Reliability Of Shares

Shares of reliability, often initiated by the trades and in consultation with the project owners, are intended to identify areas of non-quality, identify the causes and identify pragmatic ways to mitigate or delete.

The first actions are almost always in the form of manual corrections. These projects mobilize substantial charges to align the repository with the reality-duplication, enhancement or correction of signs, etc ... In addition, these actions if they can have a satisfactory short-term, must be renewed frequently to maintain quality and fight against the progressive drift.

In the long run, it is best to think of more sustainable solutions and, in this regard, the levers are very diverse appointment of quality managers in the contributing entities, workflow validation of customer data, standardization of concepts , comparisons with external sources, management of several criteria of uniqueness ... The possible solutions are many but their cost, period of implementation and impact on data quality is variable. However, the prioritization of these actions is often subjective: some effects more "visible" are given priority while others are ignored because their quality impacts are unknown.

The success of the business plan requires a continuous improvement in performance. It should be laid down in processes that involve the third party repository, a real cornerstone of the IF bank. Based on the quality approaches used in industry (six-sigma, Total Quality Management ...), the virtuous cycle is divided into five phases: definition of indicators and quality objectives of the standard, indicators measuring, analyzing results, identifying actions to improve the quality control of the effect of implemented solutions. We propose in this article, to limit ourselves to the first two phases that we consider most important.

Operative management - data quality

The importance of data quality in the operative management of counterparty risk.

Despite the efforts made by financial institutions to ensure compliance with the Basel 2, the internal audits and supervisory bodies highlight gaps in devices management customer risk.

Beyond the third scoring models in place to comply with regulations, financial institutions must continue efforts to ensure a sustainable level of quality control and so effectively and Reliable customer risk. If there are relatively simple and fast to improve data quality, only a comprehensive approach and equipped keeps this level over time and create a culture of quality in financial services, with the image of the industry.

The banking and financial regulation on the internal control of credit institutions and investment firms provides an outline of points to watch it should be integrated within the device management of counterparty risk.

To ensure compliance with regulations and ensure the proper level of control internally, branches wish to have the core quality indicators ensuring the validity of the information system risk management, validating the defined risk strategy and organization established to cover the risk client. The only way to dispose of is to use information systems to provide a quantitative analysis, but the relevance of these indicators is based on the quality of the IS.

System-level information, the presence of duplicates, unreliable links or combinations obsolescence of client identification are some examples of non-referential quality of the third most frequently cited. If they do not prevent the IF function, these problems can have a significant impact on end users and in particular the process of consolidating risks, commercial pilot, the fight against money laundering and grant decisions.

About Cross- Selling

The cross-selling as a catalyst for customer loyalty: state of the art of good practices. Faced with increased competition, banks and insurance companies must continually strengthen relationships with their customers. While 1 / 3 of the people have accounts in several banks (IREQ 2006), the challenge is to become the main bank or insurance client.

One way to be the leader is to increase the rate of multi-ownership: the interest is to provide diversified products to the customer to capture it while ensuring sufficient profitability during its life cycle. That is to increase revenue per customer (cheaper than acquiring new customers) by increasing the products held by clients and services sold.

The transformation of the sector as the penetration of bank assurance, the Assurfinance, and banking-real estate agency promotes more cross-selling. Through tailor-made pricing, offers and services can be complementary and beneficial to customers who already own one or more products and thus meet all their needs (offer a discount on the purchase of a coupled auto and home insurance or credit coupled with car insurance, etc ...)

The additional sales are based on an understanding of the client, and updated as and when relationships are maintained. They depend on the life of the client's potential risk (credit risk) and value ("life time value"). The option to develop the relationship with customers most willing to deepen and extend this relationship is vital.

To stimulate the use and income of customers, relationship marketing must move towards a proactive logic by exploiting business opportunities with specific offers that will be triggered through key moments in the client's life: a real estate purchase, a change of vehicle a termination, etc .... These can be transmitted to the client, on the one hand, in "push" or direct marketing (eg on the web, it displays the customer area of the loan amount for which he is eligible, without having make any loan application), and second, in "pull" or sales rebound as enjoy a call from the client to provide a product or service selected by the system depending on its characteristics.

The Private Equity, a market with strong growth driver - part IV

This dynamic cache, however, concerns related to the evolution of the activity. One of the first consequences of market development of private equity buyout is the generalization of so-called secondary, tertiary and even quaternary view, consisting of leveraged acquisitions of companies already owned by one or more other funds. In 2006, the third type of LBO acquisitions was made through these resale between funds. This type of assembly raises serious concerns particularly related to the high level of debt in these successive operations, which raised fears of a bubble bursting. Indeed, the succession of holding recovery strengthens the total weight of debt in financing the acquisition. But a classic LBO average 70% funded by debt. We can now understand the anxieties expressed about the level of debt when several successive LBOs are made on the same entity.

On the other hand, in a context of rising interest rates, the sector should experience difficulties, but still far from an economic downturn. Indeed, this market should continue to grow in the coming years, particularly in France where many companies are to sell, LBO funds have gained credibility recognized, will no doubt key players in the market.

The number of mega deals (ie acquisitions exceeding the one billion Euros) is more important, the private equity funds have no choice but to raise more funds. This requires, of course, on the one hand by increasing the resources collected from traditional capital providers. But also, for the sake of being less dependent on suppliers of capital and at the same time less sensitive to changes (particularly increased) interest rates on financial markets, the alternative "fund raising" on the stock market seems obvious. The money, usually so discrete and whose activity is based on the original financing of non hand, may now be found in the coast!

The Private Equity, a market with strong growth driver - part III

Then, the low cost of debt, due to low interest rates, gives montages leveraged a significant advantage over other types of acquisition financing transactions. They are based mainly on debt financing of target companies, the current environment when they are particularly favorable to more easily identify a margin between the cost of debt and the return on assets under management. However, this cannot alone suffice to explain the strong growth in activity. Private equity has above all recognition in the governance model in place in companies come under LBO financing. These companies are generally better managed and better valued, and even if some failures can be reported (ten more than 200 annual operations in France), we must recognize that the default rate of the sector is quite low and few are examples of clashes in the area of corporate governance.

Governance is indeed one of the key parameters of a company came under LBO financing. To repay debt must quickly generate cash flow. However, it is recognized that improving the economic value of a target company depends, in large part by the optimization model that will be applied. Therefore, LBO funds agree, from acquisition, to establish a mode of corporate governance more efficient and take the form of a greater focus, accountability of management (generally a shareholder as a result of the operation) and optimization of financial assets.

The Private Equity, a market with strong growth driver - part II

The Private Equity, also known financing LBO (Leverage Buy-Out) groups for its funding and leveraged acquisitions of target companies, usually mature companies with strong growth potential. LBO funds - often associated with managers of the target - develop installation and operation of acquisition of the company with the objective to remain the capital of the latter ideally between 5 and 10 years while significantly improving the result of the business recovery. The solutions for output or funds are then variables: initial public offering, taken over by another fund, an industrial sales ...

Born in the USA, in the 60's, with the purchase by McLean Industries Inc.. Waterman Steamship Corporation, this type of acquisition has been truly popular in the '80s under the aegis of funds such as KKR who have made significant transactions in the image of the acquisition of RJR Nabisco for more 36 billion dollars (which was then the first landmark LBO). The event was followed by a steady evolution for twenty years, but no relation to the recent explosion.

This momentum is the result of a combination of several positive key factors. The first of these is an abundance of liquidity in financial markets. Attracted by high yields (15-16% on average), liquidity providers (banks and insurance institutions, pension funds and private wealth) do not hesitate to fill the capital market allows investors to raise funds more increasingly important. Direct consequence, the number of LBOs has increased but more importantly, the number of very large transactions (over one billion Euros. SMEs are no longer the only target of LBO financing transactions, large groups of interest to certain funds, particularly in terms of business management. So after the frenzy of acquisitions recorded in recent years, these groups now intends to liquidate their related activities generate higher margins.

The Private Equity, a market with strong growth driver

Private Equity market has been experiencing four to five years an unprecedented dynamism. The figures for 2006 speak for themselves:

* 71% growth in business volume in 2006

* 71 billion of funds raised in 2006 or 22% over 2005

* 208 LBOs carried out in France in 2006, with two thirds of companies less than 100M € turnover,

* 1.5 million people now work for a company in France came under LBO, 9 to 10% of private sector employees,

Private equity is one of the five main areas of activity of the market says private equity (intervention in the capital of unlisted companies generally to achieve horizon 3-10 years of strong capital gains), other activities are:

* Seed capital (or seed money) which represents the first stage since it is for investment projects still in its infancy, funded in order to develop a technology still in R & D to enable to go forward to a potential market,

* Venture Capital, also known as the Venture Capital (VC), which translates into a capital in innovative companies, being in the early stages of development and which have a high growth potential but also a very high risk,

* Capital development which is a capital contribution in companies with strong growth but at a more advanced level of development that target companies for venture capital, they are usually companies who have strong financing needs through equity,

* Capital reversal of investing in troubled companies to put in place a recovery plan.

The variations in multi- channel strategy

The challenges of a multi-channel strategy are varied:

* Analyze the appetite canal of each client to use the appropriate channel.

* Update in real time all the information collected on the client and actions taken by the various channels.

* Provide a customer reference and not a contract or agency and reference different keys depending on the location of the system where you enter.

* Reorganize the network with the integration of multi-channel approach.

* To improve reception and increase the return rate to increase the effectiveness of campaigns.

* Controlling costs for greater profitability: to avoid cannibalization of a channel with one that would raise the cost of distribution for an identical volume of business.

The most delicate issue is to control the consistency of the channels. Indeed, the proliferation of channels only reinforces the risks associated with direct marketing campaigns: a campaign will generate even more inadequate for dissatisfaction it has been sent two or three times through multiple channels. Each pipe has its constraints that can undermine the effectiveness of a marketing campaign. The combination of more channels and interactivity allow them to circumvent these risks. To do this, the use of multi-channel increases the requirement on the supply, logistics, commercial pressure campaigns, performance monitoring and adjustments as well as organizational, process information system.

In conclusion, this multi-channel strategy, which appeared some years ago, remains in the crosshairs of the current issues. We have well established the online insurance cyber banking and have not had the desired penetration in the market. The trend can still be reversed and for the moment, many drivers have yet to be exploited:

* Messaging customized web portals of all institutions,

* The design of targeted advertising based on the behavior of the user,

* Improved tools subscriptions on the Internet and telephone (secure sites: electronic signature ...)

* Agency home with the setting up of terminals advisors.

A Vector of Innovation

The French are increasingly using more online banking with nearly 60% of Internet users who visit the website of their bank. Despite this, the agency remains the focus of customer relationship: 27,435 bank branches were recorded in France at the end of 2006, more than 1,000 additional branches in two years. Also, the banking and insurance from a distance, 100% online, limited for now to a few organizations: foreign banks, some credit institutions and insurance so it is important to link the distribution channels.

Personalize the communication and efficient use of distribution channels following the logic of process costs and customer value is the major axis of a multi-channel strategy. Depending on the objectives, policies can be differentiated.

In this logic, combinations client use x x channel are put forward to maintain the equivalence between the link type of transaction / channel and the link type of customer / channel.

Whatever the entry point used by the client, processes are implemented, depending on the task at hand to guide the client to the appropriate channel in terms of palatability and cost (programs incentives such as offers for online subscriptions).

In addition, indirect methods largely complete the distribution of offers and services such as the Broker (TV operators), the network affinity (automobile association for insurers) and the General Agent as an extension of networks of insurance agencies.

Current Status And Challenges of STP and Asset Managers Part.II

The new drivers of STP - the regulatory and standardization work at European level:
The Giovannini Report in 2003 pointed to weaknesses of the RL at European level concerning cross-border transactions. Regulatory works to address them are underway. They will lead to harmonization of cycles RL (and therefore a shortening of RL in some places), and impose a uniform technique, the different tax and legal depositories (CSD) Europe.

MiFID requires the tendering systems RL Europe, in the fall of 2007. The current model of a settlement made systematically at the CSD in the country of the title, lived. If they want to benefit from the introduction of competition, the players in the securities business (especially the trustees) will have to upset their traditional organization into streams.

Finally, Target 2 Securities project proposes the establishment of a European central depository, in 2012. Current European CSDs will have to focus primarily on the functions of overall conservation (settlement being provided by the system TS2), where they will find themselves in competition with the traditional custodians.

In other words, industrialization goes into high gear. For asset managers, the challenge is twofold: make the most of the opening to competition, and ensure the levels of STP always higher.

Set up middle office function common to different managements (conventional management, alternative investments) and various subsidiaries (foreign, for example) are, for large asset managers, an opportunity to reduce costs and increase operational efficiency. It is also a way to refocus the subsidiaries of their management activities.

Finally, some will choose outsourcing middle-office function. Bet that the trustees, in competition with the CSD in the field of conservation, will benefit from their proximity to the asset managers to develop the services of this type.

Current Status And Challenges of STP and Asset Managers Part.I

In recent years asset managers have conducted I their sites, both led to major changes at the organizational level:

* Changing the middle-office business, which has become a business expert responsible for dealing with exceptions STP
* Streamlining and sometimes processing service contracts vis-à-vis external actors (including custodians), and between internal stakeholders (empowerment of front-office concerning the seizure of deals)

If:

* Increased importance of reference for the automation and control requires reliable baseline data (third values, standard instructions and settlement)
* Formalization of business processes and streamlining the distribution of transactions within the information system.

Regarding the matching of transactions and settlement, patterns emerge and process to standardize.

Solutions and centralized automatic matching have emerged as solutions that provide the best rates of STP: 85% of the deals are confirmed on the day when the confirmation is done via a solution centralized matching, only 18% when the confirmation is done by back and forth between asset manager and broker.

ISO 15022 (and ISO 20022, which complements it by adding the XML syntax) makes Swift and fill rules SMPG as a standard interface for the exchange. The standard requires disclosure of such details of RL brokers in the IRL messages sent to custodians.
That said the levels of STP are highly variable, depending on the types of instruments.
For classical instruments (equities, fixed income, forex), the rate of STP is good and almost exclusive breaks STP cross-border transactions and are often caused by contact settlement brokers. The improvement involves the emergence of a global repository recognized by all and a standardization of data exchange between partners. Meanwhile, asset managers shall have in place reference coordinate RL brokers, administered manually.
On the other hand, the level of industrialization is low for complex instruments (derivatives futures, credit derivatives, OTC instruments, etc.). Several obstacles: the lack of standards and "market practices" in terms of formats and exchange protocols; gaps in modeling and benchmarks in information systems, the pace of innovation in front office. The STP is not always possible or appropriate, it requires as a prerequisite to the emergence of standards for external trade, and urbanization work and standardization of trade and in-house repositories.

Opportunities for Custodians

We have watched the race in critical mass which was played at major conservative fund.
And later, we make the following observations:

* the trend towards concentration is more than ever in progress, especially for cross-border acquisitions. As such giants seek the conservation targets of all sizes very small (e.g. BPSS acquisition activities Exel bank ,Spain)
* Most major conservatives have seen their assets under management grow by 50% due to acquisitions of domestic and border ..
* The stability of the classification of the great conservative movement despite the concentration
* the gradual disappearance of the small conservative (a few billion Euros of assets under management). As such, it is clear that the deployment of value-added offers (MO Outsourcing, Pricing OTC ...) but also the increasing complexity of financial instruments makes it difficult to maintain small structures.

The last major change is semantic; we do not talk anymore but preservation of securities services to investors...

Micro Insurance, Natural Complement of Microcredit Part.III

The combination takes advantage of this special role to provide support (including legal) in the Proceedings of the insured. Conversely, insurance products are best developed on the basis of specifications drawn up according to the needs and financial capacities of micro entrepreneurs by insurers who have the expertise and capital required.

It is clear that the design of the two products presented above are based on models of traditional products of insurance (liability, property and casualty business,) well understood by insurers and distribution models have proven otherwise.
The innovation of this type of product then essentially comes from the mix design "optimized" (an insurance policy and a simplified marketing price equal to the cost of production) and distribution of "proximity" (accompanied by networks of initiative Economic and associations).

The need for micro-entrepreneurs in terms of insurance is not new and one wonders why such offers micro insurance was not developed earlier. According to Mr. Schinzler, Chairman of the Supervisory Board of Munich Re, "the premium income is low administrative costs are relatively high and the infrastructure is lacking, as many arguments justifying the lack of interest of professional insurance for this market".
Micro insurance, such as microfinance as a whole, should not be seen as the broad market of tomorrow huge future profits (insurers partners do not mark-up on products and distribution fees are zero). Today, it should rather be seen as an activity to meet the challenges of sustainable development in Financial Services, a theme which is too often accused professionals of this sector of disinterest. The many recent initiatives in this area show the contrary a real desire...

Micro Insurance, Natural Complement of Microcredit Part.II

This is compounded by a range of options such as auto insurance products or comprehensive household. Lasting up to 4 years, time required for proper insertion into the economic fabric, it is available for less than € 1 per day.
The second offer was launched by AXA and Macif in partnership with ADIE in May 2007. Partly similar to the basic coverage, duration and price, it differs from the previous offer additional guarantees for specific depending on the type of activity. Note, for example, guarantees given for construction activities (from € 1,000 / year) that are legally binding assurances.

It is interesting to note that these offers are based on micro-insurance business model "producer-distributor-guide". To understand this model, back into the mechanisms of insurance. In an offer of insurance, there are three groups of activities involved: product design, sales and service. The design is linked to both the development and pricing to risk management of the insurance portfolio and investment of reserves and annual premiums. The sale includes all activities related to marketing, promotion and sale of the product. The service includes the collection, continuous premiums of policyholders and settlement of their compensation.

In Model "producer-distributor-guide", the producer performs all activities of product development and sometimes after-sales service, while the distributor is responsible for the act of selling the product that was recommended previously by the attendant.
Networks to aid the economic initiative are well equipped to play the role of accompanist, using the leverage of their existing networks and building on already established relationships of trust with the micro entrepreneurs during assembly files microcredit. The staffs of these networks still need to be trained in insurance products to be able to perform its consulting business.
The coach may also carry out the deed, but most often it is the producer or a third actor playing the role of distributor. In the provision of Contractors of the City, aid networks are not selling, they are responsible to the requirements and redirect to the creators of the City Entrepreneurs who takes care of distribution (no commissions) micro insurance products through its association and support the service remaining the sole representative of the member.

Micro Insurance, Natural Complement of Microcredit Part.I

After demonstrating his interest in developing countries, micro-insurance - like micro-credit - investing developed countries. As proof, two offerings aimed at micro insurance. Little publicized the world of micro nevertheless exciting. According to a study of DCASPL, 1 January 2004 there were 2.39 million in France microenterprises alone that too, more than 95% of European companies. All of these micro-employed 5,798,700 people, that is to say one quarter of salaried jobs, and generated the same year more than 8% of exports. In other words, micro enterprises are companies that have real economic importance, and much more, social.

Interesting phenomenon, according to INSEE figures for 2004, more than 220,000 microenterprises have been established. And nearly a third of the creators were unemployed (half for more than a year). That is to say that a large proportion of these newly created small organizations, which are inherently fragile, are supported by people particularly vulnerable.

To address this vulnerability, micro entrepreneurs can find support from actors to promote economic initiatives such as PACE, ADIE. In addition to expert advice, these players offer solutions to meet the needs of two main creators: to finance their project and manage risks.

Broadly, there are three main types of risks faced by micro entrepreneurs:

* The damage that the company may suffer in case of disaster;
* The damage could cause the company to third parties;
* Risks that relate to people (health, disability ...).

While microcredit is now well accepted in France among the types of funding, micro insurance is currently not among the first their risk management solution. Yet it is a natural extension of microcredit, to secure and sustain the long term activity initiated by the micro-entrepreneur.
The first offering micro insurance was launched in France by Contractors of the City in December 2006. This "First Insurance Package" provides a standardized insurance policy covering the three major types of risks faced by micro entrepreneurs and comprehensive coverage including professional liability, Welfare and Health.

Country Risk Part.III

During the introduction of the Cooke ratio, depending on whether the country was a member of the OECD or not, the commitments to residents of foreign countries were weighted at 0% or 100%. A debt security issued by a government could therefore not return in the calculation of the Cooke ratio, which consequently gave an advantage to OECD countries until 1994 and the opening of the more "modest”.

As part of the Basel II regulations, the IRB approach (Internal Rating Based) implies the existence of a probability of default for counterparties. But is it really possible to speak of "default" for the country? The S & P introduced the notion moreover SD (Default Selected) to report that states do not honor their debts, since technically they cannot be made bankrupt and businesses. Of default of a country therefore requires analysis of the creditworthiness of the state. It is thus necessary to understand properly the impact of the fiscal capacity of the State concerned on its ability to repay and to define an acceptable level of debt for sovereign debt. However, these problems are more related to the concept of sovereign risk than that of country risk as a whole; demonstrate once again that the concepts are very similar.

Investing in emerging high growth is an important trend as evidenced by the proliferation of funds BRIC (Brazil, Russia, India and China). However, although the results are quite encouraging, these investments are not safe because these countries are not immune to political tensions, as their market is very volatile at times and finally as a big part of the investment is located in the energy. That's why the rating agencies are requested by the fund managers to reassure investors, the country risk analysis and must rest.

Country Risk Part.II

Country risk is actually a combination of a multitude of risks influenced by three types of factors:

* Economic and financial factors (banking systems failing, unstable tax system, poor management of public finances ...)
* The political (legitimacy of governments, political repression, censorship, ...)
* (Socio-cultural attitudes and traditions, unequal access to resources ...)

The diagram below provides a framework for country risk analysis, the aim being to understand that country risk can be approached through a large and varied risk factors (both domestic and international).


What are the measurement tools available to risk such a company wishing to conduct an operation of setting up abroad? Two main tools are characteristic of the analytical framework for country risk:


The rating is the most used tool in the evaluation of country risk faced by business entities that have concluded a contract on an international scale. The ratings are mechanical projection of reality on a scale of one-dimensional notation. Rating procedures use criteria (economic, financial, political, social ...) very objective to make the mechanics 'scientific'.

These are essentially specialized agencies that are responsible for developing the ratings. These institutions are in most of the rating agencies (Fitch Ratings, Political Risk Services, Moody's and Standard & Poor's), but also specialized firms (Business Environment Risk Intelligence and Economic Intelligence Unit) and financial newspapers (Institutional Investor). In Europe, such as credit insurers Coface (French Insurance Company for Foreign Trade) have a role in that country risk analysis. Indeed, COFACE is often the preferred partner of SME exporters who lack the internal resources of country risk analysis.

Anticipation instruments par excellence, the risk scenarios is another essential procedure in the analysis of country risk. They aim to make combinations of multiple risk factors (economic, political ...) in "stressful" varying characteristics and for different time horizons (short, medium and long term). Scenario results then allow investors or bankers to have a more comprehensive range of their potential gains and losses, which will influence their choice whether to launch the operation.

Country Risk Part.I

The Mexican debt crisis in 1982 which forced the country to introduce a moratorium is one of the first and most contemporary manifestations of country risk. The concept also takes full extent over the 90 years with the crisis countries. Emerging from 1997 Asian crisis, Russian crisis in 1998 etc. Indeed, given the globalization of the economy and the succession of crises due to the expansion of capital movements in the world, economic agents and financial choices for their particular investment and acquisitions, need accurate information on the assessment of risk profiles of the countries covered.

A single definition of country risk is difficult to provide to the extent that it is a composite concept. Country risk encompasses all actual future events that may affect a financial investor in the conduct of its operations in relation to a country called "at risk". The risks mentioned are related to the state of the country, regardless of the quality of the debtor or the project.

However, if the concept is difficult to define exhaustively, his analysis is far from insurmountable. Many tools and procedures are available for players to understand this risk.

First, the concept of country risk and sovereign risk are often confused. Sovereign risk is the risk for financial institutions to see the sovereign (central government, ministries, local governments and regional ...) which they have granted loans, unwilling or unable to meet its payment obligations to them. Country risk in turn has a much broader scope because there is no concept of "sovereign", the entity in question is the entire country. The two concepts are nevertheless closely related. Indeed, as part of a scoring, note the Sovereign cannot be too far from the rating of the country, the quality of the first depends on the country's environment and the decisions of the Supreme rarely without consequence on the functioning economy.

China raising up ...

China is emerging as both leading markets and rising economic power, and meeting with impressive rates of double-digit growth for several years. China's financial sector also benefits from good economic policy. countries, also following the path of openness and market liberalization in accordance with agreements signed by China to the WTO in January 2001 emerging well.

Historically, between the restructuring of agriculture, industry and the banking sector, the government, in the early 1980 gives priority to primary and secondary sectors to the detriment of the banking sector which will bear the cost of the transition economy. This position has resulted in delaying the development of banks in China and weighed on the accounts of the major institutions with bad debt rates sometimes exceeding 40%. Faced with the need for modernization of the Chinese banking, the government changed tack and have signed the WTO agreement to liberalize the banking market in 2001.
Since then, many international banks, anxious to find alternatives to growing their domestic market less dynamic, investing heavily in emerging countries and primarily in the "Middle Kingdom" which presents serious advantages …

Since January 2007, the news is full of examples of foreign investment through equity, joint ventures or acquisitions in the Chinese banks. We made especially Citigroup, which won the "Guangdong Development Bank" in front of the SG, Bank Of China 10% owned by RBS or the Construction Bank of China 9.1% owned by Bank Of America. Overall, although the role of foreign banks is negligible - they represent less than 2% of Chinese assets - their position continues to grow.

Chinese and foreigners have much to gain from the recent opening of the market (2001). Indeed, the Chinese banking sector needs foreign players to upgrade the profession and make a transfer of skills; foreign players in turn reap the benefits of Chinese growth.

However, prudential Chinese are real barriers to entry for foreign banks: capitalization of at least 1bn Yuan, exposure to a single client must not exceed 10% stake in the subsidiary and the ratio of loans / deposits do not exceed 75%.

But the stakes are: market access abysmal savings of Chinese households is worth the investment for many banks and foreign insurers. Candidates rush to the office of the CBRC (China Banking Regulatory Commission) and the Chinese newspapers that tell of six banks, want to establish subsidiaries of Chinese law. Several big names such as HSBC, Citigroup, Deutsche Bank or JP Morgan have also applied. It's a safe bet that the list will grow as and regulatory developments and market opening...

New payment methods, to configure market Part.II

Deregulation also imposed with the SEPA will work no doubt for these new products, improving competition and market dynamics. However Europe's payments, particularly heterogeneous, certainly will offer a unique business model and transposed from one country to another.

The payments market is evolving towards a model driven "co-distribution". For credit institutions, historical market leaders, the challenge is to partner with as soon as new entrants, suppliers of innovative materials. This is not only to respond to the risk of decline in the volume of commissions received, but also to offer their business customers innovative and robust solutions, and this, as soon as possible to maintain their market share. The players in the consumer credit will also fit on their revolving credit card.

Sites are consistent adaptation to provide both a business perspective (definition of responsibilities, risk management, targeting policies and pricing ...) as a point of view of information systems (changing production tools and CRM, electronic banking trade flows with partners, upgrade repositories ...) The needs are also important to provide training in the branch networks, to spread the new methods of marketing and loyalty.

Finally, the area of payment being in a phase of great change, both in terms of regulation or in terms of new offerings / technologies, some players have an attitude rather than "defensive" (including banks ...) while others may adopt a logic "offensive" to take advantage of this window of opportunity to enter the market. In all cases, regardless of the type of actor, it's being played today that the reconfiguration of the market tomorrow.

New payment methods, to configure market Part.I

There are innovative ways of payments in the market. The payment of the future just around the corner: NFC mobile phones, TPE biometric or contactless cards etc. Given the diversity of solutions, potential entrants and business models possible,

In the United States and Great Britain, stores now offer the ability to adjust by putting his finger on a biometric TPE. This device allows in particular reducing the rate of commissions charged to merchants by offering an alternative to traditional electronic payment networks (MasterCard, Visa, Amex ...). A single operator manages all the activities: Registration and scanning fingerprints, food bases CRM containing biometric markers, center management authorizations and payment instructions via electronic checks.

Asia is basically the payment by mobile phone that has developed. These are the operators themselves who are behind this revolution, like NTT, Do Como - the first Japanese operator - which now has a banking license.

Other supports innovative payments, already launched or still in study, will also put in place: contactless payment card, bank transfer by SMS, prepaid bank cards, biometric payment online ...

In Europe, experience "laboratories" abound, but no business model seems to be finalized at this point. Bids still need to mature to provide an appropriate policy mix in terms of palatability and customer profitability, particularly in arbitrating on the following:

* Choice of media and associated technologies: NFC mobile phone (with card integrated or not with the SIM card), biometric POS, RFID card reading (with or without chip), USB drives to borrow for online payments ...
* Types of payments and services available: electronic wallet, bank account debit (backed or not network card), revolving credit line, transfer, various insurances ...
* Partners in the presence and role distribution business (distribution, retention, risk management, billing and collection ...): banks, telecom operators and MVNOs, biometrics specialists, retail signs, payment networks, card manufacturers and chips, cards and managers authorization centers ...

Carry Trade Part.III

This trend leads to a significant increase in financial markets, coupled with the disappearance of the concept of risk in the minds of market players due to a depletion of non cash flow. However, a decline of return on financial markets, a sudden reversal of the market, would result in substantial losses for investors, given the high level of leverage and risk now borne in the carry trade. Such a situation would cause a repositioning of investors followed by a rapid and concomitant unwinding of positions in many currencies.

The lower level of liquidity resulting from this movement would affect all markets and could be the detonator of a global currency crisis or a global economic crisis. The same situation was experienced in 1997-1998 in Asia while the yen carry trade operations had already been implemented and that the Russian market, object placement, had fallen sharply. Today the extent of yen carry trade is more important and the crisis would reach Europe and the United States, countries in which investments are made.

Against a backdrop of continued increase in U.S. and European markets, increasing the risk borne by financial transactions recently introduced, the Japanese monetary policy is closely watched by central banks. To prevent slippage of the financial markets, a gradual closing of the "tap" cash is needed and must go through a rate hike. However, the continued movement deflation in Japan does not motivate a significant rise in interest rates. Japan cannot afford to hire a genuine policy of monetary tightening; the Bank of Japan announced Feb. 21 an increase of 0.25% and should not go much further in the short term.

Several questions arise: what are today the real levers available to the Bank of Japan? Central banks have they any means to influence the global liquidity? Is it too late to avoid the worst?

Carry Trade Part.II

Since last few years, the carry trade is the most developed of the yen carry trade, however, note that they are also processed the Swiss franc.

For investors, the yen carry trade is interesting on two levels: firstly because of the difference in rates (the Bank of Japan lends at a rate of 0.25%, while investors can invest this money to rates above 5% in England and the United States), secondly because the yen's depreciation during the duration of the operation.

The situation faced today was introduced by Japan's economic policy. Following the crisis of the 2000s, Japan and the United States and Europe have dropped their rates sharply to avoid an economic slump. However, if the United States and Europe have been sharply reversed the trend, growth in Japan that has developed since then have been accompanied by a significant reduction of unemployment, low wage growth but to no inflationary pressures, the Bank of Japan was not forced to change its monetary policy and rates remained extremely low (0.25%). The yield spread, which has gradually opened up between the rates of Western central banks and the central bank has caused the Japanese yen carry trade phenomenon. The main actors are not taking advantage of that opportunity, the more comfortable it is artificially maintained by the Japanese central bank and no sign of change seems to appear.

However, significant risks facing the global economy. The current danger is that the carry trade is no longer limited to playing on differences in rates, but it greatly increases the global liquidity moving into the pockets present in economies with weak currencies to countries with high rates. The yen is borrowed in dollars, pounds sterling, Euros ... then invested in operations with high leverage.

Carry Trade Part.I

The asset borrowed at low rates is placed in high-yield assets is otherwise called Carry trade. Today, the phenomenon has grown strongly over the yen and becomes problematic. Many analysts calling the Banks to reconsider their policy. They do not seem to find echoes in Japan, but show an awareness of the danger generated. However, non-termination of existing problem at the G8 conference does not seem to go in the direction of a rapid response. The carry trade exchange, a concept theoretically unworkable in the long term.

A carry trade involves borrowing in foreign exchange currency in a country where rates are low, to change this amount in a currency "strong" and place it at high rates (treasury bills ...). Theoretically, the operation of the arbitrage transaction is ephemeral because the markets are efficient (at each moment is a financial security to its price) and rebalance through exchange rates and interest rates.

Moreover, because of the rule of parity uncovered interest rate, the interest of such an operation is theoretically zero. Indeed, a difference in rates between two countries reflects inflation differentials. But these differences are offset by a realignment of exchange rates. Thus, when an investor speculates on the difference in rates between two countries, he loses the same value on the exchange. That said, sometimes the law does not hold true in fact and that the currencies of countries with low rates suffer the opposite effect and depreciates. This is the case on the yen, which reached historic lows against the U.S. dollar and the euro.

Second life Of Online Banks Part.II

Boursorama is a convincing example of this model. Since its merger with Societe Generale, Boursorama is no longer confined to the business broker but has become a real bank. However, if the online bank has no place as an independent financial organization, recent operations have shown that banking online is now essential to any actor with a network. Newcomers in the banking landscape have understood. Insurers having embarked on the adventure of assurfinance began by acquiring or developing a range of online banking in addition to the existing branch network.

The acquisition of online banks by banks should not be seen as a way to computerize the customer relationship. Indeed, banks are now looking to boost their network by opening branches. The agency is the best way to attract customers, offering Internet users the opportunity to simplify the management of current operations.

Nevertheless, some players have managed to build a profitable model around online banking service. This model is based on tactical development articulated in two phases:

(I) a startup focused on specialized and profitable activities. For example, the tactic is to capture customer deposits and generate commissions on high value added activities (securities, life insurance ...) for which the customer is willing to pay.

(Ii) extension to activities of daily bank (current accounts, credit card) which are less profitable, because requiring investment in major infrastructure, earn little and are subject to very strong competition.

Second life Of Online Banks Part.I

In their early days, online banks were intended to attract a large clientele by proposing a new model of bank: Account Management possible at any time and from any computer connected to the Internet, with an offer "discount". Using the Internet as the only interface between the bank and the customer had in fact enable substantial savings, both in terms of personnel but also capital assets. Thus, online banks offer rates were very aggressive on a range of services equivalent to that of a traditional bank. However, they failed to offer prices low enough to stand out, to forget the absence of physical relationship between the customer and the banker, and succeed in capturing some of the customers used to a classical model.

Weakened by the explosion of the Internet bubble in 2000, online banks could not withstand the intensity of competition in the banking sector, especially as traditional banks, although lagging behind the banks line, developed or acquired equivalent services. The interest of a pure player in online banking has therefore been questioned since it was possible to combine customer relationship in a network, and maximum flexibility via the Internet. The only entities that have managed to sustain their existence are those that are backed by a bank, maintaining an independent identity. This allowed them to diversify their services, taking advantage of operational know-how and organizational parent companies and thus offer very attractive prices.

Back testing and Benchmarking Part.II

Used properly, they can calibrate (or recalibrate) rating models and thus risk tools for the granting of products or assessing customer behavior, in particular by responding to the following problems:

* Expectations of risk of the entity are they consistent with the materialization of this risk (making)? This article seeks to back test the risk parameter ex post with the estimated parameter ( back testing, diagram below).
* What is the position of the entity namely entities instead?
* Expectations of risk of the entity they are consistent with those instead? Benchmarking of the estimated internally with the external reference system can respond to this question (benchmarking model).
* Achievement of risk is they consistent with those instead? (Benchmarking loss or damage).
Answering these questions provides a comprehensive framework for monitoring and supervision mechanism of risk.

If the qualitative interpretation and the decision process can be automated, the industrialization of data flow and processing (collection, data storage and consolidation of often disparate information from divergent SI) should allow an optimal analysis results and a realization of recurrent exercises. The aim is to produce a more reliable and suitable reporting activity and minimizing its cost both in terms of budget and time.

In the context of benchmarking, the nomenclature of internal data is a priori different from the external data device, comparing the risk parameters on a common nomenclature is essential. The mapping is then to map data sources through the adoption of strict rules and documented. In practice we retain the system that will optimize the granularity of the correspondence between the two sources to minimize the loss of information.

Element's overarching Back testing and benchmarking, performance feedback must meet three key points:

* Restitution little difficult in terms of statistics and mathematics, to make operational results and convert analyzes corrective actions;
* Flexibility in handling, in reviewing and reading the results;
* Annexes detailing the key elements of the analysis.

Back testing a draft and / or transverse Benchmarking is because it requires the participation of several entities of the bank. Indeed, to be valid, corrective action affecting a parameter of risk must be decided collectively between committees at the central management of risks, crafts, commercial and financial management.

The challenge of such a project is not only to ensure the accuracy and consistency of rating systems and procedures and the estimation of risk factors, but also to develop and propose a real risk management tool and decision support.

Activity Based Costing or Management

Back testing and Benchmarking Understanding the mechanisms of formation costs to identify areas for improvement in profitability is the primary purpose of the ABC / ABM (Activity Based Costing / Activity Based Management). It is indeed a powerful analytical tool which allows to decompose and analyze the costs of products and services sold (to customers both internal and external clients).

Policymakers have through this method of indicators structured to enable them to consider changes and simulate their impact in terms of costs and therefore profitability. By the adaptation of the process, creating a new product, the projection of a new organization are guidelines that can be accurately valued using the ABC model. Officials thus have elements that accompany in their projections and decision making.

The method is now developing rapidly in Financial Services, with a view to constantly improving the profitability of operations. The factoring industry is no exception to this trend in a context of shrinking margins, among others. It is now necessary to drive a very thin cost of each activity and each service. Furthermore, the implementation of this approach is the opportunity to industrialize its processes (if not already) and to induce a change in the behavior of internal company departments (development policy consumption of resources and activities, awareness of the concept of internal customers requiring a relationship and level of service as professional as the end customers).

The objective of this is to illustrate the development and gains of the method applied in the context of factoring.

The euro is still down because of the Greek debt

The euro is still down penalized and remains under 1.44 dollars. This decrease is due to contamination of the single currency by the debt crisis that has invaded Greece and continues to do its thing. An urgent solution is needed!

After the decline experienced by the euro last Friday, the Euro has not had his best performance this Monday either. It seems that money is slow to find its stability. The Arab Spring, revolts in Spain and Portugal are to blame.

The Euro went back a bit against the Japanese currency to 115.44 yen against 115.22 yen Friday. The dollar was in recovery against the yen at 80.48 yen 80.31 yen against Friday night.

Rising interest rates and expectations of an increase in reinforcing the attractiveness of a currency, especially against the dollar, which offers a yield close to zero since the outbreak of the financial crisis in 2008.

However, investors seem to focus again on the lack of compromise in Europe to offer financial support for Greece which is in great economic difficulty.

Germany's persistence that private creditors share in the cost of the subsequent plan projected aid for Greece is about to be discussed by the working group in charge of the euro area to achieve a coherent plan.

European currencies have also affected from unsatisfactory level indicators of industrialized manufacturing in the euro area than in the UK but also in Sweden.

Adoption of the Directive ISA, Was it a compromise? Part.IV

The burden of proof is reversed, the depositary and will be responsible for loss of assets under custody unless he can prove that the loss is the result of an external event, beyond its reasonable control and the inevitable consequences. The proposal adopted, which evokes a "reasonable control" of custodian, is less severe than the original text. The depository will retain the option of using the sub-delegation, initially excluded, to transfer its contractual responsibilities, which will be accompanied by due diligence work and reporting to the authorities further.

The lobbying industry seems to have paid to alleviate the new obligations. The profession can still expect some changes coming about the chain of responsibility, because it seems that the Commission expected the adoption of the Directive before opening the ISA site clarifying the responsibilities of the holders of UCITS, and this is likely to make changes at least as demanding.


The vote by the European Parliament Directive ISA shows how the negotiations were laboring among the proponents of a regulatory status quo and those seeking tighter control of the financial industry. As usual all the European players have found a compromise of the confession of all is a "lesser evil". But unlike the UCITS IV Directive which was carried by the entire profession, this directive was made reluctantly ISA and its scope is thereby limited. While hedge funds are going to have a regulatory framework in Europe but it is relatively flexible. Nevertheless, the establishment of ESMA is a breakthrough that will require the supervisor to give the EU means to realize its ambitions to acquire a globally recognized authority. The problematic status of depositories is idle and this will invite themselves to the agenda of the future Directive UCITS V. The vote of the Directive ISA is a first step and the path is far from complete.

Adoption of the Directive ISA, Was it a compromise? Part.III

The agreement on the principle of supervision by ESMA passport allows France to take the chairmanship of the G20 in a strong position on the progress of work relating to the supervision of European financial markets.

Directive ISA ruled on the delegation of function of management companies and hedge funds of their depositors. Overall it adds considerably to its terms.

The delegation function is to use a third party to perform the tasks for which an actor is originally mandated. At the management company of AIF, the delegation of two types of functions, portfolio management and risk management, will now be regulated by the Directive. A management company will want to use will now justify an objective reason to use it in order to increase efficiency in the conduct of its business. But it should also be noted that the legislative framework has eased since the adopted version includes the possibility of using the sub-delegation, the possibility of missing the European Commission proposal of April 2009. However, the reporting requirements are considerably increased and the Directive specifies that the management company may delegate to the verge of becoming a "mailbox company", a term already used in the UCITS Directive.

At the depository, the Directive makes a significant change in its area of responsibility by delegating its functions. It is imposed an obligation of result as it was until now under an obligation of means (having led the due diligence necessary to meet the quality standards expected). Although Made off has already dramatically changed the spirit of the obligations to be met by depositories, with the conviction in France of two players to repay funds whose assets were delegates at Lehman Brother, nothing was previously written in this form. The consultation on UCITS depositaries, led by the European Commission during the summer of 2009, had already identified a need for clarification of the responsibilities of trustees. It seems that the message was taken up for hedge funds.

Adoption of the Directive ISA, Was it a compromise? Part.II

The main idea of the Directive is to oversee the marketing within the EU funds alternative:

* Non-European societies and non-domiciled in Europe;
* European societies but not domiciled in Europe;

through the award of a European passport attached to the funds must undergo an enhanced transparency, the image of what the UCITS IV Directive (Undertakings for Collective Investment in Transferable Securities) is doing for European UCITS funds.

Few countries has long opposed a plea in the European passport, claiming that only a passive marketing of these funds along with the status of private placement is appropriate, given their investment strategy and level of risk. The main risk cited to support this position was to see a licensing procedure more or less flexible according to each European country. Some might be tempted to offer a more flexible regulatory framework to capture the domiciliation of funds at the expense of other countries, with the consequence of pulling down the quality of the passport. In the final stages of negotiations, France has finally decided on the European passport, provided that it is more strict, that is to say, supervised by the future European authority market supervision (ESMA) who will take office on 1 January 2011 (and not only by the public authorities of member countries). The passport will be introduced from 1 January 2013 to cohabit with the national authorities until 2016 to allow time for ESMA to adjust its standards. ESMA will ensure that non-European countries, host of hedge funds, comply with the principles of the regulations in force within the EU. It is also anticipated that in 2015 the Commission makes an assessment of the implementation of the directive and to pronounce on a possible extension of the powers of ESMA.

Adoption of the Directive ISA, Was it a compromise? Part.I

Proposed by the European Commission in April 2009, Directive ISA on hedge funds (Alternative Investment Fund Managers) was passed overwhelmingly by Parliament 11 November 2010.

The draft Directive is that born of the political will to increase the transparency and regulation of the financial sector following the 2008 crisis.

In this general hedge funds have been pilloried particularly because of their opacity and systemic risks they might pose to financial markets and on whole sectors of the economy. Designated block, the funds "alternative" yet includes wide range of industries: venture capital, buyout capital, real estate funds and hedge funds, which had all the complicated drafting of common rules in these sectors. The main projects of the Directive focused on reducing systemic risk, on increasing the power of supervisory authorities on the improvement of investor protection on earnings and on the development of a European regulated alternative management.

Lengthy discussions on this Directive have been intense lobbying by supporters of the status quo countries (UK, Ireland ...) and those advocating stronger regulation of the financial system (France, Germany, ...). Michel Barnier, European Commissioner for Internal Market and Services, has spent all his diplomacy to bring together the viewpoints around a unifying text; But at what price?


The treatment of third countries was one of the blocking points of discussion in the Council of the European Union given its potential impact in London, second in from hedge funds, representing one trillion Euros of Assets under management at end 2008.

Time mentioned, a simple refusal of the marketing of hedge funds not registered in Europe would have a major impact on the industry with approximately 60% of hedge funds are domiciled in countries offshore cons less than 5% in Europe.

The art of negotiation among management companies Part.III

The added value of management companies is based largely on the expertise of their managers. Asset management requires special expertise in research, analysis and asset allocation. Stock selection is the differentiating factor between two managers operating on a single asset class. It is illusory to believe that the outsourcing of the negotiation will generate a visible economy for clients in fund performance. The cost of passing order on the European market is marginal (around 10 basis points) with a strong competitive pressure between the brokers and trading venues. However, the hidden cost of time spent by managers to negotiate orders is increasingly important. Markets in Financial Instruments Directive are of complex activity that is not the heart of business managers. Take away this activity is a real opportunity for management companies that have the critical mass to do so. Still it must choose the organization most in tune with the business strategy and needs. There is no optimal model but a more or less well adapted to the demands of each society.

The outsourcing of the table can be made either:

* Internally within a banking group Intermediation.
* Externally within a company without any financial relationship as proposed.
Whatever model is chosen, the expected services are identical and they cover at least:

* product coverage in line with the needs of the management company enabling it to cover all stocks in its portfolios. This coverage should be as broad as possible in terms of asset classes (stocks, bonds, fixed income, OTC derivatives,) or geographical areas (Europe, Asia,)

* An immediate liquidity and maximum with the connection to all major trading venues (regulated markets) so as to capture liquidity and find the best tariff for execution. Of course, each transaction is respecting the execution policy established by the management company.

* Cutting-edge technology to successfully carry out the rules laid down in the policy of best execution. Markets in Financial Instruments Directive require proof that orders are made in the best interests of customers with traceability and archiving every transaction regardless of the broker or the place of negotiation. These investments in systems of increasing complexity are not always accessible to small societies. Beyond these basic services, independent negotiating structures develop and grow their service offerings to add value for companies seeking to offload management activities become peripheral to the image:

The art of negotiation among management companies Part.II

The idea has made its way to separate business management and negotiation. This segregation has the advantage of refocusing the business of asset managers on their heart and professionalizes the art of negotiation with the function of internal or external specialists.

Overall, the large organizations are possible for the trading activity in corporate management. The organization currently in place in most societies, is to entrust the job of negotiating with managers Organization. This model is suitable for entrepreneurial companies with a reduced size. For the latter, the separation of functions does not make sense because the economies of scale will not be sufficient to cover investment and fixed costs of a dedicated table. Consideration is still to carry out in order to study the possibility of a negotiating table outsourced Organization if they want to outsource this activity.

The first two organizations are in place historically. They remain highly topical for asset managers wishing to retain this activity in-house growth despite its complexity. Indeed, outsourcing is not always the best answer. The best evidence for activity reporting, which is considered strategic for many players despite the maturity of the market for outsourcing by the Custodians. The price test is a key element since the investment for the implementation of a table is important, the order of 1 to 4 million Euros, with a recurring cost close to 2 million Euros year. At this price, it is not opportune to embark on such a structure for less than 20 billion Euros in assets under management. Given these numbers, why reflections flourish among asset managers who are considering very seriously the outsourcing of this business after having already outsourced recovery, back office, middle office and more sporadically reporting?

The art of negotiation among management companies Part.I

Management companies are now undergoing profound changes to align their organization with their environment more and more moving. This activity is at the heart of recent regulatory changes in the regulation of European financial system. After the global changes they all are impacting the heart of business asset managers who need to rethink the scope of their job to keep the heart of their market share. There is also a strategic repositioning of universal banks with the creation of joint ventures or transfers.

Faced with such a movement, strategic thinking have addressed the issue of operational efficiency and focusing on the heart of art. Markets in Financial Instruments Directive without being itself the cause put a spotlight on the art of negotiation in most facilities asset management.

Historically, the art of negotiation is provided by the portfolio managers. These are dedicated portfolio management (analysis and monitoring of values, investment strategies, risk monitoring and ratios, respect of management objectives) but also the passing of orders. This second activity is highly time-consuming, to the detriment of the former which constitutes the real value of the managers. The introduction of Markets in Financial Instruments Directive, with the proliferation of trading venues, but also implemented the policy of "best execution" (obligation to justify the application of best execution to the client), has added trading activity. In order to process orders in the best possible conditions, management companies must connect to the main trading venues so that they can offer their customers the most advantageous terms. This search for best execution (both in terms of price, safety, reliability and traceability) requires an overhaul of the processing chain of command.

The Effects of Adoption of Directive ISA Part.III

This framework has become particularly important for investors after the crisis. Indeed, many people who keep a bitter taste for excessively long periods of redemption given by some hedge funds, sometimes by breaking the terms of liquidity initially set. However, the entry of this new type of management strategies in a world hitherto occupied by standardized strategies and has known the risk of blurring the recognition gained by the UCITS label. Alternative strategies in place may pose risks not previously present in UCITS funds, including through use of complex derivatives. When using these instruments has been expanded with the publication in March 2007 of the Directive on eligible assets for UCITS III funds in the funds market Newcits was much narrower. For this reason, the introduction of funds from investors Newcits unskilled, which by definition cannot lead themselves a thorough due diligence on their investments, will likely require a level of information about the risks higher. The principles of Markets in Financial Instruments Directive should nevertheless partly to help distribute these products exclusively to European investors who understand.

The adoption of the Directive ISA has significant effects. By imposing new constraints on the personnel of hedge funds, it sets up very restrictive measures that will harm may be a first step in managing European alternative. But the whole directive, which provides greater transparency, hedge funds could boost the long term. Development funds for its Newcits represent a significant change in the landscape management. But the UCITS label must remain strong and its reputation and why the danger posed by the funds must be Newcits of attention. In fact behind the possibility of allowing individual investors in Europe to access a range of wider product, allowing them to diversify their investments, hides a real risk of cannibalization of the label. However, the readability of UCITS is a major asset for marketing to international investors. It is likely that the industry will look closely at this intrusion of hedge funds that can really tarnish the image of the dearly bought by European management.

The Effects of Adoption of Directive ISA Part.II

The novelty is real alternative for players, but already partially implemented by many of the banks after 2008 under pressure from governments. Part 3 on the CRD remuneration’s extension is to hedge funds relatively quick. A substantial increase in the fixed part is to provide for categories of personnel involved in hedge funds, like what the investment banks have made since 2009 in anticipation of regulatory restrictions bonuses.

In the market for asset management, anticipation of the adoption of the directive has had the effect of fostering the development of a new type of funds, qualified by the industry "Newcits. These funds are in place alternative management strategies usually developed by hedge funds in the regulatory framework.

The combination of an uncertain legal environment and the ability to raise funds from a new segment of investors, have decided the alternative managers to develop their strategy through UCITS vehicles. The entry into force of the UCITS IV Directive in July 2011, and the possibility for UCITS to receive a European passport for marketing in the EU could also weigh in the choice. This enthusiasm is reflected in the numbers: between September 2008 and May 2010 the number of funds Newcits almost doubled, from 270 to 520 funds and assets under administration from 45 to nearly 90 billion Euros.

Symbolizing the development of this type of fund, the index "Ucits HFX Index" to track the overall performance of these funds, was launched in February 2010. In view of investors, this new category of funds has some attractive compared to traditional hedge funds: diversification, leverage, valuation and liquidity are strictly supervised.

The Effects of Adoption of Directive ISA Part.I

Recently adopted by the European Parliament, the directive will come into force ISA in January 2011. All decisions taken under the ISA is a turning point for the industry of hedge funds because of restrictions imposed.


The national authorities of EU countries have a period of two years to transcribe those rules in their legislation, particularly on the issue of the European passport. However there is already fairly immediate impact in some areas. This is particularly the case for compensation in hedge funds and development of a new market, the UCITS alternative points on which we intend to return.


The compensation of hedge funds is generally of the type "2 / 20," that is to say 2% management fee and 20% of the outperformance retained by the manager. In terms of compensation, important work had already been conducted during the update of the directive regulating the implementation of Basel II (CRD 3 - Capital Requirements Directive - adopted by the European Parliament in July 2010). Its conclusions were largely contained in the Directive ISA. The main change is to align the distribution of salaries on the level of risk and lifecycle funds managed, and this with special attention on the variable. It found that 40% to 60% (depending on its size) of the bonus will be deferred over a period of 3 to 5 years and at least 50% should be distributed in shares themselves kept for a minimum period. Thus, for a variable compensation of € 100 K, a maximum of € 30k will be paid in cash the first year. Moreover, in case of negative performance of the fund, the amounts paid by the fund to employees may be partially recovered through mechanisms of penalty. The directive was not set up a ratio between the fixed and variable, merely specify that the two must be balanced, and fixed high enough to allow the non-payment of a variable, which guarantee payment is now banned. Because of work already conducted in CRD 3, Directive already provides a great level of detail through an appendix describing the new remuneration arrangements.