Financial & Economic Blog

Actually this is a good test to see how well you've followed recent developments in the banking industry. Are you thinking of the heavy competition amongst banks, that might drive some banks to bankruptcy? Or are you thinking of the high cost levels of banks due to their ancient IT infrastructure, their model based on labor instead of technology or their urge to buy expensive real estate? Or are you up to speed and considering initiatives such as Zopa and Prosper that now ring the bell to 'Dell'arize the banking industry, effectively cutting out the bank as a middle man?

Well, all of these might be right. There's one other trend that is shaking the foundation of the bank though. From an unexpected angle. It's called personalization.

Today the portfolio of products and services available to us as customers is massively broad. So broad actually, that I'd wonder if you'd be able to pick the product that is right for you. So broad actually, that I'd have second thoughts about just entering my local bank and ask the clerk to select the best product for me. This poor guy just has too much homework to go through to find his way through all of these products.

On the other hand - we've got this wild range of products because we ask for it. And because banks need to distinguish themselves against their competitors. Moving bags of money from A to B isn't very innovative in itself, as you might comment.

Anyone observing these developments will come to the conclusion that over the next year, a new player will rise who is better at creating truly personalized on the spot. That's your opportunity - go for it.

How to do this? Map out your operational economics: how are you TRULY making money and what is costing money. Make an excel sheet in which you lay out these fundamentals - best of course if your 6 year old can understand it :-) Design various ways to deliver products and services, that all tie in on these operational economics in some way or the other. Bottom line: you know in milliseconds whether you're gonna make money on a product or service or not, no matter how customized or personalized it is.

These are the fundamentals of your new business. Looking for a player who has already done some of the groundwork? Vallstein is known to have mapped portions of the basic earnings model of banks. Look for an internet mechanism such as Bank of Scotland's as an engine to produce personalized products rapidly. Be creative but pragmatic: keep things simple. The next move is yours.

My life moves a bit fast, so fast that I ended up in one place and my wallet, presumably, ended up in another place.  I do not know where this place is.  It wasn't that old, perhaps middle-aged, but perhaps it went to live with Jesus.  I don't know.  I do know that I need ID, that with the price of gas my gas cards are hot commodities, and my credit and debit cards will have to be replaced.

Columbia Bank (Tacoma WA)  www.columbiabank.com

I contacted the bank at 8:00 PM requesting cancellation of my debit card.  Which they did.  I then asked for a new card.  Nope, can't be done.  I was instructed to call back during business hours.  Which I did.  And was told that I could have one in 7-10 days.  Since I was leaving on a trip in 5 days, I asked if it could be faster.  Well, yes, it could be a little faster for $70.00. 

$70!  When I mentioned that a competitor overnighted my replacement and waved any fee, the response was, "We don't make our cards here".  I was then treated to a fairly in depth explanation of the manufacture of debit cards, a recipe which includes yellow corn and a live otter (I may not have been listening closely).  To which I responded, "Forgive me, but I don't care." 

In the very crowded world of providing goods and services to others, it is NOT ABOUT YOU, it's about me.  Particularly when an issue or hiccup comes up, I don't care how you manufacture it, buy it, plant it, grow it, transport it, stock it, or any of the other elements that go into putting something into the market place that you want me to buy.  If you want me to buy it, it's not about you....it's about me. 

Sir Alexander Belloc-Brayne returns from Southern Africa and delivers the last word on the Budget.

Readers who feel the need to respond should scroll to the bottom of the page and attack the Comments button.

March 2007

Good to be back in the old Green and Pleasant after our arduous fact-finding mission in Cape Town. Lady Belloc-Brayne is already fleshing out her travel diaries in preparation for a series of guides to Southern African countries starting with Zimbabwe on Two Dollars a Day, based on the testimonies of exiles currently on South African soil. For my part, I am much influenced by the Western Cape Regional Finance Minister Lynne Brown, whose advocacy of a Passenger Movement Tax is a shot in the arm for the local tourist industry and provides timely support for David Cameron’s “Greener Skies” philosophy. I would normally have forwarded the particulars to Whitehall, but for Her Ladyship's observation that everything that moves in our country is taxed already.

Speaking of which - three cheers for HM Inland Revenue & Customs and the Ordnance Survey lot for combining their expertise in the cause of the accurate assessment of property taxes. Word is that the new "shadow agency" will employ satellite technology capable of magnifying a garden gnome 1,250 times and amending the corresponding Council Tax demand at the speed of light. Her Ladyship has drawn up plans for revisiting the “simple life”, which seems to entail demolishing the conservatory and the garage and encouraging the erection of “inclusive housing” sited so as to obscure any “nice view” that can be assigned a taxable value. Might be simpler to emigrate.

While on the subject of lifestyle change, I should add that I am a bit disorientated by the contents of the new national inflation basket. Satellite navigation, ring tones, LCD monitors and pro-biotic comestibles…? Good Lord! Whither the faithful Brussels sprout, video cassette and cathode ray television set ? Lady Belloc-Brayne says that modern inflation is increasingly a problem of the young since very little of what our generation consumes is recognised let alone acknowledged. I rather feel the chill draught of social exclusion, though there are still credit card charges and mortgage arrangement fees to reassure us that we have not been entirely abandoned.

I must say that I do not share the establishment appraisal of Gordon Brown’s “last budget”. Nor do I hold him solely culpable for the rash of stealth taxation on his watch. We are all guilty to a greater or lesser extent. I cite the recent High Court judgment that lap-dancers are liable for VAT on their performance and “sit-down” fees (though not apparently on “lie-down” charges). Her Ladyship is elated at the prospect of tuppence off the personal and standard corporation tax rates in 2008, a higher rate threshold of £43,000 (also from 2008) and an Inheritance Tax nil-rate band at £350,000 by 2010. Tell it not in Gath, but I sense that Mr Brown may well have drafted the Finance Acts for 2007 through to 2010 on the quiet, sparing his successor the chore of writing his own budgets.

The way I see it, the “gap year” allows for a snap general election before the “simplifying” abolition of the 10p personal band and the higher small-companies tax rate become apparent to the petit-bourgeoisie. In the meantime, Mr Brown will have earned the gratitude of our captains of industry, who will be content to underwrite the Labour Party’s cash flow without the expectation of honours. More Machiavelli than Stalin if you ask me, save perhaps for the fiscal purge of the middle-income kulaks. And while on the subject of party funding, let me commend Sir Hayden Phillips’s proposal of a 50p per vote commission rate. I dare say that Prodigal Life will be happy to provide sales training and support, in exchange for a few regulatory concessions.

Lady Belloc-Brayne ranks Mr Brown among the great reforming Chancellors of our time, citing the reversal of his own fiscal innovations (such as the 10p tax band) in favour of the simplicity of a tax credit system that still baffles the Inland Revenue. The way I see it, his true monument is the 1997 Budget with its overhaul of the Advance Corporation Tax (ACT) regime – which (with hindsight) was his finest hour. No blame attaches to him for the subsequent near-terminal damage to the pension system, acting as he was on the “best advice” of civil servants – a concept that appears to have a different meaning in the private sector. I would have sought clarification of the principle from the Financial Services Authority but for reports that it has breached its own Treating Customers Fairly rules by posting dodgy information on its website. I wonder how much it will be fined.

Anyway, rather than apportioning blame, let us give thanks unto the Second Lord of the Treasury for addressing the totally unforeseeable side-effects of his ACT reform with an £8bn bail-out of the Financial Assistance Scheme that turns out to have a present value of £1.9bn. For this relief much thanks… Her Ladyship has put this apparent anomaly into perspective by pointing out that rewards always appear smaller when viewed at a distance in time. The way I see it, benefit indexation and the tax-free lump sum must lie somewhere beyond the vanishing point.

Word is that Chancellor-in-waiting, Mr Ed Balls is very much in the unbroken Brown mould, in which case I predict another “simplifying” tax reform in the general area of private equity “shareholder loans” as his first act of creative destruction upon entering No.11. I have written to Mr Brown pointing out the risk of a hasty appointment and suggesting that he chair a competition for the post of his Apprentice, with candidates undertaking taxing tasks like running a whelk stall for a day. Strictly entre nous, my money would be on Culture Secretary Tessa Jowell, who has presided over the expansion of the Olympics budget from £2.37bn to £9.3bn in just two years – with only five to go. Mind you, she would face a stiff challenge from Margaret Beckett, whose administration of the DEFRA “dynamic hybrid” system for distributing European farm subsidies ran up £500m in EU fines, quick-fix costs and interest on late payments. Of course, there remains the possibility that Mr Brown will still be Chancellor after the Labour leadership election. G-d help us all then!

Incidentally, Lady Belloc-Brayne maintains that the Olympics exercise is nothing more than an urban-regeneration project disguised as a sixteen-day circus to divert the taxpayers of London. I, on the other hand, am rather persuaded by Ms Jowell’s argument that the procurement of the Olympics has galvanised our youngsters, who even now are surely abandoning their iPods, Playstations and hallucinogenic potions to run faster, leap longer and vault higher. Well, it worked for the Hitler Youth… Lady Belloc-Brayne feels, however, that our Spartan young are unlikely to get within sniffing distance of a live event in 2012 and will follow the Games from their living rooms and the public houses as they have always done.

Can’t sign off without some reflections on the 50^th anniversary of the Treaty of Rome. I am intrigued by suggestions that the signatories appended their names to a blank document - which seems to have evolved subsequently into a blank cheque. Lady Belloc-Brayne says that I should write to Frau Angela Merkel recommending this strategy for a revived Constitutional Treaty. Meanwhile, Her Ladyship has added the original 1957 text to our faux library. The way I see it, that makes it the only authentic work on the shelves. Ha, ha!

Must rush. The Belloc-Brayne Model Portfolio is in need of attention after the turbulence on global markets during my absence – brought on by the retiring Dr Greenspan (who refuses to go quietly) and $1,200bn worth of mortgage arrears in the United States. Strictly entre nous, I sometimes regret the introduction of the sub-prime voter to the concept of the property-owning democracy. Really must go. Nurse is due any minute now on a “confidential matter”. I suspect that it has something to do with the unwinding of her personal carry trade with the Cape Town Waterfront emporium. I sense the onset of a period of industrial inaction.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Securities Exchange Law revised in July 2006 and the name of the law was change as the Financial Product Trading Law. Simultaneously, several laws were abolished: the Financial Futures Trading Law, the Investment Advisers Law, the Mortgage Securities Business Restriction Law, the Foreign Securities Trading Business Restriction Law and so on.

There have been a lot of court rulings concerning the securities disputes, where consumers asked the damages claim to the traders based on the unfair practices by the traders. The number of decisions that claimant won was over 400 cases.[1] The breach of royalty consists of a significant element in a consumer’s allegation.

In warrant sales cases, the Kobe District Court[2] admitted the consumer’s claim and ruled that the churning of securities. It said that a churning practices meant the excessive trading, where was in a view point of the aim and the financial status of customer, for the purpose of gaining charges from a customer. The court said it consisted a breach of duty of royalty that a securities trader as a fiduciary owes to the customer, and the unfair practice was coming under the breach of contract or tort.

The extension and content of the duty of royalty is still vague. The definition of the notion varies in the rulings. It is expected for the definition of the duty to be clear hereafter in the accumulation of the court rulings under the Financial Products Trading Law.

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[1] http://cgi2.osk.3web.ne.jp/~syouken/db/search.cgi [2] http://www.courts.go.jp/hanrei/pdf/42B8C8BCE361C60049256C56001073DF.pdf

In March 16, 2007, the FSA confirmed the illegal activity of the Credit Suisse
Japan, therefore the agency demanded the company to prevent unlawful business and keep compliance. According to the FSA, an employee of the Hong Kong branch of the major Swiss financial group went on business trips to
Japan and engaged in soliciting deposits for the branch in 2003. There are some acts to prohibit the business related to get deposit on business in Japan.1. Nobody can operates a business to accept deposit without a license, promising a depositor to pay interest. It is stipulated by sec. 2 of the Lending, Depositing and Interest Rate Restriction Law (amending in 2006), adding sec. 4 of the Banking Act.

I suppose it is primary understanding as a banker that it is necessary to prepare the license prior to operate the banking business even if in a short trip. [1]

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[1] http://www.fsa.go.jp/news/18/ginkou/20070316-1.html

I was reading the Matthew Goldstein article on UBS in the March 26^th issue of BusinessWeek, and I found myself fixated on one small aspect of the story.  The story briefly outlines portions of Michael Guttenberg’s work history.  I found myself wondering how he went from being a “sales assistant” with Axiom Capital Management to an Executive Director with UBS in four short years.  Now, I will be the first to admit that I do not have intimate knowledge of the New York City Financial Services market, but to an outsider that sounds like a fairly incredible jump.  I found my mind shifting from did he, and twelve others, do what they are accused of or not, to what did he accomplish during those four years that justified that type of jump?

 

I found another comment in the article to be very interesting as well.  Goldstein, through sources that are “familiar with [Guttenberg’s] duties” labels him as a “glorified marketing executive.”  I find this interesting, because one of my pet peeves is that a number of people that I have come into contact with have a low opinion of the marketing profession.  So much so that they believe almost anyone can do it.  While this article does not provide an exhaustive look at Guttenberg’s resume, it struck me as an example of this type of thinking.  It appears that Guttenberg spent a fair amount of his time in the sales profession, but yet UBS promoted him to a marketing executive position, and on top of that placed him on “an elite committee” within the company.

 

Time and the courts will tell if Mr. Guttenberg and his colleagues are guilty, in the meantime I am fascinated by the progression of his career prior to this incident.

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Foreign exchange margin trading has been massively increasing in
Japan. The outstanding of margin was about ₤1575, 000,000 in the end of March 2006, and would be estimated about ₤2782, 500,000 in the end of March 2007. The gross number of accounts would be 660,000. The reason of increasing can be sleeked to the lower deposit interest rate. It is only 0.4% apr in average.

The trading had been permitted in April 1998 accompanied by revised the Foreign Exchange Law. Subsequently, many rogue traders got involved in the market, because there was no restriction to take part in the trading.

In 2000, the number of inquiries to the consumer centre was only 28 cases; however the number increased to 724 cases in 2002. Many consumers were cheated and took huge loss by the trading.[1]

In 2005, the law was revised, introduced opt-in rule to the trading, therefore the traders were banned to solicit the consumers except the consumers’ prior consent.[2]

As a result, rogue traders faced difficulty to continue their business, transferred to the business such as a foreign commodity futures trading or foreign option trading. Therefore, the traders operating now are almost big brokerage companies. But their business practices are not honestly. It is apparently indicated by the huge number of litigations and court rulings. [3]

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[1] http://www.kokusen.go.jp/pdf/n-20031125_1.pdf

[2] http://www.kokusen.go.jp/pdf/n-20060706_2.pdf

[3] See the court ruling in the following website. It only place on the consumer winning cases, http://www2.osk.3web.ne.jp/~syouken/

In March 1 2007, the finance Services Agency published the states of damages caused by unauthorized money drawing in 2006 fiscal year: used by forged card and bank passbook, stolen card and unauthorized accessing to internet banking.[1][2]

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[1] Data: http://www.fsa.go.jp/news/18/ginkou/20070301-1.pdf

[2] Announcement: http://www.fsa.go.jp/news/18/ginkou/20070301-1.html