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RESEARCH REVEALS THAT WIDE ADOPTION OF LEGAL ENTITY IDENTIFIERS COULD SAVE BANKS AN ESTIMATED U.S.$2-4 BILLION PER ANNUM IN CLIENT ONBOARDING EFFICIENCIES

Report from McKinsey and GLEIF identifies opportunity for banks to reduce costs and improve profitability while enhancing customer experience and mitigating compliance and credit risk.   

 

Research conducted by McKinsey on behalf of the Global Legal Entity Identifier Foundation (GLEIF) has concluded that wider use of Legal Entity Identifiers (LEIs) across the global banking sector could save the industry U.S.$2-4 billion annually in client onboarding costs alone. With estimated total industry spend on client onboarding equal to U.S.$40 billion per year, productivity improvements gained through LEI usage could generate cross-sector cost reductions of between 5-10 percent annually.

 

LEIs are already used in capital markets globally, where regulators have mandated their use for reporting over-the-counter derivatives transactions. The research, however, makes it clear that the ability of LEIs to simplify entity identification in the digital age has the potential to unlock substantially more quantifiable value for banks in the near to mid-term. To realize this value, the report recommends that banks use LEIs to support all stages of the customer management lifecycle, not just in capital markets but across all banking business lines, such as trade financing, corporate banking and payments.

 

The study also found that:

  • In addition to delivering improved efficiencies and lower costs, widespread LEI usage can generate topline benefits for banks, such as between three to seven fewer days to revenue, improved client retention and a better customer experience, thanks to streamlined processes.
  • Wider use of LEIs could address common ‘pain points’ in counterparty identification during client lifecycle management, such as the manual linkage of disparate data and the difficulty in accessing entity legal ownership structure.
  • The LEI could help mitigate compliance and credit risk, as it gives banks more holistic views of clients across internal and external data sources.

 

Stephan Wolf, GLEIF CEO, comments: “The significant potential savings for the banking industry, which are outlined in this study, should compel the sector to sit up and take notice of the near-term value that can be derived from adopting LEIs more widely. With so much to gain, there really is no excuse for banks to delay making LEIs foundational to customer lifecycle management processes across all areas of business. Compliance driven adoption in capital markets means that banks are already familiar with the LEI. Voluntary expansion of LEI usage into other business banking lines is the new frontier in progressive thinking, and can only lead to a win-win situation for both banks and their clients.”

 

Gabriela Skouloudi, partner and co-head of Corporate and Investment Banking in the Americas, McKinsey, comments: “The interviews surfaced four key pain points that banks experience in relation to client identification and verification: manual linking of entity data from disparate internal and external sources; difficulties in assessing entities’ legal ownership structure; limited transparency into entities’ key officers, such as authorized signatories; and poor customer experience due to multiple round trips to gather client data and documents. If an LEI was obtained at the start of onboarding, many of these challenges could be resolved, with the net effect being expedited counterparty identification and verification processes. Know-Your-Customer compliance may also be expedited.”

 

The research report follows other recent calls for wider LEI usage by banks, by influential industry stakeholders including the Financial Stability Board (FSB) in its recently published peer review, Thematic Review on Implementation of the Legal Entity Identifier (LEI), as well as the Payments Market Practice Group, in its Adoption of LEI in Payment Messages report.

 

As a next step, GLEIF is evaluating the feasibility of changes proposed by the report, including an evolution of the Global Legal Entity Identifier System (GLEIS). GLEIF will also assess actions it can take to encourage banks to voluntarily adopt LEIs more broadly, such as enhancing the value proposition of the LEI by making it a data connector which links to the most commonly used data sources.

 

To ensure that the future evolution of the Global Legal Entity Identifier System is fully informed by, and in line with, the banking sector’s requirements, GLEIF aims to conduct its assessment on the report’s proposals with maximum engagement from the global banking community. To support that objective, financial institutions are strongly encouraged to join the GLEIF Globally Important Financial Institutions (GIFI) Relationship Group to participate in the ensuing discussion on the support needed for banks to integrate the LEI into client management processes.

 

The GLEIF GIFI Relationship Group facilitates communication between GLEIF, banks, financial institutions and other key LEI stakeholders, making it possible for members to express their views on LEI services and for GLEIF to understand the requirements of LEI data users.

 

Stephan Wolf concludes: “As GLEIF assesses the feasibility of proposals made in the report, direct interaction with banks is essential if we are to fully understand the needs of the sector and how GLEIF services and the Global Legal Entity Identifier System can best support it. We warmly welcome all interaction with banks and other financial institutions on this topic and would urge those interested in learning more to join the GLEIF GIFI Relationship Group for deeper insight and to ensure their voice is heard as we shape the future of the GLEIS together. We are excited that wider use of the LEI brings such significant potential benefits to the banking sector and our priority at this stage is to support voluntary adoption of the LEI in banking use cases beyond regulatory reporting so that these benefits can be fully realized.”

 

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INTERNATIONAL BANKING NETWORK EXPANDS AS IT WELCOMES STANDARD CHARTERED BANK

IBOS Association (IBOS), an international banking network, is delighted to announce its newest member to the group, Standard Chartered Bank.

A unique international alliance of some of the largest banks in the world, IBOS members collaborate to serve each other’s’ international clients in markets where they themselves do not operate. Standard Chartered’s rich history and extensive network across Asia, Africa and the Middle East will complement IBOS’s strong geographic coverage in Europe and the Americas, thereby creating compelling global opportunities for clients of all member banks.

IBOS Managing Director, Manoj Mistry, commented: “I am delighted that Standard Chartered is joining IBOS, further strengthening our network across this key region and opening more doors in Asia for our clients. We are relishing this next chapter and we are thrilled to be working with Standard Chartered.”

Standard Chartered will initially add Hong Kong, Singapore, India, China, Taiwan and Malaysia to the IBOS network. In time, both parties will explore expanding the relationship to additional markets where Standard Chartered operates.

Speaking on behalf of Standard Chartered, Jiten Arora, Global Head, Commercial Banking, commented “Helping businesses to connect and grow internationally is central to our brand promise. We are pleased to be a part of IBOS, which will further strengthen our role as a strategic partner in our clients’ growth journeys. We also look forward to supporting internationalising mid-corporate clients of member banks, who are keen to venture into the markets across our footprint and using our deep local knowledge to help them enter, navigate and prosper by accessing some of the most vibrant economies, trade corridors and supply chain ecosystems globally.”

Despite the current pandemic, IBOS remains open for business and the network is utilising technology to succeed at achieving its goals and ensuring clients continue to have access to services as normal. IBOS also has its sights set on growth into the markets that the ever changing economic and geographical developments demand, as it continues to develop its expansion into Australasia.

Moreover, Manoj notes that: “Additional markets across CEE are also being contemplated to serve the network as other banking association groups are starting to wind down.”

Matt Tuck, Head of Commercial Product, Service & Operations at NatWest Group, said “As a long-standing member of IBOS since its inception in 1994, NatWest Group is delighted that with Standard Chartered’s membership IBOS is extending its reach into Asia for the first time. As a market leading UK Commercial Bank, NatWest Group is looking forward to working even more closely with IBOS to support our clients’ international banking needs across this region.”

“The addition of Standard Chartered presents an incredible growth opportunity for the IBOS network and for its members,” said Chris Ward, executive vice president and head of product management & operations, PNC Treasury Management and IBOS chair and board of directors’ member. “The continued global expansion of the network will help to provide our members’ customers with the service and resources they need to be successful.”

 

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ARE MIDDLE EAST ENTERPRISES PREPARED FOR THE FUTURE?

Deloitte releases 2020 tech trends report

 

Deloitte’s 11th annual report on technology trends captures the intersection of digital technologies, human experiences, and increasingly sophisticated analytics and artificial intelligence technologies in the modern enterprise. The report explores digital twins, the new role technology architects play in business outcomes, and affective computing-driven “human experience platforms” that are redefining the way humans and machines interact.

During the current COVID-19 crisis, organizations have been turning more and more to technology to enhance business resilience and continue to operate. As organizations are forced to utilize remote working where possible or take pause, many are also realizing the benefits of this way of working as an option post COVID-19, to improve efficiencies and become more agile.  While currently dominated by communication technologies, building resilience will also require us to closely examine, and build on, trends such as ethical technology and trust, human experience platforms and architecture, and the macro forces of digital experience, cloud and risk.

“The most successful businesses today are combining cutting-edge technologies like machine learning and IoT with disruptive IT architecture and supercharged talent to create entirely new ways of working – and they already see the benefits,” said Bhavesh Morar, Lead Partner for Enterprise Technology and Performance, Deloitte Middle East. “And with enterprises needing to adapt and respond quickly to ongoing technology disruption, Deloitte expects to see more IT and finance leaders working together to develop new flexible approaches for funding innovation.”

 

The Deloitte report’s five trends of focus for 2020 include:

  • Digital Twins – Bridging the physical and digital:Digital twin technology allows businesses to create increasingly sophisticated virtual models to optimize processes, products, and services, enterprises will integrate IoT, machine learning, advanced computing infrastructure, and more to unlock entirely new business models.
  • Architecture Awakens:Systems architecture will become a strategic priority as enterprises redefine the architect role to be more nimble, responsive, and collaborative. Architects will work across the business and work creatively with non-technical project teams – forming a competitive differentiator in the digital economy.
  • Ethical Technology and Trust:Enterprises in every geography are realizing that their embrace of technology is an opportunity to gain – or lose – trust, and with it, customers’ business and brand loyalty. CIOs will emphasize ethical tech in the coming years – and create processes to help solve ethical dilemmas related to disruptive technologies.
  • Human Experience Platforms:To address the lack of connection humans often experience with daily digital interactions, a growing number of enterprises are injecting emotional intelligence into their systems. These include AI capabilities such as machine learning and voice and facial recognition, which can better detect and appropriately respond to human emotions. The net result is emotionally intelligent human experiences that leverage connections between people, systems, data, and products.
  • Finance and the Future of IT: As enterprises become more agile, financial operations will need to support new modes of working. That means CIOs and CFOs will need to explore how a new, flexible approach to enterprise finance¾across budgeting, contracting, capital planning, and more¾can redefine the future of tech innovation.

“Enterprises in the Middle East are no longer satisfied with being regional leaders – now the ambition is to go global and lead globally. There is a growing interest in looking beyond what’s new to what’s next. At present, many enterprises are looking to strengthen their structures, capabilities, and processes required to harness technology macro forces and innovate effectively in the face of exponential change,” concluded Morar.

 

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