The customer reception, a milestone being upgraded



What are the new codes for the home?

What are the new codes for the home? What implications they induce in the sales organization and how new technologies involved in this transformation? SIA Partnersproposes to decrypt the home issues in the distribution of retail banking strategy.


Despite the necessary resizing of the networks, the banking agency retains an essential place in the new models of distribution omnicanal is refocusing on the promotion of offers (showcase) and the provision of expertise in moments the relationship keys (property acquisition, precautionary savings, retirement, transmission, etc.). This transition, which marks the revival of the banking agency, translates the redefinition of the customer journey and requires revisiting the home patterns for simplicity andefficiency.



A banking consultant who fully participates in the redesign of the home into agencymodels

A controlled home should streamline the passages from clients in an agency, to ensure readability in the customer journey and finally the quality of contact into friendly spaces. Beyond work on the arrangement and the ‘phygitalisation’ of space (inclusion of the digital into the physical networks), the development of new formats of Agency (self-service, expert agencies, etc.) requires a mutation of the role of the advisors.

In fact, the profession of home load tends to disappear in favour of a model of shared hosting or all the staff of the Agency invests in the reception of the customers (more than 21,000 loaded home in 2009 against less than 13,000 today [1]). All employees of the Agency must be able to accommodate the customer covering the wholeof client situations regardless of the mode of contact (visit agency or remote contact via telephone, mail or video conference).

This model of shared hosting is put forward in the new store concepts developed bymajor french networks such as the 2 Opera agency BNP Paribas or ’19’ LCL, which are experimenting with new distribution codes in Agency. Usability is enhanced by areas of relaxation (a Starbucks coffee even came invite breast ‘ of the 19″LCL) and theworkspace is reorganized to allow customer loads to go meet the client and thereby strengthen the proximity from the home.

This new model home is based on proactive consensus even if it calls into question the traditional organization of banks.

On the one hand, support is required to raise competence across the Agency’s staff,both on the ability to provide a commercial quality relay regardless of client requests, to familiarize themselves with the new digital tools (interactive tablets, etc.).

On the other hand, this implies an adjustment of the teams and a redistribution of roles to translate in the post cards, with the need to value the commercial time allocated to the home.


New technologies at the service of the optimization of the management of flows into agency

Moments of crowd control is crucial in the home into agency. Efficient managementof the flows of persons or calls, especially at peak times, contributes to the optimization of trade efficiency and customer satisfaction. The rationalization of advisors time dedicated to administrative tasks, such as making appointments, is also an asset. From the point of view of the client, an enlightened management limited loss of time.

To achieve, the Agency must be able to anticipate the peaks of affluence and recurrent expectations to be able to effectively allocate the necessary resources (beachesof openings and appointments, schedule of contributors). Analysis of customer usage allows to improve agency clients. An IFOP study [2] 2011 indicated that one-thirdof those surveyed was not satisfied with the opening hours of their agency and complained about the wait time. Most networks, reacted with openings on Saturday andhours extended during the week on some agencies, or with a stronger presence at the reception in time point but progress still yet to do. Furthermore, the beaches of accessibility client services by phone have also been extended.

The Agency must also be equipped with a clear digital signage in order to allow thecustomer to be guided and informed in real time, throughout his career. A good orientation to the daily actions self-service areas or effective support at the level of thedigital areas pre sale are simple examples. The car configurators image in concession, interactive presentation of tenders and custom simulation shelves allow to reducethe waiting time for clients.

Finally, new technologies are being tested in order to streamline the home. Amongthe notable initiatives, the Singaporean DBS Bank has implemented a queue management system named ‘SMS Q’ which gives the possibility to book an appointment inthe Agency of their choice by SMS. The customer is then notified when its rendezvous approach. This system allows, on the one hand, fluidify the waiting zone, but alsoto unload Bank advisors of the administrative burden of making appointment.

In the same way, the Beacon technology, tested in France by Credit Mutuel Arkéa orthe Fund of savings Lorraine champagne-Ardenne, to warn banking advisers of the arrival of their clients in front Agency even that they are reported to.

The home Agency continues to play a leading role in the transformation of networks as a first link in the customer relationship in front face and first commercial relay. Banks must therefore speed up the modernization of the home in order to make thepassages in Agency more effective and enjoyable.


The model of distribution of french real estate credit put under pressure with the reflections being the Basel Committee on the supervision of rate risk


French retail banking

French retail banking is distinguished from other countries by the typology of the credit that it grants to its customers. Indeed, unlike its Anglo-Saxon counterparts or other European countries favouring credits at variable rates, French banks are able toguarantee their clients a fixed rate on particularly long maturities (up to 25 or even 30 years).


In General, a credit institution is refinances on shorter maturities and through product variable rate, de facto immediately impacted by favorable or unfavorable evolution of the rate environment. Therefore, it is even more complex for French banks to offer their customers of long loans to fixed rate, refinanced by shorter liabilities variable rate.


For this french financial institutions have a feature to be able to carry long credits atfixed rate. They back-to-back them deposits of their clients, in particular deposits. Although they have no maturity contract and that any customer can withdraw all or part of his money at any time, the aggregation of all of the accounts and the analysisof its evolution in time allows institutions to observe a certain stability and longevityof their stock over time. Furthermore, a significant share of deposits is fixed rate: for example, most of the deposits in France are not paid (in other words, they are considered with a fixed rate at 0%). Therefore, French banks are able to sell their credits,obeying characteristics of similar rate (fixed rate) to their deposits.


Credits at variable rates were already less than 20% of appropriations in 2005. Today, the proportion of loans to fixed-rate amounts to more than 99% [1]. In an environment of rates historically low and presumed a future more conducive to an increaseof interest rates, this peculiarity of French banks is therefore a real bargain for customers.


This model could, however, be required to be fundamentally challenged by the draftregulations of the Basel Committee. Indeed, the latter has recently consulted financial institutions scale world the study of a passage from the risk of rate in pillar 1, synonymous with supplementary allowance of own funds, as is already the case for credit risk, market and operational risks.


The draft regulations around the risk of rate in the banking book [2]

In an environment marked by several years of decline in interest rates, the recent return of the volatility of long-term interest rates and fear of a rise in rates on the markets recalled the importance of anticipating this kind of evolution in the overall management of the risk of bank rate. The different regulatory bodies that had abandonedthe subject of rate risk for the benefit particularly of the risk of liquidity following the 2008 crisis have handed it over to the order of the day (before this year, the latestregulation of the Basel Committee concerning follow-up and rate risk managementprinciples and the CEBS Guidelines [3] dated 2004 and 2006 respectively).

For the record, the risk of interest rates on the banking book of a financial institution is “the risk incurred in case of variation of the fact of all balance sheet operations interest rates and off-balance sheet, with the exception, if any, operations subject to market risks” [4]. Moreover, the banking book (bank holding) means most transactions in medium and long term of an establishment and includes all operations not included in the trading book (trading portfolio). EC-last records of assets held for trading purposes in the short term, or to cover other elements of this same trading portfolio.

Thus, in the wake of the publication end may 2015, the recent guidelines for the banking authority (EBA) on the guidelines on the risk of interest rates in the banking portfolio (IRRBB), the Basel Committee (BCBS [5]) has launched a consultation [6] on the subject in global financial institutions. This consultation was accompanied by an impact study quantitative (ISQ) attended by all financial institutions in September 2015 and whose returns are being analyzed by the Basel Committee.

The main principles of the draft regulations of the Basel Committee

The BCBS project mainly to ensure that banks have a level of capital sufficient to absorb a shock of (upward or downward) interest rates but also to reduce the risk of arbitration between the banking portfolio and trading portfolio. Indeed, market risk being synonymous with allocation of own funds to under pillar 1 of the Basel rules, banks can conveniently place market in banking book operations in order to avoid this allowance.

The task force of the Basel Committee dedicated to the draft regulations has initial mandate to study the passage of rate risk in the banking book in pillar 1, synonymous with allocation of an additional charge capital, calculated from a standard set by the regulator. This approach would have the advantage in the BCBS to promote more “coherence, transparency and comparability. Today, the rate risk is addressed in pillar 2. This allows, based on internal models banks, to translate the national specificities for various products. These specificities are numerous in France as banks distribute products of heavily regulated collection (PEL, CEL, LDD, Livret A..).


The standard model put forward by the BCBS in its regulation of the IRRBB project in particular forced settlements in terms of scheduling of their deposits.

Specifically, this approach sets the applicable maximum average duration accordingto the categories of deposits / customers. The regulator also limits the importance of stable share (in the long term) and mechanically increases volatile deposits, corresponding to the difference between the average amount of deposits and the minimum amount of ces-last, over a previous representative period. This share materializesindeed uncertain share in the future evolution of the outstanding amount of deposits, the banks being forced to interpret it as a resource disappearing very quickly. Ultimately, these two constraints heavily penalize the French banks whose model is on the perimeter of the retail, to distribute long credits financed by unpaid, sight deposits, fixed-rate in order to avoid upward or downward of rates. Standardisation would,inter alia, by a significant reduction of the average duration of the flow patterns of the deposits which should be less than 2 years, the proposed measure not making therefore not account for the high stability of these resources whose remuneration isdécorrélée of market rates.

The prior discussions between the Basel Committee, financial institutions and bodies representatives of these financial institutions have however paved the way for a possible continuation of pillar 2-rate risk (as is the case to this day), with a calculationbased on internal models of the establishment, validated and controlled upstream by the competent authority within a defined framework. This alternative emerges, however, any relative because the Basel Committee provides a “fallback” in standard method if the load capital obtained on the basis of the internal model of institution remains lower than that calculated by the standard approach. Furthermore, even withthe pillar 2 approach, the establishment must submit in the context of its financial communication results calculated using the standard method.

Project of pillar 1-rate risk and the calculation of capital requirements resulting in the State could, induce a real overhaul of the distribution model of loans to fixed ratein France, with a closest paradigm of Anglo-Saxon culture of the variable rate on real estate credits.


Benchmark – The cost of operational risk for large French banks



Operational risk constitutes a major risk for financial institutions post. According to Portail en ligne pour investir :If the cost of the credit risk remains very large majority (86% of the costs of Basle risk in 2014), operational risk is positioned as the second source of the most expensive risk (10%). We propose here a State of play of this risk in the major French banks, as well as its trends over the past years.

Brief reminders Basel

The calculation of own funds in respect of operational risk appeared in France at thebeginning of 2007, with the entry into force of the application of the Basel II agreements in the European area. Operational risk forming, with the credit risk and market risk, risks subject to a capital charge in respect of the “pillar I”. Three methods are available for calculating the own funds related to operational risk: and Choisor le meilleur courtier binaire on an approach basis, thestandard approach and the advanced approach (AMA), the latter being preponderant among the major players place. On the other hand we discuss here the cost of operational risk in terms of weighted assets, and not in charge of capital (which represents 8% of the weighted assets).


The place of operational risk under pillar I


If La Banque Postale introduces strongest weight of operational risk, should still measure this result on the basis of the youth of this banking institution compared to itscounterparts. Credit risk remains very majority as intrinsic to the banking activity to the general public.


After strong variations until 2012, the weight of the operational risk seems to stabilize over the last three years. The example of Société Générale, and quel strategie binaire choisir, or which the weightof the operational risk is the strongest, is stand out clearly this trend: between 2008and 2011, this share increased from 13% to 14.5% before returning to 12%. Since itstabilizes around twelve points. It goes same for other actors, on their respective levels. But more that a stabilization, there is also the reduction of the gap between themajor French banks: If in 2008 the extremes if ranged from 6.9% to 13.1% of weighted assets (i.e., a difference of more than 6%), today and since 2012, only 4% approximately between them.

Operational risk

The Basel accords provide cutting of operational risk in 7 categories of events that can generate a loss related to a factor of type “operational”. These positions generally have stable weight, both over time and between different actors considered here,with occasionally major events redistributing the weights. Posts ‘External fraud’, ‘ customers, products and practical commercial “and”execution, delivery and management of process”, represent the majority of operational risk. The remaining categoriesare very significant.


The three above-mentioned main positions explain between 76% and 94% of the cost of operational risk in the major French banks. The case of the NOPP on the position ‘ customers, products and practical commercial “is explained by the proceedingsby American regulators, following the embargo violations by the Bank, which led toa record fine of nearly EUR 9 billion in 2014. For comparison, the weight of this same post in the cost of the operational risk of the NOPP in 2013 was 18%.

The proliferation of subjects from regulators on operational risk says a lot about theimportance of its management. Off the “Review of the Principles for the Sound Management of Operational Risk” (BCBS 292) published end of 2014 by the Basel Committee, news around the operational risk is rich: consultation paper on Capital floors,”Revisions to the simpler approaches for Operational risk» (BCBS 291) or further refinement of the criteria for use of the AMA… And beyond the financial impact resulting from operational errors, hides an impact in terms of reputation (or even loss of approval in some cases) for banks, which can prove costly even in a context of mistrustof the public with regard to the financial industry.


Interview with Guillaume Tabourin, responsible Expertise regulatory risks for the Direction of the Group BPCE



Guillaume Tabourin

We met Guillaume Tabourin, responsible Expertise regulatory risks for the Directionof risks of BPCE group, which gives us his vision on the balance sheet of the Unique monitoring mechanism (ESM), one year after its implementation.


Regulation & Supervision is in charge, Directorate of risk group BPCE, perform a regulatory monitoring (BIS, EBA, etc.) and coordinate relations with supervisors (ACPR, ECB)


One year after the entry into force of the single supervisory mechanism (ESM), whatis the balance sheet which can be charted?


It is important to note, first, that the establishment of the MSU completed in recordtime and many work have already completed to constitute the first pillar of the Banking Union that represents the support of banking supervision by the ECB. Indeed, the year 2015 was prolific with the implementation of the recommendations or “remedial actions” issues of RDI but also the deployment of the “Single Rule book” with aparticular effort through the review of options and national discretions on 122 provisions contained in the CRR – CRD IV texts. Thus, the ECB opened a consultation closed on December 16, to harmonize prudential salaries retained in this optional setting, through a draft regulation and a draft guide concerning the detailed rules for theapplication of national options. These works were fed high expectations on the partof the French banks, on delicate topics like the perimeters associated with the various regulatory reporting systems, the treatment of insurance participations or the procedures for taking account of deferred taxes. Here, it is a major step in support bythe ECB of his skills as a supervisor. We now await the final version of the texts relating to the options and national discretions scheduled for Q1 2016.


This year was also the occasion a plug of knowledge of new supervisors and the mode of operation of the “Joint Supervisory Teams through meetings, missions to place, solicitations and regular exchanges. The new supervision aims harmonization within the Euro area while preserving the recognition of the specificities of the nationalmarket but also those of institutions. Also new methods of control, the year 2015 was characterised by structuring themes brought by the ECB whether, for example, on the definition by the banks of their “Risk Appetite”, through the review of the principles of governance and risk management within banks of the Euro area or on cyber crime that is becoming a predominant for banks today mobilized by the “digital” challenge


What you think will be the major projects of the year 2016?

Implementation of the SREP (“Supervisory Review and Evaluation Process”) covering the modalities by which the supervisor imposes additional requirements of pillar 2 capital, will be undoubtedly one of fiscal years 2016 headlights. Thus, it is necessary to continue the work already committed to respond to the update of the Guidelinesof the EBA and the rise in competence of the ECB on the specificities of each institution. This portal will be a significant impact such a point of view on the process of formalization, documentation, modeling and stress testing but also financial, now referred to as banks to publish the requirements laid down by the supervisor under pillar2. The ECB also launched a site review originally designated internal models “Model Quality Review” in reference to the exercise directed on the AQR. The work began inthe month of October 2015, and should be spread over four years. Today, it is a phase of information gathering, but banks have not, to date, full visibility on the continuation of the actions, which can create a zone of uncertainty. Indeed, it is complex to define a medium term strategy on the use of internal models for the calculation of the capital requirements on the evolution of existing models, their validation or permission to deploy new. Review models should not suspend the ongoing internal work and particularly in adherence with all guidelines, RTS, ITS that the EBA has produced or must produce. Indeed, the publication of March 2015 of ABB on the future of the approach IRBA, his recent publication of draft guidelines on the definition of default, debates still underway on the “benchmarks” related to the models and the risk-adjusted as well as announcement of a review by the Basel Committee of the standard approach for “floor” for the calculation of risk-weighted exposure contribute at a certain pressure on the use of internal models. While it is true that some actors were able to issue of defiance on the use of the latter for the calculation of capital requirements, the fact remains that patterns remain for banks one of the best tools for central steering of risk, shared to a group [1] level.


How unfold daily relations with the Joint Supervisory Teams (JST)?

Concerning the Group BPCE, the team is a JST “headed” composed of members of the ECB and of the national authority: Capra. Even if this operation seems easier to manage that for other group who see the intervention of several European authorities, organizational challenges are many.

First, it is necessary to deal with issues of distribution of competences. For example,issues of compliance as the protection of the customer are often on the border of the competences of the ECB and of the national authority.

Then, it is necessary to learn to communicate in a European language. If the daily use of English may be an issue for a group still essentially rooted in France, it is also essential to understand the expectations of a supervisor who must control now 129 banks beyond the linguistic aspects.

Beyond communication and pedagogy, it is necessary to adapt to the new demandsof the supervisor. From this point of view, RDI had strongly mobilized in 2014 many internal teams, partly incorporated to meet the fiscal year, with significant time constraints. Since the entry into force of the MSU, control methods complement, in particular, exercises more punctual type “surveys”, not necessarily simpler to manage. These transverse investigations unfold on also tightened periods – one to two months.Of leverage finance and more recently on the Non Performing Loans including studies. Supervisor posing himself as being “intrusive”, banks must cope with an increasein applications. This operationally translates common inquiries on topics sometimesof unequal importance. Institutions must therefore arrange to deliver the right levelof response while having enough recoil to prioritize requests and meet the “deadlines” imposed.

In this regard, beyond the organizational challenges that arise, it is important to remember that banks, including French, have praised the establishment of the MSU who fulfilled a double objective: support the European banking system destabilized by the debt crisis, but also promote the bases of a banking system allowing better competition within the Euro area. In this context, it is also for the banks to be proactive and to make proposals in order to establish a constructive dialogue and to best organize responses to the demands of the new supervisor.


What are the next challenges that await the sector and how they translate operationally according to you?

Beyond implementation of the MSU and its impacts, the regulation is more than ever at the centre of the debate. In 2008, the G20 had set a very ambitious road map. Today, the multiplicity of texts from different horizons (London, Frankfurt, Brussels, Basel, etc.) and the convergence of risks – finance – accounting prisms channel the efforts of the banking industry. Banks must be more reactive and deal with the subjects in a more transverse way by combining all of the string, IT analyst, in order to respond effectively and appropriately to regulatory expectations. This requires an adaptation of the Organization and project structures to respond to many requests in a very short time, but also by the establishment of a dialogue between peers. Banks French and European must talk and take the initiative to exchange information on the levels and means of response to regulatory, either through organizations Place or bilaterally.

On the bottom, other issues already raised discussions and exchanges. This is the implementation of procedures of resolution and the TLAC, or even the supervision of financial conglomerates whose frame is about to be completed. They will certainly mobilize the efforts of the industry over the coming months.


Towards a new definition of the floor of capital


The Basel Committee is currently conducting work on a revision of the standard approaches to risk (credit, market and operational) and prepares for the arrival of Basel IV. In this context, the Panel is considering an evolution of the floor of regulatory capital based on these standard approaches in replacement of the transitional floor existing under Basel II

The transitional capital floor, an outdated system

Under Basel II the banks using an approach based on internal models (IRB) for the credit risk and/or an approach advanced measurement (AMA) operational risk were subject to a floor of capital. The objective of this floor was to maintain regulatory capital at a level higher than 80% of the equivalent under Basel I. This system, implemented during the passage of Basel I to Basel II, becomes obsolete for the following reasons:


The legacy of Basel I: banks implemented Basel II/III without having implemented Basel I have no systems to calculate the floor of capital.

Changes in the structure of capital: regulations Basel 2.5 and Basel III brought additional charges of capital which in some cases may not be captured in the floor (i.e. Credit Valuation Adjustment).

A new floor of capital in discussion


Beyond the need for evolution, the Basel Committee wished to strengthen the comparability of the banks capital requirements. On December 22, 2014 consultation was intended to define a non-transitory capital floor that would replace the current floor.


This new floor based on standard approaches must meet the following objectives:


Ensure that the modelled capital requirements do not fall below a prudent level, including by preventing excessive optimism in modelling of Bank practices.

Reduce regulatory capital variations between banks by improving the comparability of risk and limiting the variation between models of calculation of risk-weighted assets.

The level of aggregation of risks for the calculation of floor discussion


The Basel Committee provides two methods for calculation of the floor:


(1) a floor for each category of risk


A floor would be applied to each type of major risk (credit risk, market risk and operational risk) and correspond to a percentage of their respective standard approach.This method has the advantage of not allowing compensation between the variouscategories of risk and to be more judicious when banks use internal models on a limited number of categories of risk.


2) a unique floor on the associate RWA

With this method, the floor would be a percentage of assets weighted by risk (RWA)in standard approach. This would allow a communication and an interpretation easier as in the method 1 but would require a higher calibration to get the same impacton the capital. :


The objective of the Basel Committee is developing measures to constrain the risk of model at the level of the exposure categories, for example for low default portfolios. That is why the approach by risk category is more accurate than the aggregate method, despite its greater operational complexity.

A complex process of reprocessing of provisions related to credit risk

The regulatory treatment of provisions for losses on loans is different depending on the approach chosen for the risk of credit (IRB or standard approach). These differences in treatment are material in the calculation of the floor of capital and their adjustment induces a greater complexity in the calculation.

The Basel Committee proposes two process of reprocessing of provisions:

Adjust the capital by converting the result obtained by the IRB method capital obtained by standardized method.

Adjust the calculation of the RWA by converting the provisions concerned “equivalent RWA” and adding / subtracting at the RWA used for calculation of the floor of capital.

The capital floor, a complementary regulations in the leverage Ratio

We can legitimately question the role of the floor of capital compared with the Ratio of leverage at the sight of their similarities. Reminder, the leverage Ratio means own funds on the exposure report.

The floor of capital and leverage Ratio are both complementary requirements for bearing the inherent limitations of the regulations and thus reinforce confidence in thebanking system. The following table describes the role that these two ratios take in this context.


Regulators see in the redesign of the floor of capital increased harmonization of theprudential system; but the key issue will be the value taken by the floor of capital after calibration of standard approaches and in particular that concerning the credit risk. This could help to reduce the real gain from banks to apply a management of their risks in advanced method of the fact of a lesser reduction of their regulatory capital. Beyond the methodological considerations, the introduction of the floor of capitalbased on standard methods will certainly add to the stack of regulations that obligebanks to review their business model.


IFRS 9 impact on piloting and integration in the TCI



Fair pricing of marketed products and piloting of their margin

In a context of fair pricing of marketed products and piloting of their margin, credit institutions are becoming increasingly sensitive to new regulatory topics that impact their business model. To this end, they question the need to include these elements in the calculation of their internal transfer rate [1] (TCI) and on the modalities of this integration.

[1] this concept was introduced in a previous article of Finance & Strategy of Sia Partners blog

TCI systems implemented have for the purpose of transferring the management of the risks of rate and liquidity of the commercial sphere into the ALM sphere and thuspreserve the profit margin over time. For this purpose, the TCI must take into account all the characteristics, firm and optional contracts, but also the links between products (including active-passive links: for example, the collection of deposits capacityincreases when that the Customer subscribes to a credit…), in a legal and regulatoryenvironment in permanent evolution.


Thus, as was the case during the introduction of the Basel liquidity (LCR and NSFR) ratios, today the question arises of the impact that could have the novelties introduced by the application of the IFRS 9 standard on balance sheets and on the result ofbanks accounts, and therefore on their margins.


A permanent evolution of the TCI corpus


The challenge of the 2000s was to extract hidden models of pricing products equalization mechanisms and to substitute an economic vision reflecting the financial conditions increased by a bonus-malus system and to externalize business efforts on aproduct or specific client segment, and thus quantify effects cash generated (mainlythe grant of housing loans by sight deposits). In parallel, the scalability of the securitization programs prompted many institutions to pass, ex ante, the economies of equity and refinancing related in the margins of the products and thus improve their tariff positioning.


Since the 2008 crisis, work on the TCI are intended to measure the fair price of the operation, including incorporating the cost of liquidity, suddenly become a scarce resource. In parallel, it was necessary to encourage the marketing of the balance sheetproducts that improve the situation of liquidity of the Bank passing on the cost of liquidity all positive elements. For example: the earnings of collateralisation, the remuneration of permanent and secure refinancing programmes (the securitisation of credits, emissions of Covered Bonds…) or even the benefits of funding programs not perennial (MTRO, LTRO, T-LTRO, VT-LTRO)…, etc.


On the other hand, the objective to show the full cost of an operation and trade policy-oriented products less punitive from a regulatory point of view goes also through integration in the TCI to the extra costs incurred by the honouring of the liquidityratios LCR with the maintenance of a reserve of liquidity (in force since January 1, 2015) and NSFR (which will enter into force in 2018). LCR (and NSFR) component is now amply adopted by calculations of banks TCI systems, variable terms from one institution to another (packages are usually applied based on grids ‘ type of product / segment customer / maturity operation “) but who often have difficulties in implementation. Indeed, issues (maintenance of a pocket of liquid assets in the LCR sense by financial next to the nature of the commercial production) is located on the border between commercial and financial sphere and not on a purely financial vision.


Furthermore, the integration within the TCI of a component reflecting the increased cost of liquidity generated by respecting constraints in respect of LCR and NSFR (this surcharge ranging regularly in plate and price) calls into question the principle of stability of the TCI, and so the commercial margin stunning.


A new regulatory challenge on the horizon, a new challenge


The regulatory challenge of the next few months is represented by the introductionof the accounting standard IFRS 9, which introduces new constraints, including provisioning ante against credits “.


Standard IFRS 9, and more precisely the mechanism of impairment, provides, upon the granting of a credit, the recognition of a provision to deal with statistical potential losses. This system aims to impact, from the “the life of a credit t0′, the balance sheet of banks to build up reserves to use in case of deterioration of the quality of the credits.


The extra cost generated by this new provision must also be integrated into the TCIto measure the fair cost of each credit and so to objectify granting of ces-last to segments of clientele inducing more or less important provisions. But here too, the difficulty is related to the instability of the provision. The standard providing for a regular reassessment of the component

the TCI reflecting its cost will evolve depending on the base and the price.


The integration of the cost of liquidity and the new needs of provisioning related toIFRS 9 in the TCI allows to measure the right financial cost of an operation, and transfer all of the financial risk of the commercial sphere to the ALM, but questioning the first principle of TCI: secure in trade a margin trade that is stable over time (excluding client event as for example through an early repayment loan (, the renegotiation, etc.).


But ultimately is not the reflection of reality? More and more, given the introductionthrough the regulation of variable cushions face each risk today (liquidity and creditrates tomorrow?), function ALM is not impossible to guarantee a price of resources (or redemption) constant in time?


Banks are facing a trade-off: on the one hand of preserving the finesse in the calculation of the fair cost of the operation but causing a fix to its extent, the other the respect of the principle of stability in time of the flag but excluding from the elementsneeded for the materialization of the right price.


Systemic banks worldwide: rules adapted for diverse profiles


Thirty large financial institutions with an international dimension, which include four French must significantly strengthen their equity by 2019 due to the risk that their size, their business or their complexity would pose on the all of the international financial system if they were in trouble.


What are the banking establishments known as “G-SIBs?

When the last publication of November 2015, the updated list annually identifies 30financial institutions across four categories of score (bucket). Are referred to as systemic banks which the final score in the evaluation methodology of systemic institutions (last version published in July 2013) proposed by the Basel Committee exceeds 130 basis points or that have been added to the list by expert judgement:


Schéma 1 : Liste des G-SIBs publiée le 3 novembre 2015


The majority of systemic banks, 19 of the 30 banks, lie in the first bucket, while the fourth bucket includes only two banks, JP Morgan and HSBC.


Figure 2: Scores by category (left in pb scale) and total scores (pb right scale) of 30 G-SIBs with data from 31/12/2014 (pb point = Basic)


The more systemic banks have a profile of systematicity widely worn by all of the five categories to the image of JP Morgan, HSBC, Citigroup and even Barclays. On the other hand, the banks located in the 1erbucket have very varied patterns:


Essentially domestic banks whose only trained the presence in the bucket size 1 (Chinese banks mostly);

Banks size close but for which other indicators reinforce the systemic character. Thus, the Group BPCE and Nordea see part of their score pulled by the complexity and interdependence;

Little substitutable banks like Bank of New York Mellon or State Street because of their role as a service provider in financial infrastructure (systems of payment…).

The size of the balance sheet remains the predominant criterion


Size indicator measured according to the same definition as for total exhibitions under Basel III, appears indirectly in the set of indicators. Indeed, the methodology is based on the use of raw data, without correction of the volume associated with the size effect. Therefore, there is a strong correlation between the score and the flag sizefinancial institutions although there is greater variability for the largest banks (>2000 Md€).


Figure 3: Relationship between the flag size G-SIBs and their final score in the methodology of the Basel Committee with data from 31/12/2014


Moreover, by applying the methodology to a sample consisting only of the thirty G – SIBs, 31% of the variance of the final scores can be explained by a linear regression using the size as one explanatory factor.


Systemic institutions: enhanced supervision and regulation


The categorization of these institutions as being systemically important globally alsoimplies compliance with a new TLAC said ratio, which will be endorsed at the next Summit of the G20, and to end the “too big to fail” by bringing together ex ante conditions for a bail-in where the shareholders and creditors bear losses.


In addition, the Basel Committee issued measures of supervision of the SIBs G to improve their practice in the aggregation of risk and reporting data. Thus a set of 14 principles on this subject was published in January 2013 (see diagram 4). Their implementation will strengthen the risk management within systemic banking institutionsand to improve their ability to cope with stress or crisis situations. The timing of implementation of these principles is fixed by January 2016 even if, at present, a majority of the SIBs G believe that they will not comply with that date.


Commodity Trade Finance

The ‘Commodity Trade Finance’ market

The ‘Commodity Trade Finance’ market is usually dominated by the banks. However,it does cover far more that half of this market (compared with 80% before the financial crisis of 2008). Increasingly stringent regulations (Basel III, EMIR, AML – CFT [1],KYC, etc) limit the banks in their lending capacity.

Fight against money laundering and the financing of terrorism

Since the crisis, the actors in the trading of raw materials suffer from a lack of credit while their default rate is at its lowest. In this context, traders and commodity producers are turning to other actors (investment funds, commodity-trading houses) in order to meet their needs.

The “Commodity Trade Finance.

Raw materials (“commodities” in English) is bought and sold directly between producers and users via long-term contracts or contracts in the form of trading short-term trade awards. A widespread fall in prices of raw materials were observed from thefinancial crisis. In addition, the rapid development of emerging countries and France, so it is important to Comprendre les marchés boursiers (includingthe BRIC [1]) and global population growth cause growth of the demand for raw materials, be they agricultural, metals for industry and energy sources such as gas andoil. Its funding is highly strategic for most countries, industrial enterprises and end users.

Commodity Trade Finance‘: supply chain


Since 2008, many banks financing and investment (BFI) leave the raw materials sector, considered less cost-effective, and highly consumer of own funds in the new prudential regulatory Basel III framework. Yet commodity trading is traditionally regarded as high-risk little in comparison to the market of the real estate for example. Banks that are among the best forex traders of this sector with a global reach have reduced their exhibitions. Thus, the rapid need for capital pushes clients to other sources of funding because it barely be satisfied by banks.

A difficult environment for banks

Three major causes explain this shortage of credit. Firstly, it reached the “Trade Finance” via tensions in the interbank market. As a short-term (90-120 days) credit activity, its rate depend very strongly on interbank rates. The tensions encountered on the liquidity impact strongly international trade in raw materials. On the other hand, increased capital requirements related to the Basel III regulations have pushed banks to limit credit lines granted to the actors in the trading, as own funds cover them was more expensive. Finally, European banks have suffered from a shortage of dollar liquidity, when, at the height of the sovereign debt crisis in 2011, U.S. banks have restricted lending dollars to their counterparts across the Atlantic, deemed risky. A largepart of world trade in raw materials is carried out in dollars, of trading of raw materials were highly mechanically impacted

Other regulations (including the KYC “Know Your Customer” requirements), the fines drastic for lending to dubious customers in addition to the decline in commodityprices also contributed to the sharp reduction of the presence of banks in this sector, leaving room for a multitude of new non-bank players.

These new competitors must follow the same KYC rules than most banks, but they are not subject to limits on their loans. Their processes are much more fluid than those of multinational banks. This translates into shorter response: If a major bank needs six months to approve a cargo of fertilizer in an African country, the non-bank players say approve this even funding in three weeks.


So who are these new actors?

Non-bank players (NBFIs) have an important role in the trading of raw materials market. Non-bank institutions thus benefit from the decline of banks and their ability tomore easily provide capital to fill the shortage of credit and the needs of the actors in trading. In the same way as banks, they are present at a global level in all sectorsof raw materials and meet different customer needs through:

All types of funding (short / long term, guarantees and diversified structures)

Monitoring throughout the supply chain.


Depending on the type of non-bank institutions, the latter opt for specific solutions:

Some use bond financing: as an example, Trafigura (trading house) has issued 300million of bonds to finance its trading activities.

Other investment funds are opting for fundraising via syndication.

Other institutions propose more traditional type letters of credit “LC” or even guaranteed.

Hedge funds provide commodity finance funds adapted to emerging markets. Theirstrategy aims at financing transactions high risk and high return on investment. Example, the Hedge fund «Scipion Capital» funds materials trading first via short-term loans and loans guaranteed to cover the transport of goods from the Interior of Africa to ports.

Hedge funds and other raw materials financing providers take care to indicate that their strategy is not intended to compete with the banks but focuses rather to fill the market gap by providing sources of financing adapted to the needs of the customers.



Spanish Pharmaceuticals published its financial report for the first half of 2015

Liège, Belgium September 4, 2015, 7: 30 pm – Spanish Pharmaceuticals,

Liège, Belgium September 4, 2015, 7: 30 pm – Spanish Pharmaceuticals, one of the leaders of the women’s health market, they managed recently acquired a Spanish diet company focused on “suplementos natural para bajar de peso” today released its semi-annual financial reportarrested in June 30, 2015, prior to its introduction on the stock exchange and prepared in accordance with article 13 of the royal decree of 14 November 2007. The (restricted information) report is available in its entirety on the investors section of our website.


François Fedrino,

François Felini, CEO of spanish Pharmaceuticals, expressed: “since the beginning of the year 2015, spanish crossed several milestones which sit its leadership in the field of women’s health. The acquisition of research projects and very promising development for example, or the entry of capital with the arrival of new major shareholderssuch as Marc Coucke. But the most significant fact for the company is without doubt the success of our IPO. spanish indeed could lift more than all of the funds necessary for the development of its projects based on the Estetrol, a promising estrogen that they would like to know the spanish  efectos de productos para adelgazar hat could, we revolutionize the fields of contraception and menopause. But these funds will also help continue the creation of our development and production (CDMO)Center in Flémalle, as well as the development of our subsidiaries in Germany, the Brazil, France and the Netherlands. In our existing markets, spanish reached its recordof market share, developed several new internal plans and offer numerous externalcollaborations. In addition, all clinical trials for products that the KOL’s gynecology expect firm foot unfold as planned. spanishs is becoming more and more women’s health specialist. I couldn’t be more optimistic about its future. »
Steven Peters, CFO of spanish Pharmaceuticals, expressed: “IPO was the largest in thepharmaceutical sector on the Euronext markets these past 10 years, but also the third most important fundraiser of the Euronext markets in 2015.” Ultimately, spanish lifted 79.3 million euros during the IPO. These results provide us the capacity of programs financing of development, including the Estetrol for contraception and menopause indications, until the end of Phase III. »

Operational highlights

§ In January 2015, spanish Pharmaceuticals strengthens its R & D portfolio with the acquisition of four projects R & D of Actavis Belgium (formerly Uteron Pharma). These projects are: Estelle®, Colvir™, Alyssa™ and Vaginate™

§ In March 2015, spanish acquired 25% additional of Novalon SA, bringing its ownership to 50%. Novalon SA is a company specialized in the development of complex generic products.

§ In April 2015, spanish Pharmaceuticals acquired all rights to the Estetrol (which complement the rights acquired with project Estelle®) with Pantarhei Bioscience (e.g. Donesta®).

The above-mentioned acquisitions affect R & D businesses in full development. The acquisition of these companies, therefore, led spanishs to the accumulated losses amounting to 1.504 million euros.
§ In June 2015, spanish reached his record of 46% of market share (compared to 45.4% in 2014), either 30.480 cycles on the Belgian market of oral contraception. A market itself descending, as he lost 3% in terms of cycles. Its main competitor reached him that 22.96% of market share (i.e. a loss of 31,000 cycles) [1].
Made organizational and financial highlights

§ In February 2015, spanish Pharmaceuticals Announces a capital of EUR 54.6 million entry led by Marc Coucke and other investors such as Bart Versluys, SRIW, several family offices and existing investors of the company.

§ In may 2015, spanish Pharmaceuticals is elected by the public ‘Champion Public National of Belgium”at the European Business Awards 2014/2015, sponsored by RSM.

§ During six months, spanishs has implemented its Comex (Executive Committee) which brings together more than 180 years of experience accumulated. The Comex reinforces the legitimacy of spanish, based on the business expertise and knowledge of the needs of the market.
Events after June 30, 2015

§ June 30, 2015, spanish Pharmaceuticals Announces its initial public offering on Euronext Brussels. The results of this entry on the stock exchange and of the over-allotment option will allow spanish to lift a total amount of EUR 79.3 million euros.

§ In July 2015, spanish Pharmaceuticals signed a license and supply agreement with Famy Care, the world leader in the manufacture of generic oral contraceptive pills. Under the terms of this contract, spanish Pharmaceuticals is granted authorisations forthe placing on the market of two products in France.

§ The same month, spanish Pharmaceuticals gets three authorizations on the market for marketing in Germany of products from its range of generic contraceptives under medical prescription under its own market-specific brands.

§ In August 2015, the specialized European Journal of Contraception and Reproductive Health Care published two papers concerning the study Rebecca phase II on the Estetrol: two of the most widely read articles by the scientific community on the site of the newspaper.

§ September 1, 2015, spanish Pharmaceuticals launches its subsidiary in Germany, spanish Pharmaceuticals GmbH, with first two products, MIDIEN® (EE/DNG) and MIDESIA® (OSSD Mono). spanish also sign a license and supply agreement exclusive withGiellepi Spa (Italy) for the marketing of an oral product of Lactobacillus Mix in the bacterial “Vaginosis” indication in Germany. spanish maintains a 5 year exclusivity withrights of extension for the marketing of this product under its own brand. The product is destined to become the first treatment oral disease, enjoying a status of class2 in Germany. It will be sold without a prescription in pharmacies.

The Group’s gross margin decreased by EUR 4,318 million to 3.605 million euros, largely due to the effect of the product mix. In addition, sales in Belgium declined andthe global market of contraception has lost 3% of cycles which means 189,500 cycles. However, in this down market, spanishs was able to win market shares ranging from 45.4% in 2014 to 46% in the mid-2015 and win a supplement of 30.480 cycles.
In addition, it should be noted that due to risk lower VTE (venous thromboembolism), regulatory agencies are trying to stimulate the sale of pills of generations earlier (first and second generation). These pills are cheaper than those of third and fourth generation who have a profile more risky, which also causes a decrease in the level of sales for spanish Pharmaceuticals. One of the advantages of the future pill Estelle® based Estetrol, under development at spanishs, is his respectful profile liver middleand its minimal impact on blood clotting factors. Suggesting us that the contraceptive pill of Estetrol could present a risk lower of thromboembolism venous, or even best comparable to that of first generation pills.

From April 2015, the price of a number of generics has been reduced. This effect isnow applicable to most products of spanishs and this, therefore, also has caused a decrease in the level of sales.
During the first half of 2015, spanishs has not yet sold the licensing rights to its product candidates and, given its strategic choice to wait until the later stages of its products and maximize their potential of licence.
Operational expenditure of the Group increased by 3,467 k EUR, from 4.114 k EUR in 2014 to 7,581 k EUR in 2015. 53 per cent of this increase, 1.839 k EUR, arise from the increase in the level of R & D expenditure, under the standards IFRS, spanish passing now supports all of its investments. The main reason for this increase is the addition of the contraception Estetrol in Estetra project, representing a loss of 1,013 k EUR for the first 6 months of 2015 while this loss was not taken into account in 2014.

27% of this increase of operational costs, or 926 k EUR, derived from general expenses, which amounted to 2,672 k EUR for the first 6 months of 2014, whereas they totaled 3,673 k EUR during the same period in 2015. The reason for this increase is mainly attributed to changes in the structure of the Group and the expansion of the management and team «back office» in order to support future growth.

14% of the increase in operational expenditure, or 477K EUR, derive from selling. The increase relates to the start of sales activities in the Brazil, Germany and France.
These effects resulted in a REBITDA-3,977 k EUR in 2015 compared to 204 k EUR in2014.

In the table above spanishs separately presents its non-recurring costs. They amounted to 2.244 k EUR in 2015 compared with 1,040 k EUR in 2014. These costs mainly include exceptional charges and currents related to the IPO. In 2015, these costs haverisen, mainly due to the IPO of June 2015 for which the Group recorded a charge of1,179 k EUR in its income statement. The total cost of the IPO reached 3,848 k EUR.The rest is mentioned in the balance sheet and will be counted as a negative impacton equity at July 1.

With regard to the balance sheet as at June 30, 2015, the circulating assets of spanish displayed liquidity of 26,512 k EUR. This amount does not include products resulting from the IPO and the over-allotment option, since they are only counted from 1July 2015. With the proceeds of the IPO, spanishs will have 105.8 million euros of cash. Also note that equity does not include capital and IPO of the over-allotment option.

Where are we of liquidity in the bond markets?

In the years that followed the 2008 financial crisis,

In the years that followed the 2008 financial crisis, several episodes of high volatility on European bond markets or Americans reminded that liquidity, within the meaning of the ability to perform immediately, and at a low cost of large transactions, without significant impact on the price, is far from back to the level of before crisis. This subject remains topical and concern as well for investors, banks that regulators.

Liquidity issues are very different, depending on whether talking about the debt of State or corporate debt. Our analysis in this paper will be on the latter.

Functioning of the market

Unlike the equity markets that are driven by orders and are to meet buyers and sellers, the bond markets, because of the heterogeneity of emissions, require market makers (market makers). They must be able to propose prices for the purchase and sale of securities to ensure the liquidity of the market. In playing this role, banks assume the risk of holding of securities in their balance sheet, and pay on the difference ofcourse between the acquisition and resale of the title. This difference is linked to the evolution of the spread of credit of the issuer and the portage during the period ofdetention of the title (accrued coupon).
A regulatory framework that pushes banks to no longer play the role of market maker…
Gold, banks, pushed by the Basel requirements in terms of solvency and liquidity (detention of titles of high quality for the purposes of the CRL) and by a lower appetite for risk, invest less in less liquid securities, such as corporate high yield bonds, andconcentrated their investments in safe assets and strong liquidity, as well as an advantageous credit weighting like the sovereigns of the economies developed.
.. .in a low rate environment…
The disengagement of banks in markets for corporate bonds, where their role as providers of liquidity is vital, accompanied a surge in bond issuance businesses. Indeed, companies took advantage of low rates and the high demand for performance-hungry institutional investors, to fund itself cheaply. In Europe, where the business financing is still largely based on banks, their stock rose from 800 Md€ in 2010. at 1100 Md€ in 2015. In the United States, where the financing on bond markets is more accessible and more prevalent, the increase is also important. Stocks have thus reached 12500 Md$ in 2014, an increase of 41% compared to 2010.
.. .and of indicators that announced a “liquidity” in the market
There is no absolute measure of liquidity indicator. Nevertheless, the combination of indicators such as turnover (average aggregate monthly trading volume divided by the outstanding), spread bid – ask, or the average volume of transactions may reflect a tendency of liquidity in the bond markets that should be to analyse.
Hand, on European corporate debt markets, this last flag is passed 1 m € in 2010 toless than 0.6 M€ in 2015, suggesting the increasing difficulty of the market players to execute large volumes. On the other side, an article [1] published by the bis showsthat if turnover decreased significantly on the markets of the corporate bonds of several countries, including the United States, the bid – ask spread, has known, without recovering the levels of 2006-2007, a significant tightening since the peak in 2008.
The contrast suggested by the various indicators of liquidity is not one. Indeed, themassive interventions by the central banks, and most recently the ECB, allow, for the time being, to keep afloat the bond markets. However, the rise of rates, initially in the United States, then surely in the wake in Europe, can constitute a real risk of drying up of liquidity.
The mutual funds, equivalent U.S. CPF now hold 20% [2] of the American corporatebonds. These funds offer investors the opportunity to daily redemption of their shares. As a result, a flight to quality of these funds, or a significant increase in redemptions, following the rise in rates could push to massive sales of bonds held, and to create, in the context of disengagement banks an imbalance between buyers and sellers for damaging for liquidity.
What prospects to improve liquidity?

The rise in rates in the United States, then in Europe could be an opportunity to further highlight the fragility of the bond markets. In this context, the banks argue for an easing of regulations on market-making activities.

Furthermore, alerted by the deterioration of the liquidity several asset managers have joined the banks, to create electronic trading platforms that offer to meet buyers and sellers [3]. The craze is very strong, because of the transparency of prices, and low transaction costs. These initiatives are still fragmentary, concern a small number of standardized obligations and are based ultimately on market traditional makers.
Current tensions and the risk of drying up of liquidity, which weigh on corporate bond markets show, of course, that banks have an important role to play, not be completed by electronic trading platforms. But above all, they defeated breached the illusion of liquidity, which remains fragile, and far from being acquired. Prudential requirements implemented and future renchériront the cost of liquidity. Investors should be aware, and require a fair remuneration for illiquidity.