Founding

The corporation was founded in 1971 by the Cuban expatriate banker Guillermo Hernandez-Cartaya, after he finished serving a Cuban sentence for his participation in The Bay of Pigs Invasion. The New York Times said:
With the formation of WFC, former associates said, Mr. Hernandez-Cartaya hoped to utilize his wide-ranging contacts in the Latin American political and economic world to tap the growing market between American lenders and Latin American borrowers made possible by the 1969 Edge Act.[2]

World Finance Corporation

World Finance Corporation (abbreviated WFC; it was later renamed simply WFC Corp.) was a financial corporation founded in 1971 and headquartered in Coral Gables Florida. When WFC Corp was headed and controlled by Guillermo Hernandez-Cartaya (a former Cuban banker who was an agent of the CIA, and believed to be an agent of the Mafia, Fidel Castro[1], and also of various Colombian drug lords) through the WFC Group shell company, it became known for a major financial scandal in which over $50 million was lost. This scandal was the subject of a 60 Minutes segment on 26 February 1978. Cartaya controlled it through a number of shell companies, the most well known of which was the WFC Group.

Advantage near-the-money spreads

Bank stocks draw interest, outlook positive
It’s been an eventful week, given the confidence vote followed by the blasts in Bangalore. There has been massive daily volatility and sentiment has weakened noticeably despite the overall gains. The settlement promises to be exciting with very high volumes and very high intra-day volatility.
Index strategies Last week was consistently high-volume on the derivatives front and indeed, much higher than seen in the past several months. There’s been an excellent carryover pattern so far. About 25 per cent of Nifty futures is already in mid+far month contracts and above 38 per cent of option open interest is also parked in contracts beyond July.
The FIIs have been enthusiastic participants and their position mix suggests that they are optimistic. About 38 per cent of their outstanding positions are in index options – this number is higher than normal as it often is when the FII change cash market perspective alters. They have been net buyers for the past week after being net sellers through most of the past three months.
If the high carryover pattern is maintained, the last four sessions of this long settlement will see huge volumes. At the same time, daily volatility has spiked alarmingly and the VIX has risen to above 40. This is way above the danger-mark. The fear factor is clearly evident. High volumes and high volatility adds up to a very heady combination, which could take the market through a zigzag.
The put-call ratios are bullish. The overall PCR (in terms of OI) is at 1.37 and falling while the July PCR is 1.31. Interestingly we also have a large imbalance in OI sitting in winning option positions. About 2.6 per cent of Call OI is in-the-money while over 9 per cent of Put OI is in-the-money.
This suggests that there are more bears around at this instant and the market is oversold. It implies that there will be short covering on Wednesday and Thursday, provided the market doesn’t free fall early in the week.
Most index futures are running at slight premium to the spot index. There’s higher than normal liquidity in the Bank Nifty and the CNXIT, where’s there’s already evidence of carryover. Both the Bank Nifty and CNXIT look weak and a short-covering trend should be visible by Wednesday.
Technically there is support for the Nifty at current levels and immediately below. The chart support is reinforced by the appearance of the option chain, where there’s a lot of OI in the 4200p and 4300p. If 4200 is broken, the market is likely to fall below 4100 however. On the upside there’s resistance all the way till 4600. The call option chain suggests that successive levels of 4400, 4500 and 4600 will all be major barriers.
The trader could expect that the market will swing about 150-200 Nifty points per day and that the settlement week could see a trading range between 4100-4600. That’s a huge range and it makes the strategy of July option selling to take advantage of the expiry factor quite dangerous.
The good part of this promise of high volatility is that close-to-money spreads in both directions could gain even within the same session. You don’t need to take a tight directional view if you have the courage to hold an apparently losing position. If you employ Nifty futures, keep stops at about 2-3 per cent off the transaction price.
A standard bullspread with long July 4400c (42) versus short July 4500c (19.45) costs 23 and pays a maximum of 77. An August position with long 4400c (153.65) and short 4500c (108.8) costs 45 and pays a maximum of 55.
A standard bearspread with long July 4300p (59) and short 4200p (29) costs 30 and pays a maximum of 70. An August bearspread with a long 4300p (170.75) and a short 4200p (135.55) costs about 35 and pays a maximum of 65.
The July holdings offer excellent risk:reward ratios and as mentioned above, both of these could be struck despite the expiry factor. All it would take is a 3 per cent swing down or a 5 per cent swing up. If you decide to carryover by opening August option positions, the risk:reward ratios remain decent given the extra 4 weeks of time to expiry.
If you decide to go for strangles, August is the better contract month to avoid risk of expiry. In that case, go wider with a long 4200p and a long 4400c. The long strangle costs 289 and it should be cut off with a short 4000p (86.15) and a short 4600c (78.3).
That combined long-short strangle position has a cost of about 125 and if the market swings to either limit (4000, 4600) by August 28, the maximum return is 75. If the market swings to both limits, the payoff is 150.

The future of banking

Stacy Shapiro provides an insight into the world of banking and how sustainable ethics, which are two of the worlds buzz words right now, are finding their way into the banking arena
Just imagine a world where banks and financial institutions decide to support only projects and investments which improve rather than harm our planet. Life as we know it might be more difficult, but w...

Banking in the days ahead

Stacy Shapiro provides an insight into the world of banking and how sustainable ethics, which are one of the worlds buzz words right now, are finding their way into the banking arena
Just imagine a world where banks and financial institutions decide to support only projects and investments which improve rather than harm our planet. Life as we know it might be more difficult, but we would all feel good about it knowing that our role in climate change had been reduced. But that’s the kind of world that many banks and financial institutions now claim they are trying to aspire to when investing in new projects.Often known as “sustainable banking,” most of the world’s largest banks are now enthusiastically embracing this concept, according to the Financial Times. Once the preserve of a few enthusiasts, now mainstream organisations have taken on the cause.That’s why the FT and the International Finance Corporation are carrying out for the third year the 2008 Sustainable Banking Awards which will be announced in June. Last year, the awards attracted more than 100 banks from 51 countries including many from Asia, Africa and Latin America.The move toward sustainable banking also is evident by the number of banks who have signed up to ‘The Equator Principles,’ designed in 2002 and updated in 2006 as a financial industry benchmark for determining, assessing and managing social and environmental risk in project financing.More than 60 banks from all over the world are now signed up to the Equator Principles, including Bank of America and Citibank, ABN Amro, Barclays, Royal Bank of Scotland, and Westpac. Those that have just joined this year include KfW Ipex in Germany, and Financial B.C. in Togo. The State Environment Protection Administration in China also recently signed a deal with the International Finance Corporation in Beijing to introduce the Equator Principles in China.Equator principlesLloyds TSB in the UK also signed up to the Equator Principles in January to use as a benchmark for assessing and managing social and environmental risks in project finance.The principles promote socially responsible conduct and sound environmental practices in relation to all new project finance initiatives above $10m and seek to provide a framework against which lending can be assessed, Lloyds TSB noted.“We introduced environmental assessment, a standard feature of all business lending, back in 1996 and were acknowledged as one of the pioneers in respect of environmental reporting,” stated Truett Tate, Lloyds TSB’s Group Executive Director, Wholesale & International Banking. “Adopting the Equator Principles is another step in our commitment to environmental sustainability. We believe that by lending responsibly and by understanding the environment in which we and our customers operate in, we are committed to doing business in the right way”.Another bank which is a long-time advocate of the Equator Principles is the HSBC Group, the winner of the 2006 FT Sustainable Bank of the Year, which refers to the movement in its institution as “corporate sustainability.”“For us this means finding the right balance between social, economic and environmental decisions to ensure long-term business success,” said an HSBC spokesman. “At HSBC, it is about managing the environmental footprint of our business, working with our customers to do the same, seeking out 'sustainable' business opportunities (like investing in clean technologies) and also supporting the communities in which we operate (by financing or supporting education or environmental projects). For a personal customer, this may mean making banking decisions (including where they choose to bank) considerate of society, the economy and/or the environment.”HSBC takes its responsibility to the environment seriously, and as a business, it takes steps to mitigate its own direct environmental impacts as well as the impact the bank has on the environment through its lending and investments. “Sustainability is a key part of our risk assessment process when reviewing all potential lending and investment projects,” said an HSBC spokeswoman. “We have strict standards and policies on potentially high risk sectors including chemicals, energy, forestry, freshwater and mining and metals.”Other InitiativesThere are many other initiatives within the finance industry today to improve the environment and stem the tide of climate change –all as a part of sustainable banking.For example, all of the FTSE 350 banks are part of the Carbon Disclosure Project, according to a spokesman for the British Bankers Assn. The CDP is an independent not-for-profit organisation aiming to create a lasting relationship between shareholders and corporations regarding the implications for shareholder value and commercial operations presented by climate change. The CDP’s goal, according to its website, is to “facilitate a dialogue, supported by quality information, from which a rational response to climate change will emerge.”CDP provides a coordinating secretariat for institutional investors with a combined $57trn of assets under management. Over eight years CDP says it has become the gold standard for carbon disclosure methodology and process. The CDP website (www.cdproject.net) is the largest repository of corporate greenhouse gas emissions data in the world.British banks also are members of The Forge Group which was set up to help identify, understand, manage and report on environmental impacts, risks and opportunities. The Forge Group has formed and issued a set of guidelines on environmental management and reporting for the financial services sector which is available at www.abi.org.uk/forge.“The Guidelines highlight why environmental management and reporting is an important part of corporate governance,” the Forge website states. “They also identify the business activities that create key environmental management and reporting issues and provide guidance for developing management processes that avoid environmental risk, meet governance standards, and realise business opportunities.”The Forge Group is an organisation of a number of banks which looks at how key corporate functions and business lines can effectively meet the challenges of climate change, added the spokesman from the British Bankers Assn. “They produce documents which are effectively practical actions for people in banks looking at their business levels and how they can secure their own functions in order to secure climate change.”Banks and financial institutions also have their own financial initiatives to improve the planet. For example, in September 2007, HSBC launched its Global Climate Change Benchmark Index which reflects and tracks the stock market performance of companies set to benefit from addressing climate change.There is also the HSBC Climate Partnership, which is a $100m project to combat the threats of climate change by inspiring action by individuals (including employees). Partners in this project are The Climate Group, Earthwatch Institute, Smithsonian Tropical Research Institute and the WorldWide Fund.Meanwhile, a few banks like the Co-Operative Bank in the UK have taken sustainable banking one step further and set up ‘ethical banking’ whereby they refuse to invest in companies which extract or expel fossil fuels; or in companies which use animals to test cosmetics or are involved in certain genetic modification.The futureIt could be tempting at this point in time, with the credit crunch biting hard on financial institutions’ bottom lines, to take the eye off the ball of environmental risks when considering investments.However, noted the British Bankers’ Assn. spokesman, “Banks consider risk over a longer term than many other businesses because they have money lying in long-term mortgages and other kinds of borrowing. They look toward the horizon of 25 years hence and therefore climate change remains a sizeable concern for their business as far as risk is concerned.”Yes, there are immediate risks, the BBA spokesman admitted, such as the risk of a recession in the US economy, and the risk of a credit crunch across other countries. “But climate change is one of a number of pressures that banks will be looking at the moment. Their attitude towards investment risk over the last five or 10 years has changed so radically that climate change is now an embedded part of their business. They’re not going to be dumping (this idea) quickly. It’s there for good.”The question now is what retail customers think about it, said the BBA spokesman. “If they think a credit crunch is likely, what are they going to do about their investments. Are they going to go into conventional funds rather than ethically branded products? That’s the next question, I guess, and something we’ll have to watch and wait on to see if there is the public appetite for doing something about climate change matched by what the banks are doing as an integral part of their business.”

Fully implemented

World Finance spoke with Dr Márta Tkacsik, Senior Vice President at FMC Consulting - Ness Hungary, she offered insights into sales and customer service in commercial banks of the CEE region. Topics covered included multi-channel management, operative CRM
What problems do commercial banks in the CEE region face in the field of sales and customer service?

CEE’s commercial banks – similarly to their European peers – find it increasingly difficult to differentiate from each other. Although there is still some reserve in sales, since the retail account, product, channel coverage is not complete but the difference between the profit rate of regional and European banks is continuously decreasing. Customers are less loyal to their banks even in this region compared to three to five years ago. It is hard to maintain product-based differentiation. Furthermore, technological drivers also force change: the internet generates transparency and it is revealed and spreads a lot faster if a service is not of appropriate quality. Banks operating in CEE shall also realise soon that real actions should be taken in the field of customer service and sales, and in the future the customer’s experience will determine the success of the bank. As a consequence of the above, efficient and quality sales and service processes that bridge over bank channels shall be implemented in CEE countries with more developed bank systems as well. Thus Western European and CEE banks have to fight very similar problems in this field, since customers’ opinion about European banks is often that they are “impersonal”, there is no sufficient and appropriate information available to banks during communication with the customer, marketing campaigns do not target personal interests of clients etc.What is the situation with branch networks in the region in comparison with other countries of the EU?In Western Europe there is an apparent movement from the branch network towards electronic channels, although they still play a dominant role in both sales and transaction services. There are high expectations towards mobile solutions, which will predictably fulfill a serious role in communication between the bank and its customers.On the contrary, a really significant lag must be made up in CEE countries, particularly regarding the density of branch networks. While there are 1,500 – 2,000 citizens for each bank branch in Western Europe (Spain is outstanding in this regard, there are approximately one thousand citizens for one bank branch), in CEE countries this is currently 4000-6000 persons/branch, indeed there are states where branch network coverage is even lower. It is also true that the branch network extensions currently being in process in CEE do not mean the same as earlier. Today commercial banks open diversified, more efficient branches that focus on certain products, services or customers, while a few years ago the opening of universal “large” branches was typical.Opening branches along certain concepts is already spreading in our region as well: banks open branches that are similar to ‘shopping centres,’ ‘malls’ or ‘boutique networks’ and branch openings are preceded by serious conceptual planning and business case.Can the alternative electronic banking sales and service channels used in CEE be compared to the solutions applied in the EU?There is no significant lag between CEE countries and those in Western Europe in the field of alternative electronic channels, at least not regarding available banking services and solutions. Web2, mobile banking solutions and even mobile payment are gradually gaining ground. But unfortunately Internet penetration is not nearly as high in the countries of the region, as further to the West from us, but there is no measurable difference in the penetration of mobile phones, since coverage is practically 100 percent. The strengthening of sales activities is perceivable in case of all electronic channels.What is the largest deficiency, the problem requiring a solution the most in the field of customer service and sales?Primarily the lack of information about and to the customer hinders banks in being able to communicate with their clients in a targeted way. There are no banking front-end systems independent of channels, fully integrating processes, which could ensure that data and information characterising the customer and essential for the clerk/referee or the most attractive, customised bank offers are available at all times. There are no flexibly implemented, fully automated work processes that would increase work efficiency and could divert clerks from transaction and service activities to consulting services.A lot of banking front-end or operative CRM-type projects have started in the region with more or less success in the past few years. Unfortunately, currently there is no application that meets all criteria: supports all bank channels in an integrated way, from traditional branches, through Internet solutions to third-party agents, and in addition, covers both traditional services (e.g. fund functions) and modern sales functions, furthermore, operates real time, in an integrated way with account management systems, background systems supporting analytical CRM functions, marketing and campaign support systems etc.No wonder, that large application producers do not have total banking front-end applications either. I think the complexity of this problem reaches, if not exceeds, that of integrated account management systems. In addition, such systems shall have outstanding flexibility: it is currently apparent and expected in an even larger degree in the future that there is strong movement between channels, which must be generated very quickly (movements, such as the bank’s internal branch network vs. strategic cooperation with third-party partners; traditional channels vs.electronic channels). Present SW suppliers only cover certain fields, channels or process parts with their systems, the integration of which is unfortunately not a simple task. It must be underlined that we are not only talking about IT integration here, but at least process level, or rather business level integration, also including organisational issues and motivation tools.How can FMC-Ness Hungary assist banks in solving the above-listed challenges?FMC is an independent technological consulting firm that may and does assist its bank clients in solving tasks in several fields. On one hand, we have a detailed picture of the multi-channel solutions currently possessed by each bank in the region and we are aware of the business/technological drivers, along which future changes are expected. We have also prepared an FMC CRM barometer, in which we evaluated the maturity of Hungary’s largest commercial banks in the field of sales and customer service based on a complex criteria system we established.Thus we can assist our clients on a business strategic and conceptual level. The special strength of FMC-Ness Hungary (differing from specifically strategic advisors) is that we possess serious project implementation and information technology experience; therefore we always suggest practically feasible solutions to our clients. In most cases customers assign our firm with implementation, from functional and technical specification to go-live of the realised, implemented systems, also including organisational and regulative works performed in the project.

Strengthening the EU Emissions trading system

By Stavros Dimas, European Commissioner for Environment.

In an earlier article for World Finance I explained what the European Union has achieved with carbon trading. That article set out the developments that gave rise to the EU greenhouse gas Emissions Trading System (EU ETS), the biggest such system in the world, how the EU ETS serves as a model for emission trading systems elsewhere and how it is spurring clean development projects in emerging economies.As part of a major set of climate change and energy initiatives, the European Commission in January 2008 proposed a revision of the EU ETS to strengthen it and make it more efficient in reducing greenhouse gas emissions at least cost. This article explains our proposal and its implications.Climate change is arguably the greatest challenge facing mankind today. The world's future prosperity and social stability are under severe threat unless we take urgent and bold action to reverse the continuing rapid increase in global greenhouse gas emissions.The European Union has long been leading international action to address global warming and we have put in place a panoply of measures to limit and reduce our domestic emissions. The EU ETS, launched in 2005, is by far the most important and innovative of these and forms the cornerstone of our strategy for combating climate change cost-effectively.The system has succeeded in putting a market price on carbon – at present just under 22 euros per tonne for forward delivery - and thus given companies a clear business incentive to reduce their emissions. It is a key tool for driving investment towards clean, low-carbon technologies, both in Europe and in third countries. The EU ETS currently covers some 10,500 power plants and energy-intensive industrial installations across the 27 EU Member States plus Iceland, Liechtenstein and Norway. The aviation sector is to be brought in from 2011 or 2012.Ambitious targetsIn March 2007 the European Union's leaders underlined their determination both to tackle the climate challenge and improve Europe's energy security by committing to a set of ambitious targets. They mandated a central role for the EU ETS in achieving these goals.Europe will reduce its greenhouse gas emissions to 30 percent below 1990 levels by 2020 provided other developed countries commit to comparable efforts under a new global climate agreement that should be concluded by the end of 2009. An ambitious global agreement to succeed the Kyoto Protocol is our top priority since only decisive international action will succeed in controlling climate change.Recognising the clear competitive advantages for Europe in turning itself into a highly energy-efficient, innovative, low-carbon economy, the EU leaders also committed to an emissions cut of at least 20 percent by 2020 regardless of what other countries decide. And to support these targets and strengthen energy security, they agreed that renewable sources should be providing 20 percent of the EU's energy needs by 2020.The European Commission put forward a package of proposals for implementing these targets on 23 January after months of consultation and analysis. One of the main pillars of this so-called Climate Action and Renewable Energy package, now under active consideration by the European Parliament and EU governments, is a major overhaul of the EU ETS that will take effect at the start of the third trading period starting on January 1, 2013. Our proposals to revise the system draw on the lessons of the 'learning by doing' phase of the EU ETS that took place between 2005 and 2007. We have been guided by two main priorities: to ensure the scheme provides real emission reductions so that we meet our targets, and to increase harmonisation in order to create greater transparency and predictability for participants and reduce distortions in the EU's internal market.We are proposing a limited broadening[1] of the system's scope that will increase its cost-effectiveness and environmental efficiency by expanding the range of abatement opportunities. However, the two biggest changes we envisage are the introduction of an EU-wide cap on the total number of emission allowances - replacing the current system of national caps - and a move to full auctioning of allowances instead of allocation for free.TransparencyBy 2020 the EU cap will be reduced in a linear way by 1.74 percent each year below the level of emissions in 2005. This is the easiest and most transparent way to ensure that the system contributes effectively to achieving the EU's emission reduction targets. By 2020 emissions from the sectors covered by the EU ETS – which by then will account for about 40-45 percent of the EU's total greenhouse gas emissions - will be 21 percent lower than in 2005. Once a global agreement is reached, the EU cap will be automatically adjusted to a stricter reduction target as necessary.Free allocation of allowances to companies has been the norm so far, but we have come to recognise that auctioning constitutes the simplest and most transparent approach for distributing allowances and creates the clearest incentive for investment in a low-carbon economy. It is also the best way to prevent unwanted distributional effects such as 'windfall' profits for companies.The Commission is therefore proposing that from the beginning of the third trading period electricity generators would have to buy all their allowances at auction. For other sectors auctioning of allowances would be phased in gradually to reach 100 percent in 2020. We recognise, however, that there may need to be exceptions to full auctioning for certain energy-intensive sectors that operate in a highly competitive international market and may not be able to pass on the cost of CO2 allowances to their customers without losing market share. The risk of them moving production abroad could be particularly high if a global agreement cannot be reached or it does not succeed in levelling the playing field internationally. Carbon leakage may not only mean loss of jobs, but could result in higher emissions if production is moved out.The move to auctioning will bring governments significant revenues of up to €50bn a year by 2020 and we are recommending that they spend at least 20 percent of this on combating and adapting to climate change.Fulfilling obligationsOur proposals also have an important external dimension.The EU ETS is the main driver of demand for credits from emission-saving projects in developing countries since companies in the system can use these to fulfil part of their obligations. If the EU's reduction target were to stay at 20 percent, the option of buying credits from abroad would need to be limited in order to create incentives for innovation and real emission reductions within Europe. The Commission is therefore proposing that from 2013 only credits allowed but not used in the current trading period, which runs from this year to 2012, should be eligible.However, in the context of an international agreement with a stricter emissions reduction target than 20 percent, the limit on credits would be automatically raised so that up to half of the additional reduction effort above 20 percent could be met through their use. This increase in access to credits will help Europe meet the higher target while also creating an incentive for third countries to ratify the agreement since only credits from countries that did so would be accepted.We are introducing the possibility to link the EU ETS not only to emission trading systems set up by Parties to the Kyoto Protocol but also to systems with absolute emission caps in any other country or in sub-federal or regional entities such as US states or groups of states. In this way we aim to promote the development of a network of linked trading systems around the world that would form the backbone of a strengthened global carbon market.With these changes, we believe that the revised EU ETS will offer the transparency and predictability that companies need to make long-term investments in emissions-reduction technologies. The stronger EU ETS that will result will further underline the EU's leadership in combating climate change and make it attractive for other countries to link with our system.