We always have an optimistic attitude towards the time gone by, especially dates which would not roll back, and months and years that will become part of memory, but walking off 2009 will not be that easy for the financial industry. The time gone by will remain forever etched in the pages of history. This was the year when news daily unfolded the name of one or another company as being in the bankruptcy list. 2009 will also be remembered as the historic moment of Obama’s presidency, but in the same breadth it is also the year of Dubai World debacle and the year when many more illustrious names hurtled down. Globally, the year will stand for some banking payment processes getting dressed with new technology, but this year would be remembered undoubtedly for the never-thought of names that went bankrupt and initiated economy hurricanes.
Days unfolded with screaming headlines underscoring few popular names and strange figures which were totally unexpected to have bad times. None of the sectors were left untouched with bankruptcy figures ranging from retail to banking, insurance to automobiles. It is difficult to say if any of the financial soothsayers, though often contemplating the sudden and more than enormous bloating of the market bubble, had ever imagined the tumbling of USA equity markets. Although there were people in the western world who were breathing slightly liberated from the west. But in-depth study of the globe hardly revealed the name of any country that was untouched by the chaos and where in the figures gave total relief. Even countries like UAE promising good economy ended with bad figures and nightmares like DUBAI World.
Governments offered it all: well-thought of and heatedly deliberated stimulus packages, pro-active taxation interventions coupled with delay in payments, but none acted as an antibiotic for the financial markets. Year is about to end, but it keeps reminding us of the aftershocks of the economic downturn in 2010. Many government plans for 2010 are seen nowhere fulfilling, changes in GDP numbers, hiking inflation in one part of globe and another with deflation. Both the superpowers of the globe are stumbling with odd figures which were nowhere forecasted in any report five years before.
On the flip side, 2009 was not that bad a year for countries like China and India where good banking conditions acted as the necessary roadblock and comparably few numbers joined the list of bankruptcy. These countries had space to show strength of their fundamentals, along with political stability. Changing global atmosphere of investment brought few more headlines featured for stock markets which were not popular in the Wall Street Journal.
In general, life for the common man was more difficult to live and the year 2009 brought changes in pocket money but that too only the bad ones. Reducing incomes, many losing their means of livelihood, many stuck with mounting loan payments, to name a few continued after passing of quarters. Even no government or economic policy seems to withstand against the inflation figures. Hopefully end of 2009 will bring some relief, but figures revealed in 2010 regarding the year-of-year comparing 2009 to 2008 would be again hit sentiments in January.

If you had to suggest one word to describe the category in which the modern American economy falls, which one would it be?
I personally vote for CONSUMPTION.
You can`t deny though that consumption is actually the driving force behind the previous growth and development of the dynamic US economy.
So let`s take a step further and ask: “can you imagine the modern American society surrounded by consumption economy, but without the possible ease to live on credit, and use the credit cards on a daily basis”?
I bet you don`t…
Well, prior to the financial crisis, statistics reinstate that on an average an American family owned 13 different credit cards, with an accumulated debt of $10 678. The cost of all the categories of credits taken by the family (interest rates, etc) was nearly 14, 5 percent of its annual income. In the year 2006, debts taken by the Americans grew by one third in comparison with the year 2000.

The beginning of an end…

But hmmm… borrowing money was always way less complicated in the States than in any other country in the world. The first credit card was launched in the US around 50 years ago. In the year 1959, Bank Of America made a small experiment and sent to the inhabitants of Fresno, CA 60 000 AmiCard cards, which in the 70ties changed the name to VISA. Soon after that the competitive MasterCharge card was launched, which later became MASTERCard. It seems that the credit cards were launched at the opportune moment- American economy had just changed from production to the consumption mode. In this case, the Americans found paying for all the consumption goods with this small, easy to carry plastic thing much more easy, uncomplicated and helpful than cash. They didn’t need to make the cash available anymore to buy any of the dreamy products available in the market… It was a real revolution that almost swept the Americans off their feet and led to an era of credit boom. Banks started making enormous profits out of transactional and operational fees related to the credits and credit cards` transactions.
And here we are in the year 2009.

Credit cards’ restrictions- consumers’ perspective

For many years procedures and rules concerning credit cards were not regulated enough. Credit card providers had actually a lot of freedom in terms of operational and transactional fees. As most of us- being the credit cards’ users know, it resulted in credits’ cost becoming relatively high. Users started complaining about the high costs and the unfriendly practices which were cultivated by credit card providers for years. Early this year American Congress decided to raise a voice in this case and issue restrictions strictly regulating the procedures and policies concerning the credit cards. Congress point of view was: “We stood up for consumers and stood up to abusive credit card companies,” Senator Harry Reid of Nevada, the Democratic majority leader, said after the vote. “We said that big banks can no longer take advantage of the hardworking Americans. We demanded that when Americans use a credit card — as almost everyone does almost every day — they no longer have to fear that they’ll be abused.”
The bill prohibits card companies from raising interest rates on existing balances, unless a borrower is at least 60 days late with the pay off. If the cardholder pays on time for the following six months, the company would have to restore the original rate. The interest rates can`t be raised during the first year after opening the account, and promotional rates have to be valid at least for first half a year of the usage. Statements reflecting the sum which has to be paid off by the cardholder need to reach them at least 45 days before the expiry date. It’s actually important because what happened before is that the companies postponed sending reminders with the hope that the consumer will not be able to pay off the credit urgently, or on time, which basically meant payment of high interest rates by the cardholder for the delay. Restrictions made policies much more user friendly, but obviously harmed the credit card companies’ business strategies. Banks said: “(…) new restrictions, when credit is already tight, will cause them to clamp down even more. The bill designed to protect consumers will actually harm them by limiting credit and increasing the cost to everyone else,” says Scott Talbott of the Financial Services Roundtable, which represents large banks.
The Bill was signed by the President on May, 22nd this year.

Credit cards` restrictions- retailers` perspective.

For retailers credit cards mean “interchange fees”, which have to be paid by the retailers accepting credit cards` payments and which have been a problem for them since many years. Retailers believe that “the unregulated fees have become too costly, and are asking Congress to intervene”. Retailer organization- The Merchants Payments Coalition claims that the current interchange fees are the highest in the entire globe. According to Lyle Beckwith- President of National Association of Convenience Stores, interchange fees are the second biggest cost after labor for the convenience stores. Just take a look at this example: “While interchange fees may vary from card to card, merchants say VISA and MasterCard, the two most widely used cards, generally charge merchants 2 percent of the purchase price, plus a flat fee of 10 cents per transaction. So, on a $2 bottle of pop, the fee is 14 cents: 10 cents plus 2 percent of the price. On $50 worth of gasoline, the fee is $1.10”. Cost aren`t transferred to the customer side, so it seems that retailers suffer the most because they actually pay for customer`s convenience to do the shopping and pay with the credit card.

Retailers have been fighting with interchange fees for years but now as regulations protecting consumers were issued they finally see the light in the tunnel to regulate their case as well.
Banks claims that most of the loyalty programs such as: hotel discounts, free flight miles, etc in which cardholders can participate in, thanks to the card payments, are financed by the interchange fees. It means that the banks will not be able to offer cardholders any perks if restriction against interchange fees was issued.

It seems that this case may actually cause interest conflict between consumers and retailers. But doesn`t it entail that the good times for the credit cards providers seems to be over and that pretty soon they will have to find a new way to thrive?

A friend of mine lost her husband in the unfortunate 9/11 terrorist attack on the World Trade Center. After this tragedy she claimed for the compensation which was offered to the victims of 9/11 attack by US Government. Getting it was quite a complicated and comprehensive process. All the claims had to be reviewed for approval or deny, and the compensation sum, which was paid out of the Treasury had to be calculated. Decision in this case was based on a structured and strict set of criteria. And this is exactly how I heard about Mr. Kenneth Feinberg for the first time. The 9/11 funds involved 3,000 families, who lost a relative at the World Trade Center, in the airplanes, or the Pentagon. It seems that the investigation process for this group of people was quite simple. However, there was also another group of people considered as victims. The later one included those, who survived but suffered after the attack from side-effects such as disfiguration, burn, respiratory illness, etc. Mr. Feinberg spent couple of years on overseeing payouts of around $7 billion to victims of 9/11. I heard in one of the interviews conducted with Mr. Feinberg that he actually personally reviewed every single claim application. And now he comes again as a pay czar with controversial restrictions concerning guidelines for limiting salaries of top executives at companies participating in Troubled Asset Relief Program known as TARP.

TARP and new restriction…

So let`s start from the outset. Financial crisis forced main US companies to take part in TARP. Kenneth Feinberg was delegated to take control over TARP payoffs. After overviewing the payoff procedures and policies of companies participating in TARP, he identified some unacceptable behaviors. For example, the top bailout company- AIG “is scheduled to dole out another $198 million to employees of the financial products unit – largely seen as responsible for the firm’s near failure and bailout – in March 2010”. In this situation he suggested restrictions, which in his opinion will help all those institutions to thrive. As Obama`s administration gave him a mandate to determine appropriate executive pay packages for the 25 top employees at the seven most heavily bailed out companies -AIG, Citigroup, Bank of America, General Motors, Chrysler, Chrysler Financial and GMAC, he had a lot of freedom to suggest relevant actions. Cut-offs made by pay czar are relatively high- according to CNNMoney.com “in October, the pay czar cut total compensation for the top 25 executives at the seven firms by about half, scaling back salaries by 90% and transferring payments into performance-based, longer-term stock options”- Mr. Feinberg is highly convinced that the new restrictions will help companies work properly and give money back to the taxpayers (TARP financed by taxes). As some of the executives among the industry had voluntarily rejected getting any bonuses/compensations, there was a hope that Mr. Feinberg was right and that the restrictions can be implemented smoothly and effectively because executives will take a long term approach and cooperate in order to get even better results in the future. However, the actual scene came out with a different story.

Industry reaction

As the cut-offs made by pay czar are relatively high, restrictions met some resistance among the industry- AIG and Bank Of America were the first to raise informal but strong objections against them . But what was interesting- at the same time automakers such as: General Motors, Chrysler, and Chrysler Financial were much more cooperative. Do you know what the reason for that was? Investigation showed that it seems that “their pay packages were much less than competitive pay at Citigroup or Bank of America.” After the last week board meeting, when Chief Executive Officer of AIG- Robert Benmosche, threatened to resign due the compensation restrictions, institution raised the voice that pay czar`s restrictions will result in nothing else than driving away the human capital, talent poaching and in effect poor management. As a result, executives will shift to the companies, in which operations aren`t covered by the regulations. Institutions claim that it will have an impact on investor’s money because lack of high quality and experienced executives will jeopardize the effectiveness of institutions` key operations.

Mr. Feinberg`s point of view

Since last few days, pay czar`s restrictions- its advantages and possible side-effects, have been a subject of intensive debate. Mr. Feinberg is considered as a strict, self-confident and dedicated person. He is convinced about his decisions and claims that “restrictions on pay at seven top recipients of bank bailout funds were based on fact, cooperative input and evaluating evidence presented to him”. He is also sure that restrictions will not result in talent poaching. He claims that: “for 25 top earners at each of the seven companies, without exception, compensation was too high and not aligned with shareholder interest”. Pay czar is convinced that even if AIG CEO is up to leave the company it doesn`t mean that we will experience massive exodus. He claims that only if one happened, will he review his plans and policies.

Pay czar`s restriction- is it really going to result in talent poaching?

It seems that bailout caused by financial crisis let Government review and get involved in the companies’ internal operations. The question is if it is the only one effective solution to the institutions` financial problems? Passing time will show real results but do you really think that top executives will let themselves to be poached by the competitors? Or it`s just a threat made by the companies such as AIG aimed at forcing the Government to review its strict and harmful for executives` private bank accounts policy? I am looking forward to your opinions.

MANALAPAN, New Jersey – November 12, 2009 — FSO Knowledge Xchange (FSOkx) presents the 5th Annual Asset Management Industry Forum on December 8, 2009 at the Princeton Club of New York from 8:00am to 5:30pm. The event will focus on opportunities and challenges in business processes, operations, technology, compliance, risk management and outsourcing in the asset management industry.
The forum will cover some of the most crucial challenges being faced by the asset management industry in the current times. Insightful discussions will take place on growth strategies, operational and technology challenges, alternate operating models for cost containment and increasing customer satisfaction. The forum also covers the challenges of risk management and the demands of regulatory requirements on business operations and how to manage these in the current environment. Financial services executives will have an opportunity to participate in a live survey to get the pulse of the industry on a real time basis. Delegates will also have an opportunity to leverage an extensive networking opportunity with their peers and thought leaders.

FSOkx is offering complimentary registration for representatives from the banking, insurance and capital markets industries. Sponsors for the event include: Citi, Northern Trust, BNY Mellon and SunGard.

“The aim of this event is to provide a premier setting for financial industry professionals to gain the latest knowledge and actionable insights into the asset management industry to survive in this challenging business climate”, stated Rekha Vatsa, Co-founder and CEO of FSOkx. The event includes panel discussions on various relevant topics, which are of primary concern to the asset management industry. There will be eminent panelists from leading financial organizations providing their expert opinions and perspectives on key factors that require immediate attention from the industry.

Some of the engaging sessions include the growth of alternative investments and strategies in the investment management industry and enterprise-wide data management. The extent of services to which asset managers are considering outsourcing options will also be the point of discussion.

In addition, some of other compelling Asset Management topics to be presented at the event include:

• Leveraging the global growth opportunities during economic downturn
• Middle office outsourcing trends in the investment management industry
• Best practices in risk management and compliance outsourcing
• Benefits of shared middle and back-office platforms used in investment management firms
• Next generation global investment products and solutions

For more details visit:

5th Annual Asset management Industry Forum

or contact our Media Group:

Jean Pometti
Media Relations
FSO Knowledge Xchange
(732)462-3763
jpometti@FSOkx.com
www.FSOkx.com

About FSOkx

FSO Knowledge Xchange is a unique media and research initiative focused on all aspects of financial services worldwide. FSO Knowledge Xchange’s portal www.FSOkx.com features the latest news and views, events, case studies and a directory of financial and outsourcing firms. Weekly e-newsletter and quarterly magazine provide authoritative, strategic, and actionable insight and decision support in the outsourcing domain. It is a must – read for all executives, senior management and implementers within financial services and outsourcing firms. FSO Knowledge Xchange (www.FSOkx.com) produces and promotes world-leading summits and conferences. These events focus on various topics in the financial services organizations for senior decision makers at exclusive locations around the world.

In the new economic reality, opportunities abound within the banking and capital market sectors, but only for those willing to make changes. The recently completed roundtable- New Economics of Business Operations within Banking and Capital Markets, organized by FSOkx echoed this message loud and clear. Prominent speakers and panelists from renowned global institutions attended the day long roundtable.

The deliberations in the roundtable underscored that change is imperative to maximize returns. It was reiterated that firms are recalibrating their strategies, as well as business models, and are refocusing their investments.

David Wyss, chief economist at Standard & Poors, gave an enlightening presentation. He talked about various business models being used by the banking and capital market firms to address the challenges and the shift in expectations during these turbulent times.

Even the results of a recently conducted survey by Genpact and FSOkx, and presented by FSOkx members, focused on the business priorities for banking and capital markets. It further stressed on the use of performance metrics to improve business outcomes. Besides, it also focused on best practice approaches to measure performance.

The panel discussion, mulled on the survey findings, threw light on the obstacles and the remedial measures that help in making transformation a reality. The attendees from banking and capital markets sector benefited from this forum by sharing their perspectives, viewpoints and analysis on how to meet the challenges of the new economic environment.

The roundtable started with a welcome note and opening remarks presented by Genpact and FSOkx speakers. It concluded with the attendees senior executives and decision makers interacting in the relaxed ambience of the networking hour at cocktail.

Watch this space to get significant insights on the BPM domain in the banking and capital markets.

Trends, opportunities, challenges, business solutions and best practices for enterprise business process management, are some of the perks that can be enjoyed by the participants of events, such as Industry Forums. Those forums are not only a perfect opportunity for learning about the diversity, but are also very valuable as far as it with relationships is concerned- yes, I am pointing out the networking aspect. The importance of the industry forums struck with the very first one, which I participated in few years ago. Right now, after years, I consider it as a platform to build connections, which have lasted till now and have been crucial for the most important business decisions of my career.

As a CEO of FSO Knowledge Xchange, I am involved in a lot of issues concerning financial domain. Therefore, one of the pivotal activities, with which my organization deals with on a regular basis, is organizing such events for financial industry. The growing importance of new trends in business operations management within financial industry has been observed nowadays. This aspect led us to organize a Roundtables related to those hot issues. Mentioned event will take place on 4-5 November 2009 in New York City. On the first day discussion areas specific for insurance operations will be covered. The second day is going to be related to banking/investments services operations.

The main subjects to be covered in the discussions will touch on the following areas:

- Types of Key Performance Indicators (KPIs) that are reported and monitored,
- Best practices which can be used to achieve efficiency in operations that has impact on revenues, cost, cash flow, customer satisfaction, market share, risk management, regulatory compliance etc. and
- The importance of different levers of change, such as people, process, technology, information etc which are vital to achieve the desired business outcome.

This event is a follow up of a survey: ”The New Economics of Business Operations -Performance Metrics, Operations Improvement, and Levers of Change” conducted among top executives from related industries.

4th Nov 2009
“Navigating the New Reality within Insurance Operations”

5th Nov 2009
“New Economics of Business Operations within Banking and Capital Markets: Core Competency Innovation”

To find more about Roundtables 2009 visit:

FSO Knowledge Exchange- Roundtables 2009

FSOkx has released the second quarter, 2009 edition of the FSOkx Magazine. The magazine comprises stories and articles with thoughtful insights from industry experts and analysts. It also covers legal perspectives as well as outsourcing and M&A deal analytics for Q1 2009.

The cover story focuses on green IT and its gradual fall in business priority because of the economic conditions. Although in the near future, green IT and green outsourcing are very likely to be in the spotlight, these are currently on hold because of cost cutting measures adopted by firms across industries.

The magazine also offers some insights into other topics affecting the financial services industry. The topics touched in this section involve the emergence of Egypt as an outsourcing destination and of Russia and Ukraine as financial technology outsourcing destinations. Other major highlights in this edition are the expectations from outsourcing firms to achieve cost savings and the impact of Satyam scandal on financial services outsourcing.

This edition also encompasses a detailed analysis and trend forecasting for outsourcing as well as mergers and acquisition deals that were executed in the first quarter of 2009.

About FSOkx Magazine

Launched in 2004, the FSOkx Magazine is a window to the financial services industry. It caters to the needs of CEOs, CIOs, and other senior executives in the finance industry. Every issue is replete with analysis, discussions, event coverage, and news that provide decision support for financial companies. For more information, please write to editor@FSOkx.com.

On-Demand solution refers to the delivery of software solutions or services as a flexible web based service. On-Demand spend management solutions allow firms to gain tight control over their data and transform it into knowledge, which becomes the key to achieving their business goals.

Unlike finance process, based on global standards, spend management solutions are more customized and extend horizontally across an organization. They comprise of less complex software solutions that can address particular business requirements. Market knowledge, extensive network, and support service integrates into a single On-Demand spend management solution to offer businesses a competitive advantage. It helps companies to get an accurate picture of their expenditure by analyzing spending patterns across company departments, divisions, and technology systems.

Moreover, an On-Demand spend management solution only requires a web browser for access, which saves the time required for a conventional software installation. It helps lower up front licensing fees as they are converted into subscription-based payments. Most importantly, leveraging On-Demand solutions allows companies to accept change and deliver results in the current grim economic scenario. This not only optimizes processes but also helps in managing risk better. At a time when sustainment is a key priority, effective On-Demand spend management solutions can help firms meet the need of the hour. read more…

Conformed Speakers: Annual Risk and Compliance Forum 2009 (October 29, 2009, NY, U.S.A.) host by FSOkx.com

Bill Savage - AVP Enterprise Risk Management, The Hartford Financial Services Group –>Bill has been leading the development and implementation of ERM programs for the past nine years in the telecommunications, banking and insurance industries. Currently, Bill is responsible for the development of The Hartford Financial Service Group’s ERM methodology, risk policy process and risk management technology solution delivery strategy. Bill coordinates the efforts of 18 risk stewards, corporate compliance, line of business Chief Risk Officers and audit to ensure the effective implementation of risk management practices. In addition to being a speaker at industry conferences and leading educational institutions, Bill is the Chair of the RMA’s Operational Risk Management Discussion group. read more..

Peter Poulos - Executive Director, Morgan Stanley : Peter Poulos is an Executive Director at Morgan Stanley in the Operational Risk – Business Continuity Management group. Peter’s principal responsibilities include managing activities to ensure Morgan Stanley’s compliance with US federal bank regulatory requirements for business continuity and disaster recovery as well as enhancing and managing the firm’s business resiliency risk assessment program for critical third parties/vendors. Peter has provided strategic direction for enterprise-wide business requirements of the firm’s data centers with goals to help IT improve its current resiliency risk mitigation efforts and improve business alignment of future IT architecture and service delivery solutions based on optimized risk, cost and operational factors. In addition, Peter has re-engineered and enhanced Morgan Stanley’s methodologies for mapping business processes and applications, business impact analysis and business and IT continuity planning by expanding risk scenario assumptions and shifting the analysis and risk mitigation approaches from a “vertical” or departmental bias towards a “horizontal” or end-to-end business process orientation. In his current role, Peter has multiple reporting lines into the firm’s Global Heads of Operational Risk Management, Business Continuity Management and Data Center Strategy, Design and Operations. read more..

Ram Subramanian - Principal Architect, Risk & Compliance, Bank of America : read more….

Marta Johnson - Senior Vice President, Global Markets Group, Bank of America : Marta Johnson works in the Global Markets Group of Bank of America and heads up the Business Risk and Governance group. Her group provides support to the four lines of business that make the trading business at Bank of America. The scope of her group includes: Records Management, Operational Risk, Information Security, Vendor Management, Business Continuity, Electronic Communication Governance, and Legal Vehicle Governance.

Ms. Johnson’s career in financial services has been split between front office P&L positions and working in Operational Risk Management. She was chosen to lead the industry’s first formal effort into Operational Risk and has remained active in the field contributing in conferences and articles on the topic. read more..

According to a recent study conducted by Everest Research Institute, India has attracted a majority of global outsourcing business among all Asian countries. In the second quarter of 2009, 27 new captive centers were set up in Asia, amongst which nine were in India.

On the whole, a large number of offshore centers were set up in Asia in the second quarter of 2009. A high growth was seen in transaction signings and captive setups during this period. The market activities increased from 140 in first quarter of 2009 to 161 in second quarter of 2009, with a combined value of USD nine billion. Although IT outsourcing transactions perked up, a marginal decline was seen in the BPO sector. A 25 percent increase was observed in the number of transactions in the Banking, Financial services and Insurance (BFSI) vertical as compared to the first quarter.
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