Erste Group, with insights on industry developments

in the last months since the workshop – the speed of change in

retail banking but also more and more in SME and corporate

banking became highly visible. AI and Big Data, Open Data and

Cloud being a few of the core underlying technologies reshaping

banking. Matters such as “platformisation”, challengers and

Big Tech trends were tackled. Is coopetition with the GAFA, BAT,

FATBAG an option? Should banks cooperate more together?

And how to strengthen collaboration with other sectors and

start-ups? Views differed, experiences were exchanged, everyone

sharing their best practices on innovation and open banking,

drawing a picture of trends for the next five to ten years.

Building meaningful collaborationsto unlock new potential

Roundtables, presentations and brainstorming

sessions allowed participants to reflect on the

importance of collaboration. Kristian Luoma from

OP Financial Group presented ideas on how to

establish bank – startup partnerships to enhance

the client offering and help evolve from a traditional

banking approach to a multiservice company.

“Focus on tackling concrete needs” in your bank

– start-up projects, was a clear advice given.

The vivid discussions brought forward a clear

common point: Next to building up banks’ own

capabilities, collaboration is becoming or is

already a vital part of banks’ strategy. As Natalie

Staniewicz, manager in innovation and business

development at WSBI-ESBG, said: “Banks must look at where

customers will be and keep an eye on the future to be relevant

today”. Banks are actively rethinking how they can remain flexible

and what they can implement to deepen the strong relationship

and trust they already have with customers and ease the customer’s

daily financial journey.

Insights from other industries – the TravelIndustry

Cornel Dinu and Daniel Farmache from Veltravel, an aggregation

platform to ease customer’s travel-related journey, shared insights

on how the travel industry was disrupted over time and drew

parallels to today’s banking disruption.

46 | News & Views MAY 2018

WSBI’s Natalie Staniewicz

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Veltravel showcased how APIs have helped to aggregate services,

build platforms by integrating various offers, open new

opportunities for cross-industry collaboration and lower costs to

companies as well as clients.

Open banking & new business models

Alexander Keim from Projective discussed platformisation trends

and how banks could experiment, pilot and scale in an open

environment of co-creation. “Savings banks have a unique position

because they often maintain a relationship in an intimate setting

rooted in local communities. Customers are more likely to trust

them with what is at their heart and not just in their wallet. In order

to stay ahead of BAT & GAFA, they need to become self-aware of

their role as data fiduciaries”, Alexander Keim stated.

“The game is changing”, said Oscar Sala, co-chair of the Mobey

Forum Open Banking Workgroup, referring to what it means to be

a bank today. He showcased differences between UK Open Banking

and PSD2, trends of how banks are reacting and various strategic

options to connect people, merchants and banks in a new open

ecosystem.

In the afternoon, participants were split into discussion groups to

tackle on the one side Bank-Bank Collaborations and on the other

hand New Value Creation and Data Management.

The Workshop showcased a positive view of Open Banking, namely

that of ‘Sharing and cross use of bank products, services functions

and data with third parties to bring additional value and create new

business opportunities’.

Why is the ‘digital wave’ and Workshops suchas the one in February important for savingsand retail banks?

Jalal Douame from Erste Group mentioned after the Workshop:

“The workshop was a fantastic forum to discuss some key topics

for banks today, especially with our industry moving toward open

banking and GDPR. Today, banks need to act fast and leverage on

opportunities to cement relationship with clients and create

competitive advantages. Having such workshop will help us address

crucial questions, exchange views and debate approaches. There is

no right or wrong in the equation, it is all about maximising

opportunities!”

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Learn more about the 2018Innovation Workshop athttps://www.wsbi-esbg.org/Events/Banking_Disruption_Workshop

For questions, emailinnovation@wsbi-esbg.org

New: ‘Innovation Exchange’ videoseries continues

MULTIPART SERIES HIGHLIGHTS WSBI MEMBER BANKS’ EFFORTSTO HARNESS DIGITAL WAVE

WSBI released in early 2018 more episodes of its WSBI Innovation

Exchange video series. Representatives from WSBI member banks

in Austria, Spain, Sweden joined WSBI staff and members from

other markets to share their innovation successes. Episode 11

features CaixaBank’s Javier Mas, who talks about innovation and

how the Spanish bank approaches digital change. The two-minute

video looks at insights from Spain’s leading retail bank and how it

approaches digital channels to serve customers and how band

branches continue to play a role.

About WSBI Innovation Exchange

WSBI released in November its 11-part innovation-focused video

series. Episode 1 kicks things off with WSBI-ESBG’s Natalie

Staniewicz explaining how innovation and digitisation best works

within WSBI-ESBG member savings and retail banks. The second in

the series features WSBI-ESBG payments expert Diederik Bruggink,

who gives insight into the role retail banks play in the digital “New

Normal” sweeping over the financial services sector.

The third video features Shaheen Adam, acting general manager,

PostBank in South Africa, who tells how innovation will shape the

future of retail banking and the role of brick and mortar banks in

the digital age.

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See the latest videos on YouTubeat http://bit.ly/2AgAuhG or byscanning this code.

New ‘Innovation Insights’ page launched

In advance of the 8 March European Commission FinTech Action

Plan, WSBI-ESBG launched a new webpage dedicated to the latest

insights from the associations and members related to innovation

and digitisation.

Called “Innovation Insights”, it gives a first-hand look at how

innovation is taking place on the ground at WSBI-ESBG member

banks. Visitors can find policy positions and insight articles on topics

such a framework for FinTech, cybersecurity, cloud outsourcing,

data protection and data flow as well as digital financial inclusion

– to name a few areas. Also included are videos and opinion pieces

from WSBI-ESBG, its members as well as partners on innovation.

In the coming months, members will continue engaging in various

committees to develop positions in areas such as roboadvice, ICOs

and cryptocurrencies, digital skills and e-identity.

Visit Innovation Insights atthe WSBI-ESBG website athttps://bit.ly/2pQZCaR or byscanning this QR code.

InnovationExchange

InnovationInsights

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Upcoming: 25th World Congress ofSavings and Retail Banks in New Delhi

SUSTAINABLE RETAIL BANKING: MAKING GLOBALISATION INCLUSIVE FOR ALL

The WSBI World Congress set for 15-16 November in New Delhi,

India, aims at bringing WSBI and ESBG members and all interested

retail bankers together to discuss the topics that define the future

of the retail banking sector and to bring a powerful message to the

worldwide policymaking community.

The congress features speakers

and panellists from WSBI’s

membership as well as experts

from the banking sector around

the world. It offers the attendees

insights during high-impact panel

discussions.

The WSBI World Congress of

Savings and Retail Banks is an

excellent opportunity to create

and strengthen business relation -

ships and to promote your

products and services to an

international audience of retail bankers and policy makers.

This year’s theme: Sustainable Retail Banking:Making globalisation inclusive for all

Is the tide turning against globalisation? Are too many people

feeling left behind by global growth? These questions are being

asked more and more, reinforced by the tendency of some

countries to shift towards protectionism. Yet, while raising living

standards, globalisation is a positive force able to lift many people

out of poverty. Over the past half-century, globalisation has brought

many benefits to the world economy. Openness to trade enhanced

competition and spread technology; income and jobs increased.

Stronger income growth allowed global poverty and cross-country

gaps to decline.

However, very few citizens experience this positive force in their

everyday life. Inequalities still exist and are rising.

Local savings and retail banks’ undeniable role

The financial sector has an important role to play when it comes to

globalisation. Trade integration relies on financial links (for payments,

investments, etc.), creates additional financial links and stimulates

foreign direct investment (FDI). One can say that the financial sector

is symbiotic with global trade.

At the local level, globalisation allows citizens to access a greater

variety of goods too, while inward investment provides jobs and

skills to workers. Besides, while countries open to trade grow faster,

their living standards tend to increase too.

Globalisation has a positive impact on SMEs and local communities.

It provides more employment opportunities, gives them access to

wider markets and availability of a

greater variety of goods. In return,

businesses trigger innovation,

add new jobs to the economy,

which has a positive impact on

workers. Very often, the main

obstacle to such developments is

financing. Here is the role of retail

banking: providing such support.

Savings and retail banks are the

banks with the strongest regional

presence. A big branch network,

complemented by digital customer

channels is testament to that

presence. As traditional partners of their local private and

commercial partners, savings and retail banks are uniquely placed

to accompany their clients on their international expansion and relay

the benefits of globalisation to local communities. Indeed, retail

banks are ideally placed to help the private sector adjust to new

economic realities, with an extra focus on social sustainability.

They can provide financing to local SMEs so that they can go and

conquer the world. That is when global and local join hands in order

to create a better future for all of us. These banks base their

financial decisions on the needs of people and SMEs, and thus

positively finance businesses that benefit to society. In the current

context of post economic crisis, sustainable retail banking gained

prominence and appears as a fair trade-off between individuals,

business and investors.

So that everyone gets the most out of globalisation, domestic

policies must guarantee a more equal redistribution of the growth

generated and fuelled by globalisation. As stated by IMF Managing

Director Christine Lagarde: “Building a more resilient and inclusive

global economy, the world economy needs to be based on a

foundation of sound domestic policies, combined with a steadfast

commitment to international cooperation.

India: a gigantic retail banking marketin the making

India is undergoing a digital revolution thanks to which more and

more Indians will be included in the financial system. >

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The country is one of the most cash intensive economies in the

world, 97% of all transactions being made in cash. Reason why

India is among countries with the lowest access to digital payments

in the world. Yet, as said previously, digital technologies are an

opportunity to connect unprivileged and poor people – the

unbanked – to financial services such as savings, loans, insurance.

A blessing in rural areas in particular.

In 2014, Indian Prime Minister Narendra Modi announced the

launch of a program aimed at financial inclusion which priority was

to ensure that each Indian household has a bank account.

Accessible financial services had to become global and affordable.

In a developing country as India, banks have an important role

in mobilising savings and allocating credit in order to trigger

investment and production. Several measures have been settled to

reach such goals in India. The Financial Stability and Development

Council has been given a special mandate to promote financial

inclusion and financial literacy. The Reserve Bank of India and the

government also played an important role in terms of building

infrastructures and raising awareness.

Considerable investments in creating infrastructures have been and

still are made to offer various solutions such as mobile banking, e-

wallets or virtual cards. Digital-only banking in India is based on the

Aadhaar infrastructure, the world’s largest biometric ID system to

which 99% of the Indian population is enrolled to. This Unique

Identification Number (UID) can be used as a permanent financial

address and thus facilitates financial inclusion of the weaker

sections of Indian society.

As a result, over the past years, an enormous amount of bank

accounts have been opened in the country while studies show the

positive impact of bank branches and retail banks on the GDP on

India, financial inclusion being strongly associated with its progress

and development.

Why you should attend

Many speakers and panellists from all over the world will attend the

25th WSBI World Congress and share their experience and views

on the topic of globalisation, financial inclusion and the role of

savings and retail banks in this respect. It will be the occasion to

hear about how those banks can make their infrastructure in the

field of payments, credit decisions, financial advice work while

bringing the benefits of globalisation to every street and every

house. You will have the occasion to know better about robotic

breakthroughs in manufacturing and how to cope with the threats

those innovations bring: what’s left of the human dimension of

work, how to train the workforce, what about social protection and

what influence on banks? A particular focus will be made on India,

a country that has been able to provide an electronic ID to more

than one billion of its citizens in only ten years. Attendees will see

how this can lead to a higher level of financial inclusion. This will

allow attendees to compare different models, from financial

institutions in developing countries and their European counterparts.

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African financial institutions transformvia innovation

SUCCESS HIGHLIGHTED AT TUNIS WSBI REGIONAL GROUP MEETINGS

Fifteen African members convened in Tunisia on

11-13 April for the WSBI Africa Regional

Group meeting at the kind invitation of la

Poste Tunisienne. The event focused on rapid

and smart adaptation to digital banking

with mobile solutions for payments, savings

and micro-loans and parameters for a complete

management of their mobile accounts.

Day 1 included keynote addresses from Tunisian government digital

economy director Sami Ghazali and Yacine Fal, deputy director

general for the African Development Bank's North Africa regional

unit. MED Confederation President Jaloul Ayed led a morning

panel on regulation and digitisation. La Poste Tunisienne CEO

Moez Chachouk moderated the afternoon panel on digital

financial inclusion.

Day 2 focused on innovation, with morning panel sessions followed

by afternoon workgroups. On that day WSBI launched its first-ever

UFA 2020 best achievements award for 2017 was given to Post

Bank Uganda, Centenary Bank Uganda and Caixa Económica de

Cabo Verde. Day 3 included a visit to a la Poste Tunisienne branch.

Transforming financial institutions throughinnovation

The La Poste Tunisienne-hosted Africa Regional Group Meeting was

in cooperation with the Caisse des Dépôts et Consignations de la

Tunisie. The meeting comes at a time when financial institutions

worldwide are embracing the change fuelled by new technology,

changing rules and customer demands. Given this context, meeting

participants assessed what are the necessary business model

transformation requirements to be successful and sustainable in

disruptive innovation times and how the regulation should support

this transformation. Latest innovative developments in areas like

blockchain, crypto-currency, biometry and virtual banking were

covered from the regulatory and operational perspectives.

Discussions also focused on how innovation can at the same

time differentiate WSBI member institutions from competitors,

better serve their customer sand “bancarize” populations that

are poorly served.

The meeting also gave members an opportunity to compare the

various strategies deployed to develop an innovative offer through

the creation of a subsidiary or the purchase of a company or

through partnerships. Participants were also invited to reflect upon

key success factors of the bank of the future and how to take the

leadership of innovation on their respective markets.

PostBank Uganda Alex Kayaayo receives award.

Antonio Moreira , CEO, Caixa Económica de Cabo Verde receives award.

Charles Kabanda, General Manager, Financial Inclusion, Centenary Bank

Dedicated to retail banking.

www.wsbi-as.org