The travels of a t-shirt in the global economy par Pietra Rivoli


What, specifically, is globalisation?


What, specifically, is globalisation? To understand it, Pietra Rivoli, at Georgetown University in the United States, followed all steps in the life of his T-shirt “made in China”. And discovered that international trade has less to do with neo-liberal competition history, politics and all possible maneuvers to avoid the law of the market!


Done two hundred years that the Texans dominated world production of cotton. Supremacy due to a rapid mechanization and the use of fertilizers (making it a very polluting industry), well organized marketing, in a virtuous circle linking public expenditure on research, firms and universities. And for billions of subsidies: big texan cotton producer is generally not too many worries, receiving public money to protect it from fluctuations in the world price of climatic hazards, and to help to repay its loans.Before being very mechanized, its production was slaves, then permission to use Mexican seasonal. A model that is now more the family pension than the innovative entrepreneur…

The transformation of the cotton T-shirt is far away

The transformation of the cotton T-shirt is far away, to be mechanized: half of the added value produced is still by labour. Cotton hand so where there’s arms, as in China. Young girls sort, cut, and sew in a work taylorized excessive, poorly paid and supervised by government rules that allow, as nicely said Pietra Rivoli, “an unlimited supply of submissiveness”. However, she wondered, can we refuse the Chinese to followthe same path as we? American and European 19th-century capitalism was also terrible, but workers have fought and obtained the rights. It will be the same in China. Meanwhile, by a trick of history, young women interviewed, even exploited, say that this work has pulled up to the family rural right-of-way and they earn money which they do what they want. Rivoli thus advises the otherglobalists don’t condemn this system, but to fight for change towards a recognition of human rights and labour.


Once the ready T-shirt, back to the United States. There again, it is far from free andundistorted competition! The remade author history of textile U.S. protectionism, ofrestrictions on exports “voluntary” requested the Japanese at the end of World WarII, to the multi-fibre agreement ended in January 2005… and that Europe and the United States are trying to control the effects the establishment of quotas for imports.


Once bought, worn, worn, the T-shirt has not yet finished his life. Given to the Salvation Army or to any other charity, he was ransomed by thousands of small and medium-sized enterprises (SMEs). Which will sort. The more worn, approximately 30%, end up in rags in plants (especially the all-white, more efficient). The one with the Rolling Stones may be sold to a shop for fans. Anyone who wears a Mickey and other hallmarks of American culture will leave among Japanese who are crazy.


But the real business is to transfer them vintage… markets in Africa. Worn clothing are an important part of U.S. exports in Tanzania, Benin, Togo… Male clothes are themost popular because more rare: 90% of what throw women is still relatively goodquality while the men who buy less clothing and wear them longer, only half is resalable. History, society, political, here are the main determinants of global trade, concludes Pietra Rivoli, in surprised that the debate has been cornered by economists!


BCBS 239 – for a better quality of regulatory reporting data


In a regulatory context becoming more demanding…

Following the recent financial crises many regulatory developments have been implemented accompanied by increased requirements in terms of reporting, but also quality of the information presented. In this context, the Basel Committee issued on January 9, 2013, a set of principles under the BCBS 239 name whose objective is to allow banks to improve their production capacity and reliability of the regulatory reporting.


… new recommendations say «BCBS 239»


These recommendations are based on 14 principles including 11 destined for banking institutions and 3 destined for supervisory authorities. These 11 principles are divided into three streams: i / global governance and infrastructure, ii / capacity of aggregations of data and iii / reporting capabilities (see Figure 1).



Establishments known as “G-SIBs [1]” have until 1 January 2016 to comply, and thebanks ‘ D-SIBs [2] “within three years once designated by national regulators.



Significant impacts at the level of the banks to comply…

The results of self-evaluations of G – BB in 2013 and 2014 (cf.), sent to the controllerand associated studies have identified the weaknesses most significant around the perimeter of the G-SIBs:

Stream 1: global governance and IT Infrastructure

Setting up a real governance of the quality of data involving all levels of institutionsto improve the financial communications (regulatory reporting accurate and relevant, more reliable decision-making processes);

Improvement of the IT infrastructure for the automation and the reliability of the aggregation and reporting key chain;

Stream 2: capacity of aggregations of data on risk

Improving the quality (accuracy, completeness) and the availability of the necessarydata for the reporting must be refreshed timely especially in times of stress.

Notifications of risk practices have fewer impacts, although some work rationalization must be conducted.

Then, it should be noted that BCBS 239 primarily the quality of the data necessary for the risk reporting and related global governance.

.. .necessitant the establishment of a large-scale project

Identified developments involve:

Reliable priority data

Special attention must be given to the identification, control and management of the data from which are analysed the risks to which institutions are exposed.

So the dedicated reporting teams must agree on the choice of the sources from which the priority data will be extracted and to ensure the mastery of this information from their origination to reporting. Indeed to favour the use of a single source (DirectSourcing) for a given extraction and controlled throughout the chain of reporting toavoid its alteration by virtue of intermediate handling.

In addition, there is also that, for the same concept, different levels of an institutioncan use different granularity or BOM data. That is why work of convergence of repositories and the definitions of data priority, specific to the different lines of businessto local subsidiaries if necessary, are needed. However this process of harmonisation of data between different systems of the Bank must be able to rely on strong governance.


Transverse and enhanced governance

While governance concerning the quality of the data may be, it must be improved by implementation of a transverse governance, particularly as regards coordination inthe definition and use of reference data. On the other hand, it is also justified because of overlapping responsibilities and important interdependencies in the case of certain lines of business (risk/Finance).

In addition, governance must extend from the local level up to the consolidated level, including the designation of officials in charge of the coordination of the actionsof control, corrections and validation of the data transmitted.

A more flexible infrastructure

The definition of a new it infrastructure involves significant changes in the SI. They are aimed at the reliability of information (completeness, fidelity), from its extraction to its distribution, around one or more repository (common (s) and respond rapidly to requests for planning (scalability) reports not only in normal conditions, but also in times of stress?

To do this, the distribution of repositories should be optimized and automated reporting channels in order to minimize the manual actions and make the system more flexible.


Limitations in the ability of compliance within the required time limits…

However this type of project is of such magnitude that it does not take place without difficulty for banks, especially to meet regulatory deadlines. This issue is linked tomany work and complexity (convergence of repositories, implementation of data quality, governance at local level at the group level,…). According to a recent study, almost 80% considered sample [3] banks believe that they will not comply with 1 January 2016. On the other hand, another study conducted by Moody’s [4] showed thatmore than one third (38%) considered sample banks believe may not be compliant within the next three years. All of these involve the subdivision of such a project with a prioritization of sites to deploy for January 1, 2016, and a communication with the European regulator.

.. .but at end of the advantages in the management of risk data…

To conclude, the BCBS 239 recommendations require a significant investment by banks, involving significantly a redesign of processes and the Organization as to the quality of the data. In return, these developments will enable a quicker implementation of future reforms on reporting, better steering of the activity and cost savings in terms of production by automating many tasks now performed manually.


Are the Fintechs and the GAFA, an opportunity or a threat for the BFI and commercial banks?


Google founded in 1998

Google founded in 1998 and first world market capitalization, über created in 2009 and valued at more than $ 50 billion, Airbnb founded in 2008 and valued at 25 billion dollars… The list of new players taking advantage of the digital wave and the changing expectations of consumers wishing to more mobility, services online and a removal of intermediaries is long. Face this new competition, traditional businesses fearto be “uberisees” because these new players upset their business models and jeopardize their positions.


Of many Fintechs [1] and [2] have launched recently the GAFA Bank offers (means ofpayment, crowdfunding and aggregation of accounts…) destination of individuals orSMEs. These newcomers represent a competition which offers many innovations in areas that were previously reserved for banking groups, especially in their retail banking activities. Because of the high barriers to entry inherent in their activities (expertise, binding legislation, important capital needed…), the BFI [3] and commercial banks would be preserved? The Fintechs and the GAFA, represent an opportunity or a threat for these actors?


Panorama of the Fintechs/GAFA which are involved in the sector of the BFI


Far from being a simple opposition, financial start-ups and the giants of the web may be involved as:


suppliers of digital services to facilitate the activities of the BFI or compete with theirhistoric suppliers such as Bloomberg (table 1)

partners completing the traditional offer of the BFI (ex: management of collateral) by optimizing the quality of service (ex: dematerialization and process automation) toensure productivity gains (table 2)

competitors introducing market breakdown products and/or existing services innovations, making obsolete some trades or by removing certain intermediaries (table 3)



Comparison between the actors

The digital development decreased significantly the barriers to entry by making more directly accessible final customer for these new entrants. The Fintechs and the web Giants looking to position themselves in the market with assets that differentiate them from the BFI:

A young and dynamic image

A strong capacity for innovation combined with greater agility and flexibility in the Organization and operating modes that allow them to more quickly remove new concepts on the market

Less pressure from regulators at present

The BFI and the commercial banks shall nevertheless retain the following advantages:

A strong expertise in their historic trades and the possibility of cross-selling

A customer confidence in the confidentiality of their banking data

An ability to convince regulators through the capitalization of the transformation and regulatory compliance projects these past 5 years

Significant capital available for investment and infrastructure already existing keys(which may hinder the adoption of innovations)

Prospects for the future

In the current state, it is still difficult to identify the impacts that could have these new entrants on financing activities, investment, capital markets and cash management. The BFI may be deeply impacted in terms of offer (arrival of complementary products/services or competitors), (need to reallocate resources), organizational process (search for more flexibility and innovation) in order to adapt to the new situation.

In addition some technologies are still under development. For example, many projects in financial services in the form of consortia of banks (such as R3, a FinTech, in which thirty BFI have invested), bilateral collaborations BFI/FinTechs (for example between Digital Asset Holding and JPMorganChase) or R & D internal (Citi with its Innovation Labs Citi), are currently seeking to apply the originally used blockchains for virtual currency bitcoin. This technology, which allows to carry out transactions without central organ in registering and checking transactions anonymized by block on anetwork of computers and making them public, has the following advantages:

Speed of transactions (absence of intermediaries)

No administrative fees or infrastructure

Better security

Better resilience of the system (historical recorded on computers on the network)

The blockchains technology could potentially change in the middle of the BFI in thecoming years by being a chance (drastic reduction in their costs of structure or facilitation of compliance actions) but also posing a threat (revolution in Exchange for securities, international payments and post trade activities).

Thus, exchanges, partnerships, cross investments and redemptions are increasing. This emulation could force the BFI to reinvent their business model to adapt to the new situation and not get left behind. Goldman Sachs announced: “We are a Tech Company” and not only a financial undertaking, i.e. a platform on which the Fintech can join.


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.


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.


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.