Best Bank Awards: Standard Bank

African currencies, particularly those that are considered frontier, almost always pose challenges in terms of liquidity and the potential for regulatory change, according to Standard Bank.

This year, for example, authorities in both Ghana and Mozambique banned FX swaps trading, which created additional hurdles for the bank’s clients, says Richard de Roos, global head of foreign exchange at the firm. He adds that other regulatory challenges faced by the bank include restrictions in pricing some products, as well as the documentation required.

“We develop our service offerings to our clients considering these factors, whilst ensuring we are proactive in managing the outcomes. The adoption of digital FX trading capabilities has also been challenging in the frontier markets, due to the lack of digital market data, as well as occasional connectivity issues,” says de Roos.

“The rand is unique in that it trades like a G10 currency for much of the day and then like a frontier currency for the rest of the time. It is challenging assigning levels of risk to client transactions that are in relation to true market risk. The market remains exceptionally competitive due to an increased digital footprint globally,” he notes.

De Roos anticipates a pick-up in East African markets in particular next year, with the expected removal of rate caps stimulating more interest in Kenya, and more corporate activity from Ethiopia to Mozambique.

He says Angola will probably also see rapid developments that could throw open opportunities for the bank’s clients after two years of fairly precipitous depreciation of the kwanza.

“What is certain is that there will always be one corner of this continent that gets traders excited, and another corner that gives us grey hairs,” he adds.

In the bank’s view, a continuing growth trend will be the trade between Africa and China, the continent’s largest commercial partner.

Our commitment to the digitisation of the bank is synonymous with our growing data science capability

Richard de Roos, Standard Bank

China-Africa trade expanded by 20% in 2018, increasing to $205 billion from $170 billion the year before – its fastest rate of growth since 2011. Meanwhile, Sub-Saharan Africa, which boasts annual GDP of $1.7 trillion, continues to grow in 2019 at an expected 3.4% despite a global economic slowdown, according to the International Monetary Fund, notes de Roos.

“From a South African rand trading perspective, we anticipate continued competition and increased activity from non-bank liquidity providers as well as non-disclosed venues, which may contribute to greater fragmentation and spread compression,” he predicts.

Standard Bank has made a significant investment in sourcing and implementing cutting-edge technology for market-making, de Roos continues: “Our commitment to the digitisation of the bank is synonymous with our growing data science capability. We have dedicated capacity looking at millisecond-by-millisecond data, monitoring market quality, enabling the business to be proactive, thereby enhancing pricing, and ultimately optimising the experience of our franchise clients.”

Another key focus of the bank has been on making sure it has the right distribution mechanisms for its enhanced pricing, including various APIs that ensure scalability and faster development of new products. 

Other successful initiatives for Standard Bank’s client franchise include a range of payments solutions. 

Blockchain banking

“We have developed the first blockchain banking solution in South Africa, which facilitates cross-border payments with embedded FX. We have also deployed a robotic process automation solution for settlements that removes the requirement for manual intervention on standard settlement procedures in FX and money markets. These initiatives have been instrumental in improving our processing time, reducing errors and thus contributing to our goal of an exceptional client experience,” de Roos says.

With regard to rand trading, he expects to see digital themes similar to those evident in developed markets, such as increased algorithmic execution and a greater focus on data and transaction cost analysis.

“We also think that the FX Global Code will continue to be a key theme, due to continued questions around the participation of non-disclosed electronic communication network venues in the market,” he adds.

Foreign exchange volumes will increase in most of the bank’s markets, coming off a low base, de Roos concludes: “There is always a risk that something changes to depress flows in the biggest markets – currently Egypt and Nigeria – but we see that as a low probability in those countries now. More likely is that all frontier markets see a boost from any resolution of trade tensions and an eventual improvement in global growth.”

The full list of winners of the 2019 FX Week Best Banks Awards