Etiqueta: visualconcept

PSD2 is the European Directive that regulates payment services (for example transfers, direct debits or card payments) made in Europe, with the proposal to promote transparency, competition, and innovation of payment services in the financial sector . It also allows third companies to intervene in payments. This is what is known as «open banking».

The PSD2 regulates and harmonizes two types of services that already existed when the first PSD was adopted in 2007: payment initiation services (PIS) and account information services (AIS).

The AIS consists of collecting and specifying the information of the different bank accounts of a client in one place, while the PIS facilitate the use of online banking to make payments online.

Exposition of the mural with more detailed information:

Links:

https://www.triodos.es/es/que-es-psd2

https://www.bbva.com/es/lo-saber-la-psd2/

https://www.bbva.es/finanzas-vistazo/ef/banca-digital/psd2.html

Big Data is a set of high volume, high speed and / or high variety data that requires new forms of processing to improve decision making processes, research and process optimization. Its appearance in the 2000’s is explained by the fact that this set of data was difficult or impossible to process using traditional methods. Doug Laney (industry analyst) articulated the definition of Big Data as de three V’s:

• Volume: It refers to the extreme volumen of data that organizations must process.
• Velocity: There is a growing need to deal with these data torrents in near real time.
• Variety: Data comes in a wide variety of types. From structured (for instance,the numeric one) to unestructured (such as videos and text documents).

The importance of Big Data lies in the fact that with it you can take data from any source and analyse it to find answers that enable costs and time reduction, optimization and smart decision making.

About the relationship between Big Data and banks, it is important to know that the banking sector is one of the business domains that makes the highest investment in Big Data. Thanks to this relationship banks gets the data and from all the information contain, take out the useful and profitable information. In summary, Big Data has helped the banks in the following aspects:

• Personalized customer experience, where the bank uses Big Data to know their users and find new ways to cater to them.
• User segmentation and product targeting: by using Big Data, you can better understand your customer’s needs and also to pinpoint problems in your product targeting.
• Business process optimization and automatization.
• Improved cybersecurity and risk management by identifying fraud or preventing terrorist activities.
• Better employee performance and management.

Links:

• https://www.sas.com/en_us/insights/big-data/what-is-big-data.html
• http://www.bbc.com/storyworks/banking-on-innovation/bigdata
• http://www.bbc.com/storyworks/banking-on-innovation/bigdata-improve-banking-experience

Securitization is a procedure whereby a financial institution creates a package of different assets, such as loans and credits, and then sells it. Thanks to this operation the issuer receives immediate cash and reduces the risk of its business by transmitting part of it to the investor. The buyer receives a profit in form of regular payments throughout the life of the instrument and also the amount lent at the end.

Securitization instruments played a vital role as one of the triggers of the 2008 financial crisis due to its importance in the credit crisis that affected the United States financial system.  During the early 2000s, investment banks increased the commercialization of securitization titles backed with mortgage loans such as MBSs and CDOs. There was a huge demand boosted by low-interest rate conditions and the illusion that the real estate market was solid rock. Then banks started to bundle high-risk mortgages, also known as subprime, into those assets. As debtors began to fail their payments after the real estate bubble burst, and investors realized that the titles were full of toxic mortgages, the market for those products deteriorated and some specialized institutions went bankrupt. The bottom line was the loss of trust among market’s agents and the subsequent credit crisis that later passed on to other economies and ended up, after several mutations, being a central cause of the 2008 financial crisis.

It is model or a way of banking that embraces environmentally and socially conscious practices. While “traditional” banks try to earn profits, the ethical banks try to do it in a way consistent with their principles and values, such as participation, transparency, coherence, implication…

An ethical bank invests in projects that aim to earn a healthy profit and to make a positive difference in society. It finances those businesses with their depositors and investors’ money. So, the money that those people save is invested back into the society they are living in.At any time, customers know what the bank does with their money (transparency).
The supported projects of each organization to whom they lend money for, are published in the bank website. By lending exclusively to those organizations that put people and planet before profits, the savers’ money contributes to create a positive impact and real returns (real economy).This type of banking makes the difference because it only invests in things which are good for both people and the planet. Things like renewable energy, organic farming and ecological development. In addition, it offers the possibility of being able to share part of the interests generated with different social, cultural and environmental organizations. On the other hand, they do not offer services that include alcohol, gambling products, pornography, tobacco and weapons.

Example: “For self-employed copywriter Kate Duggan and her partner Rick, ethical banking was a natural consideration when deciding where to save their money.

Having once worked at an ethical bank herself, Duggan was well aware of the growing awareness of responsible investing. This is when savers put money in funds or accounts that support social and environmental programs that aim to bring about a positive change.”

Source: https://inews.co.uk/inews-lifestyle/money/ethical-investing-savings-make-positive-difference/

Video:  https://www.youtube.com/watch?v=VRP5E0EF8kc

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«Bank Panic» happens when many clients withdraw their money from banks because of a lack of trust and fear that they will not return the cash. This massive withdrawal of deposits can happen in contexts of financial crisis or changes in the economic policy of a country.

This panic can destabilize a bank to the point that its system collapses due to a lack of liquidity and it has to face bankruptcy.

The bankruptcy of an important financial institution, can produce a contagion effect to other big institutions, affecting the stability of the global international financial system, which is known as systemic risk.

Example:

“Thousands of depositors, panicked by rumors, lined up today in the steamy August heat to withdraw their money from the venerable Standard Chartered Bank, one of two banks that issue Hong Kong currency.”

Source: www.nytimes.com/1991/08/10/business/panic-and-run-at-hong-kong-bank.html

Videos (links):

Bank panic: https://www.youtube.com/watch?v=xa75BfmXQH4

Systemic risk: https://www.youtube.com/watch?v=O6rl_ImpGkM

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Banks have the obligation to keep in reserve only a part of their customers’ deposits, in a percentage that depends on the requirements of the Central Bank (the reserve requirement, 2% in Spain). When banks lend the part of the deposits that are not in reserves, the money can return to the banking system in the form of a new deposit. That repetition of loans can happen several times. Banks «multiply» money by creating bank money.
The reserve requirement is a central bank regulation that establishes the minimum amount of reserves that a commercial bank must have.
The money multiplier is the process that allows banks to multiply the bank money by starting from an initial amount of money. This is because banks are only obliged to keep in their reserves a minimum level of money (The Cash Reserve Ratio, CRR)
With this process of creation of bank money, the money supply of a country is
increased. In most modern economies most of the money supply is in the form of bank money and not legal money (notes and coins).

Example: ‘‘The standard story about how banks create money, and how reserves work, is the ‘Money Multiplier Model’. Money creation starts with the government injecting ‘fiat money’ into the economy – say by giving a welfare recipient $100 in cash. That recipient then deposits the cash in a bank, which hangs on to a government-mandated fraction of it (the ‘Reserve Requirement’) – say 10 per cent or $10 – and lends out the rest to a borrower. The borrower then deposits that $90 in another bank, which does the same thing – hangs onto 10 per cent of the $90 or $9, and lends out another $81 to another borrower.’’

Links:

News about the money multiplier

Videos:

Cash Reserve Ratio (CRR)

The money multiplier

Monetary policy, money creation in a fractional reserve banking system.

Hedge funds are collective investment institutions ruled by a free investment regime. In the CII many participants provide funds and the Hedge fund is in charge of their management, with the main objective of obtaining the highest profitability through the investment. In addition, the “free investment” characteristic distinguishes them from the rest of the investment funds in having a higher level of freedom to manage their funds, normally investing in more risky assets. To assume a higher risk enables them to obtain a higher profitability, but, on the other hand, the opposite situation may also happen, higher losses. They use different investment strategies: short-term operations, long-term operations, leverage, trading, arbitrage, complex statistical models…

The origin of the last financial economic crisis originated in the United States in 2007 began with the fall of the Hedge fund Bear Stearns.

In Spain there are two types of Hedge Funds, called “Free Investment Funds” or “Free Investment Society”. The National Securities Market Commission (CNMV) is the institution that establishes their regulation in Spain.

Example: “Many of the hedge funds were set up over the last year to invest exclusively in virtual currencies. The research firm Autonomous Next has said the number of such hedge funds has risen from around 30 to nearly 130 this year alone.”

Source: https://www.nytimes.com/2017/11/06/technology/bitcoin-hedge-funds.html

Video:  https://www.youtube.com/watch?v=5ItfdOC1B9Q