- 1.IT in Banking in Central Europe An Overview Enterprise
Ireland Dublin November 2006
2. Content
- Development of the Banking Sector
- Overview of the Banking Sector in Central Europe
- Differences to Western Europe & Business Trends
- Key Areas of IT Opportunity
- Strategies for Winning the Business /Decision - Making
Process
3. Introduction to G&C Management Consulting
- Banking and IT Consulting Company
- Founded in 1990, Headquartered in Czech Republic
- 4 Partners, over 20 Consultants and SW engineers
- Offices in Germany and Switzerland
- Over 50 clients (financial sector), mainly in Europe
- SW Development and Implementation
- Universal Banking System (T/O/P Banking)
- Enterprise Content Management(WINS / FileNET)
- Risk and Profitability Management (SAP R/3 SEM)
- IT Strategy (development and implementation)
- IT Procurement / IT Outsourcing / IT Organisation / IT
Audit
- Project based co-operation with global IT Vendors &
Consulting Companies
- SAP, ORACLE, IBM, Getronics, IFN Systems, FileNet, Mantas,
Logica, IHAG Informatik AG (CH)
- Savings Bank Foundation for International Cooperation
(Germany), WestLB
4. Selection of G&C Clients
- Agro Banka / GE Money Bank
- Czech Savings Bank (Erste Bank Group)
- eBanka (Raiffeisen International)
- Komern Banka (Societe Generale Group)
- Bank am Bellevue, CH(Swissfirst Bank AG)
- E.Gutzwiller&Cie Banquiers, CH
- Rd, Blass Private Bank, CH (Deutsche Bank Group)
- Savings Bank Foundation for International Cooperation, D
- Central Bank of Lithuania
- Komercijalna Banka, Macedonia
- State Savings Bank, Bulgaria
- National Savings Bank, Yugoslavia
- Several private banks in Azerbaijan
5. Clients Over 50 banks in 22 countries GREAT BRITAIN SOUTH
AFRICA NAMIBIA ESTONIA RUSSIA BELARUS UKRAINE BULGARIA ROMANIA
LITHUANIA GERMANY SWITZERLAND CZECH REPUBLIC SLOVAK REPUBLIC
MACEDONIA HONG KONG ARMENIA CROATIA YUGOSLAVIA UGANDA TANZANIA
KENYA AZERBAIJAN 6. Content
- Development of the Banking Sector
- Overview of the Banking Sector in Central Europe
- Differences to Western Europe & Business Trends
- Key Areas of IT Opportunity
- Strategies for Winning the Business /Decision - Making
Process
7. Development of the Banking Sector
- Banking sector limited to monobanks serving ascentral bank and
commercial bank
- Supplemented usually by one big savings bank
- Banks were more passive administrative units
- Restructuring of financial systems
- P rivati z ation / split-up of monobanks
- L icensing of foreign banks
- Legal framework and bank supervision
- First wave of automation and modernisation
- Macroeconomic instability
- Crises of some financial institutions
- Solvency problems / bankruptcies
- State-lead recapitalization programs
- Transfer of bad loans from commercial banks
- Review of legal framework
- Major restructuring of the sector
- Positive results of restructuring
- Majority of banks with dominant foreign ownership
1989/90 1995 2000 Communist Period Founding Period Crisis &
Stabilisation Consolidation & Internationalisation 8.
Development of the Banking Sector Example: Czech Republic
- S upplemented by a few state banks specializedonselected
activities and controlled by Sttn banka eskoslovensk
- Czech and Slovak Savings Bank
- Central bank : Sttn banka eskoslovensk
- T ransfer of assets , liabilities, branch network and
clientstoKB and VUB
- CSOB, Czech and Slovak Savings Banks and Zivnostenska banka
continued their activities onacommercial basis
- 1990 -1992:from 5 to42 commercial banks and ,
- 6 branches of foreign banks
- Mainlywith domestic capital
- Review of legal framework
- Major restructuring of the sector (Capital aid, cleaning of
balance sheets)
- Consolidation and stabilisation programmes launched
2000 Merger ofSOBand IPB 2000 Erste Bank :98% of esk
spoitelna2001 Socit Gnrale :Komern banka 200 3UniCredito -Z
ivnostensk abank a 2005 KBC SOB2006 Raiffeisen International -
eBanka 2007M erge rofHVB Bankand Z ivnostensk abankplanned , both
under UniCredito 1989/90 1995 2000 Communist Period Founding Period
Crisis & Stabilisation Consolidation & Internationalisation
9. Content
- Development of the Banking Sector
- Overview of the Banking Sector in Central Europe
- Differences to Western Europe & Business Trends
- Key Areas of IT Opportunity
- Strategies for Winning the Business /Decision - Making
Process
10. Overview of the Banking Sector in Central Europe
- The entire development process resulted in a banking
environment in CE that is
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- Most banksare owned byinternational banks
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- Roughly 90 per cent of assets are controlled by banks with
dominant foreign ownership
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- Relativestrongconcentration
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- 5 largest banks have always more than 55 per cent share
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- Only a few state banks still left to be privatized
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- S tate-owned banks still havea market share of around19 % of
total banking assets in Slovenia
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- Few domestically owned players
- The situation in SEE and CIS is slightly different as the
process is not that far yet
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- E.g. Takeoverof BCR in Romania by Austrian Erste Bankjust
recently
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- For comparison: Komercni Banka in CZ was acquired by Societe
Generale in 2001
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- SEE and CIS are the focus of international banks at
present
11. KeyP layers(foreign owners)inD ifferentC ountries Source:
Groups official pages (Oct. 2006) 12. Comparison of selected
countries Share of 5 biggest banks o ftotal banking assets in%
(2004) Commercial banks by type of ownership Share in total bank
credit, in per cent CENTRAL EUROPE Source: National data (BIS
questionnaire). Privat - domestic State owned Foreign owned 13.
BankingS ector in Central Europe
- Banks in central Europe have a good profitability and show
increase of all key indicatorsdue to
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- Policies to improve bank governance and market
transparency
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- Regulatory measures to reduce risks
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- Evolution from "ratio watching" to process examination in bank
supervision
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- Competition from foreign banks
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- Significantly improved balance sheets
Source: NB Return on Equity ROE in% (2004) Source: Bankovnictv,
8/2006 Remark: Slightly different numbers caused by different
sources and methodologies 14. Content
- Development of the Banking Sector
- Overview of the Banking Sector in Central Europe
- Differences to Western Europe & Business Trends
- Key Areas of IT Opportunity
- Strategies for Winning the Business /Decision - Making
Process
15. Main Differences to Western Europe
- Main d ifferenceisin product penetration rather than
offering
- Potential for future growth
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- 150 million people in CEE have no business relationship to a
bank
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- Overall size of the banking sector in CEE remains small
compared to the Eurozone and the degree of intermediation also
remains rather low
- However, efficiency lags behind Western European standards
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- X-efficiency in old / new EU member states in 2003: 86% vs.
67%
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- (x-efficiency = measure how managers are able to minimise cost
by input allocation and exploration of technological
opportunities)
16. Business Trends in Retail Banking
- Retail iscurrentlythe main growth engine, especially loans
segment
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- Products: Consumer loans, Mortgages, Payment Cards,Mutual
funds
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- Robust growth & low interest rates
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- Improved bank balance sheets further greater supply of
loans
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- However: Risks from risk management deficiencies (default
estimates, liquidity management, etc.)
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- Upgrades: Functionality &security
- The revival of the branch :G rowing importance of retail
banking proved the importance of a solid branch network
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- Raiffeisen and Unicredito each have approximately 2500 branches
across 15 countries
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- Erste, Intesa, OTP and Societe General each have between 1000
and 2000 branches across 7 8 countries
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- The next 10 largest banks in CE each have several hundred
branches across various countries
17. Business Trends in Retail Banking
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- Banks will have to concentrate on customer loyality programs
and price determination
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- Leasing marketin Europereached a record volume of 270 mil. EUR
last year
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- Importance in CE even higher than in WE: Outstanding leasing
contracts make up 8% of GDP in CE (vs. 5% in WE)
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- Markets in CEand CEE countries growing 3 times as fast as in
Western Europe (36% vs. 12%)
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- Building society services,Life and pension insurance
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- Asset Managementstarts emerging
- Growing competition from non-banks
* Includes retail and corporate 18. Trends in Corporate
Banking
- Competition is concentratedonSME
- Not much space for competition in the area
ofcorporateclients
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- Clients are shared among banks
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- Only portions of provided services can be cha r ged
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- Corporate loans are declining due to restructuring of balance
sheets, risk aversion, other means of financing (capital
markets)
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- Fee income from financing services
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- Direct interfaces between the economic system of company and
bank
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- Support of corporate clients in fulfilling compliance
requirements, for example SOX (Sarbanes-Oxley)
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- Corporate payment cards/ Loyality programs
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- Flexible usage for business trips, limits on manipulation with
cash, security, etc
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- Loans to housing developers, municipalities, etc.
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- Co-branding of credit cards with car manufacturers, telephone
and energy companies, airlines, etc.
19. General Legal and Regulatory Trends
- Banks in CE more often face the same regulatory framework as
Western banks:
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- Banks owned by foreign groups have to report to mother banks
based on their regulatory requirements
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- Compliance with capital adequacy and risk control
guidelines
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- Compliance with regulations regarding Anti-Money-Laundering
(AML) and Terrorist Financing, e.g.
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- 40 + 8 FATF Recommendations
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- Compliance with regulations regarding market abuse
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- EU Market Abuse Directive (MAD)
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- Markets in Financial Instruments Directive (MiFID)
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- Enhanced regulatory reporting requirements &
supervision
20. Content
- Development of the Banking Sector
- Overview of the Banking Sector in Central Europe
- Differences to Western Europe & Business Trends
- Key Areas of IT Opportunity
- Strategies for Winning the Business /Decision - Making
Process
21. New Business Model Transforms the Industry 22. Key Areas of
IT Opportunity 23. Key Areas of IT Opportunity , cont. 24.
Content
- Development of the Banking Sector
- Overview of the Banking Sector in Central Europe
- Differences to Western Europe & Business Trends
- Key Areas of IT Opportunity
- Strategies for Winning the Business /Decision - Making
Process
25. Strategies for Winning the Business
- Strategic IT Technologies
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- Central p rocurementmanagementvia foreign owners of the
bank
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- Centraldecision and /orprefered vendor
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- Local implementation of business processes, maintenance,
legislation, localization
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- How strict lyto be applied dependent on the culture of the
mother company
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- ATMs (different standardsin different countries )
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- Adjustments and functional overlays of strategic (centrally
selected) systems
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- Local services: is not effective to solve centrally
26. Decision Making Process
- Banks are conservative customers
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- It takes a longer time to create a business relationship
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- Alliances with local companies established on the market are
recommended
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- Knowledge of language, local environment, on-site support
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- Local support partner are highly valued
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- Personal contact with key players and decision makers is
important
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- Regular meetings, Seminars, Lunches ,Etc.
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- Differences to Western Europe: longer, slower decisions
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- Conduct of formal tender process often with no decision at
all
- References, successful projects (local references are
important)
- Not only IT knowledge but also experience in the industry
(Banking) is becoming more and more important!