Singapore

The recession may be key to much needed change - Ernst & Young explains why.

Economic recovery and new CEO prompts lender to expansion that could increase earnings by 26 percent.

Dr. Lee Boon Keng joins Dr. V. Anantha-Nageswaran in managing the bank's Investment Solutions and Investment Advisory.

The last two years have been extraordinary by any standards. Established financial institutions have been swept away, amalgamated or nationalised in many countries across the world. Property bubbles have burst. Governments have been forced to step in to save entire industry sectors at a vast cost to the public. Government spending has also ended up in the limelight.

The life insurance unit of Singapore’s second-largest lender by market value will be purchased by Prudential Plc for S$428 million ($306 million).

The last few years have experienced a rapid growth of Islamic banking and finance services around the globe. GCC and Southeast Asian countries pioneered Islamic banking and finance. Though estimates vary, there is little dispute that annual global growth is consistently in the double digits and that Islamic finance assets under management are currently valued at more than US$400 billion.

In the current economic environment, many organisations seek to become more customer-focused, and this requires fresh, detailed high-quality data. Silos of customer information slow down the progress toward becoming a customer-savvy company – resulting in a fragmented view of the customer and individual departments that struggle to be effective in customer contact. There is no silver bullet for customer focus. It’s a long process that will likely involve changes to business processes, company culture and technology. However, there is a common starting point that is shared by many of the organisations that have successfully embarked on this journey – the measurement of customer profitability and lifetime value as the foundation for a Customer Equity Optimisation strategy. Years ago Gartner* reported that “Customer Relationship Management (CRM) refers to the concept of moving ownership of the customer up to the enterprise level and away from individual departments and channels. These departments are responsible for customer interactions, but the enterprise is responsible for the customer.” Customer centricity has to be an enterprise level strategy. Frontline employees and departments have their own specific responsibilities and priorities. It is the enterprises’ responsibility to provide an environment – culture, technology and information – that enables employees to serve their customers in a way that acknowledges the customer as a whole. Companies which are now practicing enterprise-level customer management are enjoying dramatic success. Many have put Customer Equity Optimisation at the heart of their efforts. Their executives understand, track and articulate the value of their customer equity and know how their business is optimising customer equity. It all starts with an executive commitment to increasing the value of each customer relationship to the business with every interaction – while also increasing the value of the business to select customers. This commitment must be backed by accurate and timely information. Enterprise profitability analytics encompass every dimension of customer management including behaviours and transactions as well as expenditures and business activities across the enterprise. By integrating customer lifetime value calculation tools with analytical CRM there are tremendous opportunities to understand and grow customer equity. However, only with an effective and comprehensive customer profitability model and analytics can a company understand which of its customers are contributing, how much and why. Customer profitability should not be viewed as a gauge of the customer’s value; instead, it is a measurement of the value of a company’s customer-business interface – how well a company understands, informs, serves and profits from its CRM efforts. To effectively interact with each customer at any given touchpoint you need to understand what customers actually value. From a humanistic standpoint, successful firms understand customer needs and desires and meet them with relevant and timely offers. Analytical CRM can provide an understanding of the economic drivers and variables in each relationship and, therefore, useful clues to customer needs. It was not until recently that technology tools were developed to measure and optimise customer equity at a deeply detailed level on an enterprise scale. Working together in the late 1990s, the Royal Bank of Canada (RBC) and Teradata developed a data warehouse-driven value engine which accurately measures and tracks customer profitability. Since then RBC has used profitability analytics and event-driven customer relationship management to optimise customer equity and increase shareholder value. RBC had already been experimenting with customer profitability measurement. The key lesson learned was that truly useful customer profitability models had to begin with detailed, accurate, account or customer level activity-based costing information. A substantial challenge as it required close cooperation between Finance, Marketing, and IT, however all parties recognised the value of the effort.The bank found that profitability rankings changed by at least two deciles for 75% of customers, highlighting the improved accuracy. Further, RBC realised that customer profitability calculations were not enough. It came to understand that customers can be both profitable and have the potential to be profitable, and that the bank needs both kinds. Customer lifetime value tools, using historical profitability information, enabled RBC to determine which customers had high potential to be profitable in the longer term. Once the bank had the tools and processes in place to determine customer profitability and lifetime value, it included those measures when making customer decisions. This encompassed customised marketing campaigns, alignment of pricing discretion and service levels based on relationship depth (products held) and potential (lifetime value). The insights gained from RBC’s deep access to detailed customer information are used to guide organisational strategy and structure as well as daily decisions made by thousands of customer-facing employees. RBC is uniquely successful among customer equity-optimising companies because it incorporates a deep understanding of customers into all of its day-to-day operations. Employees are given the freedom and latitude to use the value of customer focus in nearly all their actions. This ‘scientific’ marketing focus is increasingly going to become the rule rather than the exception, as the value of customer relationships is understood as the key driver of a firm’s market value. The practice of Customer Equity Optimisation is important for more reasons than its impact on shareholder value – but that in itself is certainly good reason to take the approach and put it to the test.* Gartner Research Note, Ferrara and Nelson, June 4, 2001

The banking world hasn't been as dynamic as we see it today and bankers are looking at technology as an enabler to meet up with the challenges of ever changing banking industry.

DBS Islamic arm maintains commitment on bank's growth following CEO Vince Cook's quitting.

The Aaa-rated government is capable of supporting its lenders to become drivers for economic growth.

Recent events in the global financial markets are a poignant reminder that financial institutions have exposures that extend beyond the assumed risks. The recent crisis has prompted a thorough re-examination of liquidity risk, and how financial institutions should manage it more comprehensively. Now, more than ever, liquidity risk is on par with market, credit and operational risks. In the past, markets were flushed with liquidity and easily available credit, encouraging complacent attitudes towards liquidity risk. However, the financial crisis changed all that. Suddenly, there was a realization that the lack of liquidity could cause the collapse of not only specific institutions but an entire system. The market looks at liquidity risk broadly at two levels: at the institutional level, in other words an issue with a bank, or on a regulatory level, in response to broader market or systemic risk. On an institutional level, financial institutions are reviewing the type of assets they hold, whether they need to be lowered in order to boost liquidity, the maturity of those assets, and the currencies in which they are denominated (for example, US dollars). They are also assessing their funding sources, particularly non-domestic institutions and the degree to which they are dependent on liquidity funding from headquarters. The latest thinking on liquidity management is that each location should have means to raise liquidity or have access to it by itself. Stress-testing Generally, institutions are evaluating their entire liquidity picture to see if and how they can efficiently strengthen liquidity. In doing that, institutions need to recognize the importance of a robust risk management framework, including stress-testing. Stress-testing allows an institution to identify the impact of liquidity events that it can encounter, thus providing insight into potential liquidity shortfalls and the strategies needed to maintain an appropriate liquidity position. Although institutions have used stress-testing in the past, lessons learnt from the crisis have highlighted the inadequacies and failure of its prior practice to thoroughly quantify potential liquidity risk. Institutions are now prompted to re-think the stress-testing scenarios of their liquidity positions. Rather than looking at liquidity for funding, they now incorporate impact on the entity's overall balance sheet that is likely to be brought about in a crisis situation. For example, the impact on asset value in an illiquid or severely stressed market, and the consequence on capital and confidence. Financial institutions now perform stress-tests on their liquidity profile on a regular basis to ensure that a strong credit stress-testing policy is not only in place, but continually enhanced. Stress-testing processes, approaches and methodologies also need to include an expanded number of stress-test scenarios to evaluate the accuracy of projections. Maintaining liquidity targets to ensure that funds are available even under adverse conditions to cover customer needs, maturing liabilities, and other funding requirements is essential in managing liquidity risk across all classes of assets and liabilities. Management must not only recognize the need for change but also quickly and effectively execute programs and reshape the business to make sure they are in a position to respond and adapt. Evolving regulations Previously, due to a lack of industry-standard key risk indexes, evolving regulatory guidance and possibly no integrated view of an institution’s global liquidity position, it has been a challenging task for boards of directors and the C-suite to provide investors and regulators with an efficient flow of liquidity risk information. However, there have been steps towards liquidity regulations, including Financial Services Authority (FSA) rules on liquidity for banks operating in the UK. Regulators now demand that stress-testing considers forward-looking information and qualitative insight in order to identify and consider liquidity events for which there are no precedents. They also expect institutions to be able to perform certain ad hoc analyses in a timely manner. Given the recent events of global financial markets, such external pressures and internal demands are not likely to let up in the years ahead. Global regulatory regimes are still evolving, and it remains to be seen the extent to which they will be reshaped in Asia. In Singapore, the Monetary Authority of Singapore has said that it will continue to work on strengthening the risk management systems and processes of financial institutions, to assess vulnerabilities and fine-tune measures for them to mitigate financial stresses. These include building up prudent capital buffers to absorb losses when necessary. Many financial institutions here have already begun to identify scenarios that pose the greatest risk to the long-term viability of their business and have started to develop contingency plans that will help manage their business through a crisis. They are also beginning to review their scenario analysis capabilities to ensure that they have the ability to model a variety of short-term and protracted institution-specific and market-wide stress scenarios and assess specific vulnerabilities and systemic effects. While it is clear that the global financial crisis has brought unprecedented turmoil to many financial institutions with a landscape that continues to evolve, positioning the organization to emerge stronger from the crisis is now vital, as opportunities still exist for efficient and agile companies. No longer just the purview of the asset and liability committee of a bank, liquidity risk should now be an integrated part of the overall risk management function that requires a coordinated management approach by all who oversee risk - from the board of directors, chief risk officers, senior management as well as risk committees and other lines of business. Coupled with a potent cocktail of proper processes and tools that are aligned with liquidity risk programs to gather liquidity information across the organization, financial institutions will be better equipped for any future crunches and be able to hold competitive advantage.  

The United Nations Principles for Responsible Investment now claims over 550 signatories with more than USD 18 trillion in assets. UNPRI provides a framework for institutional investors to integrate environmental, social and governance (ESG) factors into investment processes. Also, the International Finance Corporation has sponsored a study on the prevalence of RI in emerging markets. High profile pension funds and sovereign wealth funds are starting to integrate ESG into their investment process.

Standard & Poor's counterparty credit ratings on DBS Bank Ltd were not affected by the bank's credit exposure to Dubai.

MasterCard Worldwide has appointed Kevin Goldmintz as Senior Business Leader, Corporate Payment Solutions, Asia/Pacific, Middle East & Africa.

New online remittance service can transfer money from Singapore to India in no time. Through the service, known as 'DBS2SBI Remittance', DBS/POSB customers will now be able to transfer funds quickly and conveniently to beneficiary accounts at over 16,000 SBI branches, as well as to 30,000 other branches in India, according to a report in BankingBusiness Review. Rajan Raju, head of consumer banking at DBS, said: "We are constantly exploring opportunities to offer greater convenience to our customers. India is one of the key recipients of home remittance from Singapore. We currently offer direct remittance service from DBS/POSB accounts in Singapore to accounts with 10 DBS branches across India."  Seah Boon Ching, head of consumer banking at SBI Singapore, said: "SBI is a household name in India, and it is only natural and makes perfect sense for us to partner with a bank which resonates similarly in Singapore. Establishing this arrangement with DBS marks another milestone we've achieved since attaining our QFB license in Singapore.  "Through this tie-up with DBS, we are able to provide speed, convenience and ease to customers banking with DBS/POSB, who wish to send remittance to our clients of the SBI Group in India."

A partnership with State Bank of India will allow DBS customers to remit online from Singapore to 46,000 bank branches in India. Known as 'DBS2SBI Remittance', the service will tap 16,000 State Bank of India branches, as well as to 30,000 other branches in India.