wsbi news & views · 2013-12-02 · giving new impetus to the world economy, their own...

WSBI ESBG The global voice of savings and retail banking

NEWS & VIEWS• JUNE 2012 •

2012 WSBI CONGRESS SPECIAL EDITION

Contents

Editorial

3 The savings and retail banking renaissance

Opening Session

6 Morocco: a nexus between North and South 8 Europe’s banking sector after the crisis: oversight, regulation

and responsibility

Plenary Sessions

11 Plenary Session 1: The retail bank: rock solid and right around the corner

18 Plenary Session 2: Keeping pace with the customer in the digi-tal age

25 Plenary Session 3: Making money and making a difference: banks and their foundations

Keynote Speaker

13 Funky Business

Workshops

15 Workshop 1: The best of both worlds: customer protection and profitability

16 Workshop 2: Diaspora banking: tapping into a global eco-nomic force

17 Workshop 3: Fuel for the real economy: access to finance for SMEs

19 Workshop 4: Value at the bottom of the pyramid: making small balance accounts work

22 Workshop 5: Bridging the middle sea: The Union for the Medi-terranean

23 Workshop 6: Retail banking versus casino banking

Working Paper

20 Mass retail banking: How savings banks in Africa, Asia and Latin America can provide usable services to the poor

Closing session

26 The future: local banking and financial inclusion27 The glocal link to a sustainable international economy

MARRAKECH DECLARATiON AN AccoUNT for EvEryoNE

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The savings and retail banking renaissanceHeinrich Haasis, WSBI President

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it WaS a great Honour to address the 23rd WSBi Congress,

which was the ideal occasion to congratu-late José Antonio Olavarrieta for having successfully led WSBi through the financial turbulence of recent years and for his tire-less efforts to defend the interests of our institutions and create new opportunities for business cooperation among members. it was also the moment to express my thanks for the trust that has been invested in me to be the next WSBi President. i will do my very best to represent the interests of savings and retail banks all over the world through what is proving to be a pro-longed period of challenge.

These continue to be challenging times. The world is still in financial and economic crisis. The US suffers from high unem-ployment, significant trade imbalances and high state deficits. in Asia and Latin America, although emerging powers are giving new impetus to the world economy, their own economies are growing so quickly that new problems may lay the groundwork for the next bubble. While new market players are making innovative breakthroughs in Africa, most countries there still suffer from a lack of financial resources, infrastructure and political stability. Then there’s Europe, with its sov-ereign debt and euro currency crises and tremendous unemployment, at least in some countries.

Yet despite all these challenges sav-ings and retail banks are experienc-ing a renaissance. How can this be? Until the financial crisis, the predominant financial paradigm was comprised of global players. The world was their oyster. They allo-

cated funds for the most promising return on investment, regardless of the

social, environmental or local economic impact. Many bankers and leading econo-mists and politicians were fascinated by a financial system that could send trillions of dollars around the globe in the blink of an eye. Computerized trading capitalised on split-second spreads and increased the volume of financial trading relative to the volume of the real economy, creating a bubble inflated by traders who were basi-cally betting against each other. This was supposed to be innovative. it turned out to be disastrous.

The crisis showed that a model that turns financial markets

into casinos is not sustainable.

The financial system should not be an end in itself. it must serve society, the environ-ment, the needs of people and the real economy in order to be sustainable. We’re now looking for structures that bring more stability into the financial system. Savings and retail banks weathered the financial crisis, proving that they’re a resilient and stabilising force, driven by their unique capacity to finance local and regional economies and provide access to finance for the entire population. Community banks and postal savings banks perform the same function: collecting local savings and reinvesting them locally.

Savings and retail banks stabilise the finan-cial system due to the fact that theirs is a solid traditional banking business. They contribute to creating development poten-tial because they’re based on local and regional economies and the real economy. They’re open to all members of society and create the basis for people to save for and invest in the future and to participate in economic life.

Politicians realise this. Our partners in the United States, the independent Commu-nity Bankers of America (iCBA), in navi-gating the struggle between Wall Street banking and Main Street banking, have achieved major success. in other countries where local banking has been neglected in recent decades we now see increasing interest in our model: banking as an insti-tution oriented toward access to finance at all levels of the population and that finances SMEs in their communities. We can be proud and confident. A window of opportunity has opened that all of us must capitalise on over the next couple of years. We must learn to appreciate our identity as savings and retail banks and defend our model as a crucial pillar of the real economy.

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4 | News & Views JUNE 2012

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it will not be easy. Huge market, demographic, political and tech-nological challenges loom, as do new and innovative market play-ers. Do these challenges threaten the savings and retail banking model, or do they present opportunities for the model to evolve? Since their founding 200 years ago, savings banks have always been able to adapt; i’m confident we can do so again. But in order to have the opportunity to adapt, we need enabling regu-lation that fosters sustainable development of a business model aimed at stability and access to finance.

Certainly, banking industry regulation has to be enforced. i have been very much in favour of the Pittsburgh G20 Summit’s con-clusion that no part of the financial services industry should go unregulated. G20 decisions were right in principle. Unfortunately, we have to realise that only those decisions that affect our institu-tions are being implemented. There is a gigantic imbalance being created: whereas huge parts of casino and shadow banking escape regulation, regulators focus ever more intensely on tradi-tional banking. Deposit guarantee scheme legislation, consumer protection measures and liquidity requirements – to mention just a few buzzwords – are becoming more restrictive, and the Basel iii regulatory framework is drastically raising capital requirements. This regulation was originally designed for big international banks but is being implemented for small and medium-sized banks that work mainly in national environments. The resulting pres-sure lessens the flexibility of our institutions to finance the real economy and will make loan access for SMEs – the backbone of the economy – more difficult. The low-risk business of sav-ings and retail banks is being punished while casino and shadow banks escape almost unscathed. This will have consequences. Will financial activities move away from the regulated traditional banking system, and will casino and shadow banking grow? if so, the regulation will achieve exactly the opposite of what was originally intended.

Experience shows that an ever greater impact of regulation within our respective countries comes from the global level: the G20, the OECD, international institutions and standard setters. Now and in the future, we’ll have to defend our interests at the global level much more efficiently than we have done in the past. This is why i’m convinced WSBi will become an even more important voice of our interests globally. WSBi must be heard. For this reason, we must strengthen WSBi membership in quality and quantity, inten-sify dialogue with international institutions, and deepen contacts between members.

WSBi is a wonderful organisation. it is one of the world’s few organisations through which member institutions deeply rooted in their regions and countries work together on a global level. This represents an enormous treasure of knowledge, experience and cultural diversity that must be developed. All of us at WSBi contribute to our aims. But we must become stronger, we must do more to defend the interests of our institutions and create possibilities for development in all countries. We must articulate this treasure of experience in all its diversity, but with one voice.

More than ever, we will need the voices of Africa, Asia and Latin America in our global network.

WSBi will work hard in the years to come on intensifying its work in the Regional Groups of Latin America and the Caribbean, Asia/Pacific and Africa. i ask all of us to increase our engagement in the work of these platforms. We’ve proven that our model is effective and solid, but there is much more to do to ensure its durability. We must simultaneously safeguard it and anticipate changing market demands and practices driven by rapid globalisation. Now is the time for savings and retail banks to strengthen their institutions, their sector and the savings and retail banking model. We must speak with one voice that represents the economic weight of our institutions and their essential role in the sustainable development of strong, humane societies.


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While multiple crises and restructuring have disrupted the pro-ductivity of developed economies, a new map of the world’s economic growth has taken shape, with an increasing focus on emerging economies, including those on the African continent.

The WSBi Congress hosts – Caisse de Dépôt et de Gestion (CDG) and Poste Maroc/Al Barid Bank, co-organising under the high patronage of His Majesty King Mohamed Vi – unveiled a country that boasts a strong banking sector, influential and well-estab-lished in Africa; Africa’s second largest stock market capitalisa-tion; close ties to African, European, Middle Eastern and American markets; and world-class infrastructure, including the Mediterra-nean’s largest commercial harbour – no small factor in Morocco’s position as a nexus between North and South.

Khalid Safir, Secretary General of the Ministry of Finance and Economy, told the Congress that over the last decade Morocco has seen significant economic growth and modernisation. The government’s philosophy of financing growth sustainably, he said, is based on a four-pronged approach: first, increasing financial inclusion by creating a postal bank with 900 agencies, by increas-ing social housing by 1,000 houses/month, and by promoting savings and microcredit; second, offering loan products geared specifically toward financing SMEs; third, reinforcing banking supervision by increasing the independence of authorities and the cooperation and coordination between them and preventing risk; and fourth, developing the capital market through new instru-ments and consolidating market liquidity and solidity.

Also over the past decade, Morocco has undertaken significant sector and structural reforms to liberalise the economy, facilitate its alignment with global standards, improve its overall competi-tiveness to ensure better integration into the global economy, and control public finances, inflation and public debt. As a result of these reforms and the government’s growth philosophy, between 2000-2009, Morocco achieved strong economic growth that was more sustained and less volatile than in the past. From a macroeconomic perspective, its performance can be attributed to an effective consolidation and application of economic fun-damentals. This certainly paid off during the crisis: while other economies, including America’s, were having their credit ratings downgraded, the Moroccan economy’s resilience and strong performance led Standard & Poor’s to upgrade Morocco’s credit rating to “investment Grade” in 2010.

As for the banking sector, Mr Safir said the savings and retail banking model has been made credible by all the crises afflicting the financial system. “it resisted because the client is at the centre of the strategy and the proximity model is profitable and effective at financial inclusion, especially regarding the most vulnerable.” This is not least because of the model’s simplicity, as Anass Alami, Director General of Congress co-organiser Caisse de Dépôt et de Gestion (CDG), pointed out. “Our mission seems complex but is in fact quite simple,” he said, “collecting savings and lending them.” if an institution can focus on doing that efficiently, locally, and with an emphasis on banking the unbanked, it will consolidate a customer base that will help sustain the bank in times of crisis. As though to demonstrate the point, Mr Alami said Morocco’s rate

Mr Safir said the savings and retail banking model has been made credible by all the crises

afflicting the financial system. “It resisted because the client is at the centre of the strategy and

the proximity model is profitable and effective at financial inclusion, especially regarding the

most vulnerable.”


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of bankarisation jumped from 36% in 2006 to 50% in 2010 – precisely the years when the crisis was at its most intense. He also emphasised CDG’s focus on promoting long-term savings, includ-ing the expansion of its retirement products through partnership with the National Fund for Retirement and insurance (CNRA) and the Collective Retirement and Pension Plan (RCAR).

Amine Benjelloun Touimi, Director General of Poste Maroc, sees savings as a major socio-economic and development force, and providing financial access as a driver of economic growth. “Accumulating savings is a basic, solid, dependable means to fuel growth, improve quality of life, increase literacy, and improve women’s lives, and is an engine to finance the economy.”

Putting to work the trust it enjoys among citizens, Poste Maroc launched its banking subsidiary Al Barid Bank in June 2010 to accelerate financial inclusion by targeting the unbanked popula-tion and low-income earners with a wide range of products dis-tributed via 2,000 points of contact. Reaching remote rural areas, this network enjoys unrivalled proximity. “Poste Maroc has thus contributed to Morocco’s UN Human Development index,” Mr Touimi added, citing that Moroccan bankarisation in 2012 edged up to 52%. Having begun operations with four million custom-ers, Al Barid Bank aims to have six million by 2013.

While Morocco’s retail banking sector resisted the crisis because of responsible behaviour and the conservative nature of its busi-ness, Mr Touimi warned, “We’re not out of it yet. We must con-solidate customers’ trust, and postal banks in the South have a great role to play. New technology can lower costs. Mobile bank-ing is already successful. And savings banks are natural actors to launch a country’s economic development.”

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The crisis started almost five years ago, when many of us first heard the term “subprime mortgages”. it mutated from a financial crisis into a deep economic contraction and – since 2010 – a sover-eign debt crisis shaking the pillars of the euro area. in its latest stage, the crisis hit Europe’s economy in particular: EU unem-ployment is at its highest levels in years; signs of robust GDP growth are non-exist-ent; fiscal positions and external current accounts still need serious adjustment; and the financial sector remains fragile.

Europe’s predicament – and the troubles of the euro – are of global concern. Europe has been far from inactive. Regarding banking, financial and monetary policies, beginning in 2008 we introduced financial rescue and restructuring rules for banks in distress and set up a new Europe-wide supervisory system. The European Central Bank has been a source of financial stabi-lisation – the recent €1 trillion Long-Term Refinancing Operation being the latest example. in addition, financial regulation is being overhauled in coordination with our international partners to limit risk and improve market transparency and resil-ience.

On fiscal policy, ambitious consolidation strategies are being implemented and European Monetary Union governance reinforced. Therefore, this crisis is pushing the EU towards higher levels of integra-tion. Not all decisions bring immediate results, and some must overcome serious resistance, but i’m convinced a stronger Europe will emerge from the crisis.

How did banks fare during the crisis? in a context of cheap money and price stability, financial innovation – especially the “originate and distribute” practice

that generated a massive securitisation of debt – flooded the market with struc-tured products and derivatives that were poorly understood but enthusiastically purchased. Enormous amounts of risk were accumulated and the links between financial institutions grew so tight that practically every large entity became vital to the whole system. Public authorities have their share of responsibility because all this happened with little or no regula-tory supervision.

Soon after Lehman Brothers’ collapse, it became apparent that retail banking – traditionally a conservative sector – had not sheltered its business from the storm. Many retail banks in Europe were on the verge of collapse. How was this possible? The reasons vary from one country to another. One common cause was seek-ing higher returns than those produced by their traditional operations, which pushed many institutions to assume too much risk. Financing long-term credits with short-term funding, or substituting deposits with wholesale funding, became quite common throughout the banking sector, owing to the enormous amount of cheap liquidity.

in real terms, money was cheaper in the euro area’s periphery where inflation rates were higher, which encouraged both the public and private sectors to pile up exces-sive leverage and debt. However, until 2010 the markets treated the euro area as a single economic zone, and therefore almost no risk premium was attached to these countries. Eventually, public and private debt in some member states led investors to raise awkward questions about the sustainability of public accounts and even some countries’ solvency.

What was initially a financial crisis linked to risky conduct and bubbles turned into serious liquidity and solvency problems affecting weaker entities, and eventu-ally into a sovereign debt crisis, in which investors raised the risk premiums associ-ated with sovereigns in some countries. This weighed heavily on retail banking sector balances. Banks that had relied on sovereign bonds as their safest assets sud-denly saw some of them degrade, creat-ing fresh problems.

Since the beginning of the crisis the European Commission has been deeply involved in the long and difficult process of rescuing and restructuring endangered financial institutions. it made sure the public bailout of banks would be carried out under the same conditions through-out the internal market, to return banks to long-term viability or achieve their orderly resolution. Our rules would also address the moral hazard issue and estab-lish conditions for the sector’s competitive functioning in the medium term.

We responded swiftly, introducing special rules for state aid to banks in 2008 and 2009, under which we decided on the viability, restructuring or liquidation of 43 banks and are still working on more than 20 other cases. The emergency regime provided guidance on the pricing, dura-tion and type of liabilities that national authorities across the EU can guarantee for a bank, and common criteria on how banks must remunerate the government for recapitalisation and impaired asset measures. Finally, it set out terms for the restructuring or orderly liquidation of aided banks, depending on the amount of support and the soundness of the bank’s business model.

Europe’s banking sector after the crisis: oversight, regulation and responsibility Joaquín almunia, Vice-President of the european Commission, responsible for Competition Policy


Thus the Commission has been acting as a de facto crisis-management and resolu-tion authority at EU level, also addressing the structural problems that had been affecting many banks well before the crisis. We impose three main conditions: the bank needs to restructure to return to long-term viability without any need for further aid, and if this is not possible, we ask for the institution’s orderly liquida-tion; capital holders – shareholders and hybrid-capital holders – should contribute adequately to rescue and restructuring cost, to limit the aid and the cost to the taxpayer; and to limit competition distor-tions, banks are not to expand on the back of state support to the detriment of unaided competitors.

To address structural problems, we are asking some banks to move away from unsustainable business models. Signifi-cant restructuring efforts will continue in ireland, Greece and Portugal – the so-called programme countries (that pro-gramme being the EU/iMF/ECB bailout agreement). We are also looking for ade-quate solutions for some banks rescued long ago in other EU countries.

As for Spain, state aid is not only rescuing individual banks but helping restructure the sector of savings banks – the cajas – hit by the property market’s collapse. We are working with Spanish authorities as they promote the transformation of sav-ings banks into commercial banks and the integration of weaker banks. Some of the weaker and smaller cajas have been restructured, partly resolved and priva-tised. Others – such as Bankia/BFM – are following this restructuring path.

Ultimately, the goals of our state aid control are the same in every EU country,

regardless of the special characteristics of their banking sectors; we want a leaner, cleaner and healthier banking system centred on financing the real economy. Restructuring should be seen as an oppor-tunity for more efficient and competitive banks to expand, acquire activities and assets, turn them around, and provide better and cheaper services to customers. We can no longer afford zombie banks as we struggle to generate growth.

What remains to be done to put our house in order? in my opinion, we need

to break the vicious cycle between public debt and banks’ balance sheets; reach adequate levels of best quality capital for banks; complete the restructuring and pursue orderly liquidation where neces-sary; and put Europe’s banking industry in the best possible position to finance the real economy.

Breaking the vicious cycle between sover-eign debt and banks is the most urgent task. Both the European Banking Author-ity and the European Central Bank have taken action to address it: the EBA, with

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its request that banks reach a 9% Core Tier 1 capital ratio by the end of June; and the ECB, with its Long-Term Refinancing Operations. LTROs removed the risk of an imminent funding crisis and eased ten-sions in sovereign debt markets early this year. But these operations weren’t a silver bullet. We should explore the conditions to set up and use the appropriate fire-walls, which would ring-fence European sovereign debt from speculative attacks, so that it is again considered a risk-free asset in banks’ balances. This breathing room will allow us to design a new regu-latory framework for the long run. The Commission has been quite active on this front.

Regarding capital levels, we have pro-posed two changes to follow up the Basel iii agreements: the Capital Requirements Directive – or CRD 4 – and the Capital Requirements Regulation. CRD 4 is being discussed in the ECOFiN Council and the European Parliament. The main issue is the degree of flexibility national supervi-sors might have to set capital buffers. Given significant cross-border spillover, this is a sensitive issue which requires careful consideration and broad consen-sus. At the ECOFiN level, a compromise was prepared by the Danish Presidency and an agreement reached when minis-ters met on 15 May.

These measures are putting pressure on banks as they continue their process of deleveraging. Deleveraging is driven pri-marily by the need of banks to eliminate funding gaps, the most important of which are mismatches between long-term assets – such as loans – financed by short-term funding. This is one of the key meas-ures that banks must take to return to a

healthy condition. For the moment, banks are selling non-core assets and getting rid of risky loans in an orderly way. The role of supervisors is to ensure that bank measures to reach higher capital buffers don’t lead to a contraction of lending to businesses and households, which would have dire consequences for the economy.On restructuring, we are implementing a new EU-level resolution framework. The crisis showed how problems at one bank rapidly spread across the system regard-less of national borders, and the lack of a mechanism to manage financial institu-tions in distress – again, especially across borders. The Commission is working on a proposal for an EU framework for crisis management to tackle bank failures at the earliest possible time and avoid or limit the cost to the taxpayer.

Amid the large public interventions in the financial sector, we must not lose sight of our main tasks: integrating Europe’s financial markets, preserving a level play-ing field, and putting the sector on sound footing. Clearly, state aid interventions carry the risk of renationalising banking markets – and that must not come to pass. This is why i will not loosen compe-tition and state aid rules during the crisis. i will also continue to insist that banks remunerate public support and repay tax-payers’ money.

These measures will prepare the ground for the financial markets that will emerge from the crisis. in this new environment, banks will be more transparent, more resilient, and more focussed on their core business – which is providing financing to the real economy.

This year is critical for Europe’s economy and financial system. On the sovereign debt front, we need to implement the stronger budgetary surveillance rules on which we agreed. At the same time, after years of austerity, it is time to relaunch economic growth in Europe. Two days before the WSBi Congress, the Commis-sion discussed – and President Barroso announced – a substantial package of initiatives that we have proposed to our member states to complement stabilisa-tion efforts with growth-enhancing meas-ures.

Millions of citizens have made enormous sacrifices to help resolve this crisis: lower wages, lost jobs, public service cuts, higher taxes. While necessary, it’s all tak-ing a toll on our people and their patience could soon run out. Growth and jobs should be a consequence of the impres-sive adjustments and reforms.

Banks and other financial institutions should live up to their responsibilities. They owe it to society to ensure that their business models are sound and supervi-sors well informed, and that regulation includes adequate safeguards to control risk. Above all, they should bear a fair share of the cost of resolving their prob-lems.

European and national authorities will continue to work together to build a sounder, safer and more efficient financial sector in Europe. i call on the banking community – and on the retail and savings banks represented at the WSBi Congress – to join our efforts to stabilise the finan-cial sector and relaunch the economy.


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The retail bank: rock solid and right around the corner

“We can be confident in our model,” declared newly elected WSBi President Heinrich Haasis in his opening remarks to Plenary Session 1. Why? “Because the financial crisis exposed the weaknesses of the centralised, ‘big is beautiful’ banking model as much as it demonstrated the strengths of the savings and retail banking model. Politicians all over the world see this now.”

That said, in the public mind all banking was sullied by the crisis, inflicting serious dam-age to relationships with customers and causing a crisis of confidence that has yet to be fully restored. in the discussion that fol-lowed, WSBi Managing Director and panel moderator Chris De Noose asked, “How can we restore customer confidence?”

Anass Alami, Director General of Moroc-co’s Caisse de Dépôt et de Gestion, replied, “We can only do it if all actors engage at three levels. First, governments must cre-ate an environment to fuel growth via long-term investment, inject liquidity into the system, and maintain a certain level of liberalisation, which is always good for growth. Second, at the sector level, con-solidation is required: don’t just penalise poor students, encourage the good ones. Third, savings banks know their clients best and so are best placed to tell good from bad, and the good need money today more than ever. We must have the courage to give credit and reduce costs, which will also restore confidence in the markets.”

Poste Maroc Director General Amine Benjelloun Touimi echoed these remarks and added, “Savings banks resisted bet-ter than others during the crisis because our proximity means we know our clients better. Confidence can be re-established by financing individuals and SMEs, which puts more liquidity in the market and drives the economy.”

“Governance is crucial,” insisted Abdellatif Jouahri, Governor of the Central Bank of Morocco. “Banks must apply Basel iii rules appropriately and provide more transpar-ency. We are conscientious savings banks, unique in that we’re close to our clients, and this is also a competitive advantage.”

“Did any of you lose your customers’ con-fidence during the crisis?” asked Mr De Noose.

“Not in Germany,” replied Helmut Schle-weis, Chairman of the Board of Sparkasse Heidelberg. “Our 50 million customers feel they’re in good hands with the savings banks because these are the very institu-tions that stemmed the credit crunch during the crisis. From 2009 to 2010 our customer deposits actually increased by 2% and our loans by nearly 3.5%, so we played a pivotal role in ensuring financing for recovery. We could grant loans wisely in uncertain times because our 429 savings banks are present locally. We know our customers, but perhaps just as important, our customers know us.”

While italy was not as fortunate, Giovanni Manghetti, Chairman of Cassa di Rispar-mio di Volterra Spa was adamant. “We will not be transformed into commercial banks!” he said. “What is our savings bank identity? The majority of European savings banks hold most of their assets in deposits. More deposits means lower costs, it means

If you convince the customer you’re

not out to make a fast buck, you’ll gain his

trust.


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more income engaged in the real economy, and, because of our model, it means we have a social presence. When these values are not respected, our future is at risk. Ethics makes the differ-ence. We don’t have the same ethics as investment banks. We are not destined to be transformed into commercial banks!”

Mr De Noose asked, “Are any of you succeeding in your efforts to restore trust?”

Doubling its assets over recent years to $56 billion suggests the Government Savings Bank of Thailand is succeeding. GSB First Senior Executive President Tariyo Yongyuth replied, “One has to educate people how to save, which we do through 700 school banks. And while we look for some return, we’re conservative. So people trust us more.” Proximity helps tremendously: “We have 1,000 branches, including 100 mobile branches.” And so does giving back to the community: “After the major flooding in 2010, GSB used its vast network and resources to distribute $120 each to over 4 million households over a period of just three months.” While the funds came from the government, GSB also transferred them free of charge for those who held non-GSB accounts.

But it must be said that Thailand was not as hard hit by the crisis, and as the hard times continue elsewhere, funding will remain a challenge, because savings banks have to bend over backwards to get the necessary deposits – which, after all, represent cus-tomer trust – to fund their loan activity. Unless, of course, sav-

ings banks disagree with Mr Manghetti about their identity and choose to pursue other forms of funding.

They can forget government help. As another audience member pointed out, governments can’t help the banks to restore trust because they don’t have the resources to spare; because they’ve already injected a lot into the system, their hands are tied, so the only way they can help to restore trust is by making banks more capable of instilling it. And governments can only do that by striking a balance between promoting innovation and imposing regulation.

The overall theme of the panel discussion is probably best summed up by a comment from the audience. Anil Bhattacharya, Director of india’s National Savings institute, observed, “india has a very strong, vast savings bank system. if you convince the cus-tomer you’re not out to make a fast buck, you’ll gain his trust.”

Truer words were never spoken.

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funky Business

Wearing a fashionably feltish dark blue jacket over a gauzy white teeshirt, jeans and sneakers that all looked ecologically friendly, and thick chrome glasses around his perfectly shaved head, Dr Kjell Nordström, looking quite the cutting edge Scandinavian, told the Congress how he sees the world today. “The most recent comparable point in human history is the inven-tion of the printing press nearly 500 years ago. And we’ve seen only 2% of this development, we’re at the very beginning.” What exactly is “this development”? “Everything that can be digital will be digital.”

“Globalisation and information are what made our world. They are the two greatest forces.” The discerning reader will ask, What about technology? After all, what was the printing press, what is digitalisation if not technology? Dr Nordström said, “Technology is not important. What it enables is important.”

What has technology enabled? “We can share information at almost no cost.” And we can share it whether we’re separated by a wall or the Earth itself. “This interactivity means we don’t need a centre anymore. The world has become multipolar, so we can’t identify where a given threat comes from. it’s the end of predic-tions, so you can’t make plans. Or you can, but they’re useless.”

if planning is useless, then what can you do? Experiment. “We’ll see much more experimentation because no one can give you a correct prediction.” So multipolarity leads to experimentation. Add to this the fact that each generation is smarter than the last. “A child is 1.25% smarter than his parents. And new information is born daily. So every day we wake up a little stupider.” To keep up, we have to ask each other for help. “Collaboration is the name of the game.”

And thanks to what technology has enabled, the world is made for collaboration. “We do not live our lives within a frame of a nation state. Politics is local, but business and so much else is global.” You might be a socialist or a Christian Democrat or a Tory or a Republican, but, Dr Nordström said, “We are all capitalists now. Out of 200 countries, 199 have gone capitalist.” And North Korea can’t holdout forever. Why?

“Capitalism has nothing to do with politics. it’s a machine, the most powerful, most simplistic machine ever created. it does just one thing: it sorts things into two piles: the efficient and the inef-ficient. No one can control this machine. We have to relate to it.”

Men relate to it most. But changing demographics are imbuing the machine with a decidedly feminine side. “it’s women who study. in Europe the rate is 65% to 70%. What the men do, we don’t know – not study, apparently. But what does this mean? We know that stupid men in large groups is a bad idea. More to the point, men and women relate to risk completely differently.”

Men take risks. Women – educated women even more so – know they don’t have to. in the future, relating to the machine of capitalism will take brains, not brawn. Dr Nordström calls this the “feminisation of capitalism”.

What else will it take to relate to this machine? “Half of Europe is comprised of single-person households. We live alone. Mean-while, nearly all economic activity takes place in cities, and by 2040, 80% of us will live in cities.” That is, we will live alone, together.

Dr Kjell a. nordström calls himself the enfant terrible of the new world of business. In 2011, Thinkers50, the definitive ranking of management thinkers, ranked him 5th in europe and 36th worldwide, and he has been ranked among the Thinkers50 for 11 consecutive years. Bloomsbury Publishing ranked Funky Business, which he co-authored with Jonas ridderstråle, 16th in its survey of the best business books of all time.



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You do the math: women + cities + alone = ? But wait, there’s another factor in the equation. Not only will we live alone, together. We will do alone, together: three-dimensional printing will soon redefine the role of production. A 3D printer will cost no more than an inkjet printer. You’ll create products at home. innovation will become a household word, literally. Some will do it better than others.

“innovation isn’t possible in a dictatorship, so forget about China dominating the world economy. The US will continue to domi-nate in innovation. Why? Because America is not a country but an idea: anyone can become American if one shares the idea, while it takes generations to become French or German. it’s an innovation machine, while the EU can’t get integrated and can’t handle immigration.”

So: women + cities + alone + the means of production in the comfort of your own home = ...cities of lonely women making stuff at home for hordes of brutish men?

Not exactly. According to Dr Nordström, “The new customer is a demanding dictator. The stupid, humble, loyal customer is a thing of the past.”

Great, but what does all this high-falutin’ talk mean for banks? Companies, including banks, will have to spend as much time creating as they spend on exploiting what they create. And that’s hard. Because making money requires creating a temporary monopoly – the product or service must be perceived as unique – again and again and again, ad infinitum. it requires the ability to change and change and change. Survival of the fittest, you say? Not exactly, because the definition of “fittest” has changed: brains over brawn. if banks aren’t fit to be banks, other compa-nies will be.

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The best of both worlds: customer protection and profitabilityThe workshop focused on the challenges that a bank needs to address in order to stay profitable while maintaining a high level of customer protection as expected by regulators and customers.

Panellists representing regulators and international organisations (the European Banking Authority, or EBA, the Central Bank of Morocco, the Consultative Group to Assist the Poor, or CGAP) as well as the banking industry (the German Savings Banks Associa-tion and Postbank Uganda) shared their experiences. The work-shop was moderated by Joseph Delhaye, Senior Vice President at the Banque et Caisse d’Epargne de l’Etat (Luxembourg).

Opening the debate, Mr Delhaye confirmed that it is possible to combine customer protection with profitability. As mentioned by Stephen Mukweli, Managing Director of Postbank Uganda, “When customers are protected, their trust in the financial system will increase and as a consequence they will invest more money in their banks and buy more products.” indeed, Adam Farkas, EBA Executive Director, mentioned that irresponsible lending and mis-selling certain products are examples of how poor customer protection has led to less profitability.

Karl-Peter Schackmann-Fallis, Managing Director of the German Savings Banks Association, noted that regulators need to remem-ber that the priority is to have safe and sound banks, especially in times of crisis. As a concrete example, following the financial crisis, European banks have faced an increase in the regulatory burden, including customer protection rules, when it is more nec-essary to stabilise the system. Discussion also revealed that the needs of customers in terms of protection differ depending on the development of the financial sector in each region. This is true for both regulators and financial institutions.

As noted by Abderrahim Bouazza, Director of Banking Supervi-sion at the Central Bank of Morocco, the priorities of regulators in developing countries are the protection of deposits and financial inclusion, while in developed countries additional concerns exist. in Morocco, added Mr Bouazza, half the population live in rural areas and this makes financial inclusion via traditional banking means very difficult. This is why the central bank is facilitating mechanisms that will at the same time help the inclusion of rural populations while guaranteeing minimal protection. in the European Union, the EBA was established after the crisis with a mandate to enhance consumer protection. “The effective tools, however, do not fully exist yet,” said Mr Farkas. The EBA has the power to issue guide-lines and recommendations, but also warnings. in addition, it can ban products in certain extreme cases. These capabilities show the EBA is serious about customer protection.

Finally, Antonique Koning, Microfinance Specialist at CGAP, said that the importance of customer protection is also reflected in the involvement of the G20, owing to the clear synergy between consumer protection and financial inclusion. in all cases, added Ms Koning, “Transparency, fair treatment of clients and the avail-ability of a recourse mechanism appear to be common denomina-tors required by customers worldwide.”

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“Transparency, fair treat-

ment of clients and the avail-

ability of a recourse mecha-

nism appear to be common

denominators required by

customers worldwide.”


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Diaspora banking: tapping into a global economic force

This workshop, moderated by Robert Meins, Remittances Special-ist at the international Fund for Agricultural Development (iFAD), brought together a panel of representatives from Central America and North Africa, and speakers from international organisations researching and serving the remittance market and diasporas. The two case studies presented by the representatives from Central America provide strong evidence as to how worker remittance flows can be leveraged to advance bancarisation, provide access to a broader range of financial services, and increase the well being of the populations served.

in addition, a lively example was provided that even in a post-financial crisis environment securitisation (in this instance on the basis of remittance flows) remains an attractive vehicle for financial institutions to access funding. Fernando Peña, Executive President of Guatemala’s Banrural Financial Group, explained the segmentation strategy which helped it to achieve a 50% market share for incoming remittances, and described several products (e.g. micro-insurance, health insurance for women) aimed at spe-cific customer segments that help to increase customer loyalty in a competitive market.

Armando Rosales, President of El Salvador’s Fedecrédito, also voiced the creed that remittances – for which it claims a 30% market share, supported by alliances with about 20 money transfer operators – are the entry point to a permanent customer relationship. Fedecrédito described how it converted short-term funds (remittance flows) into long-term resources using a new mechanism provided by the international Finance Corporation (iFC, an arm of the World Bank). The long-term funding thus secured is being used by Fedecrédito to develop its activities in microcredit and home financing.

Opening the debate iFAD’s Robert Meins stressed that over five years of remittance flows to developing countries represent a resource of no less than $2 trillion, and that in addition diasporas in immigration countries hold some $400 billion in savings. Driss Al Yazami, President of the Council of the Moroccan Community Abroad, described the changing structure of emigration and dias-poras (particularly in terms of education levels) and highlighted how efficient Moroccan banks have been early on in establishing branches abroad and maintaining the link to migrants. He stressed that with no less than six actors involved in remittance transfers (namely, the migrant, the beneficiaries, the countries of origin and of destination, the formal and the informal banking sector,

and international institutions), there is a necessity for countries of origin to acknowledge that over time migrants may have two nationalities and belong to two systems of values, which requires countries of origin to formulate diaspora policies. He also stressed that cultural development should not be neglected in terms of investment.

M’hamed El Moussaoui, Member of the Board for Al Barid Bank, outlined its key role in enabling migrants to continue to invest in Morocco. The bank collected some $8 billion in remittances in 2011 (an 8% annual increase) mostly through account-to-account transactions. The focus on bancarised remittances allows orienting the flows towards productive investments. The circular link between bancarisation and remittances (with an increase in bancarisation making it possible to mobilise remittances much more effectively) was again in evidence. Finally, Leon isaacs, Man-aging Director of the international Association of Money Transfer Networks and CEO of Developing Markets Associates (UK), said a fundamental shift is taking place in the market from remittances being a mere transfer tool to remittances becoming a financial tool, thus offering far more opportunities to productively harness the underlying funds. coNTAcT

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fuel for the real economy: access to finance for SMEs

SMEs are a powerful engine for creating value in our economies. But in the midst of the financial and economic crisis, how can they get financed? Some say that banks won’t be able to provide what SMEs require and that alternatives, such as easing access to financial markets (i.e. promoting equity financing) and pro-moting venture capital, must be found. However, in his opening speech, Professor Richard Wenger mentioned that equity won’t be enough and that banks will remain the main source of financ-ing. Banks play a crucial role in “money creation”, he said, and hence economic value. By lending responsibly to SMEs – that is, by lending for productive purposes – banks “create” money that in turn creates growth.

During the panel discussion moderated by Gert Wehinger, Senior Economist at the Organisation for European Cooperation and Development, participants addressed the difficulties encountered by SMEs trying to access finance and how banks can help them by adapting their services.

Andrew McCartney, Senior SME Banking Specialist at the inter-national Finance Corporation (iFC), pointed out that in the cur-rent tumultuous economic situation approximately 50% of SME customers remain unserved, thus banks have a great opportunity to expand their business. SME lending could be doubled or even tripled by tapping these unserved customers, he said, which could generate significant income for banks, thus they should make tar-geting SMEs and lending to them profitably a priority. He stressed that SMEs’ current accounts are the most profitable for banks and, apart from lending profit, in some cases up to 50% of the business that SMEs do with banks doesn’t come from the fund-ing itself but from other sources, such as transactions. For that reason, banks should provide more than financing to SMEs; they should play the role of SME business consultants.

Filipe Teixeira, Strategic Marketing Manager at Portugal’s Caixa Geral de Depósitos, said that banks should cultivate closer rela-tionships with SMEs. Bank managers should know inside and out the SMEs they are working with so they can properly analyse the particular situation of each SME and offer tailored products. They must also know how to adapt to any kind of business, since SMEs operate in all markets and even SMEs participating in the same market have different targets, strategies, products and time requirements, all of which requires attentive, tailored financing. A careful analysis and well-defined strategy will clarify financing needs and yield a more efficient, and accurate, financing process.

Regarding countries where banking is less developed, Rym Ayadi, Senior Research Fellow at the Centre for European Policy Studies

(CEPS), mentioned obstacles that prevent customers from acquir-ing appropriate financing. Usually, the obstacle is not a lack of money but a lack of a proper channel for getting the money to the customer. Other problems are uncompetitive practices inher-ited from obsolete economies, corruption, and lack of worker skills. institutions providing funds to SMEs must take into account the structure of the country and its economy so they can adapt products to specific needs.

Ali Bensouda, Managing Director of Morocco’s Caisse Marocaine des Marchés, and El Hadi Chaibanou, Managing Director of the Moroccan Banking Association (GPBM), stressed that most SMEs in Morocco are self-financed owing to difficulties in accessing financing either from banks or from the underdeveloped capital market. Stressing the importance of supporting SMEs, both pan-ellists suggested that the government should help by providing guarantees to encourage potential private lenders and by formu-lating policies that promote and support SMEs.

Latifa Echihabi, Managing Director of Morocco’s National Agency for the Promotion of SMEs (ANPME), agreed with her Moroccan colleagues, saying that current problems include the lack of both transparency and government-guaranteed private loans. in the wake of the corporate market collapse, she said, banks should focus on SMEs not only by providing loans but also by playing a greater role in the private equity and venture capital businesses.

in conclusion, savings and retail banks claim to be leaders in granting loans to SMEs, but the panel revealed that 50% of SMEs remain unserved; many developing country SMEs lack a channel to receive money; and some SMEs self-finance because accessing financing otherwise is too difficult. Even if savings and retail banks are leaders in SME financing, the gap that remains is enormous. They should jump in with both feet and become more of a tool for SMEs to foster their growth. Banks should not only finance SMEs but also provide other services tailored to their needs and help them expand and become larger businesses. international cooperation could ease access, as could support from interna-tional institutions and governments. Such support could be man-dated through legislation supporting small business (such as the Small Business Acts of the US and of the EU), which should focus on encouraging and developing the growth of small businesses. Finally, banks should make the most of new frontiers in the retail banking industry, such as the use mobile channels and lending to women.

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Keeping pace with the customer in the digital age

The debate was moderated by Swedish economist and business guru Kjell Nordström, who set the scene by proposing that his-torically three things define an industry: technology (which he equates to knowledge), the institutional framework (in effect, all the agreements which establish and manage relationships between the components of society, including, for example, mar-riage), and the value system (including, of course, what is right and what is wrong, but also how much people spend, and why). But he stressed that what is unique today is that the world lives with one force that drives everything: technology. institutions and values are changed by technology, which is a unique situation in history because no one truly controls this force. He proposed that two axioms will increasingly be realised: first, everything that can be digital will be digital (e.g. in five years, objects will be printed by machines that can be acquired for about €100, a develop-ment which will change forever the face of manufacturing), and, second, everything that can be mobile will be mobile. This sets the customer free to know, to go, to do, to be, with no institu-tion in the world capable of stopping him. Against these trends it is useful to remember that all industries have ultimately been transformed by outsiders: what will happen to banking?

“Technology is not necessarily the main driver for change,” said CECA Deputy General Manager Agustin Marquez. “The world has changed much more rapidly and consumers now behave very differently compared to even ten years ago. it’s now up to banks to provide new services that are in line with those new patterns of behaviour. it’s a desire for convenience that drives consumers – the technology must be seamless and hidden. This is where banks need to do more.”

Charles Martinson, General Manager of HFC Bank Ghana, agreed that banks are at times lagging behind retailers, but they also need to strengthen relationships with their customers. The lat-ter could accept some inconvenience or even errors from a bank provided they are treated with respect. But he appealed to WSBi to intervene at government level in order to reduce or at least “rightsize” the KYC (“Know Your Customer”) regulatory obliga-tions, so that banks can compete on a level playing field with telecommunication operators which are not subject to similar obligations.

Nyambura Koigi, Managing Director of the Kenya Post Office Sav-ings Bank, explained that not being a telecommunication opera-tor and having no experience in this field, KPOSB decided when mobile money emerged with M-Pesa to become an agent, earn-ing commissions and – more important – learning how it works.

Capitalising on this experience, it started to entice the customers it was servicing as an agent of M-Pesa to open bank accounts and make deposits (actually using the M-Pesa channel). Clearly, it is up to the banking industry to add value and accompany customers who have moved ahead, using infrastructure that others (e.g. a telecommunication operator) may have established.

Dominique Pinoche of FiDEM Consulting (France) reminded eve-rybody that with the mobile today the bank branch (which had been so far an object of pride to many bankers) is always in your hand. Whilst banks already have clients and data about them, telecommunication operators not only gain new data but may also be more astute at using that data. The “old” data of banks do not allow them to react quickly, with Customer Relationship Management tools having been implemented for the physical world. A “mobile banking CRM” model has yet to be created, probably with the analysis of behaviours through the mobile replacing segmentation.

Fouad Zaidi, Business Development Director for Poste Maroc, proposed that in this new world banks need greater freedom and should be able to resort more to self-regulation when adopting new technologies. Regulation should be “natural”, coming from the market, and be fair and equitable.

Dr Nordström closed the debate by reminding the audience that any new technology adoption first mimics what has been done in the past. People now use the internet to do things they never did before, e.g. Facebook, or in a way they never did before, e.g. Amazon. Hence, one must understand that when banking is ultimately digitalised, it will not assume a traditional form, but rather a form we’ve never had before.

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regulation should be “natural”, coming from the market, and be fair and equitable.


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value at the bottom of the pyramid: making small balance accounts work

Can banks balance the sustainability of their business and the affordability of their services when providing small balance sav-ings accounts? The good news from this workshop is that the interests of the small balance customer and those of the bank are not mutually exclusive.

Drawing on lessons learned from the WSBi Doubling Savings Accounts programme (see http://www.savings-banks.com), its Director, ian Radcliffe, set the scene for a discussion of the business models used in different countries to reach out to low-income customers in a cost-effective way.

Oscar Gonzalez, Planning and Management Control Officer at BancoEstado (Chile), outlined his bank’s successful agent banking model, where agents are recruited from the bank’s microfinance customers. Redouane Najm-Eddine, President of the Board of Al Barid Bank (Morocco), underlined the importance of Al Barid’s partnership with Morocco’s post office, Poste Maroc. The pool-ing of both institutions’ resources was a strategic choice preced-ing the creation of Al Barid Bank in 2010 and was crucial to its success. Saut Pardede, Financial, Treasury, Logistics & Network Director at Bank BTN (indonesia), provided details on the card-based POS product Bank BTN is using to serve women’s groups. He stressed that the replacement of passbooks by cards has cut costs, but the training costs linked to the product are substantial.

initial discussion confirmed one of the lessons of the WSBi pro-gramme: the need to go electronic is real if banks want to lower costs and thereby balance sustainability and affordability. Tamara Cook, Programme Manager at the Bill & Melinda Gates Foun-dation, stressed that to tackle the challenge of lowering costs and increasing revenues, partnerships between banks and mobile network operators (MNOs) are crucial.

Partnerships were explored from different angles. Tanzania Postal Bank (TPB) CEO Sabasaba Moshingi asked Mr Najm-Eddine about Al Barid Bank’s cooperation with Poste Maroc and any best prac-tices that TPB itself could use. Mr Najm-Eddine stressed that their model of cooperation is based on what the French savings banks have done and that Al Barid Bank is today renting out the whole branch network to Poste Maroc. Further, postal staff and bank staff have equal status.

Panel moderator Robert Stone, Financial and Private Sector Development Leader at Oxford Policy Management (UK), asked panellists how banks could make the quest for profit fit customer needs. Tariq Sijilmassi, Chairman of Crédit Agricole (Morocco),

underlined the importance of customer relationships and training staff to meet specific customer needs. He stressed that outsourc-ing such a crucial relationship can be very risky, as technology is only the first step to meeting client needs; the second is providing client service that will foster increased usage. Ms Cook empha-sised that just as banks face high costs, clients encounter costs beyond bank charges, such as travel or waiting time, which need to be factored in when thinking about a bank’s value proposition to the customer.

Speaking from the audience, Niclaus Bergmann of the Savings Banks Foundation for international Cooperation (Germany) said that branches will remain crucial and questioned whether M-Pesa customers can really be described as financially included, as they are using transfers solely and no other financial products. Ms Cook replied that branches will indeed remain service hubs in the future, but partnerships can function as extra and low-cost ways of servicing the customer. She also stressed that M-Pesa is only one means to achieve financial inclusion and is certainly not enough. However, M-Pesa proved it corresponds to a specific customer need and other players such as savings banks need to wake up to this unmet need. in reaction, audience members cited the critical issue of who “owns” the customer in a partnership between a bank and an MNO, warning banks against leaving all direct client contact solely to the MNO and thus sidelining themselves. After hearing about the challenges banks face in finding new customers, Leora Klapper, World Bank Development Research Group Lead Economist, suggested customers not trust-ing the bank was one obstacle, and that financial education could be a way of addressing it.

The workshop provided valuable insights and active discussions regarding how to balance sustainability and affordability for small balance savings accounts. Robert Stone concluded that two main points emerged: the need to engage in partnerships to lower costs, and the need to explore customer needs in depth and meet them with the right products and adequate customer service.

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WSBI Doubling Savings Accounts Programme Working Paper

Mass retail banking: How savings banks in Africa, Asia and Latin America can provide usable services to the poor

Distributed at the WSBi Congress in Mar-rakech, this Working Paper, authored by WSBi Senior Project Manager Weselina Angelow, WSBi Associate Consultant Piet Biemans, and Oxford Policy Management Consultants Sukhwinder Arora and Ste-phen Peachey, marked another step in the WSBi Programme “Working with savings banks to double the number of savings accounts in the hands of the poor”. The paper features lessons learned by Kenya Post Office Savings Bank, Lesotho Post-Bank, PostBank Uganda, Postbank South Africa, Sistema Fedecrédito El Salvador, Sonapost Burkina Faso, Tanzania Postal Bank, and Vietnam Postal Savings Com-pany. The full Working Paper will soon be available at www.savings-banks.com

Product mapping for pro-poor service delivery: key messages

All projects under the WSBi Programme included commitments that there would be demonstrable improvements in the usability of products for the poor by the end of this year and progress on this has generally been limited. This study was set up to look at what the poor really do with their money and see what potential there is within existing product ranges to meet their needs.

The positive message coming out of the study is that the poor are not so differ-ent in their needs than the mass market of which they constitute the largest part, so the mass retail banking model to which most WSBi members aspire should be able to meet their needs. Even more encourag-ing, investments made under the WSBi Programme are closing gaps in capacity to offer a genuinely mass retail product and service package, particularly in the area of customer initiated transfers that matter

so much to the poor. Moreover, we are finding a more pro-poor bias in existing customer bases than we ever expected (at least half of client activity is taking place across accounts with average daily bal-ances of less than $25).

The paper makes a bold assertion that uni-versal means pro-poor, but this will only be accepted when savings banks demonstrate growing use of their products and services by the poor. Here the picture is much more disappointing, with slow take-up of new accounts through new “pro-poor” dis-tribution channels. This is partly because it is too early to tell for most projects, so the paper has to look for evidence of the potential to reach the poor and for obvi-ous obstacles likely to stop that potential from becoming a day-to-day reality. This brings up a number of fundamental ques-tions. What is the difference, if any, in the demand that needs to be met across the whole mass retail spectrum and the poorer end of that spectrum? if there is no fundamental difference in the needs to be addressed, how do we configure those packages so as not to discourage potential demand for services coming from the poor and push it back towards the informal/cash economy? And, if we know those packages can meet the needs of the poor, how do members communicate this to the poor so they start using what is available?

Research done specifically for this paper shows most elements of a pro-poor ser-vice package are in place or being added to existing product and service ranges. Background market analysis suggests pric-ing for growth will have to be at levels that the rural poor can afford because the only real open market space for partner banks is towards the bottom end of the socio-economic spectrum; better off households,

earning much above $3-5/day (depending on country income levels), are already well penetrated. The study shows what a challenge this is but suggests affordability to the client can be achieved even when clients are poor rural householders, but only by shifting the transaction mix from cash to electronic, then cost per transac-tion should be no more than $0.10-$0.20 in many countries. On the other end, in order to be usable to the poor and stay within an affordability envelope, we need to match the mixed bundle of transactions and savings operations with what the poor already (informally) do. if members can make themselves relevant to this most challenging part of the market they will also make themselves more competitive in segments where customers have more money: one of the strengths of the mass retail model. The challenge is to do this both affordably and sustainably.

There is a clear sequence of how the mass retail banking model builds success-fully, namely market penetration through addressing immediate payment and trans-fer needs before building sustainability through savings accumulation and ulti-mately consolidating into a full mass retail product range with appropriate lending and insurance services. Not all of the banks covered by this study are allowed to fol-low the whole sequence at the moment, but there seems to be enough potential with the capacities that are being made available by the projects to dramatically improve service levels for the poor.

Mass retail banking is characterised by a clear internal uniformity but also by an external presentation that speaks to needs across the whole mass retail financial market. Promotion and other marketing activities are, however, an area where

aVaILaBLe at www.savings-banks.com

Working Paper

MaSS retaIL BanKIng:HoW SaVIngS BanKS In

aFrICa, aSIa anD LatIn aMerICa Can ProVIDe

uSaBLe SerVICeS to tHe Poor

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more work needs to be done under the WSBi Programme – what mechanisms are used by mass retail banks (market research, anal-ysis of transactions, focus group discussions, etc.) to understand who is using or not using their product and service range; what improvements can make the customer experience less onerous and more satisfying? in essence, how does a mass retail bank that needs to cover as broad a spectrum of the market as possible let the poorer end of that potential customer base realise that the bank is there as much for them as for the middle and better off parts of the market?

it is for each bank in the programme to decide how to use the information in this study, but the general conclusion is that gaps in product and service ranges and quality of sustainable delivery can be addressed with means that should now be at the disposal of those banks, and that pricing for affordability is also possible. Banks now need to decide whether the products they have desig-nated as pro-poor really do offer the usability that the poor need and that is necessary for rapid uptake.

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Bridging the middle sea: The Union for the Mediterranean

Dr Lino Cardarelli, Senior Deputy Secretary General of the Union for the Mediterranean (UfM), described the challenges facing Euro-Mediterranean cooperation, notably regional political ten-sions and a precarious socio-economic situation owing to weak integrated industrial systems, major demographic upheaval and high unemployment. A 2009 study showed that the region needs to add five million jobs per year just to keep the unemployment rate from rising.

in early 2011, the Arab Spring demonstrated the region’s crav-ing for democracy, economic equality, social justice and better representation. Dr Cardarelli emphasised the role of youth – more than 50% of the population in the southern rim of the Mediterra-nean is under 20 years old – and pointed out that unemployment will remain a pressing issue in the future. All Euro-Mediterranean stakeholders consider the micro and SME sector, which requires a young and qualified workforce, essential to economic growth and social stability.

The Euro-Mediterranean Partnership, the European Neighbour-hood Policy and the UfM are leading several initiatives to boost the SME sector. These are supported by the EU Committee of the Regions, whose Secretary General, Gerhard Stahl, emphasised the role of the Euro-Mediterranean Regional and Local Assem-bly (ARLEM), which ensures the participation of regional and local authorities in the Euro-Mediterranean political debate and the exchange of best practices through civil society, whose role should be enhanced.

The SME sector, however, faces several obstacles, according to Guido Prud’homme, Head of the Facility for Euro-Mediterranean investment and Partnership at the European investment Bank. These include the weakness of inter-regional trade, the depend-ence of Mediterranean partner country exchange on the EU, and the limits of the institutional and legal frameworks. Mr Prud’homme acknowledged that solutions could be found in the re-launch of the Union of the Arab Maghreb, free trade, and increased institutional efficiency, including juridical security.

Ahmed Rahhou, CEO of Morocco’s Crédit immobilier et Hôtelier, said that what Mediterranean SMEs really need is adequate financ-ing, exchanges of positive experiences, innovation and an entre-preneurial environment. This was echoed by Joan Rosas, Head of international Financial institutions at La Caixa, who insisted on the importance of the region for his bank, and emphasised the need for SMEs to increase their competitiveness and the quality of their management. Along this line, the European investment Bank provides credit lines to intermediary banks, participates in

investment capital, encourages the opening of local capital mar-kets and provides technical assistance for the development of risk assessment tools.

Driss Fares, Secretary General of the Union des Banques Maghrébines, said Maghreb countries need to develop South-South trade and commercial relationships supported by instru-ments developed locally, taking into account the region’s differ-ent cultures. Omar Moro, Vice-President of the Association of Mediterranean Chambers of Commerce and industry (ASCAME), suggested that the UfM could be a vehicle to organise and coor-dinate the actions necessary to boost the economy and the micro and SME sector in particular.

Panel moderator Rym Ayadi, Senior Research Fellow at the Centre for European Policy Studies (CEPS), pointed out that measures for boosting the economy of the Mediterranean should also include non-financial measures such as modernising public administra-tion, fighting corruption, tackling the informal sector, and devel-oping human capital.

WSBi’s member banks in the Euro-Mediterranean region, thanks to their proximity banking policy and financing of individuals and micro and SMEs, can play an important role in economic develop-ment. The WSBi Marrakech Declaration, calling for an account for everyone, is an impetus for these banks to provide access to financial products and services, with a view to integrating a maxi-mum number of households in the formal banking system.

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retail banking versus casino banking

Perhaps the liveliest debate at the Congress was moderated by Chris De Noose, Man-aging Director of WSBi, who posed the essential question: “What value do retail banking and casino banking, respectively, add to and detract from the economy?” We all know what retail banking is, but what is “casino banking”? The practice whereby a commercial bank engages in unduly speculative or risky financial activi-ties with the aim of achieving high profits. A less formal definition might be: gam-bling. High risks and high stakes, it’s like rolling the dice or playing Russian roulette. Hence the name “casino banking”.

“Some people say that retail banking feeds the economy and casino banking feeds off it,” Mr De Noose said, “that retail banking adds value and casino banking gambles it away. But is it really that simple? One thing is for sure: the financial crisis revealed how certain bankers were free to engage in high-risk, high-return investment behav-iour in part because their institutions were ‘too big to fail’.”

Retail banks focus on their customers’ deposits, which they use to grant loans while preserving the soundness of their balance sheets. “But does such ‘basic‘ banking satisfy the whole economy’s appetite for credit?” asked Mr De Noose. Does the more conservative nature of retail banking hold back or even hurt the economy by preventing it from performing at its best? “Do we need a ‘ring-fencing’ approach to isolate retail banks because they hold the deposits that are the sys-tem’s most delicate parts?”

Comparing the two models, Professor Horst Gischer of Germany’s Magdeburg University said, “in Germany only two banks are listed on the stock market, while 50% of business debt is financed by loans. Retail banks take risks to increase society’s welfare. Do casino banks really improve

society by selling derivatives? Retail banks produce welfare, but casino banks, what do they produce? There’s no gain in real economic terms. They take risks for noth-ing.”

“Casino banking is not always bad,” said Alain David, Deputy CFO of BPCE (France). “The question is who supports the risk, and when banks support it, that’s not good. During the crisis, some banks managed their portfolios like hedge funds. Excess of leverage in investment banks was the main cause of the crisis. But separating retail banking from investment banking is 1930s thinking, because today it’s between cus-tomer activities and financial activities. The Volcker Rule would say our banks are not allowed to invest in hedge funds, but that’s not customer-oriented activity.”

“Greed and ignorance are the problem,” said Hamid Tawfiki, CEO of CDG Capital (Morocco). “Casino banking, when client-driven, is important for the financial sys-tem, but when greed takes over, it’s desta-bilising. You can also have greed in retail banking: pushing loans when you know the client can’t reimburse, hence the sub-prime crisis. Retail banking is not an end in itself but a means to an end: financing the economy. We need different players, we need risk, so we shouldn’t say we need to purify the system. How to keep diversity in the financial system and contain risk is the key.”

“But what are the incentives to take risk in our banks?” asked Fernando Vega, Social investment Manager at Banca Cívica (Spain). “Has supervision played its role properly?”

Adam Farkas, Executive Director of the European Banking Authority, said, “At the height of the crisis, the public sector commitment to back up losses amounted to 25% of global GDP – 25%! Not all of it

was used, but what was went into public sector debt. Dodd, Volcker and Vickers are all focused on what activities should be backed by the public sector and which should not have this incentive of public backing. The regulator’s dilemma is where to draw the line, and how, between activi-ties worth supporting publicly and those that aren’t.”

On how to draw that line, Jordi Gual, Chief Economist at Spain’s La Caixa, said, “Regulators say increase equity, but when a bank fails debtors are practically insured by the government. We want to avoid the public sector paying the bill, but increas-ing capital for the bank while subsidising funding through debt doesn’t make sense. The only subsidy that makes sense is insur-ing deposits. Securities holders should go under if a bank fails. Regulators are focus-ing only on capital, and that’s the wrong approach.”

“Regulators need to ask three questions when it comes to banking models,” said Rainer Münz, Head of Research and Devel-opment at Erste Group Bank (Austria). “is it legal? is it profitable? is it socially and economically useful? if the answer is yes three times, it’s a sound model. Now, some hedging enhances welfare: many airlines couldn’t exist without hedging over kero-sene prices. it’s not easy to walk the line.”

Mr Tawfiki agreed, saying, “The emer-gence of new products has raised the question of how far should we go in lev-eraging the economy. Now, there hasn’t been much innovation in retail banking over the past 20 years—”

Mr Gual disagreed immediately. “Mobile money, cash management, improved services, using the internet to pay bills. Maybe it’s not cutting edge but it’s innova-tion customers understand.”

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“Retail banks didn’t invent mobile technol-ogy or the internet,” Mr Tawfiki clarified. “in terms of service and client relationships, not much has been done or innovated by retail banks. Anyway, we can’t avoid crises, but we can find ways to survive them.”

“One way is regulating capital,” Mr Farkas said. “More, better quality capital is needed but will not solve the entire problem. if a bank fails, its death must be dealt with in an orderly fashion without excessive public involvement. Lehman was a pure invest-ment bank and its death caused systemic impact. New regulation wants to allow a bank to die without systemic impact.”

“That’s the advantage of regional savings banks,” Professor Gischer said, “no one bank poses a systemic risk.”

“German savings banks run the Landes-banks,” Mr Münz cautioned, “which assume unsustainable risks and had to be bailed out by the state in Bavaria. So a sav-ings bank can still create that kind of risk.” (Professor Gischer nodded his acknowl-edgement.)

Mr Vega said to Mr Farkas, “Capital is important but monitoring risk-weighted assets is the real challenge.”

Reacting first to Mr Münz, Mr Farkas said, “i agree we have to avoid the impression that a savings bank poses no systemic risk. Just think of Northern Rock – it wasn’t systemically important or large, yet in a country with a huge financial system panic caused a bank run that could’ve crashed everything. it was a classic retail bank. As for risk-weighted assets, i couldn’t agree more with Mr Vega, they’re just as impor-tant as capital. Their inconsistency across Europe and between Europe and the US is a major problem.”

From the audience, Paul Dembinski, Sec-retary General of the Observatoire de la Finance (Switzerland), observed that there was an obvious warning sign before the crisis. “in the ten years that preceded the crisis the ratio of real GDP growth versus credit creation was 1 to 4. The shrinking of the financial system is by implication inevitable. Can we do it smoothly is the question.”

Also from the audience, OECD Senior Economist Gert Wehinger said, “if exist-ing regulation had been enforced, the crisis wouldn’t have happened. We need a lender of last resort and deposit insurance, but also self-insurance of the sector by banks giving to a fund for future crises.”

Giovanni Manghetti, Chairman of italy’s Cassa di Risparmio di Volterra Spa, asked about the effectiveness of measures to deal with cyclicality. Mr Farkas replied, “Countercyclical measures are becoming procyclical because they’re being intro-duced during a downturn.”

“Countercyclical measures aren’t credi-ble,” Mr Gual interjected. “They make you keep more capital. it’s the same with the bail-in measure: if you implement these things now, you’ll make the crisis worse. Do these things when the crisis is solved.”

Mr Münz appeared to agree. “it would take 50 years to build up that kind of buffer. if the buffer is so high that it’s insur-ance against all risk, then people will go elsewhere.”

And that, in conclusion, seemed to be the crux: the economy needs stability, but it also needs risk. Retail banking provides stability, casino banking provides risk – the first does so only as long as it responsibly manages the relatively low risk associ-ated with its activities, and the second feeds a hungry economy effectively only until its excesses spin out of control. As for ring-fencing and other regulation, debate revealed the conflict between the political pressure to do something now to stem the crisis and the potential hazards of acting before the economy is ready to stomach a cure. While panellists of a more academic bent saw little of value in casino banking, the most interesting conclusion to the discerning listener was that casino banking should never go unchecked but neither should it be wiped out. it should be contained. it sounds strange, but the old adage could also be true for banking success: Everything in moderation. includ-ing excess.

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Making money and making a difference: banks and their foundationsThe session focused on the savings and retail banks’ “double-bottom line”: finding a balance between the pursuit of profit and the pursuit of social and financial inclusion.

Jaime Lanaspa, General Manager of La Caixa Foundation (Spain), opened the session with a presentation on the corporate social responsibility (CSR) activity of savings and retail banks in Austria, Spain, italy, France and Germany. The fact that the savings banks provide their socially responsible activities through a diversity of channels is an indicator of their sustainability, he said, adding that most banks are empirically linked to foundations, which aim to empower their region’s people, SMEs and communities. Some savings banks have created banking institutions that focus specifi-cally on people in need, and all dedicate a considerable amount of financial and technical support to social projects that make a difference in people’s lives. He presented the Microbank project of the Caixa Foundation, which aims to provide microcredit to socially excluded people (unemployed or migrant workers), thus favouring universal access to the financial system.

Panel moderator Paul Dembinski, Secretary General of Observa-toire de la Finance (Switzerland), asked panellists to address the challenge – especially in the current economic situation – of estab-lishing balance between the banks’ dual aim of generating profit and giving back to society. Gerhard Stahl, Secretary General of the Committee of the Regions of the EU, pointed out that in the aftermath of the financial crisis, the financial strength of socially responsible banks to further engage in inclusive and financially responsible activities is indeed challenged, especially by regulatory issues, notably the implementation of the Basel iii framework. However, he mentioned that finding a balance is not difficult for savings banks, especially in Germany with their 717 foundations and a CSR tradition that dates back to their founding.

Antonio Miglio, Chairman of the Fondazione Cassa di Risparmio di Fossano and Deputy Chairman of the Association of italian Foun-dations and Savings Banks (ACRi), pointed out that foundations are the philanthropic arm of the savings banks and that together they promote a different form of banking, which concentrates on the profitability of local investment, thus enhancing regional development and social cohesion. This in turn instils customer trust in banks. Trust is instilled similarly in Austria and Central and Eastern European countries, according to panellist Franz-Karl Prül-ler, Programme Director at Erste Stiftung (Erste Foundation). The Foundation supports local economic activity and has also joined forces with its savings bank to create the “Zweite Sparkasse”, which rehabilitates people in financially precarious situations.

Responsible banking techniques are thus fully integrated into the decision-making process of the savings banking structure. Yves Hubert, Chairman of the Steering and Supervisory Board of Caisse d’Epargne de Picardie, pointed out that each of the 17 savings banks in France are fully integrated and closely linked to the economic stakeholders in their regions, thus they are able to give their activities a social orientation. Approximately 3-4% of their net earnings are engaged in microcredit, SME and CSR activities via the Fondation Caisses d’Epargne pour la Solidarité, whose main goal is to involve savings banks in the social realities and needs of the population in their regions.

M’Hammed Grine, Deputy President of Fondation CGD (Caisse de Dépôt et de Gestion, Morocco), mentioned that in the search for profitability, CDG embraces CSR activities and has established partnerships with social stakeholders in the field in Morocco, such as Al Barid Bank, which is the first access provider in Morocco, and the Agence du Partenariat pour le Progrès. Deputy Manager Director Malika Laasri said the APP’s aim is to implement and execute socially responsible programmes pertaining to Morocco’s “Millennium Challenge Compact” signed with the US in 2007. Valued at around $700 million, the Compact aims to reduce pov-erty through economic growth by increasing employment and productivity.

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on The future: local banking and

financial inclusion

During the closing session, two speakers analysed the present situation in banking and financial inclusion, respectively, and thus prognosticated a crucial role for savings and retail banks.

Professor Richard Werner of the University of Southampton presented his ideas on “Why local banking is the future”. Banks hold a crucial function in the economy. The most important is to provide a community or nation with purchasing power in the form of bank lending. This can be done in a good or bad way. it’s bad when banks give credit to the wrong type of borrowers and for the wrong purposes. When banks aim for short-term profit maximisation, they tend to focus on lending to speculators for financial transactions.

Professor Werner identified two criteria that determine whether banks lend for the right purpose: ownership structure and size. Not-for-profit banks and banks not owned by shareholders have fewer incentives to maximise profits. Furthermore, banks that are very large tend to centralise the credit allocation decision and are less likely to lend to small and medium-sized enterprises, as they lack local knowledge. Small-scale banks with a decentralised decision-making structure tend to exercise socially responsible and productive lending.

Professor Werner strongly believes that the future belongs to smaller scale, locally based banks or banking organisations with a decentralised decision-making structure: they are less prone to suffer from banking crises, and they contribute less to the creation of asset boom-bust cycles. instead, they do more to deliver stable growth than other types of banks, and he urged policymakers to encourage local and small retail banking.

in her presentation, “The global context of financial inclusion”, Leora Klapper introduced us to the Global Financial index Data-base, or “Global Findex” (www.worldbank.org/globalfindex), which was created by a development research group at the World Bank and was funded by a ten-year grant from the Bill & Melinda Gates Foundation. Global Findex provides a new set of indicators to measure how adults from 148 economies save, borrow, make payments and manage risk. The data, which is from 2011, show that 50% of adults worldwide have an individual or joint account at a formal financial institution, though account penetration var-ies widely across regions, income groups and individual charac-teristics. The share of adults in high-income economies with an account at a formal financial institution is more than twice that in developing economies. This means that over 2.5 billion adults around the world do not have a formal account.

Moreover, this data can also help identify population groups that are excluded from the formal financial system and impart a bet-ter understanding of certain financial behaviours. Women, youth, the poor, and rural residents are the least likely to have a formal account. While 46% of men have a formal account, only 37% of women do. A 6- to 9-percentage-point gender gap persists even across income groups in developing countries.

Furthermore, the data uncover sharp differences in the usage of the accounts. The purpose and benefits of accounts vary widely. in Europe and Central Asia 61% of account holders use their account to receive wage payments, compared to only 34% in developing economies.

The most commonly reported and identified barriers to financial inclusion include not having enough money, high cost of main-taining an account, distance, and paperwork.

Approximately 65% of adults without an account indicate “lack of money” as a major reason not to have a formal account. This speaks to the fact that having a formal account is not without cost and that simply having a bank account is too expensive. in response to these barriers, many people use informal methods to save money or make payments. in developing economies, savings clubs and mobile money (for example, in Kenya 68% of adults use mobile money technology) are two popular alternatives or complements to saving at a formal financial institution. There’s a clear need for savings banks to offer more affordable financial products.

The presentations of both speakers imply a crucial role for region-ally oriented savings and retail banks both in socially responsible and productive lending in the developed world and in increasing financial inclusion in the developing world.

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onThe glocal link to a sustainable

international economyChris De noose, WSBI Managing Director

The 23rd WSBi Congress was truly a “world” Congress, with participants and attendees from all over the globe, reflect-ing the worldwide scope of WSBi and its representation of the savings and retail banking sector. it was also an ambitious Congress, with nine panel discussions over two days, including three plenary sessions and six workshops, enlightening case stud-ies, and insightful speakers. in all, over 70 speakers and panellists participated. This Congress touched on more topics and covered more ground than its predeces-sors, and of that we can be proud. But what did we learn? i want to keep fresh in your memory the key messages of this Congress and the WSBi vision for tomorrow’s savings and socially committed retail banks. Remember what WSBi President Heinrich Haasis said in Plenary Session 1: Be con-fident in the savings and retail banking model. indeed, we are truly “glocal” institutions: a worldwide sector that thinks globally; but also regional insti-tutions that focus on our local commu-nities. We think globally, we act locally. We also act “glocally” as a network; imag-ine what this network can accomplish if it cooperates to its fullest potential. Out of a crisis that crippled much of the banking industry, our model emerged as a stabilis-ing force. its sound structures can serve as the foundation of a more equitable, inclu-sive, accessible and stable financial system. it is a model for the future, but decision-makers must appreciate both the model and the savings and retail banking culture. international regulation must be adapted to the needs of local banks, not the other way round, as is the case, for example, with the Basel iii rules, which have been designed to apply to internationally oper-ating banks and in many countries will

also be applied to decentralised financial institutions. This will endanger efficient lending to SMEs, which are the backbone not only of our business but of the real economy. Explaining our model to inter-national opinion leaders and authorities is one of WSBi’s top priorities.

in his dynamic keynote speech, Kjell A. Nordström enlightened us about the age we live in: not since the invention of the printing press have we lived at such a pivotal moment of technological development. Paradoxically, he said tech-nology is not important – what it enables is important. Today, we can share informa-tion at almost no cost.

This has implications for the simple mes-sage of Plenary Session 2: digitise or die. Our model is solid, but it must be able to incorporate digital age practices in a way that complements “brick-and-mortar banking”. We must think in multi-channel terms and bring banking to the customer in the same way Amazon.com delivers books, music and a whole range of prod-ucts. How? Let’s avoid the word “technol-ogy” for the moment, because savings and retail banks are all about the customer. But the customer is a consumer – active, not passive – and consumers want conveni-ence, security, reliability, trust – the whole package. But you will not be able to make the excuse that providing the whole pack-age digitally is too complex and too expen-sive – the consumer will not stand for it. Why? Because consumers already have digital experiences in other sectors and come to banking with these experiences in mind. So do not agonize over the ques-tion of should we or shouldn’t we digitise – we simply cannot have a digital deficit. Prepare for an era when the consumer benchmark is the virtual world, and for what this means for our image, brand,

and product introduction. Keeping pace with the customer in the digital age is not about technology. it’s about mindset, and that mindset is: embrace the customer in a forward-looking manner.

in Plenary Session 3 we learned that even in a post-crisis context, savings and retail banks’ traditional commitment to support-ing their communities’ social, economic and financial cohesion is crucial. For the last 20 years, international financial mar-kets valued above all profitability and the size of the financial institution. But the financial crisis showed that well-being depends on other things: thriftiness, stability and local roots. These values are inherent to our model, which supports activities with a long-term perspective, not disrupted by the short-term maximisa-tion of gains. This reduces the impact of financial market volatility on our institu-tions’ solvency and liquidity. our phi-losophy also strengthens our status


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as proximity bankers: contributing to our communities in social and environ-mentally conscious ways helps us learn more about our customers’ needs and capacities, and empowers us to act as responsible lenders in good or bad economic cycles. Also, the intermediation model known as “short loops”, as mod-erator Mr Dembinski called them, where local savings are reinjected into the local economy via credit to local entrepreneurs and SMEs, has been critical to our success. international banks are now trying to do this by repatriating their activities to their home markets, but only because they see home markets as less risky, whereas savings and retail banks see serving their home markets as fundamental to eco-nomic stability and well-being. Home mar-kets are our bread-and-butter. That’s why we grant loans more efficiently: we know our customers. And we know our custom-ers because acting responsibly toward our communities is not just an added layer to our model that floats away in the slightest headwind.

Workshop 1 showed that banks can pro-tect their customers without sacrificing profitability, but that regulators need to remember that the priority is to have safe and sound banks, especially in times of cri-sis. Customer needs are different depend-ing on the development of the financial sector in each region, but transparency is the common denominator required by customers worldwide.

Workshop 2 illustrated the transforma-tion of remittances into real financial tools. Banks in destination countries can leverage remittances for productive invest-ment; use remittances as the entry to bankarisation, leading to the use of mul-tiple financial products such as savings, loans and insurance; and use remittances to guarantee bonds issued to members of the diaspora, thus financial institutions in countries of origin can and must maintain links between migrants and their commu-nities throughout the time of migration.

Workshop 3 showed that the financial cri-

sis created a situation where many SMes that can be financed are not being financed. No two SMEs are alike: banks know this and can tailor and adapt to the needs of each SME, helping in terms not only of money but structure, adaptability, and business strategy. Banks must reach out and help them evolve into larger busi-nesses.

Workshop 4 showed how the WSBi Dou-bling Savings Accounts programme funded by the Bill & Melinda Gates Foundation is figuring out a way to make the value at the bottom of the pyramid mutually ben-eficial to banks and customers by making small balance savings accounts afford-able for low-income segments yet still contribute a viable business case.

Workshop 5 addressed how banks can contribute to and benefit from business cooperation across the Mediterranean. There is immense potential for cooperation across the region. Banks must pool their resources and realise the unique opportu-nity they have as players in a region that is the nexus of Europe, Africa and Asia. Mediterranean institutions are in an excellent position to play a major role in increasing north-South cooperation.

Workshop 6, retail banking versus casino banking, showed that all banks take risks, but that the kind of risks retail banks take increase society’s welfare and contribute to the real economy, while so-called casino banks engage in high-risk, high-stakes activity that is often self-serving. The regulator’s dilemma is where to draw the line between activities worth supporting publicly and those not worth supporting publicly. Some hedging enhances wel-fare, given that many airlines, for exam-ple, could not exist without hedging on kerosene prices. And just because you’re a retail bank doesn’t mean you pose no risk to the financial system: we all remember the bank run on Northern Rock in the UK. But while casino banking is often an end in itself, retail banking is a means to an end, and that end is financing the economy.

From Professor Richard Werner we heard that the future belongs to smaller scale, locally based banks or bank-ing organisations with a decentralised decision-making structure: they are less prone to suffer from banking crises, and they contribute less to the creation of asset boom-bust cycles. They do more to deliver stable growth than other types of banks. i echo his call for savings and retail banks to take advantage of this post-crisis window to establish your institution’s indispensabil-ity to your local economy.

Finally, we heard from Leora Klapper, who provided insightful data from the “Global Findex”, the Global Financial inclusion Database, on how people in 148 countries save, borrow, make payments and man-age risk. The most efficient and secure way to do these things is through a savings account, but, as Ms Klapper told us, over 2.5 billion adults do not have a formal account. that startling number is the perfect segue to the WSBI Marrakech Declaration: “an account for every-one”. Providing financial access is integral to the identity and stakeholder business model of savings and retail banks. Financial inclu-sion in developed countries is higher than 90%, but in developing countries less than 20%. Savings banks have an enormous task to perform, but so did Bill gates 30 years ago when he set himself the goal of putting a computer on every desk. Not every desk has a computer on it today, but just look at how much of that dream he accomplished. WSBi is a team of more than 2.2 million people working for 6,150 financial institutions in 89 countries. With a team that big, an account for eve-ryone is a dream that we can make reality. But remember: Bill Gates did not just make a declaration; he implemented a strategy. our challenge is not to declare, it’s to do.

WSBi members commit to enhancing their efforts to provide an account for every-one, by implementing a shared vision to advance financial access. This will entail


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offering quality products and services to integrate a maximum number of house-holds in the formal banking system. Banks will strive to offer a basic, entry-level product at a fair price to unbanked and low-income groups, and fair, affordable, convenient and cost-effective services. Providing access to a diversified range of services and empowering customers to receive and make payments are funda-mental to initiating a banking relationship. innovation will be key to providing com-petitive and adapted services to clients and extending outreach to unbanked and underserved segments. Members will review their product offer to ensure that it includes a simple, user-friendly product focused on the specific needs of the most vulnerable customers. They will develop alternative customer points of contact to facilitate banking service accessibility and convenience, especially for unserved and remote groups, through banking beyond branches solutions and innovative partnership models. They will participate in financial education initia-tives that are clearly distinct from product marketing or promotion, both to provide basic knowledge about money and to empower customers. And they will explore technological solutions to expand access to finance.

WSBi and its members call upon stake-holders, policymakers and regulators to support its global financial inclusion vision by designing comprehensive strategies to achieve inclusive financial sectors at the

national and regional levels, as part of a long-term plan for poverty alleviation and social cohesion. it should involve bank-ing and financial authorities and institu-tions working with unserved people and those involved with infrastructure, such as telecommunications. Also paramount is a proportionate policy, regulatory and supervisory framework conducive to finan-cial inclusion. Financial access varies widely from country to country, with huge differences between developing, emerging and developed markets, so the best approach must be defined at the national level. The national solution must recognise the contractual freedom of banking service providers and their financial sustainability objectives. WSBi members’ commitment to financial inclu-sion should in no way be read as a call for the introduction of a right to an account. in the current context of global reform of the financial sector, WSBi and its members call for a banking policy and regulatory environment which stimulates the diver-sity of sound financial services providers and enables WSBi members to fulfil their double objective of financial sustainability and financial inclusion. This requires the coexistence of different banking structures that ensure stable, solid and inclusive banking markets, which proved a key element to containing the financial crisis. the role of savings banks in financing the economy must not be undermined by regulatory reforms, which should be proportional and neutral regarding the banks’ ownership structures. Competition

between all financial services providers must be fair, and non-bank players offer-ing banking services must be subject to the same obligations applied to banking players. Finally, and crucially, WSBI will forge closer links with the g20 and interna-tional organisations in order to enlist their support and action in creating a global reality conducive to a diverse, stable, sustainable financial system that includes an account for everyone. i am convinced that it’s a new dawn for savings banks. The financial crisis dem-onstrated that our model is stable and close to citizens. The world is beginning to understand that because our decentralised banks act responsibly toward their regions, because they are anchored there, they overcome crises and endure for centuries. And we’ve done so much more than just endure. We’ve become access to finance experts.

What’s our ultimate aim? the allevia-tion of poverty. All businesses, including banks, serve people, not the other way around. To serve them properly, banks need a stable, sustainable international economy, which can only be achieved through stable, sustainable domestic economies; and these can only be achieved through stable domestic financial systems, which cannot be achieved without savings and retail banks. Domestic financial sys-tems are our territory. We are the crucial, “glocal” link between them and a healthy, stable, sustainable international economy.

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AN ACCOUNT FOR EVERYON E

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Concluding the 2012 WSBI Congress, WSBI members renewed a shared vision to success-fully advance financial access and financial usage by working toward the provision of an account for everyone. In the current context of global reform of the financial sector, they also called for the definition of a banking policy and regulatory environment that stimulates the diversity of sound financial services providers and enables WSBI mem-bers to fulfil their double objective of financial sustainability and financial inclusion.

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WSBi, the World Savings Banks institute, brings together 111 members representing 6,000 savings and socially committed re-tail banking institutions that offer their services mainly to private clients, small and medium sized enterprises and local authorities. They work through extensive distribution networks that enable them to offer proximity services and provide regional outreach. They also develop a socially responsible approach to business and to society. The WSBi network extends to 89 countries throughout the world, both developing countries and mature markets.

On the occasion of the 2012 WSBI Congress, WSBI members adopted the following Declaration “An Account for Every-one”:

The Members of WSBi re-affirm their strong support for financial inclusion, a commitment which they maintain despite the diffi-cult economic and market context for the financial sector. Savings banks across the world have an embedded social commitment to the communities and regions in which they operate, and provid-ing financial access is an integral part of their identity and of their stakeholder business model.

Based on this renewed and voluntary approach to financial inclu-sion, the members of WSBi commit to enhance further their ef-forts towards the provision of an account for everyone, especially through:

the implementation of a shared vision to successfully advance financial access and financial usage, which entails: the offer of quality products and services, with a view to inte-

grate a maximum number of households in the formal bank-ing system, in a long-term perspective;

the existence of a basic, entry level product for the still un-banked and low-income groups. Services provided should be fair, affordable, convenient, cost-effective, accessible and ap-propriate;

access to a diversified range of services for all, with priority given to the capability to transact, i.e. to receive and make payments, as a key incentive for initiating a banking relation-ship;

a diversity of sound and efficient financial services providers operating on a level playing field.

consider innovations in a number of key fields, with a view to provide competitive and adapted services to clients and extend further their outreach to the unbanked and underserved seg-ments: review their product offer, with the objective to ensure that it

includes a simple, user-friendly product, focused on the spe-cific needs of the most vulnerable customers;

develop alternative customer points of contact to facilitate the accessibility and the convenience of the banking services, es-pecially for unserved and remote groups, through banking be-yond branches solutions and innovative partnership models;

participate in financial education initiatives, both to provide basic knowledge about money and to empower customers, clearly distinguished from product marketing or promotion.

WSBi and its members call upon stakeholders, policymakers and regulators to support their global financial inclusion challenge by:

designing comprehensive strategies to achieve inclusive finan-cial sectors, at national/regional level, as part of a long term vision for poverty alleviation and social cohesion. it should involve both banking/financial authorities and institutions working with unserved people and those involved with infra-structure aspects, telecommunications, for example;

developing an enabling and proportionate policy, regulatory and supervisory framework, conducive to financial inclusion. Given that the current level of financial access varies wide-ly from country to country, with huge differences between developing, emerging and developed markets, the best ap-proach has to be defined at national level. in any case, the national solution has to take into account the contractual freedom of banking service providers and their financial sus-tainability objectives. WSBi members’ commitment to finan-cial inclusion should in no way be read as a call for the intro-duction of a right to an account;

defining supportive conditions to encourage the opportuni-ties that technology solutions bring to expand access to fi-nance.

in the current context of global reform of the financial sector, they also call for the definition of a banking policy and regulatory envi-ronment which stimulates the diversity of sound financial services providers and enables WSBi members to fulfil their double objec-tive of financial sustainability and financial inclusion:

the coexistence of different banking structures is a core el-ement for stable, solid and inclusive banking markets, and proved a key element in confining extension of the financial crisis;

the strong role of savings banks in financing the economy must not be undermined by regulatory reforms, which should be proportional and neutral regarding the banks’ ownership structures;

competition between all financial services providers should be fair and non-bank players offering banking services should be subject to a similar level of obligations as banking players when providing a similar service.

News & views

Published quarterly by WSBi-ESBG, Brussels,Belgium, and distributed to 4,000 individuals inover 90 countries, including all WSBi-ESBG members.

Responsible Editor: Chris De Noose, Managing DirectorEditors: Dirk Smet, Communications Manager, andLee Gillette, Communications AdviserDesign & Layout: Malou Doumen

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aFrICa: [algeria] Caisse nationale d’epargne et de Prévoyance (CneP) [angola] Banco de Poupança e Crédito (BPC) [Benin] La Poste du Bénin [Botswana] Botswana Savings Bank [Burkina Faso] Société nationale des Postes (SonaPoSt) [Cameroon] CaMPoSt [Cape Verde] Caixa económica de Cabo Verde (CeCV) Correios de Cabo Verde, S.a.r.l. (CCV) [Comoros] (Islamic F.r.) Société nationale des Postes et des Services Financiers (SnPSF) [Côte d’Ivoire] Caisse nationale des Caisses d’epargne (CnCe) [egypt] Principal Bank for Development and agricultural Credit [ethiopia] Construction & Business Bank [gabon] gabon Poste [ghana] HFC Bank (ghana) Limited [guinea (republic of)] office de la Poste guinéenne [Kenya] Kenya Post office Savings Bank [Lesotho] Lesotho PostBank (LPB) [Madagascar] Caisse d’epargne de Madagascar [Mali] Banque de l’Habitat du Mali [Morocco] Poste Maroc - al Barid Bank Caisse de Dépôt et de gestion [Mozambique] Cooperativa de Crédito para o Desenvolvimento rural - CCDr [namibia] nampost Savings Bank [nigeria] nigeria Postal Service (nIPoSt)** [Senegal] Caisse de Dépôts et Consignations Fonds d’Impulsion de la Microfinance (FIMf)** PoSteFInanCeS [South africa] Postbank [Sudan] Savings and Social Development Bank [tanzania] tanzania Postal Bank [togo] Banque Populaire pour l’epargne et le Crédit [tunisia] office national des Postes, La Poste tunisienne [uganda] PostBank uganda (PBu) Pride Microfinance Limited (PML) uganda Finance trust (uFt) [Zambia] national Savings & Credit Bank of Zambia [Zimbabwe] People’s own Savings Bank of Zimbabwe

aSIa PaCIFIC: [China] China Postal Savings Bank the Industrial and Commercial Bank of China (ICBC) [China S.a.r. Macau] Caixa económica Postal de Macau [India] national Bank for agriculture and rural Development (naBarD) national Savings Institute, Ministry of Finance [Indonesia] P.t. Bank tabungan negara (Persero) [Iran] Postbank Company of Iran [Kazakhstan] JSC Halyk Bank [Korea] (republic of)] Dongbu Savings Bank Korea Federation of Savings Banks (KFSB) Korea Post, Postal Savings Division Korean Savings Banks group [Malaysia] Bank Simpanan nasional [Mongolia] Savings Bank of Mongolia [Pakistan] BuKSH Foundation ** Central Directorate of national Savings [Philippines] Philippine Postal Savings Bank [Sri Lanka] national Savings Bank [tajikistan] the State Savings Bank of the republic of tajikistan ‘amonatbonk’ [thailand] government Savings Bank [uzbekistan] XaLQ BanKI - the State Commercial People Bank of the republic of uzbekistan [Vietnam] Lien Viet Post Bank Vietnam Bank for agriculture and rural Development (VBarD)

euroPe: [albania] Banka Kombetare tregtare (BKt)* [austria] Österreichischer Sparkassenverband* [azerbaijan] Kapital Bank [Belarus] Belarusbank [Belgium] argenta Spaarbank n.v.* [Bulgaria] Bulgarian Post Bank [Croatia] Hrvatska poštanska banka d.d. (HPB) (Croatia Postal Bank) [Czech republic] Ceska Sporitelna aS* Ceskoslovenska obchodni Banka, a.s. (CSoB) [Denmark] 3S group* [Finland] Säästöpankkiliitto* [France] Fédération nationale des Caisses d’epargne* BPCe* [germany] Deutscher Sparkassen- und giroverband e.V. (DSgV)* [greece] Hellenic Postbank* [Hungary] otP Bank Plc* erste Bank Hungary rt. [Iceland] Samband Islenskra Sparisjóda* [Italy] associazione di Fondazioni e di Casse di risparmio Spa (aCrI)* [Latvia] Latvijas Krajbanka* [Luxembourg] Banque et Caisse d’epargne de l’etat (BCee)* [Malta] Bank of Valletta Plc* [netherlands] SnS reaal* [norway] Sparebankforeningen i norge* [Poland] PKo Bank Polski Sa* [Portugal] Montepio* Caixa geral de Depósitos* Caixa económica da Misericórdia de angra do Heroísmo (CeMaH)* [romania] Banc Post Sa [Slovak republic] Slovenska Sporitelna aS* [Spain] Confederación española de Cajas de ahorros (CeCa)* International association of Credit Institutions and Social Pledge (PIgnuS) [Sweden] Swedbank* Sparbankernas riksförbund (Swedish national Savings Banks organisation)* [turkey] VakifBank, türkkiye Vakiflar Bankasi tao* [ukraine] oschadny Bank ukrainy [united Kingdom] Lloyds Banking group*

tHe aMerICaS: [Bolivia] unión Boliviana de entidades Financieras de ahorro y Préstamo para la Vivienda - unIVIV [Brazil] Caixa econômica Federal do Brasil [Chile] Bancoestado [Colombia] Banco BCSC [Costa rica] Federación de Mutuales de ahorro y Préstamo de Costa rica [Cuba] Banco Popular de ahorro [Dominican republic] Banco nacional de Fomento de la Vivienda y la Producción (BnV) asociación Popular de ahorros y Préstamos (aPaP) asociación La nacional de ahorros y Préstamos (aLn) [el Salvador] Federación de Cajas de Crédito y Bancos de los trabajadores (Fedecrédito) [guatemala] Banrural [Mexico] Banco del ahorro nacional y Servicios Financieros (BanSeFI) [Panama] Caja de ahorros de Panama [Peru] Federación Peruana de Cajas Municipales de ahorro y Crédito (FePCMaC) [united States of america] Independent Community Bankers of america (ICBa) Wells Fargo

* also member of eSBg - european Savings Banks group ** Correspondent member

Situation May 2012

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