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Javier Meseguer has been appointed as General Manager Southern Europe. Based in Madrid, he will report to Steffen Schaack, Senior Vice President Global Business Development, and will oversee Drooms’ business expansion in real estate, corporate finance and M&A in Spain, Portugal and Italy.

Drooms has also expanded its UK sales team with the appointments of Ditte Nielsen as Senior Business Development Manager and Alessandra Azzena as Business Development Manager. They will report to Rosanna Woods, Managing Director of Drooms UK.

Alexandre Grellier, co-founder and CEO of Drooms, commented: “We continue to see a need for digitalisation among our customers. This not only means making documents available in digital formats but also by ensuring that entire work processes are digitalised. Our latest expansion is the logical next step in our support for customers around the world in this process. Our new offices in Madrid and Barcelona means we are ideally placed to tackle this need in southern Europe head on. As we see it, data protection and data transfer have no borders and we plan to continue our expansion globally in 2020”.

Steffen Schaack, Senior Vice President Global Business Development at Drooms, added: “Our new team members will strengthen our presence in their respective markets and develop further our relationships with customers. We are now widely recognised as the global, independent experts for secure data transfer and digitalisation.”

Javier Meseguer has 16 years’ experience in digital services and data rooms and has invaluable expertise in establishing sales networks. He previously worked as Director of Sales for Snowflake, a provider of cloud-based data rooms, as well as IntraLinks, SAS Institute and The MathWorks.

Prior to joining Drooms, Ditte Nielsen worked as Senior Account Manager at Merrill Corporation, a global SaaS provider for M&A. Alessandra Azzena arrives from Tableau Software, where she oversaw account management and sales in her role as Commercial Territory Manager.

Drooms has also appointed Dennis Kasch as Business Development Manager for the DACH region sales team, bringing its total number of employees across the European market to 170.

You can find our latest interview with Drooms specialists here.

Digital banks raised over $1.1bn in fresh funding throughout 2018 in Britain, a figure that is set to be dwarfed if the current pace of growth continues to demand the attention of investors. Claudio Alvarez, Partner at GP Bullhound, explains for Finance Monthly.

Europe is truly leading the fintech charge, accounting for roughly a third of global fundraising deals in 2019, up from only 15% in the fourth quarter of 2018 according to our data. These are digital firms raising globally significant levels of capital. Adyen, the Dutch payment system, is now one of the frontrunners to become Europe’s first titan, valued at over $50bn. Europe has become a breeding ground for businesses that can go on to challenge US tech dominance, and it is fintech where we will find most success. Europe’s unique capacity for incubating disruptors is a phenomenal trend to have emerged over the past few years.

It’s true, European culture has always been more open to contactless and cashless, in contrast the US, where legislation and the existing banking infrastructure make adopting new technologies in banking slower and more convoluted. Europe has been able to take an early lead, while the US remains fixed on dollar bills.

As the ecosystem evolves, borders will become less relevant and markets more integrated, allowing the big players based in Europe to expand into further geographies with greater ease. European success garners the growth, momentum and trust needed to brave new regions and cultures. Monzo won’t be alone in the US for long.

As the ecosystem evolves, borders will become less relevant and markets more integrated, allowing the big players based in Europe to expand into further geographies with greater ease.

Whilst the Americans’ slow start has allowed European start-ups to become global players, it’s also true that the regulatory environment has distracted the European big banks and opened up the space for innovative and disruptive newcomers. While PSD2 has eaten up the resources of the incumbents, the likes of Monzo and Revolut have focused on consumer experience, product development and fundraising. The result? Newcomers are able to solve problems that older institutions simply don’t have the capacity to address.

However, a word of warning: traditional bricks and mortar banks aren’t dead yet. For one, digital banks will still need to justify the enormous valuations they’ve secured recently, and will have only proved their worth if, in 3 to 5 years’ time, they have managed to persuade consumers to transfer their primary accounts to them, which would allow digital banks to effectively execute on their financial marketplace strategies

Meanwhile, traditional banking institutions have a plethora of options to fend off the fintech threat and most are developing apps and systems that mimic those created by the digital counterparts. Innovation isn’t going to come from internal teams – it needs to be a priority for the old players and they need to invest in third party solutions to excel as truly functional digital platforms in a timely manner. In the first instance, the traditional banks will need to solve the issues that pushed consumers towards the fintechs and secondly, work on attracting consumers to stay by offering, and bettering, the services that make fintech’s most attractive.

Competition breeds innovation. For the fintech ecosystem as a whole, this new need for advancement is only good news – a rising tide lifts all ships. As traditional banks try to innovate and keep pace, we’ll see them investing in other verticals in the fintech market. Banks’ global total IT spend is forecast to reach $297bn by 2021, with cloud-based core banking platforms taking centre stage. Digital banking may have been the first firing pistol, but the knock-on effect of the fintech revolution is being felt across the board.

The fintech boom shows no sign of bust, market confidence is riding high and will continue supporting rapid growth. The aggressive advance of digital banks has opened doors for a whole host of fintech innovation - from cloud-based banking platforms to innovation in the payments sector. The number of verticals that sit within financial services creates a plethora of opportunity for ambitious and bullish fintechs to seize the day.

 

Machine learning and AI can have huge benefits to the financial department and could allow companies to create and tailor their models based on the data they have collated. This technology can dissect the data inputted and try to perceive the deviating patterns in this – a good example already prevalent in the financial industry is the analysis of payment behaviour in fraud detection. Machine learning is able to signal that someone is making payments from two completely different locations in a short period of time, which can indicate a fraudulent purchase. Though this is a common example of machine learning in finance, there are a huge amount of other significantly beneficial ways that AI and machine learning could be implemented – so, why are European firms not applying this as eagerly?

Well, there are a number of reasons as to why this could be the case, the most common being that there is simply a lack of know-how in this area. Accountants and finance professionals, of course, have extensive knowledge and expertise in the field of accounting standards, risk management, investment analyses and controlling, but not in the area of emerging technologies, machine learning or AI. Therefore, those in the finance department are not able to simply implement this technology and must look to external parties to help this transition – which can be timely and also a deterrent. But this is unjustified, as many CFOs could quickly master the basics of machine learning through training and not necessarily take on these roles themselves, but at least understand the technology.

Many CFOs could quickly master the basics of machine learning through training and not necessarily take on these roles themselves, but at least understand the technology.

Not only is there a lack of know-how, but there is also a lack of time for a CFO to implement this technology, or find a partner who is able to do so. A CFO’s job role usually focuses on value creation and protection, and transactional tasks too. Only once less time is spent on these is there the possibility for CFOs to focus on strategic tasks, such as implementing new technologies. CFOs tend to be extremely time-pressed individuals, until they free up time to focus on these strategic areas, or employ someone in the finance department to do so, it is likely that the option of applying these technologies will not be possible.

Infrastructure, company culture and the risk and governance surrounding implementing this technology can all have a profound effect on the possibility of companies doing so too. Not every company has the designated ICT infrastructure to store, analyse and structure data, and of course, the extra computing power and server capacity that are also required to do so. In a company where the financial department culture is not data-driven, it may be hard to convince the necessary actors of the importance of implementing data in financial practices; the management needs to support this area of focus. The risk and governance related to data issues is also a major concern for companies, whether it be related to security, GDPR or compliance, which means that many firms may be reluctant to pursue this avenue.

All these barriers that a CFO may be faced with when trying to implement data analysis and AI into their practices can, however, be overcome. Whether it is redistributing money to focus on technology in finance, employing external firms or internal actors with knowledge of the technology, or investing in software and infrastructure which can facilitate data analysis, these all are worthwhile tasks for a CFO to implement in order to benefit from this new technology.

In this pursuit to apply AI in the finance department, the CFO should continue to play an overarching role in the company, but also add advanced automation and machine learning to their list of tasks.  There is a need to have employees that excel not only at accounting and financial knowledge but also at the ability to work with new technologies, including AI. A data-driven finance department will better position itself as a strategic business partner.

In this pursuit to apply AI in the finance department, the CFO should continue to play an overarching role in the company, but also add advanced automation and machine learning to their list of tasks.

In fact, there are four concrete applications of AI that could be seen currently in the finance department. For example, these technologies have the ability to quickly evaluate potential investment opportunities, by scanning and consulting annual reports and management reports of the companies on the list of their potential investments. This can help companies to quickly understand possibilities of profit growth in these investments and allow them to come to a much quicker decision on their potential investments.

Machine learning and AI can also be implemented to analyse mass social media messages regarding the company’s practices, products or services or current prices. This will help companies gather mass opinions of them in a short space of time and give them the ability to understand how to better streamline their financial services and offerings in the future too.

This technology can also predict future business issues as well, by mapping the network and history of potential suppliers and collaborators. AI can provide a specific and sophisticated understanding of a company’s public image, which could help the company avoid aligning themselves with companies with the potential to have a negative image, and therefore save them money in the long-term by maintaining their positive brand image.

Every company looks to gain insight into the profitability of its customers, this AI technology can also help companies with predicting the potential reaction to new services and products that they are looking to offer. Therefore, companies are able to understand whether or not these will be financially worthwhile in the long-term, and whether customers will be likely to consume these.

New technologies such as AI and machine learning will have a profound impact on all business areas, including the finance department, and CFOs who look to embrace this as soon as possible will be one step ahead of their competitors. For the future of finance, it is important that the training of financial students and current employees includes a greater focus on technology - how to implement this and its impact on finance. This is something that education institutions like Vlerick Business School have adapted to, offering more and more technology-focused modules in their finance programmes and ensuring that the next generation of CFOs has a strong knowledge of both accounting & finance and technology.

Blow by blow, a wave of claims has hit an increasing number of European banks who are alleged to have handled suspicious transactions involving Russian money. European banks such as Raiffeisen Bank, Sweden’s Swedbank AB and Finnish financial services group Nordea are some of the latest firms that have been drawn into Europe’s expanding money-laundering activities. The scandal first came to light when US authorities led an investigation into Latvia’s ABLV bank, accusing it of institutionalised money laundering, but the first major bank who was questioned over illegal activities back in 2017 was Danske Bank A/S after a whistleblower raised suspicions over the origins of billions of euros that had flowed through the Danish bank.

Investigations are currently underway after the most recent claims and the constantly increasing number of revelations suggests that the surprises won’t stop here. And although it may take months for regulators and enforcers to determine if any of the allegations from the past few months are substantiated by fact, the question on everyone’s lips is: if the claims are true, why do European banks continuously fail to detect the movement of illicit funds? What is wrong with the European banking system?

The how and the why

 As Gregory White explains for Bloomberg, the transition to capitalism in Russia and its neighbouring countries set off a wave of hundreds of billions of dollars flooding out of the ex-Soviet Union. In most cases, the money was routed through offshore zones with restricted controls which predisposes for difficulties in telling the difference between legitimate business and illicit flows from criminal activity. This, in turn, led to some of this cash being moved to prominent international banks. What is interesting is that most of the banks accused of laundering Russia’s dirty money are either Baltic banks or Nordic banks that have Baltic units; in the case of Danske Bank, for example, $230 billion of suspicious transactions were allegedly handled by the bank’s branch in Tallinn, Estonia.  On the one hand, financial institutions that operate across border tend to find themselves linked to suspicious activity oftentimes due to the difficulties they face when creating platforms and handling funds in foreign countries where a number of issues such as language differences could result in various complications. However, why is the wrongdoing so heavily focused on the Baltics?

A team of researchers estimated in 2017 that Russians’ offshore wealth is about $1 trillion, or the equivalent to three-quarters of the country’s GDP in 2015.

After the dissolution of the Soviet Union in 1991, the banking industries in all Baltic nations were thriving, partially because they began servicing flows of Russia and the rest of the former Soviet Union nations. According to regulators, a lot of banks started opening accounts for individuals and companies based in other countries (called ‘non-residential portfolios’), not questioning who the individuals were or where the cash came from. Due to tighter regulations, over the past decade banks have ceased doing business with clients who are believed to be dodgy, but past practices have left their mark on the Baltics’ banking industry.

Estimating the scale of the criminal activity is a difficult task due to launderers’ hard work to disguise the origin of their money and the fact that not every transaction that looks questionable is actually illegal. A team of researchers estimated in 2017 that Russians’ offshore wealth is about $1 trillion, or the equivalent to three-quarters of the country’s GDP in 2015.

Where are the regulators?

The key paradox in all of this is the lack of a centralised European authority tasked with investigating and prosecuting money laundering cases. To this day, the authorities that have been expected to investigate financial crime allegations have been local police and national regulators, which naturally leads to a mishmash of different laws and practices.

The key paradox in all of this is the lack of a centralised European authority tasked with investigating and prosecuting money laundering cases.

In September last year, in an attempt to tackle money laundering, the European Commission proposed tightening regulations and changing banking supervision, however, the introduction of a centralised agency is not on the agenda. For a long time, the European Banking Authority (EBA) has mentioned its physical inabilities to combat financial crime in the EU’s 28 states, due to being understaffed and not having enough power. At present, only two out of EBA’s 170 staff members work on money laundering cases.

The one thing that is perfectly clear is that the existing gaps need to be filled – exploiting the European banking system shouldn't be as easy as it seems to be. Relying on two people to monitor and investigate financial crime across all EU member states and all of their banks is unacceptable. Harmonising existing rules in the EU to investigate and punish money laundering would be a good place to start, but ultimately, the European Commission needs to increase its efforts in the fight against money laundering and introduce a centralised authority to crack down on flows of dirty money.

There have been a number of high profile stock market crashes over the years often resulting in huge losses for both individual investors and businesses.  Although there is no specific number that determines when a stock market crashes, a crash occurs when there is a significant decline in the share prices.  Usually it becomes a crash when one of the major stock market indexes loses over 10% of its value.  Most of the major stock market crashes are preceded by a long bull market and they often result in panic-selling by investors attempted to liquidate their stocks to avoid further losses.

The stock market fluctuates daily, but on some occasions the crashes can be seismic and cause long lasting effects. Here we take a look at 10 of the biggest stock market crashes in history.

1. The 1673 Tulip Craze

In 1593 tulips were first brought to The Netherlands from Turkey and quickly became widely sought after. After some time, tulips contracted a non-fatal tulip-specific mosaic virus, known as the ‘Tulip breaking virus’, which started giving the petals multicolour effects of flame-like streaks. The colour patterns came in a wide variety, which made the already popular flower even more exotic and unique. Tulips, which were already selling at a premium, grew more and more in popularity and attracted more and more bulb buyers. Prices, especially for bulbs with the virus, rose steadily and soon Dutch people began trading their land, life savings and any other assets they could liquidate to get their hands on more tulip bulbs. The craze got to a stage where the originally overpriced tulips saw a 20 fold increase in value in one month.

The 1673 Tulip Mania is now known as the first recorded economic bubble. And as it goes in many speculative bubbles, some people decided to sell and crystallise their profits which resulted in a domino effect of lower and lower prices. Everyone was trying to sell their bulbs, but no one was interested in buying them anymore. The prices were progressively plummeting and everyone was selling despite the losses. The Dutch Government tried to step in and offered to honour contracts at 10% of the face value, which only resulted in the market diving even lower. No one emerged undamaged from the crash and even the people who got out early were impacted by the depression that followed the Tulip Craze.

Tulip Mania; Image credits: Krause & Johansen

 

2. The South Sea Bubble 1711

Another speculation-fuelled fever occurred in Europe a few decades after the Tulip Mania – this time in the British Empire. The bubble centred around the fortunes of the South Sea Company, whose purpose was to supply 4,800 slaves per year for 30 years to the Spanish plantations in Central and Southern America. Britain had secured the rights to provide Spanish America with slaves at the Treaty of Utrecht in 1713 and the South Sea Company paid the British Government £9,500,000 for the contract, assuming that it could open the door to trading with South America and that the profits from slave trading would be huge.

This was met with excitement from investors and resulted in an impressive boom in South Sea stock – the company’s shares rose from 128 1/2 in January 1720 to over 1,000 in August. However, by September the market had crumbled and by December shares were down to 124. And the reason behind the bubble burst? Speculators paid inflated prices for the stock, which eventually led to South Sea’s dramatic collapse. The economy was damaged and a large number of investors were completely ruined, but a complete crash was avoided due to the British Empire’s prominent economic position and the government’s successful attempts to stabilise the financial industry.

Commentary on the financial disaster of the "South Sea Bubble"

 

3. The Stock Exchange Crash of 1873

The Vienna Stock Exchange Crash of May 1873, triggered by uncontrolled speculation, caused a massive fall in the value of shares and panic selling.

The National Bank was not able to step in and provide support because it didn’t have enough reserves available. The crash put an end to economic growth in the Monarchy, affected the wealth of bankers and some members of the imperial court and confidants of the Emperor, as well as the imperial family itself. It also led to a drop in the number of the Vienna World Exhibition visitors – a large world exposition that was held between May and October 1873 in the Austria-Hungarian capital.

Later on, the crash gradually affected the whole of Europe.

Black Friday on 9th May 1873 at the Vienna Stock Exchange

 

4. The Wall Street Crash of 1929

On 29th October 1929, now known as Black Tuesday, share prices on the New York Stock Exchange collapsed - an event that was not the sole cause of the Great Depression in the 1930s, but something that definitely contributed to it, accelerating the global economic collapse that followed after the historic day.

During the 1920s, The US stock market saw rapid expansion, which reached its peak in August 1929 after a lot of speculation. By that time, production had declined and unemployment had risen, which had left stocks in great excess of their real value. On top of this, wages were low, agriculture was struggling and there was proliferation of debt, as well as an excess of large bank loans that couldn’t be liquidated.

In September and early October, stock prices began to slowly drop. On 21st October panic selling began and culminated on 24th, 28th and the fatal 29th October, when stock prices fully collapsed and a record of 16,410,030 shares were traded on NYSE in one day. Financial giants such as William C. Durant and members of the Rockefeller family attempted to stabilise the market by buying large quantities of stocks to demonstrate their confidence in the market, but this didn’t stop the rapid decrease in prices. Because the stock tickers couldn’t handle the mammoth volume of trading, they didn’t stop running until about 7:45 pm. During the day, the market had lost $14 billion. The crash remains to this day the biggest and most significant crash in financial market history, signalling the start of the 12-year Great Depression that affected the Western world.

 17th July 2014 Washington DC, USA - A detail from one of the statue groups at the Franklin Delano Roosevelt Memorial that portrays the depth of the Great Depression

 

5. Black Monday 1987

On 19th October 1987, stock markets around the world suffered one of their worst days in history, known today as Black Monday. Following a long-running rally, the crash began in Asia, intensified in London and culminated with the Dow Jones Industrial Average down a 22.6% for the day – the worst day in the Dow’ history, in percentage terms. Black Monday is remembered as the first crash of the modern financial system because it was exacerbated by new-fangled computerised trading.

The theories behind the reasons for the crash vary from a slowdown in the US economy, a drop in oil prices and escalating tensions between the US and Iran.

By the end of the month, stock markets had dropped in Hong Kong (45.5%), Australia (41.8%), Spain (31%), the United Kingdom (26.45%), the United States (22.68%) and Canada (22.5%). Unlike the 1929 market crash however, Black Monday didn’t result in an economic recession.

Following a long-running rally, the crash began in Asia, intensified in London and culminated with the Dow Jones Industrial Average down a 22.6% for the day – the worst day in the Dow’ history, in percentage terms.

 

6. The 1998 Asian Crash

The Asian crisis of 1998 hit a number of emerging economies in Asia, but also countries such as Russia and Brazil, having an overall impact on the global economy. The Asian crisis began in Thailand in 1997 when foreign investors lost confidence and were concerned that the country’s debt was increasing too rapidly.

The crisis in Thailand gradually spread to other countries in Asia, with Indonesia, South Korea, Hong Kong, Laos, Malaysia and the Philippines being affected the most. The loss of confidence affected those countries’ currencies – in the first six months, the Indonesian rupiah’s value was down by 80%, the Thai baht – by over 50%, the South Korean won – by nearly 50% and the Malaysian ringgit – by 45%. In the 12 months of the crisis, the economies that were most affected saw a drop in capital inflows of more than $100 billion.

 

7. The Dotcom Bubble Burst

In the second half of the 1990s, the commercialisation of the Internet excited and inspired many business ideas and hopes for the future of online commerce. More and more internet-based companies (‘dotcoms’) were launched and investors assumed that every company that operates online is going to one day become very profitable. Which unfortunately wasn’t the case – even businesses that were successful were extremely overvalued. As long as a company had the ‘.com’ suffix after its name, venture capitalists would recklessly invest in it, fully failing to consider traditional fundamentals. The bubble that formed was fuelled by overconfidence in the market, speculation, cheap money and easy capital.

On 10th March 2000, the NASDAQ index peaked at 5,048.62. Despite the market’s peak however, a few big high-tech companies, such as Dell and Cisco, placed huge sell orders on their stocks, which triggered panic selling among investors. The stock market lost 10% of its value, investment capital began to melt away, and many dotcom companies went out of business in the next few weeks. Within a few months, even internet companies that had reached market capitalisation in the hundreds of millions of dollars became worthless. By 2002, the Dotcom crash cost investors a whopping $5 trillion.

As long as a company had the ‘.com’ suffix after its name, venture capitalists would recklessly invest in it, fully failing to consider traditional fundamentals.

8. The 2008 Financial Crisis

This market crash needs no introduction - we all must remember how ten years ago Wall Street banks’ high-risk trading practices nearly resulted in a collapse of the US economy. Considered to be the worst economic disaster since the Great Depression, the 2008 global financial crisis was fed by deregulation in the financial industry which allowed banks to engage in hedge fund trading with derivatives. To support the profitable sale of these derivatives, banks then demanded more mortgages and created interest-only loans that subprime borrowers were able to afford. As the interest rates on these new mortgages reset, the Federal Reserve upped the fed funds rates. Supply outplaced demand and housing prices began to decrease, which made things difficult for homeowners who couldn’t meet their mortgage loan obligations, but also couldn’t sell their house. The derivatives plummeted in value and banks stopped lending to each other.

Lehman Brothers filed for bankruptcy on 15th September 2008. Merrill Lynch, AIG, HBOS, Royal Bank of Scotland, Bradford & Bingley, Fortis, Hypo Real Estate, and Alliance & Leicester which were all expected to follow however were saved by bailouts paid by national governments. Despite this, stock markets across the globe were falling.

And we all remember what followed… The bursting of the US housing bubble and Lehman Brothers’ collapse nearly crushed the world’s financial system and resulted in a damaged house market, business failures and a wounded global economy.

Don’t miss our articles on the impact of the Lehman Brothers’ collapse:

https://www.finance-monthly.com/2018/09/lehman-brothers-lessons-have-we-learned-anything/

https://www.finance-monthly.com/2018/10/lehmans-lingering-legacy-why-financial-services-ma-has-not-recovered-from-the-crisis/

9. The Flash Crash 2010

On 6th May 2010, the US stock market underwent a crash that lasted approximately 36 minutes, but managed to wipe billions of dollars off the share prices of big US companies. The decrease occurred at a speed never seen before, but ended up having a very minimal impact on the American economy.

With the opening of the market on 6th May 2010, there were general market concerns related to the Greek debt crisis and the UK general election. This led to the beginning of the flash crash at 2:30pm - Dow Jones had declined by more than 300 points, while the S&P 500 and NASDAQ composite were affected too. In the next five minutes, Dow Jones had dropped a further 600 points, reaching a loss of nearly 1000 points for the day. By 3:07pm things were looking better and the market had regained much of the decrease and only closed at 3% lower than it opened. The potential reasons behind the crash vary from ‘fat-fingered’ trading (a keyboard error in technical trading) to an illegal cyberattack. However, a joint report by the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) stated that the extreme price movement could have been caused by the combination of prevailing market conditions and the large automated sell order.

As some securities lost 99% of their value in a few minutes, this was one of the most impressive stock market crashes in modern history.

10. 2015–16 Chinese Market Crash

After a few years of being viewed in an increasingly favourable light, China’s Stock Market burst on 12th June 2015 and fell again on 27th July and 24th August 2015. Despite the Chinese Government attempt to stabilise the market, additional drops occurred on 4th and 7th January and 14th June 2016. Chaotic panic selling in July 2015 wiped more than $3 trillion off the value of mainland shares in just three weeks, as fear of complete market seizure and systemic financial risks grew across the country.

Surprise devaluation of the Chinese yuan on 11th August and a weakening outlook for Chinese growth are believed to have been the causes for the crash that also put pressure on other emerging economies.

 

Sources:

https://www.investopedia.com/features/crashes/crashes2.asp

https://www.britannica.com/event/South-Sea-Bubble

http://www.habsburger.net/en/chapter/crisis-highest-circles-economic-boom-and-stock-exchange-crash

https://www.citeco.fr/10000-years-history-economics/industrial-revolutions/crash-of-the-vienna-stock-exchange-in-austria

https://www.history.com/topics/great-depression/1929-stock-market-crash

https://www.thirteen.org/wnet/newyork/

https://www.britannica.com/event/Asian-financial-crisis

https://qz.com/1106440/black-monday-1987-the-stock-market-crash-that-was-so-bad-hospital-admissions-spiked/

https://www.investopedia.com/terms/d/dotcom-bubble.asp

https://www.thebalance.com/what-caused-2008-global-financial-crisis-3306176

https://www.thestreet.com/markets/history-of-stock-market-crashes-14702941

https://www.sec.gov/news/studies/2010/marketevents-report.pdf

https://www.economist.com/news/2015/08/24/the-causes-and-consequences-of-chinas-market-crash

A decade on from the great financial crisis and the fall of Lehman Brothers and Europe’s financial services is the only sector not to have returned to pre-crash levels. Below Finance Monthly hears some expert commentary from Beranger Guille, Global Editorial Analytics Director at Mergermarket, an Acuris Group company, on the current state of European M&A in the Financial services sector.

Despite an appetite for large-scale banking mergers and an eagerness to create pan-European banks capable of challenging rivals across the Atlantic, Europe still operates under strict rules that have so far prevented such merger ideas from materialising.

Between 2006 – 2008, Europe saw a total €607.9bn change hands across 1,592 deals. Since 2016 to date, activity remains still nowhere near these pre-crisis levels, with a mere €221.1bn traded over 1,251 deals and a spectacular absence of mega-deals that were once a prominent fixture in the build up to last financial crisis.


10 years later

A decade on from the crash, regulators continue to introduce new rules on top of what is already a very comprehensive rulebook. Basel III and Solvency II: the first ever set of rules on liquidity, placed a robust set of capital requirements on banks and insurers, with additional process still not complete. The capital conversation buffer, which ensures banks build up capital reserves to weather losses incurred during downturns, will take effect on 1 January 2019. In 2013, The European Market Infrastructure Regulation (EMIR) drove the centralised clearing of derivatives and promoted robust reporting requirements to trade repositories. While most recently, the Markets in Financial Instruments Directive (MiFID II) and Central Securities Depositories Regulation (CSDR) has pushed more transactions to occur on exchanges to improve transparency and the overall efficiency and safety of securities settlement.

In the build up to the crash, Italian lender Unicredit conducted a string of mergers between 1998 – 2006, while Royal Bank of Scotland spent €71.1bn acquiring Dutch lender ABN Amro on the eve of disaster. Both left shareholders and taxpayers alike reeling from heavy losses.

The current situation

Today, mega-mergers are once more mooted with cross-border deal discussions between Unicredit and Société Générale reportedly taking place. However, “there is nothing on the table,” according to France’s Minster of the Economy and Finance, Bruno Le Maire.

There is also talk of potential national mergers afoot. In the UK, Barclays chairman John McFarlane is eager to do a deal with Standard Chartered, while German lenders Deutsche Bank and mull a merger of their own.

But, despite an apparent eagerness to get deals done, there is a lot of cold water that investors and analysts are only too quick to pour on such tie-ups.

There is a lack of strategic rationale behind a Barclays-Standard Chartered deal, with two banks having little to no geographical overlap, with the former boasting strong ties in the UK and US and the latter firmly focused on emerging markets in the Asia and Africa. Meanwhile, discussions between Deutsche Bank and Commerzbank certainly offer a stronger rationale, but it should not be forgotten that Deutsche Bank launched a €8bn rights issue – its fifth capital hike since the crash – to plug holes that continue to leak.

A political climate

Given the political environment in the EU, and that there is a degree of nationalism when it comes to banks, large-scale cross-border deals look anything but likely. Two years ago, Swedish lender Nordea made an approach to acquire ABN Amro but had its offer slapped down by the Dutch government. Some bankers were even brazen enough to pitch a merger between Barclays and Santander. Cross-border European deals for the time being at least seem off the table, but domestic mergers could provide dealmakers something to chew on.

The timing of renewed merger talks is interesting, with the next cyclical downturn expected to come to bear in the next two years.

Calls for consolidation amid so much uncertainty is cause for concern, but desperate times lend themselves to management contemplating desperate measures. Weak profitability is putting pressure on banks to take action at a time when big tech, fintech and alternative lenders threaten to grab market share. And while the appeal of cross-border mergers may provide a boost to the sector's profitability, bigger banks, history tells us, are not necessarily healthier banks.

The estimated 1.8 million British expats living in the EU should consider reviewing their personal financial strategies as ‘no-deal’ Brexit looks increasingly likely, warns the deVere Group.

The warning from James Green, deVere Group’s divisional manager of Western Europe, comes after British Prime Minister Theresa May claimed that a no-deal Brexit “wouldn’t be the end of the world,” as she sought to downplay statements made by Chancellor Philip Hammond.

It also follows the UK government publishing last week its first technical notices advising businesses and consumers on the preparations being done for the prospect of there being no Brexit deal.

Mr Green comments: “A no-deal Brexit is now expected by a growing number of experts and the wider population to be the most likely outcome.

“If the UK crashes out of Europe with no deal in place, the estimated 1.8 million expats living in the EU could be financially impacted in two key ways.

“First, the pound would inevitably suffer and it could fall hard. This would deliver another heavy and serious blow for those who receive UK pensions or income in pounds as the cost of living, in effect, would be significantly more expensive.

“Second, unless there is considerable post-Brexit collaboration between the UK and EU there is a risk that existing payments from British companies, including pension and insurance companies, to those living within the European Economic Area (EEA) could be disrupted or even made impossible. Of course, this would be a major inconvenience to many UK expats.”

He continues: “Against this chaotic backdrop it is prudent that British expats in the EU consider reviewing their personal financial strategies sooner rather than later with a cross-border financial expert. This will help best position them not only to mitigate the risks of a no-deal Brexit, but also to enable them to take advantage of potential opportunities that may arise.”

Mr Green concludes: “Unfortunately, a smooth and orderly exit of the EU is looking increasingly unlikely and this can be expected to hit the finances of many expats.

“They should seek to make their financial strategies ‘no deal Brexit’ proof.”

(Source: deVere group)

Taking a closer look at the start-up industry in Europe, card processing specialists, Paymentsense, have conducted research to find out which countries have seen the most significant rise in start-ups between 2013 -2017.

 The data has been mapped out across Europe allowing users to uncover the industries that each country specialises in and how fast those industries are growing.

Paymentsense analysed 30 European countries and ranked each one of them based on how many new businesses have been registered in that 5-year period and which business types have been the most popular in these countries.

Turkey tops the list with the most start-ups registered, followed by France and then the United Kingdom. However, data reveals that the UK is the fastest growing start-up nation in Europe and has brought more than a few successful companies to Europe, including Transferwise and Deliveroo.

Top 10 countries fuelling the European start-up industry:


Among all these countries, the UK has seen the biggest growth in the number of start-ups between 2013 and 2017 at 5.09%, followed by Romania and Portugal. What all of them have in common is a business-friendly environment that gives founders the possibility to grow and nurture their company over time.

When looking at what type of start-ups have dominated Europe in the last few years, wholesale and retail have the largest presence with 3.7 million new businesses started up.

This is surprising to see when in recent years we have seen a retail crash with companies like Woolworths and ToysRUs go bust.

The type of companies that have started up in Europe between 2013-2017


Guy Moreve, Chief Marketing Officer at Paymentsense, says: “It’s interesting to see that the UK ranks among the top five countries with the highest numbers of registered new businesses. It shows that the country offers a great setting for those interested in founding their own company.

Further afield, it’s fascinating to see how Europe has changed in recent times. A number of countries are now placing more emphasis on technology which has helped create a ‘golden era’ for tech startups.

“In order to thrive a business in your respective country, make sure you analyse the market you’re addressing – what works best and what doesn’t; It’s also worth looking at the legal and environmental conditions in order to make sure your business idea is a success”.

(Source: Paymentsense)

The United Kingdom, specifically London, has built a position as Europe’s primary financial hub, bridging the gap between the European Union and Asia, the United States and other regions. After Brexit comes into effect in March 2019, this once unassailable position will no longer be certain if it becomes more difficult for banks and other financial enterprises to provide services to EU clients due to a loss of ‘passporting’ rights – if no contingency plans are made.

Many financial institutions are not waiting to see how Brexit plays out and are seriously considering – or already planning – to move at least part of their operations to remaining EU countries in order to be prepared for any fallout from Brexit. Hiring rates in London’s financial sector have already halved, according to LinkedIn – reportedly due to the uncertainty surrounding Brexit and how it will impact the industry. Research from EY shows almost a third of banks and asset managers in the City of London confirmed that they are looking at moving staff to locations such as Dublin, Amsterdam and Frankfurt.

As a result, teams will be scattered across numerous time-zones and locations, with more employees likely to be working from remote locations, including their homes. Connecting a relocated and dispersed workforce is no easy task, and if the process is not well managed, it can cause serious disruption to day-to-day activities. Banking and financial services organisations need to have the right tools in place to ensure far-flung teams can communicate effectively and implement a standardised and coordinated way of working so that employees do not have to flit between numerous applications to complete tasks, collaborate on projects, monitor progress, manage resourcing and track deadlines. Fortunately, disruption can be minimised by utilising tools that nurture joined working environments despite geographical barriers and offer structure that keeps employees at different locations on the same page – in real time.

 

The challenges of collaborating across borders

Remote working is not new phenomenon – it’s widespread and a hugely popular way of working –

But many businesses are still trying to overcome the barriers it presents to communication and collaboration. Clarizen’s own research has shown that some of the most prevalent issues workers struggle with when working remotely include:

 

 

The banking and finance industry needs to ensure that these issues are resolved before Brexit takes place. Otherwise, the serious and negative impact they have on effective collaboration, productivity and business profitability.  Having to relocate operations is just one area of business that organisations need to navigate as the UK continues its withdrawal from the EU.

Internal company restructuring, product and services analysis and engagement planning are also elements businesses have to plan and execute, which is why it’s so important that teams have tools that facilitate a coordinated work environment during this tumultuous period.

 

Equipping employees with the tools to succeed

During Brexit and beyond, banking and financial organisations need to ensure employees are equipped with tools that help promote coordination between dispersed teams, while maximizing efficiency. Recent research from Clarizen found that almost three quarters of respondents said that what they specifically need to boost communication and collaboration among employees is technology, structure and support that enables them to overcome geographical barriers and the gap between time zones to increase productivity, ensure management oversight and foster flexibility.

What can help achieve this is a cloud-based platform that enables real-time collaboration across locations and empowers teams to coordinate workflow, track progress, align goals, allocate budget and meet deadlines from any device and location.

 

Overcoming communication overload

Ahead of Brexit, businesses need to ensure that they pick the right tool to maximize productive interactions between employees. Some businesses have previously used social media apps to facilitate easy and frequent employee discussion – such as WhatsApp and Facebook – in the belief they would streamline communications between workers and reduce long email chains that cause frustration and confusion. Unfortunately, such applications have often only served to encourage non-work chat and oversharing of irrelevant information that doesn’t bring employees any closer to meeting business objectives.

In a bid to become more focused in their approach, businesses have been turning to business-focussed communication apps. A recent global survey showed that, in the past year, companies deployed one or more of the following apps to improve productivity: Skype (39%), Microsoft Teams (14%), Google Hangouts (8%) and Slack (7%). Yet, even then, efforts to boost productivity proved fruitless as they merely became a place for office banter and overloaded people with numerous notifications and interruptions, which negatively impacts productivity.

It’s a modern workplace malady that has been dubbed ‘communication overload’, which is symptomized by workers struggling under the weight of clusters of unfocused messages, meeting requests and unnecessary interruptions. Clarizen’s research indicates that, in the end, apps that fail to directly link communication to business activities, aims and status updates actually hamper collaboration, effectiveness and efficiency. The survey showed that 81% of respondents said that, despite taking steps to improve communication among employees, they still lack a way to keep projects on track and provide management oversight – and only 16% of the companies surveyed said productivity levels were ‘excellent’ – while a nearly quarter said they were ‘just OK’ or ‘we need help’.

 

Looking ahead to a post-Brexit world

Brexit presents the banking and finance industry with a number of challenges that could put successful collaboration – and ultimately revenues and profits – at risk. However, by employing tools and methods that encourage an environment that nurtures a truly collaborative environment – where communication is in a business context and reporting in real time – the sector can enhance productivity and business agility, taking some of the sting out of any staff redeployments necessitated by Brexit. Even though it’s not clear what shape Brexit will take, there is no reason businesses in the banking and finance sector cannot minimise disruption and its potential costs by providing their employees with an approach and the tools they need to succeed during Brexit and beyond.

 

Website: https://www.clarizen.com/

Refugee crisis, political turbulences, economic struggles brought on by austerity and Brexit. Katina Hristova explores the crisis that the European Union has found itself in.

 

"The fragility of the EU is increasing. The cracks are growing in size”, warns EU Commission Chief Jean-Claude Juncker. With Italy’s Government crisis finally being resolved and the country’s shocking rejection of NGO migrant rescue boats, it has been easy to detract from the political earthquake that the third largest EU economy experienced and the quick impact that it had on the Euro. But Europe’s problems go deeper than Italy’s political turbulences. A month ago, Spain, the fourth biggest Eurozone economy, was faced with a very similar crisis and even though the country now has a new leader, analysts believe that the Spanish instability is not over yet. With the shockwaves of both countries’ political uncertainty being felt on Eurozone markets, on top of migration pitting southern Europe against the north and as the UK marches on towards Brexit whilst Trump abandons the Iran Nuclear Deal, which could mean the end of the transatlantic alliance between the US and Europe, is the EU in serious trouble?

 

Why is it so serious?

Billionaire Investor George Soros is one of those people that can sense when social change is needed and when the current cultural and political processes are about to collapse. A month ago, in a speech at the European Council on Foreign Relations, Soros claimed that: “for the past decade, everything that could go wrong has gone wrong”, believing that the European Union is already in the midst of an ‘existential crisis’. The post-2008 policy of economic austerity, or reducing a country’s deficits at any cost, created a conflict between Germany and Greece and worsened the relationship between wealthy and struggling EU nations, creating two classes – debtors and creditors. Greece and other debtor nations had sluggish economies and high unemployment rates, struggling to meet the conditions their creditors set, which resulted in resentment on both sides toward the European Union. Back in 2012, the European countries that struggled with immense debt, malfunctioning banks and constant budget deficits and needed help from other member countries were Portugal, Ireland, Greece and Spain. In order to help them the creditors countries set conditions that the debtors were expected to meet, but struggled to do so. And as Soros points out: “This created a relationship that was neither voluntary nor equal – the very opposite of the credo on which the EU was based”.

Although Italy finally has a government, after nearly three months without one, the financial markets are apprehensive about what to expect next, considering the country’s €2.1 trillion debt and inflexible labour market. On 29 May, fearing the political crisis in the country, the Euro EURUSD, +0.6570%  slid to a six-month low, whilst European stocks ended sharply lower, with Italy’s FTSE MIB I945, +1.43%  ending 2.7% lower, building on the previous week’s sharp losses. Bill Adams, senior international economist at PNC believes that: “The situation serves as a reminder that political risk in the Euro area hasn’t gone away. Italy is not on an irrevocable road to anything at this point,” he said. “I think what is most likely is another election later this year, and what we’ve learned is that outcomes of elections are very unpredictable.”

Spain on the other hand has made huge progress since being on ‘EU life support’ when ‘its banks were sinking and ratings agencies valued its debt at a notch above junk, on a par with Azerbaijan’. Since receiving help, the country’s economy has been growing, unemployment is not as high and its credit rating has been restored. However, with the Catalonia separatism, and the parties, Podemos and Ciudadanos who have emerged to challenge the old duopoly between the Popular Party (PP) and the Socialists, the political uncertainty in the country is set to continue.

Greece has been in a permanent state of crisis for a decade now, with its current debt of 180% of its gross domestic product (in comparison, Italy's is 133%). In less than two months, on 20 August, the country is due to exit its intensive care administered by the European Central Bank and International Monetary Fund. The EU will then have to come up with a new debt relief offer on the $280 billion Greece still owes – which could be challenging, as the ‘creditors’ are not in a charitable mood.

In contrast, Poland and Hungary are financially stable, however, both countries seem to be in opposition to the EU with regards to immigration, the independence of the judiciary, ‘democratic values’ and freedom of the press. Both governments have dismissed EU plans to share the burden that the Mediterranean region carries in terms of migrants arriving into these countries. In addition to this, Hungary’s Prime Minister is promoting an ‘illiberal’ alternative to European consensus, whilst Poland has sided with the US and against its European partners on a range of subjects, including the Iran sanctions and Russian gas pipelines.

And of course, let’s not forget the EU’s list of unsolved issues – the main one being Brexit. With nine months until its deadline, the terms of Britain’s exit from the EU are nowhere near finalised.

 

Make the EU an association that countries want to join again

Today, young people across the continent see the European Union as the enemy, whilst populist politicians have exploited these resentments, creating anti-European parties and movements.

Since its establishment, the EU, an association that was founded to offer freedom, security and justice without internal borders, has survived many turbulences. Although the current crisis is based on a number of deep-rooted problems, odds are that these challenges will be overcome. To save the EU, Soros believes that it needs to reinvent itself via a ‘genuinely grassroots effort’ which allows member countries more choice than is currently afforded.

"Instead of a multi-speed Europe, the goal should be a 'multi-track Europe' that allows member states a wider variety of choices. This would have a far-reaching beneficial effect."

And even though he isn’t offering a proposition for a bill that someone needs to draft and pass as soon as possible, he has opened a conversation - a conversation about moving away from the EU’s unsustainable structure. “The idea of Europe as an open society continues to inspire me”, says Soros. And in order to survive, it will have to reinvent itself.

 

Finance Monthly explores corruption in East African organisations and FBW Group’s efforts towards upholding ethical standards within their offices.

 

According to the EY’s Europe, Middle East, India and Africa Fraud Survey 2017, companies need to work harder to encourage their staff to successfully uphold ethical standards all over the world.[1]

63% of Africans working in corporate environment believe that regulation has a positive impact on ethical behaviour. In South Africa alone 79% of the population believes that bribery and corruption remains widespread in the country.

One in four Generation Y employees (ages 25 to 35) can justify offering cash payments to win or retain a business. Since Generation Y staff are the future leaders of our businesses, if the problem is not combated now, there is bound to be an overall problem with ethical behaviour in organisations in the future.

Kenya, through the Law Society of Kenya, adopted a code of ethics and standards of professional practice and ethical conduct for its members. These standards were benchmarked against The Commonwealth. However, many professional fields in East Africa remain unregulated.

According to the organisation for Economic Co-operation and Development (OECD), the real estate, construction and associated industries are among the sectors with the highest level of corruption risk: 40% of foreign bribery cases occurred in construction, transportation, and information and communication; however the Uganda 2017 corruption report does not prioritise the construction sector as corrupt.

Organisations like FBW Group are doing their best to uphold ethical standards within their offices. Using the UK Bribery Act 2010 as their baseline, FBW holds itself to world-class standards of anti-bribery.

Their internal policy goes into details like describing what a bribe is, assuring their staff that they will not be retaliated against should they whistle blow against something, intolerance of kickbacks of any sort, and keeping of adequate financial records to evidence payments made to third parties among other things.

Many property developments are compromised because of concessions made by those in charge of putting them up. A number of criminal issues can arise in the construction industry as Architects may find themselves involved in these if they participate in a project on which violations of law take place.

The violations may take the form of giving money to owner representatives in exchange for their agreement to select a certain team’s proposal, trading information to ensure a particular team gets the job and bid rigging.

Joseph Debuni, the Director of Engineering at FBW Uganda, discusses the need for the architectural and engineering firm to adhere to a strict anti-bribery policy to retain the reputation it has developed over the past 20 years.

According to Mary Rose Atubo, FBW Uganda’s Section Manager, it has come to a point where: “many of the people in the industry see our logo and tie it back to the fact that we do not hand out “wheel oilers” and in other words, do everything as the book says it should”.

“In doing so, initially we met our challenges, but we feel that others are slowly adapting to our way,” added Debuni.

“In order to change our narrative, we need to get back to our drawing board, change our attitudes towards work, enhance our productivity and polish up on the outlook of organisations in Africa. Then, we will be a stronger economy and will eventually rebuild the reputation of organisations in Africa.”

 

Website: http://www.fbwgroup.com

[1]http://www.ey.com/Publication/vwLUAssets/EY-EMEIA-Fraud-Survey-2017/$FILE/EY-EMEIA-Fraud-Survey-2017.pdf

Billon and the Polish Credit Office (Biuro Informacji Kredytowej - BIK), the largest credit bureau in Central and Eastern Europe, have announced they will implement blockchain for storage and secure access to sensitive customer information. Billon's blockchain technology will benefit the bureau through superior security, integrity and immutability of data. The fully-GDPR compliant solution guarantees total visibility, trackable history and full data integrity for any client-facing document including banking records, loan agreements, insurance claims, telephone bills and terms & conditions.

BIK, owned by the largest banks in Poland including Pekao, ING, mBank, Santander and Citi, tracks nearly 140 million credit histories of over 1 million businesses and 24 million people. "Our cooperation with Billon is long-term. We believe that blockchain technology will transform client communications in the financial sector. Our solution will soon be expanded to include electronic delivery with active confirmation and remote signing of online agreements. It is also important that the solution meets legal requirements of a durable medium of information, as well as the EU GDPR requirements," said Mariusz Cholewa, President of BIK.

BIK and Billon developed the solution for durable medium of information, defined by EU regulations and directives such as MIFID II and IDD directives. The partnership saw eight Polish banks participating in trials, which established that Billon's scalable blockchain architecture could publish over 150 million documents every month. This would be more than sufficient for even the largest institutions to move to paperless customer service.

The solution has been approved following extensive consultation with the Polish Office of Competition (UOKiK) and Data Protection Regulator (GIODO), making it one of the world's first Regtech compliant blockchain solutions, and the only one with on-chain data storage and a mechanism enabling "the right to erase personal data". Currently, the only major alternatives to this are hardware-based archive solutions such as legacy WORM drives. Compared to them, Billon's solution offers 30% saving in TCO, ensuring minimal upfront costs.

"Our partnership is the start of a true revolution in information management. It is now possible to move away from the constraints of closed central databases to a democratic blockchain-based Internet where every user will be able to control their identity," explained Andrzej Horoszczak, CEO of Billon. "This solution provides the world's first GDPR-compliant blockchain platform that streamlines customer service processes and implements customer rights such as the "right to be forgotten". We're fixing the problem of consumer data control, creating a level playing field between individuals and corporations. The benefits could affect more than the financial sector, and we anticipate it will soon be adopted by industries such as telecommunications, insurance and utilities. Our cooperation is only the first step to introducing mass blockchain technology use for trusted document management."

(Source: Billon)

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