Back to fundamentals and basic banking services is key for commercial and retail banks to navigate the financial crisis, agreed a panel of experts at a recent roundtable hosted by IT services firm Logica.
With the crisis beginning to hit the real economy, corporates are being hit with tight liquidity and are looking to the banks and governments to fuel the global economy. Corporates are tightening their belts and are expecting more for less from their banking partners.
“Corporates want the same thing but for less money. They want better visibility of the financial supply chain,” said Peter Guldentops, principal consultant in payments, who recently joined Logica UK. “As the risk level increases, the move towards more traditional trade finance will also increase.” He predicts that these will be heady days for letters of credit (LC), which is credit guaranteed by a bank, bucking the recent trend towards open account transactions, where credit is extended by the seller to the buyer.
Another fallout from the crisis is the trend towards increasing regulation, targeting areas such as banker bonus schemes and reporting detail. Bob McDowall, research director -Europe at TowerGroup, warned that detailed rules that negatively impact the consumer and small businesses are unwanted and governments need to heed that point.
How the credit crisis will affect regulations already in the pipeline, such as the Payment Services Directive (PSD) and single euro payments area direct debits (SDD), was a trickier question. Stewart McKinnon, outgoing general secretary of European Payments Council (EPC), said that it will be a gamble as to whether or not the PSD will be successfully transposed in all the countries by the November 2009 deadline. He also pointed out that the French has admitted they won’t be ready for the SDD until 2010.
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