Deutsche Börse AG and London Stock Exchange Group announce that they have reached agreement on the terms of a recommended all-share merger of equals. Under this industry defining combination, the companies will merge to create a leading Europe-based global markets infrastructure group, resulting in a significantly enhanced product offering for customers and in leading positions across multiple asset classes (derivatives, equities, fixed income, FX and energy products). The newly formed combined group will have the ability to serve global customers across the investment, trading and risk and balance sheet management life cycle. The Merger will deliver a platform of choice for risk and balance sheet management, increasing safety, resiliency and transparency in global markets.

The initial composition of the UK TopCo Board is as
follows:

• Donald Brydon will become Chairman
• Joachim Faber will become Deputy Chairman and Senior Independent Director
• Carsten Kengeter will become Chief Executive
• David Warren will become CFO
• Six further non executive directors nominated by LSEG and six further non-executive directors nominated by Deutsche Börse

On completion, Xavier Rolet will step down from his role as Chief Executive Officer of LSEG. On stepping down as CEO, Xavier Rolet will become an adviser to the Chairman and Deputy Chairman to assist with a successful transition. It is presently envisaged that this arrangement would last for up to one year.

Ownership structure of the new formed company 

Following completion of the Merger, assuming 100 per cent acceptance of the  Deutsche Börse Offer, 54.4% of UK TopCo will be owned by Deutsche Börse  shareholders and 45.6% will be owned by LSEG shareholders on a fully diluted  basis.

Below is a nice FinTech Industry infographic presented by Call Levels and designed by Savvy Beaver Canada.

@Credits: Call Levels

The Enterprise Data Management Council (EDM Council) has received approval for FIBO Foundations as the first of thirty data content standards for the financial industry. FIBO Foundations is now approved as Official OMG Standard

The Financial Industry Business Ontology (FIBO) is an open standard for defining the business terms and relationships associated with financial instruments, pricing concepts and financial processes. These “common language” standards are used to align the way financial institutions describe complex financial instruments and financial processes so that industry participants and regulators can harmonize reporting, validate data quality, aggregate transactions and analyze risks across the global financial system.

David Newman, Chair of the EDM Council’s FIBO initiative and SVP Enterprise Architecture and IT Strategy for Wells Fargo & Company, says “FIBO provides a type of ‘Rosetta stone’ to help unlock the complexity of financial transactions and increase transparency in support of global financial system stability.FIBO Foundations provides the essential building block for this type of analysis and is a critical development for the financial information industry.”

The EDM Council, under the technical governance of the Object Management Group, was able to expedite the release of FIBO Foundations as a result of its new ‘Build, Test, Deploy and Maintain’ (BTDM) methodology.

Dennis Wisnosky, Senior Advisor to the EDM Council for FIBO, says  “The BTDM process promotes collaboration among financial institutions, technical experts and ontology vendors to both model the complexity of financial processes and express it in the Web Ontology Language standard known as RDF/OWL. The release of FIBO Foundations and the industry’s use of the BTDM methodology pave the way for expedited development of the additional finance industry domains needed to support risk analysis and enhance the efficiency of operations among financial institutions.”

Wisnosky developed the BTDM methodology while implementing semantic processing as the Chief Technology Officer of the Business Mission Area within the US Department of Defense.

The BTDM development process for FIBO brings together subject matter experts from the financial institutions (including such firms as Bank of America, Wells Fargo & Co., Bloomberg L.P., Nordea Bank, Goldman Sachs, JPMorgan Chase, Deutsche Bank, Citi, HSBC, Manulife, and State Street Corporation) to ensure structural validation of the conceptual model; and semantic processing vendors (such as Thematix, Adaptive, Cambridge Semantics, Semantic Arts, Complexible, Mphasis, IBM, NoMagic) to automate testing of the ontology.  These members operate as a series of FIBO Content Teams (FCT’s) who are each contributing to the build out and testing of the FIBO ontology.

EDM Council members have already made substantial progress on a number of other FIBO components including

• FIBO-Business Entities (the model of entity types and ownership concepts);
• FIBO-Securities (the baseline model of how financial instruments are constructed);
• FIBO-Loans (the model of mortgages and other lending instruments);
• FIBO-Business and Commerce (the model of contractual agreements);

and other domains that are currently working their way through the EDM Council/OMG process.

BRICS 2014, the 6th Summit of Heads of State and of Government of BRICS hosted by Brazil and held in Fortaleza and Brasília has announced the details of the BRICS Bank in its agreed minutes

Capital

• The Bank shall have an initial authorized capital of US$ 100 billion.
• The initial subscribed capital shall be of US$ 50 billion, equally shared among founding members.

Management Roles

• The first chair of the Board of Governors shall be from Russia.
• The first chair of the Board of Directors shall be from Brazil.
• The first President of the Bank shall be from India.

Location

• The headquarters of the Bank shall be located in Shanghai.
• The New Development Bank Africa Regional Center shall be established in South Africa concurrently with the headquarters.

BRICS Finance Ministers are directed to work out the modalities for its operationalization.

Quick highlights of Barclays Strategy of ‘Go-To BANK‘ update by CEO Anthony Jenkins & CFO Tushar Morzaria
Barclays will be a focused international bank with 4 core businesses

1. Personal and Corporate
2. Barclaycard
3. Africa
4. The Investment Bank

Barclays Non-Core
to be formed to exit,sell or run down of non strategic assets.
It will include:

• Parts of the Investment Bank such as physical commodities (excluding precious metals) and elements of other trading businesses including emerging markets and non-standard derivatives
• European retail banking operations
• Non-core corporate banking in Europe and the Middle East.
• certain fair-value, long-dated loans in the UK
• a small number of Barclaycard and Wealth portfolios.

It targets a reduction in Non-Core RWAs to ~ £50B by EY2016 with the drag on Group return on equity down from c. 6% in 2013
Cost guidance

• 2014 Group operating expense revised to ~£17B, down from our earlier target of £17.5B
• 2014 Group gross headcount reduction revised from 10-12,000 to ~ 14,000.

Leadership

• Ashok Vaswani will now lead Personal and Corporate Banking division.
  • Pete Horrell, as CEO of Wealth,
  • John Winter, as CEO of Corporate Banking,
    will report to Ashok with immediate effect.
• Val Soranno Keating will continue to lead Barclaycard,
• Maria Ramos will lead Africa business.
• Tom King will lead the Investment Bank.
• Eric Bommensath will step down from the Executive Committee to lead Barclays Non-Core, reporting to Antony
  Jenkins.

Financial targets
New financial targets set to assess progress:

• principal commitment to deliver a ROE above the COE on a sustainable basis.
  That means an ROE >12% by 2016 for Core business
• On capital, targeting a fully loaded CET 1 ratio >11% in 2016.
• a CRD IV leverage ratio > 4%.
• ambition for the dividend is a payout ratio between 40 & 50%, although we expect to be at 40%
  until we reach a 10.5% CET 1 milestone in 2015.
• committing to a cost target < £14.5B in 2016 for Core business
• estimating an ROE drag of < 3% in 2016 for Non-Core business

Delivering keynote at Mobile World congress, Citi CEO Mike Corbat says Citi sees itself as a technology company with a banking license.

He pointed out that Banking has traditionally been innovative in the financial space, from inventing new products such as the credit card, to spotting transformative projects and putting our resources to work behind them.

He recalled how Citi pioneered the widespread use of ATMs and made them an industry standard. Citi provided indispensable financing to the Transatlantic Cable and the Panama Canal—both of which revolutionized communication and connectivity in their day.

Citi’s strategy is built around what they have identified as the three defining secular global trends of our time:

Globalization—the increasing connectivity of all the world’s nations, economies and markets;
Urbanization—the concentration of people and GDP growth in cities; and
Digitization—the transformative power of technological innovations, large and small, and the countless efficiencies they create.

Citi’s digital strategy has three core pillars.

First, everything we do is customer-centric. We seek to deliver the best possible experience to our target clients and customers.
Second, our efforts must be globally common. We work to leverage our global footprint and operational infrastructure to provide one-stop solutions for multinational clients.
Third, we’re creating digital partnerships. Working with existing and prospective clients, we’re building new distribution channels that expand our reach in the digital space.

Citi on an average day, moves $3 trillion in business and institutional financial flows—and $9 trillion on peak days, or more than half the entire U.S. GDP. Nearly all of that is moved electronically.

85% of global consumer transactions are still paper-based.

A study conducted by Citi and The Imperial College in London found that a mere 10% increase in the adoption of digital money would move $1 trillion in “off the books” transactions into the formal economy—with a corresponding $100 billion rise in global tax revenues. In an era when governments are struggling to meet their obligations, that’s significant.

Citi estimates that a 10% increase in digital money usage would bring an additional 220 million people into the banking system
He concludes his keynote by saying

our future will be global—and it will be digital.

Full text of his keynote.

The Board of The Co-operative Group has agreed to proceed on the basis of non-binding heads of terms with Lloyds Banking Group (“LBG”) in relation to the acquisition of the “Verde” business. The move by The Co-operative Group would create a real challenger bank on the High Street with almost 1,000 branches.

The Co-operative Group and LBG are now working towards agreeing definitive, binding documentation, subject to the satisfactory completion of further due diligence and Board approvals. Completion of the transaction is expected before the end of November 2013 and will be conditional on, among other things, regulatory approvals from the FSA, HM Treasury and the European Commission.

Highlights

• The Co-operative Group to acquire 632 branches from LBG with an estimated 4.8m customers, thus creating an enlarged Co-operative Banking Group, differentiated through the quality of its customer-centric, member-led, ethically driven, banking model
• The acquisition meets the recommendation from the Independent Commission on Banking to create a challenger bank with a market share approaching 7% of today’s UK personal current accounts
• The transaction would accelerate delivery of The Co-operative Group’s strategy, creating the compelling co-operative alternative with a combined bank network of almost 1,000 branches across the UK, representing nearly 10% of today’s UK bank network and 11m customers
• The acquisition would increase the scope and reach of The Co-operative Group as a whole and enable The Co-operative Banking Group, through an extensive branch network, to provide banking services to The Co-operative Group’s wider member and customer base
• Paul Pester, currently Chief Executive of Verde, would become Chief Executive of the combined banking business, subject to FSA approval.

Under the heads of terms:

• The Co-operative Banking Group to pay LBG an initial consideration of £350m; with a further £400m of additional earn-out payments in present value terms between completion and 2027, subject to the meeting of certain performance measures
• To fund the initial consideration, The Co-operative Group will issue perpetual subordinated debt of £350m fully underwritten by LBG
• The Verde business is expected to have a balance sheet as at 31 December 2013 (estimated by LBG) of around £24bn, with fully matched customer assets and liabilities, leaving no funding gap
• It is anticipated LBG will initially provide £1.5bn of equity capital to fund Verde at completion under a standardised capital model. Under an advanced capital model and subject to regulatory approval, the equity capital to be provided by LBG is expected to be in the range of £1.1bn to £1.4bn
• LBG will also provide access to around £500m of Tier 2 capital
• The Verde business is estimated to have around £11bn of risk weighted assets on a standardised basis
• LBG will use the TSB as the banking brand for the Verde business and will make this transition from Summer 2013, prior to completion of the proposed transaction
• Once it becomes part of The Co-operative Banking Group, the TSB business would operate separately for a period of time ahead of integration with the existing Co-operative Banking Group business
• The combined bank would ultimately operate on a separated version of the existing proven LBG IT platform which would be managed by LBG, for the enlarged Co-operative Banking Group, on a managed service basis, under commercial market terms
• It is anticipated that the earliest point at which the migration of the existing Co-operative Banking systems to the LBG IT platform would begin is 2015

The heads of terms is expected to move to a full sale and purchase agreement, subject to satisfactory completion of due diligence processes and Board and regulatory approvals. However, agreement may not be reached on a definitive sale and purchase agreement or, once signed, the agreement may not become unconditional. Accordingly, there is no certainty that the proposed transaction will proceed, or that it will proceed on the terms set out in the non-binding heads of terms.

Source