A couple of days ago, the Consumer Union asked for clarification of the situation regarding ABN AMRO. Yesterday, the central bank provided a formal answer by means of an official letter of its president, Mr Wellink, to the director of the Consumer Union.
Essentially the answer is a reassurance that ABN AMRO is a very solid bank and that customers/consumers needn't be afraid that their funds will suddenly vanish. The central bank will carefully monitor the developments as a part of its supervision role and its role to advice the Ministry of Finance on the takeover.
Well, of course there is no real reason to worry. But the suggestion of Mr Wellink that customers can sleep quietly given that DNB watches over them is not one that is comforting. Last year, the central bank effectively failed to properly manage/supervise a smaller bank (van der Hoop), which lead to its downfall. And as of last week, some remaining creditors are now lining up to sue the central bank for neglect and not fullfilling its supervisory role properly.
Saturday, May 12, 2007
SIA-SSB merger completed
Finextra reports that SIA-SSB has merger is now completed. This constitutes a merger between Società Interbancaria per l’Automazione and Cedborsa and Società per iServizi Bancari and it may become one of Europe’s technology main players in the card processing, payments system and capital markets space. The firm expects to manage 7.3 billion transactions with debit and credit cards and payment and collection operations, 8 thousand billion bytes carried on the network and 73 million trading transactions on financial markets this year.
The new group is composed of the parent company and the subsidiaries Kedrios, Perago, RA Computer, SiNSYS and TSP, which will maintain autonomous corporate structures. Hungarian firm GBC will be added to the group pending authorisation by the local market antitrust authorities.
The new group is composed of the parent company and the subsidiaries Kedrios, Perago, RA Computer, SiNSYS and TSP, which will maintain autonomous corporate structures. Hungarian firm GBC will be added to the group pending authorisation by the local market antitrust authorities.
EU banks in secret debit card talks..... but why would that make sense
A Reuters message outlines that EU banks supposedly are in secret debit card talks. Meaning that a third scheme would be born for EU-use in particular. The source is a document from Laffety Group which states that the banks are "believed to be unhappy with the possible emergence of MasterCard's Maestro as the dominant provider of debit card network services in Europe. The banks involved include Societe Generale, Deutsche Bank, Dresdner Bank, Commerzbank, Unicredito, ABN AMRO, ING, and Rabobank.
The main concern is that having two schemes is around would be insufficient for competition.... but why and how a third scheme would solve this is not clear. If we look at for example the situation in Australia. There used to be a bank credit-card scheme. But with international schemes coming in (also offered by those banks to allow their customers usage abroad and such) the bank card was in less demand than the international card schemes. Which is what will happen in Europe with this supposedly new scheme as well of course.
Imagine that a number of banks set up a EU-brand.. how are they gonna get that brand to work in the rest of the world? It is hard to figure out why this EU-brand would be preferred in Europes countries. Customers are increasingly travelling and mobile all over the world, so what would be the use of trying to build this third EU brand for EU-use. This would only work if the ambition and investment would go so far to completely replace one of the two brands internationally...
Which would be a silly ambition because in that case, this third EU-bred brand is a triplication of previous scheme efforts. So all in all, this doesn't make a lot of sense, other than that it might help a bit in the negotiations of EU-banks with Visa and Mastercard.
The main concern is that having two schemes is around would be insufficient for competition.... but why and how a third scheme would solve this is not clear. If we look at for example the situation in Australia. There used to be a bank credit-card scheme. But with international schemes coming in (also offered by those banks to allow their customers usage abroad and such) the bank card was in less demand than the international card schemes. Which is what will happen in Europe with this supposedly new scheme as well of course.
Imagine that a number of banks set up a EU-brand.. how are they gonna get that brand to work in the rest of the world? It is hard to figure out why this EU-brand would be preferred in Europes countries. Customers are increasingly travelling and mobile all over the world, so what would be the use of trying to build this third EU brand for EU-use. This would only work if the ambition and investment would go so far to completely replace one of the two brands internationally...
Which would be a silly ambition because in that case, this third EU-bred brand is a triplication of previous scheme efforts. So all in all, this doesn't make a lot of sense, other than that it might help a bit in the negotiations of EU-banks with Visa and Mastercard.
Friday, May 11, 2007
Groeninks appointment as a Shell-Commissioner under threat of institution investors
Dutch Volkskrant informs its readers that the huge ABP pension funds has prepared a policy note for other pension funds in which it discusses whether or not to agree with a proposal to appoint Groenink of ABN AMRO as a Commissioner for Shell next Tuseday. This is to be understood as a highly unusal event.
Apparantly the discussion between these institutional investors is a clear no against the appointment, with the discussion between these investors now mainly focused on the argument for the no-vote: a pragmatic reasons that Mr Groenink cannot be assumed to have sufficient time or a more specific statement about his lack of demonstrated managerial skills.
I think they'll go for the pragmatic approach in order not to be caught in a web of litigation (which might arise if they would choose for voicing their real opinion). Or.. what would be wisest.... Mr Groenink himself could choose this weekend to withdraw his candidacy for the post.
Apparantly the discussion between these institutional investors is a clear no against the appointment, with the discussion between these investors now mainly focused on the argument for the no-vote: a pragmatic reasons that Mr Groenink cannot be assumed to have sufficient time or a more specific statement about his lack of demonstrated managerial skills.
I think they'll go for the pragmatic approach in order not to be caught in a web of litigation (which might arise if they would choose for voicing their real opinion). Or.. what would be wisest.... Mr Groenink himself could choose this weekend to withdraw his candidacy for the post.
LANZen blog sheds light on possible weak BoA legal position
Just stumbled over this LANZen technology and strategy blog which contains an interesting analysis and would really mean that the LaSalle trick could backfire on ABN AMRO:
Here’s another interesting situation. In terms of US corporate law, Bank of America’s case looks strong and the ABN board could lose heavily if BofA’s case succeeds.
However, US corporate law lends precedence to the rights of the shareholders. As the ABN decision to sell LaSalle was taken without any consultation with the ABN shareholders, then a breach of “fiduciary duty” would have occurred, which could simply render the entire deal null and void.
On the basis of that, it looks very unlikely that BofA could force ABN to sell them LaSalle, their only remedy would be to claim damages from the ABN board.
The situation could change overnight if an auction for LaSalle starts with more US banks interested. BofA would have to bid or risk losing LaSalle by taking their eye off the ball. US Lawyers. You’ve got to love them, haven’t you?
Only last Friday, BofA’s chief investment officer, Ian G. Banwell suddenly resigned to launch an alternative investments company, Round Table Investment Management. His resignation was effective immediately.
Mr Banwell’s position has been taken by insider Walter J. Muller, who was the Bank’s Quantitative Finance Executive, a post he’d held since 1999. Make of that what you will…
So with LaSalle and ABN AMRO's CFO stepping down, the only one still in charge is Barclays CFO....
Here’s another interesting situation. In terms of US corporate law, Bank of America’s case looks strong and the ABN board could lose heavily if BofA’s case succeeds.
However, US corporate law lends precedence to the rights of the shareholders. As the ABN decision to sell LaSalle was taken without any consultation with the ABN shareholders, then a breach of “fiduciary duty” would have occurred, which could simply render the entire deal null and void.
On the basis of that, it looks very unlikely that BofA could force ABN to sell them LaSalle, their only remedy would be to claim damages from the ABN board.
The situation could change overnight if an auction for LaSalle starts with more US banks interested. BofA would have to bid or risk losing LaSalle by taking their eye off the ball. US Lawyers. You’ve got to love them, haven’t you?
Only last Friday, BofA’s chief investment officer, Ian G. Banwell suddenly resigned to launch an alternative investments company, Round Table Investment Management. His resignation was effective immediately.
Mr Banwell’s position has been taken by insider Walter J. Muller, who was the Bank’s Quantitative Finance Executive, a post he’d held since 1999. Make of that what you will…
So with LaSalle and ABN AMRO's CFO stepping down, the only one still in charge is Barclays CFO....
CFO ABN Amro leaves - RBS consortium will outline its bid end of May
Latest news on ABN AMRO is that its CFO, Hugh Barett-Scott, is leaving. ABN AMRO website states that he will step down per 1 August 2007 and will be succeeded as CFO by Huibert Boumeester, Member of the Managing Board. Officially the reason is that he is not satisfied with the place reserved for him in the Barclays merger.
This is an interesting motivation as it assumes that that deal with Barclays will go through. So we see ABN AMRO framing the world's mind as to continuation of the merger. But despite the steadily declining shares (a logical market reaction to the cost of the mess being made) that still is not a done deal. And we can only speculate as to the real reasons behind this move. Is this a first scape-goat? Will we soon see mr. Barett-Scott joining other companies? Time will tell.
Meanwhile Fortis, a partner in the RBS consortium, has announced that it will provide clarity as to its bid, well before the special shareholders meeting. This is expected before 27th of May. This we heard on the BNR-radio ; Fortis explained such in a conference call. Furthermore the FD had the news that it will take its time (3 years) to consume its takeover of Dutch ABN AMRO.
While some analyst find this time period too long, others find it appropriate and realistic. Furthermore Professor Pluijm explained to BNR that he considered the effects of the two bids to be equal in terms of effect on organisational change and the size of work force. Both operations require a lot of reorganisational stuff to be organised. So naming the one a merger and the other a spit-up is inaccurate. He also found a period of three years not to be long; the merger of ABN and AMRO (1992) even required about 5 years. So that's nothing to worry about.
Finally the Works Council of Fortis has yesterday afternoon (16.53) sent a letter to its own management asking for further clarification as to the bids.
to be continued.....
This is an interesting motivation as it assumes that that deal with Barclays will go through. So we see ABN AMRO framing the world's mind as to continuation of the merger. But despite the steadily declining shares (a logical market reaction to the cost of the mess being made) that still is not a done deal. And we can only speculate as to the real reasons behind this move. Is this a first scape-goat? Will we soon see mr. Barett-Scott joining other companies? Time will tell.
Meanwhile Fortis, a partner in the RBS consortium, has announced that it will provide clarity as to its bid, well before the special shareholders meeting. This is expected before 27th of May. This we heard on the BNR-radio ; Fortis explained such in a conference call. Furthermore the FD had the news that it will take its time (3 years) to consume its takeover of Dutch ABN AMRO.
While some analyst find this time period too long, others find it appropriate and realistic. Furthermore Professor Pluijm explained to BNR that he considered the effects of the two bids to be equal in terms of effect on organisational change and the size of work force. Both operations require a lot of reorganisational stuff to be organised. So naming the one a merger and the other a spit-up is inaccurate. He also found a period of three years not to be long; the merger of ABN and AMRO (1992) even required about 5 years. So that's nothing to worry about.
Finally the Works Council of Fortis has yesterday afternoon (16.53) sent a letter to its own management asking for further clarification as to the bids.
to be continued.....
2007 Conference Papers on Nonbanks completely overlooks m-payments and mobile operators?
Payments news pointed out this page with the papers from the 2007 Nonbanks in the Payments System Conference in Kansas City. It starts with a first paper by Rosati and Weiner which compares the US en EU payments market and regulation. And interestingly we can see a complete white spot for m-payments, suggesting the market is still in its infancy.
Although volumes are still extremely limited, there are expectations in Europe about their growth potential, also in light of the forthcoming regulatory opening to nonbank payment institutions (see Section 4.2.2) which may contribute to a significant development of m-payment services.
Is this true?
I think it may be a sign of the complete ivory tower approach of central banks who don't have sufficient knowledge on the new payments markets out there. For example, earlier in 2003, a local policy analyst and payment expert, Lelieveldt, observed that M-payments already outsmarted the Dutch e-purse, with mobile operators being the new kid on the payments block. Yet, some four years later it appears as if regulators and central banks still haven't woken up to reality. Which is quite astonishing. Let's do some numbers here.
In the Netherlands payments via pre-paid or postpaid mechanism of the mobile phone (be it SMS, premium services, i-mode or what have you) have in 5 years come to grow from a small size comparable to the credit-card (40 M transactions), to the niche-market size e-purse type: 150 M and now have surpassed the debit-card at POS landmark of 1,5 billion transactions (deriving this from last years 2 billion euro revenue income for so-called data-services of the Dutch mobile industry). So in terms of number of transactions, m-payments are now the dominant payment mechanism in the Netherlands!
One wonders as to the nature of incidents that would be required to let the central banks wake up to reality. It can only be a monely laundering scheme via pre-paid phone money that will eventually make everyone look back amazed by the question whether it was ignorance or a deliberate regulatory capture situation that made the regulators/supervisors turn a blind eye as to the mobile operators' payments activities.
Which would of course be an interesting topic for a next research conference...
Although volumes are still extremely limited, there are expectations in Europe about their growth potential, also in light of the forthcoming regulatory opening to nonbank payment institutions (see Section 4.2.2) which may contribute to a significant development of m-payment services.
Is this true?
I think it may be a sign of the complete ivory tower approach of central banks who don't have sufficient knowledge on the new payments markets out there. For example, earlier in 2003, a local policy analyst and payment expert, Lelieveldt, observed that M-payments already outsmarted the Dutch e-purse, with mobile operators being the new kid on the payments block. Yet, some four years later it appears as if regulators and central banks still haven't woken up to reality. Which is quite astonishing. Let's do some numbers here.
In the Netherlands payments via pre-paid or postpaid mechanism of the mobile phone (be it SMS, premium services, i-mode or what have you) have in 5 years come to grow from a small size comparable to the credit-card (40 M transactions), to the niche-market size e-purse type: 150 M and now have surpassed the debit-card at POS landmark of 1,5 billion transactions (deriving this from last years 2 billion euro revenue income for so-called data-services of the Dutch mobile industry). So in terms of number of transactions, m-payments are now the dominant payment mechanism in the Netherlands!
One wonders as to the nature of incidents that would be required to let the central banks wake up to reality. It can only be a monely laundering scheme via pre-paid phone money that will eventually make everyone look back amazed by the question whether it was ignorance or a deliberate regulatory capture situation that made the regulators/supervisors turn a blind eye as to the mobile operators' payments activities.
Which would of course be an interesting topic for a next research conference...
Wednesday, May 09, 2007
ABN AMRO appeals verdict of Enterprise Chamber; customers seeking accounts elsewhere...
Elsevier.nl has the news that ABN AMRO will challenge the Enterprise Court ruling forbidding it to sell LaSalle without asking shareholders. Which basically means that ABN AMRO is now on a course to make the whole takeover a litigation mess, so messy that no one dare enter and bid for them any more. Meanwhile they won't cooperate with the RBS Consortium in an effort not to help them prepare clarity for the outside world as to the details of their plans. And my guess is that this strategy might just work.
In the meantime there appears to be an increasing flow of customers thinking about leaving the bank. Most of them appear to go to Rabobank (which due to its cooperative structure, cannot be taken over). And newspaper the Telegraaf threw some oil on the fire in an article (implying that ABN AMRO would not survive a sort of bank run if all customers move to different banks). Which made Mr Wellink (supervisor/central bank director) assure the public that its funds were safe at ABN AMRO.
As a final reassurance the chair of ABN AMRO Netherlands, Mr JP Schmittman, will be reassuring the public in a nationwide advertisment containing a letter to the public. He explains that the outcome of all the discussion cannot be anticipated. Yet, regardless of the outcome, ABN AMRO and its employees will be continuing servicing their customers. And these customers can either contact their regular contactperson or send him a personal e-mail.
So would this letter mean that there are more than just a couple of dozen customers that are leaving the bank?
In the meantime there appears to be an increasing flow of customers thinking about leaving the bank. Most of them appear to go to Rabobank (which due to its cooperative structure, cannot be taken over). And newspaper the Telegraaf threw some oil on the fire in an article (implying that ABN AMRO would not survive a sort of bank run if all customers move to different banks). Which made Mr Wellink (supervisor/central bank director) assure the public that its funds were safe at ABN AMRO.
As a final reassurance the chair of ABN AMRO Netherlands, Mr JP Schmittman, will be reassuring the public in a nationwide advertisment containing a letter to the public. He explains that the outcome of all the discussion cannot be anticipated. Yet, regardless of the outcome, ABN AMRO and its employees will be continuing servicing their customers. And these customers can either contact their regular contactperson or send him a personal e-mail.
So would this letter mean that there are more than just a couple of dozen customers that are leaving the bank?
Tuesday, May 08, 2007
ABN AMRO finds RBS bid insufficient, consumers worried and Finance Minister demands clarity on RBS bid
The sequel on ABN AMRO continues of course with the following steps:
- first of all ABN AMRO explaining that they find the bid of the RBS consotrium not superior to the Bank of America bid, amongst others because of a lack of financial guarantee; this is accompanied by a strong (unbacked) statement on this issue by ABN AMRO official Boumeester in FD,
- the RBS consortium replying with a statement they do find their bid superior, and outlining towards another newspaper (Telegraaf) that ABN AMRO has earlier last week received confirmation of Meryll Lynch that they do guarantee the bid,
- the Consumer Union writing a letter to the central bank: explaining that they get a lot of calls/mails of consumers asking if their money is still safe,
- one Labour Union taking position against the RBS bid and in favour of Barclays,
- the Minster of Finance explaining that he wishes quick clarity of the RBS bid
- shareholders getting rid of ABN AMRO, leading to a price more near to the Barclays than the RBS bid.
So this looks as if all signs point to the Barclays-deal. The interesting things among all this news are:
- Groenink is out of the picture: Boumeester is the man in charge now; I take it that Groenink will effectively resign once the Barclays takeover is done,
- the ABN AMRO top management and supervisors are still groupthinking towards Barclays; the claim that they do their best for the shareholders is bound to be formal lipservice,
- there are very few parties involved which essentially sit back and say; Hey dude, this is what markets do. Only the Minister of Finance dares to say so and explains that it was ABN AMRO in the first place that put itself on sale.
- first of all ABN AMRO explaining that they find the bid of the RBS consotrium not superior to the Bank of America bid, amongst others because of a lack of financial guarantee; this is accompanied by a strong (unbacked) statement on this issue by ABN AMRO official Boumeester in FD,
- the RBS consortium replying with a statement they do find their bid superior, and outlining towards another newspaper (Telegraaf) that ABN AMRO has earlier last week received confirmation of Meryll Lynch that they do guarantee the bid,
- the Consumer Union writing a letter to the central bank: explaining that they get a lot of calls/mails of consumers asking if their money is still safe,
- one Labour Union taking position against the RBS bid and in favour of Barclays,
- the Minster of Finance explaining that he wishes quick clarity of the RBS bid
- shareholders getting rid of ABN AMRO, leading to a price more near to the Barclays than the RBS bid.
So this looks as if all signs point to the Barclays-deal. The interesting things among all this news are:
- Groenink is out of the picture: Boumeester is the man in charge now; I take it that Groenink will effectively resign once the Barclays takeover is done,
- the ABN AMRO top management and supervisors are still groupthinking towards Barclays; the claim that they do their best for the shareholders is bound to be formal lipservice,
- there are very few parties involved which essentially sit back and say; Hey dude, this is what markets do. Only the Minister of Finance dares to say so and explains that it was ABN AMRO in the first place that put itself on sale.
TJX breach due to bad protected wireless retailer network; lawsuits upcoming
Ian Grigg notes at his Financial Cryptography blog that the hackers in the TJX case did the following:
- sat in a carpark and listened into a store's wireless net,
- cracked the WEP encryption,
- scarfed up user names and passwords ....
- used that to then access centralised databases to download the CC info.
Now that banks are taking the hit for this uncareful behaviour the Massachusetts Bankers Association, a trade group, announced that it is filing a class action lawsuit against retailer TJX over this data breach, as it that put more than 45 million credit and debit cards holders at risk of having their financial information accessed.
The bankers association, along with the Connecticut Bankers Association and Maine Association of Community Banks, filed the lawsuit in the U.S. District Court in Boston. The three banking associations represent almost 300 banks and are seeking to recover "tens of millions of dollars" in damages, according to the filing.
Interesting to note that for a change it is not the retailers complaining and sueing over interchange fee, but the banks sueing the retailers for being careless.
- sat in a carpark and listened into a store's wireless net,
- cracked the WEP encryption,
- scarfed up user names and passwords ....
- used that to then access centralised databases to download the CC info.
Now that banks are taking the hit for this uncareful behaviour the Massachusetts Bankers Association, a trade group, announced that it is filing a class action lawsuit against retailer TJX over this data breach, as it that put more than 45 million credit and debit cards holders at risk of having their financial information accessed.
The bankers association, along with the Connecticut Bankers Association and Maine Association of Community Banks, filed the lawsuit in the U.S. District Court in Boston. The three banking associations represent almost 300 banks and are seeking to recover "tens of millions of dollars" in damages, according to the filing.
Interesting to note that for a change it is not the retailers complaining and sueing over interchange fee, but the banks sueing the retailers for being careless.
ECB proposes oversight framework for card schemes
Finextra reports that the European Central Bank is proposing to establish a new oversight framework to oversee all card payment schemes operating in the euro zone. And the ECB starts a consultation on their work.
Interestingly, Finextra is incorrect to call this a legal framework, because the European Central Bank has no legislatory power over retail payments. Of course the ECB claims in the document that it has such power:
Under Article 105(2) of the Treaty establishing the European Community and Articles 3 and 22 of the Statute of the European System of Central Banks and of the European Central Bank (ECB), one of the basic tasks of the Eurosystem is to promote the smooth operation of payment systems. In this context, the ECB’s policy statement in 2000 clarified the role of the Eurosystem in the field of payment systems oversight. In particular, the policy statement states that “The Eurosystem may also formulate policy concerning the security of payment instruments in order to maintain the confidence of the users of the payment systems”.
But we should not forget the primary role of the ECB: monitor and ensure a stable interest rate in Europe and operate a gross-settlement system to effect open market operations. It is for this purpose of this specific whole-sale gross settlement/payment (via TARGET, to become TARGET2) that the ECB has been granted the powers to ensure a smooth operation of payment systems. It has never had the role or goal assigned to regulate retail payments.
This is a classic example of institutional drift. Central banks just sit together and find that they are responsible for retail payments as well. And then start making up stuff like security requirements for e-money. Or requirements for recycling bank notes which are then suddenly also applicable to retailers and banks all around. A bit too far a stretch.
So now the European central banks find themselves responsible for level playing field and maintaining confidence in card networks. They dug up the usual requirements (lamfalussy: legal issues, transparency, operational reliability, governance and clearing and settlement) that are usually applied to gross settlement systems and now rephrased them for cards. Without asking themselves if it might not be possible that market players already have a bunch of scheme requirements in place.
Each card scheme will then be expected to make sure that information - including data on financial risks - is available to all parties involved in the payment, and to ensure "an adequate degree of security, operational reliability and business continuity". Card companies will also be required to implement effective, accountable and transparent governance arrangements and manage and contain financial risks in relation to clearing and settlement processes. Companies providing credit and debit cards in the euro zone, including pre-paid card and gift card schemes, whill be expected to comply with the new rules. But the framework will not apply to card providers that have issued fewer that one million cards a year over the past three years. Companies that have recorded less than EUR1 billion in annual average transactions over the past three years will also be exempt, as will non-card e-money providers.
Well, quite an interesting move of the central banks. The ink of the Payment Service Directive isn't dry or they publish a bit of draft-regulation of their own which is not agreed by the European parliament and only bound to raise cost and prices in the sector. My guess is that that isn't the proper way forward for any European institution. If you are not satisfied with the rules that EP and Council drafted, you shouldn't try to make up some of your own.
Interestingly, Finextra is incorrect to call this a legal framework, because the European Central Bank has no legislatory power over retail payments. Of course the ECB claims in the document that it has such power:
Under Article 105(2) of the Treaty establishing the European Community and Articles 3 and 22 of the Statute of the European System of Central Banks and of the European Central Bank (ECB), one of the basic tasks of the Eurosystem is to promote the smooth operation of payment systems. In this context, the ECB’s policy statement in 2000 clarified the role of the Eurosystem in the field of payment systems oversight. In particular, the policy statement states that “The Eurosystem may also formulate policy concerning the security of payment instruments in order to maintain the confidence of the users of the payment systems”.
But we should not forget the primary role of the ECB: monitor and ensure a stable interest rate in Europe and operate a gross-settlement system to effect open market operations. It is for this purpose of this specific whole-sale gross settlement/payment (via TARGET, to become TARGET2) that the ECB has been granted the powers to ensure a smooth operation of payment systems. It has never had the role or goal assigned to regulate retail payments.
This is a classic example of institutional drift. Central banks just sit together and find that they are responsible for retail payments as well. And then start making up stuff like security requirements for e-money. Or requirements for recycling bank notes which are then suddenly also applicable to retailers and banks all around. A bit too far a stretch.
So now the European central banks find themselves responsible for level playing field and maintaining confidence in card networks. They dug up the usual requirements (lamfalussy: legal issues, transparency, operational reliability, governance and clearing and settlement) that are usually applied to gross settlement systems and now rephrased them for cards. Without asking themselves if it might not be possible that market players already have a bunch of scheme requirements in place.
Each card scheme will then be expected to make sure that information - including data on financial risks - is available to all parties involved in the payment, and to ensure "an adequate degree of security, operational reliability and business continuity". Card companies will also be required to implement effective, accountable and transparent governance arrangements and manage and contain financial risks in relation to clearing and settlement processes. Companies providing credit and debit cards in the euro zone, including pre-paid card and gift card schemes, whill be expected to comply with the new rules. But the framework will not apply to card providers that have issued fewer that one million cards a year over the past three years. Companies that have recorded less than EUR1 billion in annual average transactions over the past three years will also be exempt, as will non-card e-money providers.
Well, quite an interesting move of the central banks. The ink of the Payment Service Directive isn't dry or they publish a bit of draft-regulation of their own which is not agreed by the European parliament and only bound to raise cost and prices in the sector. My guess is that that isn't the proper way forward for any European institution. If you are not satisfied with the rules that EP and Council drafted, you shouldn't try to make up some of your own.
Rabobank to start pilot to do banking via television
Leeuwarder Courant reports that a local Rabobank (Sittard-Geleen) is the first to start tv-banking, thus making banking more accesible to the public (and possibly the elderly and/or disabled). If the pilot works, it will be rolled out to the rest of the land.
Sunday, May 06, 2007
RBS Consortium bids for LaSalle: US$ 24,5 billion
A new day/event in the ABN AMRO story. FD reports that the RBS consortium has overbidden Bank of America to buy LaSalle. And the purchase condition is that LaSalle remains a part of ABN AMRO and that the three will not wish to be paying for any of the damages as a result of the Bank of America lawsuit.
Stuff is really getting complicated now. Because until the last day of the open period in which one could bid for LaSalle, there would have been no reasons for Bank of Amercia to start sueing. Nevertheless they immediately started to sue after the ruling of the Dutch Enterprise Court. So this can only mean that we are now less than one step away from the RBS Consortium sueing the Bank of America for obstruction or improper conduct (or whichever legal term one might find to desrcibe this premature litigation battle). Because if as Bank of America you have a signed a buying agreement which is quite advantageous to you if the deal would not come through, you should simply wait out your time/turn and take your losses if you can't match a bid.
This will most certainly become another interesting week !
Stuff is really getting complicated now. Because until the last day of the open period in which one could bid for LaSalle, there would have been no reasons for Bank of Amercia to start sueing. Nevertheless they immediately started to sue after the ruling of the Dutch Enterprise Court. So this can only mean that we are now less than one step away from the RBS Consortium sueing the Bank of America for obstruction or improper conduct (or whichever legal term one might find to desrcibe this premature litigation battle). Because if as Bank of America you have a signed a buying agreement which is quite advantageous to you if the deal would not come through, you should simply wait out your time/turn and take your losses if you can't match a bid.
This will most certainly become another interesting week !
Saturday, May 05, 2007
ABN Amro doens't allow more bids on LaSalle: Groenink did offer to resign
Nu.nl informs us that ABN AMRO doesn't allow for more bidding on LaSalle. It refers to the Enterprise court ruling for an explanation. Not the strongest argument if I may say so.
Furthermore, DFT has the news that the RBS consortium are preparing a bid after the weekend. And they also tell that Rijkman Groenink has offered to step down 'for the sake and the good of the bank'. One could argue that is an interesting Freudian choice of words, implying no fault on his behalf.
Then again, he remains a lawyer of course; quoting any other reasons would have the implication that he would step down in recognitions of (the doubts as to) his ability to manage the bank properly. And that would most certainly incur some more law suits.
Words and action, action and words.
Furthermore, DFT has the news that the RBS consortium are preparing a bid after the weekend. And they also tell that Rijkman Groenink has offered to step down 'for the sake and the good of the bank'. One could argue that is an interesting Freudian choice of words, implying no fault on his behalf.
Then again, he remains a lawyer of course; quoting any other reasons would have the implication that he would step down in recognitions of (the doubts as to) his ability to manage the bank properly. And that would most certainly incur some more law suits.
Words and action, action and words.
Banks block Mastercards as precautionary measure
Volkskrant informs: that Postbank and ING block a series of Mastercards as a precautionary measure, without further disclosing how many. There will be free new cards for the account holders in the Netherlands and there will be an arrangement for those that are on the road and require a new one. ABN AMRO is also replacing cards (some ten or twenty).
Friday, May 04, 2007
Bank of America sues over LaSalle sale; Dutch part of ABN AMRO thinks Fortis could work too
Reuters informs us that Bank of America sues over LaSalle sale. Which was of course to be expected. We have also come to know that Mr Groenink will not resign (given that the decision to sell LaSalle was a joint deciscion of Executive and Supervisory Board). And there was also the news that the higher management of ABN AMRO has informed the press indirectly that it is open for a cooperation with Fortis.
Analysts are also discussing if and which role our supervisor for the securities market should/would have had in the process surrounding the bidding. Shouldn't they have ensured due process more than just checking if the bidding statements are compliant with the current rules? And another analyst points out that the central bank, in its role as supervisor of ABN AMRO, has also evidently not delivered on their promise to very carefully monitor the further bidding process. Where were they?
So what does the continuing story of ABN AMRO tell us so far?
I think it tells us that big companies may just have become so big that they become steerless bureaucracies in the hands of incapable leaders (or groups of leaders) which are unable to think properly and independently. Most likely the financial compensation packages for leaders increase the groupthink processes near the top, leading to biased visions of reality and of what is and isn't right. Supervisors claim to be supervising but don't effectively substantiate their role. Meaning that indeed it is left to the market (shareholders) and the courts to correct the wrong vision/actions of the managing board (rather than Commissioners or supervisors).
Now we could try to increase the competencies of supervisors. Or change the financial compensation packages. But in the end all change will have to come from the inside. And my guess would be that the independent mental attitude required to contribute to correcting or preventing these odd groupthink processes is more of a Buddhist/Zen-like disattachment of money and status. Where people are not afraid to suffer prestige, financial loss or status loss when they speak up their real analysis.
But, how likely is it that anyone with such an attitudes will survive in those coherent topmanagement groups? And where could one find such attides in a society which values money beyond everything?
Analysts are also discussing if and which role our supervisor for the securities market should/would have had in the process surrounding the bidding. Shouldn't they have ensured due process more than just checking if the bidding statements are compliant with the current rules? And another analyst points out that the central bank, in its role as supervisor of ABN AMRO, has also evidently not delivered on their promise to very carefully monitor the further bidding process. Where were they?
So what does the continuing story of ABN AMRO tell us so far?
I think it tells us that big companies may just have become so big that they become steerless bureaucracies in the hands of incapable leaders (or groups of leaders) which are unable to think properly and independently. Most likely the financial compensation packages for leaders increase the groupthink processes near the top, leading to biased visions of reality and of what is and isn't right. Supervisors claim to be supervising but don't effectively substantiate their role. Meaning that indeed it is left to the market (shareholders) and the courts to correct the wrong vision/actions of the managing board (rather than Commissioners or supervisors).
Now we could try to increase the competencies of supervisors. Or change the financial compensation packages. But in the end all change will have to come from the inside. And my guess would be that the independent mental attitude required to contribute to correcting or preventing these odd groupthink processes is more of a Buddhist/Zen-like disattachment of money and status. Where people are not afraid to suffer prestige, financial loss or status loss when they speak up their real analysis.
But, how likely is it that anyone with such an attitudes will survive in those coherent topmanagement groups? And where could one find such attides in a society which values money beyond everything?
Thursday, May 03, 2007
Next step: Dutch judge forbids sale of LaSalle by ABN AMRO
In continuation of the ABN AMRO take-over sequel todays the news is about the court ruling by the Enterprise Chamber. It ruled that the sale of LaSalle by ABN AMRO be stopped/canceled. Which will lead to further litigations of course. Share prices rose on the news as it increases the odds for the RBS consortium to take over ABN AMRO.
Also, today there was a second court ruling on ABN AMRO as well. It found ABN AMRO and Goldman Sachs guilty of not informing the public properly on the IPO of World Online in 2002. Again it was the proactive association of share holders (named VEB) that sued ABN AMRO and won this case. VEB will further pursue a lawsuit for compensations of damages to the 11000 share holders they represent (which may lower the price for ABN AMRO a little).
In sum: everything is possible once again. Yet I can't imagine how the board of commissioners/supervisors would let chairman of the director continue functioning in office. So either they leave him formally in place so that he can continue finishing this deal (while informally the commissioners require him to ask for their approval on all his actions) or they kick him out and sort out the work himself. Either way it is quite likely that further lawsuits be started to sue either the managing director of ABN AMRO or the board of Commissioners.
So I wouldn't at all be surprised if we soon hear that someone has to take the fall and steps down....
Also, today there was a second court ruling on ABN AMRO as well. It found ABN AMRO and Goldman Sachs guilty of not informing the public properly on the IPO of World Online in 2002. Again it was the proactive association of share holders (named VEB) that sued ABN AMRO and won this case. VEB will further pursue a lawsuit for compensations of damages to the 11000 share holders they represent (which may lower the price for ABN AMRO a little).
In sum: everything is possible once again. Yet I can't imagine how the board of commissioners/supervisors would let chairman of the director continue functioning in office. So either they leave him formally in place so that he can continue finishing this deal (while informally the commissioners require him to ask for their approval on all his actions) or they kick him out and sort out the work himself. Either way it is quite likely that further lawsuits be started to sue either the managing director of ABN AMRO or the board of Commissioners.
So I wouldn't at all be surprised if we soon hear that someone has to take the fall and steps down....
Visa further penetrates retail market with Gamma
While retailers representative organisations are trying hard to stop the credit-cards from being used, large building and D-Y-I chain Gamma has introduced a Visa-Gamma card. Providing discounts to the D-Y-I shoppers.
Wednesday, May 02, 2007
Annual report 2006 of National Forum of Payments sent to Ministry of Finance
Our Dutch central bank (DNB) holds the secretariat of the socalled National Forum on Payment Systems. Basically a forum where representative groups of providers and customers of payment services meet and discuss relevant developments such as SEPA, safety of payment systems, how to improve efficiency and ergonomic accessibility and regional availability of payments services.
Today DNB sent out the annual report over 2006 of the Forum which contained an 1 MB update on:
- SEPA: it's coming but a lot of details are not clear yet; the work in 2007 will focus on a transition plan for the Netherlands,
- availability of payment services (see also this log-entry): no indications that there are serious problems; just some minor issues that all involved players agreed to solve,
- further improvement of efficiency: smart pinpackages should help out small retailers by providing low cost easy-to-use POS-terminals and fee deals,
- the publication of future reports on fraud characteristics of credit-cards, accessibility guidelines for POS-terminals, further research into cost/benefits of payments.
Today DNB sent out the annual report over 2006 of the Forum which contained an 1 MB update on:
- SEPA: it's coming but a lot of details are not clear yet; the work in 2007 will focus on a transition plan for the Netherlands,
- availability of payment services (see also this log-entry): no indications that there are serious problems; just some minor issues that all involved players agreed to solve,
- further improvement of efficiency: smart pinpackages should help out small retailers by providing low cost easy-to-use POS-terminals and fee deals,
- the publication of future reports on fraud characteristics of credit-cards, accessibility guidelines for POS-terminals, further research into cost/benefits of payments.
Dutch domestic web-payment method iDEAL outsmarts creditcard as web payment method
Scheme-owner Currence notifies us in a press-release that IDEAL, the home bred Dutch domestic web-payment method, is now more often used as the credit-card for online-payments in the Dutch market. Market research shows that customers find iDEAL easier, faster and safer. So within 1,5 year after its introduction, iDEAL usage now stands at 15 % while credit-cards are used 13 % of the times. We should note that this is quite a nice track record, given that iDEAL was launched only 1,5 years ago.
Currence expects the role of iDEAL to become even bigger in the future. Already in the month March, the total number of iDEAL-payments was 1 million (compared to 3 million for the whole of 2006). So we definitely have a winner here.
Some more information on other payment methods can be found at Planet's website. This shows that other payment methods, often used are:
- bill payment (acceptgiro) via internet banking: 24 %
- credit-transfer via Internet banking: iDEAL: 16 %
- bill payment (acceptgiro) via post: 7 %
- one off direct debit; 7 %
- Paypal: 3 %.
Which does leave another 15 % for obscure/other payment methods (payment via SMS, 0900-phone lines, pre-paid systems/cards etcetera).
Currence expects the role of iDEAL to become even bigger in the future. Already in the month March, the total number of iDEAL-payments was 1 million (compared to 3 million for the whole of 2006). So we definitely have a winner here.
Some more information on other payment methods can be found at Planet's website. This shows that other payment methods, often used are:
- bill payment (acceptgiro) via internet banking: 24 %
- credit-transfer via Internet banking: iDEAL: 16 %
- bill payment (acceptgiro) via post: 7 %
- one off direct debit; 7 %
- Paypal: 3 %.
Which does leave another 15 % for obscure/other payment methods (payment via SMS, 0900-phone lines, pre-paid systems/cards etcetera).
Tuesday, May 01, 2007
Retailers continue gallery play for low bank fees while overcharging consumers themselves
Last week I noted that members of Dutch parliament (quite obviously prompted by retailer-lobby organisations) started asking questions in parliament on the competition in payments and on the possibilities of price increase as a result of SEPA. Which showed that retailers succeeded quite easily in (hijacking and) narrowing down complex policy discussions about European payments markets into an ordinary Dutch price-rebate discussion for merchants.
This week the retailers continue their battle in the Financieele Dagblad. Mr van der Broek, chairman of all retailers in the Netherlands explained in an interview that the retailer representative organisations withdrew from some subgroups of the socalled National forum on payment systems that dealt with SEPA. The reason for doing so was that the retailers found it unacceptable that the banks did not collectively wish to give a low price guarantee for future fees of payments authorisation. Not receiving any affirmative response, they concluded that it was most likely that further price hikes were upcoming and that in the end there would only be two acquirers in Europe: Visa and Mastercard; which would have to mean higher fees for everyone.
This oversimplification of reality did not go by without a comment of the Dutch banks. On their website they have provided a somewhat cool reply. In this news posting (in Dutch) they point out that the claim and fear for a duopoly in the cards market rests on the misunderstanding that retailers have direct contracts with scheme-owners rather than with all the players (banks and non-banks alike) in the acquiring market. So the duopoly is nowhere near in sight and will never become a reality.
They further continue - as a part of their explanation of the six most common misunderstandings about POS-authorisation fees- that already at this very moment retailers can choose from a wide number of banks and acquirers for pos-authorisation processing. And research by the Dutch competition authority demonstrates that this competition works and leads to lower fees.
In their statement the banks also politely hint at the oddness of the retailers price guarantee question, by explaining that it is forbidden as a collective of banks to do joint price setting. And that it is not proper conduct to asks banks to committ to such behaviour nor to draw conclusions from the fact that banks do not answer to this question that shouldn't even be asked in the first place. They point out that it even more incorrect to assume that the silence in reply to this question thus means that fees will become higher.
My personal viewpoint is less polite. Some 5 years ago, the retailers were among the loudest bunch in the audience to want the existing price-cartel/monopoly of banks (for authorisation of PIN-transactions) to be eliminated. And they were right in doing so. They got exactly what they wanted: banks were fined and all contracts now need to be bargained by retailers at individual banks. Retailers even got one cent discount as a part of a separate agreement with banks to set the past aside and work towards efficient payments in the future. So they dismantled the existing monopoly in exhange for competition. But instead of competition the retailers now appear to want a Dutch domestic bank monopoly back to fix or set some even lower prices for the future.
On their website, the Dutch banks once more outline that SEPA is not a banking party but the result of political pressure on banks (Lissabon agreement in 2000), leading to standardisation by the European Payment Council on the one hand and to legislation (Payment Service Directive) on the other hand. So the banks reject the retailer suggestions that SEPA is brought on the public because the banks want this so much. The banks also ask retailers to join in and do their bit: accept all panEuropean payment brands so that all Europeans may be able to pay efficiently at the point of sale.
And finally the banks point out that irrelevance of the whole issue brought forward by the retailers. They clarify that in the Netherlands it is possible to surcharge at the point of sale. So the retailer can choose to ask a fee from the consumer if a certain payment brand (or cash !) is a bit costly. Which would solve the whole problem of bank fees in the first place.
And with that last explanation comes another fine example of interesting retailer behaviour. The banks outline that 25 % of the Dutch retailers ask a 25 eurocent fee from the consumer if he chooses to use the direct debit card over other payment instruments for low value payments. While the bank fee for this transaction is only 5 cents, this does raise an additional question as to why retailers so heavily overcharge the consumer. It can't really all be 20 cents for terminal or telecommunication cost...
This week the retailers continue their battle in the Financieele Dagblad. Mr van der Broek, chairman of all retailers in the Netherlands explained in an interview that the retailer representative organisations withdrew from some subgroups of the socalled National forum on payment systems that dealt with SEPA. The reason for doing so was that the retailers found it unacceptable that the banks did not collectively wish to give a low price guarantee for future fees of payments authorisation. Not receiving any affirmative response, they concluded that it was most likely that further price hikes were upcoming and that in the end there would only be two acquirers in Europe: Visa and Mastercard; which would have to mean higher fees for everyone.
This oversimplification of reality did not go by without a comment of the Dutch banks. On their website they have provided a somewhat cool reply. In this news posting (in Dutch) they point out that the claim and fear for a duopoly in the cards market rests on the misunderstanding that retailers have direct contracts with scheme-owners rather than with all the players (banks and non-banks alike) in the acquiring market. So the duopoly is nowhere near in sight and will never become a reality.
They further continue - as a part of their explanation of the six most common misunderstandings about POS-authorisation fees- that already at this very moment retailers can choose from a wide number of banks and acquirers for pos-authorisation processing. And research by the Dutch competition authority demonstrates that this competition works and leads to lower fees.
In their statement the banks also politely hint at the oddness of the retailers price guarantee question, by explaining that it is forbidden as a collective of banks to do joint price setting. And that it is not proper conduct to asks banks to committ to such behaviour nor to draw conclusions from the fact that banks do not answer to this question that shouldn't even be asked in the first place. They point out that it even more incorrect to assume that the silence in reply to this question thus means that fees will become higher.
My personal viewpoint is less polite. Some 5 years ago, the retailers were among the loudest bunch in the audience to want the existing price-cartel/monopoly of banks (for authorisation of PIN-transactions) to be eliminated. And they were right in doing so. They got exactly what they wanted: banks were fined and all contracts now need to be bargained by retailers at individual banks. Retailers even got one cent discount as a part of a separate agreement with banks to set the past aside and work towards efficient payments in the future. So they dismantled the existing monopoly in exhange for competition. But instead of competition the retailers now appear to want a Dutch domestic bank monopoly back to fix or set some even lower prices for the future.
On their website, the Dutch banks once more outline that SEPA is not a banking party but the result of political pressure on banks (Lissabon agreement in 2000), leading to standardisation by the European Payment Council on the one hand and to legislation (Payment Service Directive) on the other hand. So the banks reject the retailer suggestions that SEPA is brought on the public because the banks want this so much. The banks also ask retailers to join in and do their bit: accept all panEuropean payment brands so that all Europeans may be able to pay efficiently at the point of sale.
And finally the banks point out that irrelevance of the whole issue brought forward by the retailers. They clarify that in the Netherlands it is possible to surcharge at the point of sale. So the retailer can choose to ask a fee from the consumer if a certain payment brand (or cash !) is a bit costly. Which would solve the whole problem of bank fees in the first place.
And with that last explanation comes another fine example of interesting retailer behaviour. The banks outline that 25 % of the Dutch retailers ask a 25 eurocent fee from the consumer if he chooses to use the direct debit card over other payment instruments for low value payments. While the bank fee for this transaction is only 5 cents, this does raise an additional question as to why retailers so heavily overcharge the consumer. It can't really all be 20 cents for terminal or telecommunication cost...
TCI fund calls for ABN Amro chairman Groenink to step down and class action in US underway
See the news here: to discover that the TCI fund calls for ABN Amro chairman Groenink to step down. Financieele Dagblad furthermore has the news that Halpert Enterprises will also jump on the litigation bandwagon with a class action suit to prevent ABN AMRO from selling LaSalle.
There is an interesting question here by the way. Could there be a point of time where the behaviour and strategy of Mr Groenink would lead either the Supervisory Board of ABN AMRO or the most senior management of ABN AMRO to step in and explain Mr Groenink that they can ethically no longer endorse the actions proposed by him and that they will refuse to further execute his orders?
There is an interesting question here by the way. Could there be a point of time where the behaviour and strategy of Mr Groenink would lead either the Supervisory Board of ABN AMRO or the most senior management of ABN AMRO to step in and explain Mr Groenink that they can ethically no longer endorse the actions proposed by him and that they will refuse to further execute his orders?
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