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Big Four accountancy firm PricewaterhouseCoopers (PwC) plans to sell its fintech unit amid mounting scrutiny on its potential conflicts of interest within the sector.

The unit, eBAM, uses PwC-developed technology to automate regulatory risk analysis for around 10 major London-based finance firms. It is set to be acquired by its management and rebranded as LikeZero in a deal backed by UK-based private equity firms Souter Investments and Manfield Partners.

Michael Lines, PwC’s former head of contract solutions, will become CEO of LikeZero. Speaking with Financial News, he said that the unit’s sale was prompted by regulations limiting the services that Big Four firms could provide to the financial institutions and listed companies they audit.

Specifically, restrictions introduced by the Financial Reporting Council – the UK audit watchdog – prohibit PwC from selling its own technology to their audit clients. The FRC also prohibits non-audit PwC clients from continuing to use PwC-developed technology if they become customers of the firm’s audit business.

“In the current environment, PwC [is]... not really the right home to turn LikeZero into a proper global business,” Lines said.

In 2016, the FRC introduced measures restricting Big Four firms from providing audit clients with fintech solutions as part of an initiative to reduce conflicts of interest in the financial services sector. It built on these measures in 2019 by banning auditing firms from providing certain clients, including banks and insurers, with advisory services such as remuneration and tax advice. The move was intended to strengthen auditor independence following a number of scandals, including the collapse of department store chain BHS and outsourcer Carillion.

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Chris Biggs, Partner at Theta Global Advisors, commented on the announcement: "This announcement is another move by a Big Four firm to realign its business model with the FRC regulations to prevent a conflict of interest with its auditing clients.”

“The global pandemic has shone a light on the practices of the Big Four and their interests in the auditing and non-auditing space. Now, they are beginning to sell-off businesses that could be deemed to go against regulations and this is unlikely to be the final announcement in the space.”

eBAM’s technology allows financial institutions to automatically search complex legal documents potentially thousands of pages long for risks that could arise from significant regulatory events, such as Brexit.

The value of the deal is not yet known, and is set to be announced later today.

Car production in the UK fell to its lowest level for 25 years during September, according to new figures released by the Society of Motor Manufacturers and Traders (SMMT).

A mere 114,732 cars were built by UK factories over the course of the month, around 6,000 (or 5%) less than in September 2019. The slump reflects general consumer uncertainty as new lockdown measures are imposed across the country, and as the UK approaches 31 December and the possibility of leaving the EU without first establishing a free trade deal.

Exports in September also declined 9.7% to 87,533 units, around 9,500 fewer vehicles sold overseas year-on-year. Overall, UK car production has fallen 35.9% behind levels seen in 2019. Car plants are forecasted to make fewer than 885,000 cars during 2020, marking the first time that production volumes will have fallen below one million since 2009.

“These figures are yet more grim reading for UK Automotive as coronavirus continues to wreak havoc both at home and in key overseas markets,” SMMT CEO Mike Hawes said in a statement.

“With the end of transition now just 63 days away, the fact that both sides are back around the table is a relief but we need negotiators to agree a deal urgently,” Hawes continued. “With production already strained, the additional blow of ‘no deal’ would be devastating for the sector, its workers and their families.”

One positive sign revealed by the September data was an uptick in battery-electric vehicles. Production of BEVs was up 37% from September 2019, with over three-quarters being exported.

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However, the boom in BEV production could yet be short-lived if no free trade deal with the EU is agreed upon. SMMT noted that, if the UK were to be subject to the WTO’s standard tariffs of 10%, the cost of UK-made electric cars exported to the EU would increase by an average £2,000 per vehicle.

Giles Coghlan, Chief Currency Analyst at HYCM, provides Finance Monthly with his insight into how the balance of markets and currencies may shift as December looms.

Brexit negotiations recently risked falling off the cliff edge as political posturing reached new heights. In the lead-up to the EU Leaders Summit on 15 October, Prime Minister Boris Johnson said the UK would stop negotiations outright if no credible progress was being made. Of course, in such a scenario, this would then open the door to a no-deal Brexit potentially unfolding.

The British pound has certainly been bearing the brunt of these Brexit worries throughout 2020, with sterling often falling to prices not consistently seen since the 1980s.

However, contrary to the forecasts of some commentators, talks have now advanced, and to put it in the words of EU officials: “intensified”. Those who believed a deal could be struck often reflected on how the initial withdrawal agreement was only agreed to mere weeks before the end of 2019, and it seems the UK government seeks to replicate such last-minute compromises as the final Brexit hurdle approaches.

So, after much grandstanding and posturing, daily talks have begun in an attempt to solidify a deal within three weeks, allowing the minimum amount of time needed to implement a post-Brexit trading relationship before 31 December.

Investors and traders must remain vigilant and aware of all the possibilities on the horizon. That’s why now is an ideal time to consider these possibilities and the impact they could have on the pound and financial markets more generally.

Investors and traders must remain vigilant and aware of all the possibilities on the horizon.

A clean break?

At the moment, it is still possible for a deal to be agreed upon by London and Brussels. Looking beyond the political rhetoric and grandstanding on display from both sides of the channel, a no-deal Brexit is not an ideal outcome for either parties. Of all the reasons, the sheer uncertainty and potential disruption that could be caused are of top concern.

So, if an agreement is made, this is expected to have an immediate impact on the value of the pound. We could see the pound instantly jump to $1.35 against the dollar, especially if the UK retains the same level of Single Market access as enjoyed previously. With goods still able to freely move between the UK and its European neighbours, a fruitful deal would dispel the long-standing uncertainty that has overshadowed UK economic forecasts since 2016. Sterling would undoubtedly benefit massively from the lifting of this worry from the minds of investors.

However, a final breakdown of negotiations and a no-deal Brexit is still something to be considered seriously. This outcome would likely incur an immediate devaluation of the pound to approximately $1.20, with the potential to fall further as the logistical issues of the UK’s new import/export reality are fully realised.

The third outcome, an extension of the withdrawal period and the continuation of negotiations, would likely provide a small boost to sterling’s value but not change the weekly volatility we’ve seen from the pound throughout 2020. Admittedly, such an outcome would require a re-ratification of the withdrawal agreement and signing off from all 27 EU state leaders who, given the ongoing COVID-19 crisis, may not be inclined to allow Brexit to distract from other pressing concerns for another year.

Regardless of if a deal is agreed upon or not, however, there will be other factors that could potentially affect sterling’s value in the foreign exchange markets. From geopolitics to COVID-19, I believe it is vital for investors to stay abreast of other unfolding trends that are affecting currency values in 2020.

We could see the pound instantly jump to $1.35 against the dollar, especially if the UK retains the same level of Single Market access as enjoyed previously.

Global factors

The recent jump in the pound’s value as a result of Brexit talks resuming in earnest was accompanied by a drop in the dollar’s value. This was seen as a consequence of stalling US Congressional talks regarding a COVID-19 relief package. Potentially more impactful for the dollar, though, is the upcoming US presidential election. Regardless of which candidate wins, a contested election – in which a candidate questions the validity of the results – could see the dollar’s value rapidly rise in risk off flows. The USD has been acting as a safe haven currency during the COVID-19 crisis and any potential of a Trump win would be seen as USD positive as US protectionist policies would look set to continue. However, the medium-term pressure on the USD favours a selling bias on record QE levels with interest rates set to remain low until 2023, according to the Federal Reserve’s latest minutes. If a Brexit deal is secured around the same time, some further GBP/USD upside could be encouraged by outflows from the USD.

Looking to the Bank of England (BoE), another potential change in sterling’s value could come as a result of negative interest rates. BoE governor Andrew Bailey has repeatedly confirmed such a policy is ‘in the BoE’s toolbox’ since August, demonstrating that this could help spur the country’s post-pandemic economic recovery. Thankfully for those unconvinced by this controversial policy, BoE deputy governor Dave Ramsden this week reassured investors that it was still not yet the ‘right time’ for such measures to be introduced.

Investors on alert

In summary, there are multiple ways the value of the sterling could be affected by geopolitical events this year. Volatility remains rife across global currency markets, and there is no indication of this volatility disappearing anytime soon.

This is especially relevant for investors, as research commissioned by HYCM earlier this year demonstrated that cash savings have become the premier asset class for those concerned about market uncertainty. Of the 900 investors surveyed, a massive 78% held cash savings, as opposed to the 48% with stocks and shares and 38% with property.

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So, for such investors with liquid-asset-heavy portfolios, keeping informed regarding the UK’s geopolitical situation is paramount for avoiding a sudden portfolio devaluation. Or, conversely, one should consider alternate safe-haven assets that also allow for hedging against uncertainty, such as gold, silver, copper or cryptocurrency, without the risk of long-term devaluation through basic monetary inflation.

Regardless of one’s specific strategy, investors and traders would do well to ensure they keep a level, informed head when approaching financial decisions in 2020. Despite any future potential uncertainty, I firmly believe there are still great investment opportunities to be found as the UK begins its transition outside of the EU. The challenge is finding them.

High Risk Investment Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. For more information please refer to HYCM’s Risk Disclosure.

Lee McDarby, Managing Director, Corporate Foreign Exchange and International Payments at moneycorp, offers Finance Monthly his advice for SMEs and corporates looking to keep their financial requirements stable as they expand.

With Brexit on the horizon, and COVID-19 likely to be around for a little while yet, it’s more important than ever that businesses across the UK have access to experts, and know that they can access their money at any time, wherever they are in the world. In the past decade, the payments sector has moved at an increasingly fast pace. With this continuing to develop, there’s a need to further drive innovation that supports financial inclusion for all corporates, SMEs and individuals, to enable international success.

If you’re currently looking at expanding your business to different markets, or adapting your supply chains, and thus payment routes, it’s important that your banking partner can take the stress out of your financial requirements, enabling you to focus on elevating your business. So, what should you be on the lookout for when it comes to your banking and FX needs?

Multi-currency International Bank Account Number (IBAN)

The multi-currency IBAN supports British businesses looking at international expansion. We know that some traditional banks require you to open multiple bank accounts for different currencies – bringing an increasing amount of hassle to the simple act of receiving a payment. It can also take months to open multiple euro and/or dollar accounts, so a modern multi-currency IBAN is the hassle-free and significantly simpler option.

With one multi-currency IBAN, businesses can receive international payments in varying currencies across the globe. Supporting UK corporates to enhance their supply chain and take their business to the next international step in their global expansion.

With one multi-currency IBAN, businesses can receive international payments in varying currencies across the globe.

Security of funds

When choosing a provider for your payments and foreign exchange needs, it’s important to ensure it has safeguards in place to protect your funds. There are a number of specifics you can look out for to ensure the security of your accounts. These include:

The human touch

Customer service is key when it comes to the relationship between a business and a bank. While it is imperative that customers have 24/7 access to their account regardless of where they are in the world, talking to a person at the other end of the phone is just as important.

While our society has moved to be digital-first, when there’s an issue, the first thing the customer wants is to speak to someone. As such, access to a support team, across a multitude of channels, is irreplaceable when you need it most. To support all of your customers across the entire spectrum, it’s imperative that customer services are multi-faceted.

Ease and speed

Varying customer needs are echoed in the diverse range of Application Programming Interface (API) solutions. For an SME, corporate, or individual trading in various currencies across the globe, a seamless API that integrates ease of user experience, along with speed of delivery is crucial. However, one API doesn’t fit all.

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At moneycorp Bank, we’ve been able to seamlessly align the agility of fintech with substantiative banking networks to create bespoke API solutions, dependent on the client requirements. In addition, the central API endpoints built as part of the programming allow clients to have access to the core banking facilities on a multi-currency wallet, peer-to-peer facilities for instant transfers, global and local beneficiary validation, view balances, 24/7 multi-bank dealing, international payment and transactional and statement capabilities as standard.

Having a banking system that offers API integration gives you access to an array of benefits that leave you with more time to invest into your business. It also gives customers the capability to monitor exchange rates and automate conversions at a desired value, putting FX hedging tools right in the palm of their hands.

Looking ahead

Fundamentally, whilst we are currently navigating extraordinary times, there are also opportunities afoot for UK businesses to look at expansion. At moneycorp Bank, we believe that by picking the right partner for their payment needs, businesses can assemble best-in-class services when it comes to technological advancements in the sector, security, and customer service – without needing to trade one for the other. This in turn, will allow companies to start a new journey on the international stage, putting their best financial foot forward.

The value of the pound dropped on Thursday as COVID-19 lockdown measures were reimposed across the UK and a key deadline arrived in Brexit talks.

The pound fell against the dollar and euro around noon on Thursday. Pound sterling fell 0.4% against the euro and 0.7% against the dollar, reaching €1.1025 and £1.2921 respectively.

The currency’s decline followed after UK health secretary Matt Hancock confirmed that restrictions would be increased in multiple regions of the UK from Saturday onwards. Most notable was the announcement that London would be upgraded to “Tier 2” restriction status in order to curb the continued spread of COVID-19, a move that is likely to impact major businesses in the area.

Under Tier 2 restrictions, separate households are banned from mixing indoors. Though pubs and restaurants will be permitted to remain open, the increased restrictions will likely have a significant impact on demand; Altus Group’s head of UK property tax, speculated that the measures “could be the death knell” for the more than 10,000 bars, pubs and restaurants in London.

The pound also suffered from investor attention turning towards Brexit negotiations. Last month, UK prime minister set 15 October as a deadline to reach a trade deal with the EU, pledging to walk away from the negotiations if an agreement could not be reached beforehand.

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However, some investors remain confident that the passing of the deadline will not spell the end for a potential deal. “In our view, neither the UK prime minister’s 15 October deadline nor the European Commission’s 31 October deadline constitutes a hard stop on Brexit negotiations,” wrote Goldman Sachs economist Adrian Paul in a letter to clients on Thursday.

Though the pound gained around 1% against the dollar and euro on Wednesday, its gains were later reversed as French president Emmanuel Macron took a hard stance on EU fishing states retaining access to the UK’s waters.

Rich Vibert, co-founder and CEO of Metomic, takes a look at the changes the UK financial sector will soon see and how banks can best prepare for them.

With headlines focused on the UK's plans to breach parts of the Brexit agreement, many key business discussions have fallen by the wayside. But, this begs the question: how are banks going to be protecting customer data? And, what data protection regulation is in place to govern this process as GDPR becomes inapplicable?

These are difficult questions to answer and require banks to unpick complex regulation and governmental disputes, before they can even start to implement the tools that will protect their customers.

Securing data privacy

Recent reports show that there’s room for improvement when it comes to the banks’ ability to secure data privacy. According to a Bitglass study, 62% of the data breached last year came from financial services, and with the increased risk brought by COVID-19, the prospect of what could happen to data collected and managed by banks is worrying. Furthermore, back in March, a report by Accenture showed that one-third of financial services organisations didn’t have the technical or personal resources to address privacy risks related to customer data. If these firms haven’t addressed this gap yet, they will simply not be prepared for Brexit and the risk that a potential last-minute change in regulations will pose.

Post-Brexit data protection: what is at stake

After investing two years of work to become compliant with the General Data Protection Regulation (GDPR), banks are understandably unwilling to start again. At present, once we are out of the EU, UK organisations will need to comply with regulation that is yet to exist. Thankfully, there is a large chance that the UK will incorporate GDPR principles into its own law, but uncertainty and confusion still remains. And should new local measures be implemented, banks will need to move quickly to become compliant.

After investing two years of work to become compliant with the General Data Protection Regulation (GDPR), banks are understandably unwilling to start again.

When it comes to data transfers with other European countries the rules will become stricter, adding extra layers of complexity for financial institutions.

As we stand, the UK government has already declared its willingness to reach an adequacy agreement, to maintain a free flow of data between the two regions. However, given the turbulent relationship with the EU, the agreement on such a deal is by no means a given.

Financial organisations also need to prepare for the possibility of a no-deal Brexit, with speculation that this could see companies sending their data to the EU next year and simply not getting it back. For businesses which heavily rely on constant transfers of sensitive data such as bank accounts and income, this is simply not acceptable. Unpicking the mess will require the investment of time and funds that many businesses can ill-afford.

The biggest loser: your customers' data privacy

While a potential headache for financial institutions, the UK’s lack of reassurance when it comes to post-Brexit data protection is even more detrimental to its own citizens. The government’s current track record for safeguarding people’s data leaves much to be desired. The recent admission that the UK track and trace system wasn’t GDPR compliant is just one example that has eroded citizens’ trust. The systematic disregard for data privacy has not gone unnoticed either. 75% of consumers report being concerned with the safety of the information they share with organisations, according to IDEX Biometrics. This has to be addressed if banks are going to survive and ensure that that customer trust is maintained.

A change in mindset

While the future of data regulation in this country remains in flux, we know that privacy and data protection is top of mind for consumers. To maintain the trust and loyalty of their customers, financial services organisations must think ahead and be prepared for any outcome, specifically at a technical level. But many organisations will be concerned about where to begin and how to navigate this journey.

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Thankfully, financial institutions can tackle this challenge without exorbitant costs but they will need a change of mindset. They must put customer data at the centre of their strategy and embrace technology that will help them put privacy first.

But this means having a clear understanding of what is happening to customer data at all times. There are simple mechanisms that can be put in place to deliver this level of control and visibility. These include automating compliance and embedding data protection rules into the IT infrastructure. Solutions such as these can be cost effective and have the potential to save thousands of hours in auditing and developing data management processes. What’s more, they will give businesses the right foundation for protecting data, whatever the regulatory outcome of Brexit.

While the future of data protection rules in the UK are still being negotiated, the financial services firms that embrace a privacy-first approach starting now will be better prepared for any outcome in the Brexit negotiations.

Going forward, collaboration with the EU is vital to prevent a scenario where data transfers are blocked. We need to work closely with our European counterparts to create a data privacy framework that's protective of UK citizens without being restrictive to our businesses. Only time will tell, but with the respect and protection of our data is in the hands of governments and businesses, data privacy can no longer be treated as an afterthought. If banks act now, and protect against the inevitable, the ultimate benefit will be earning their most important asset: their customers’ trust.

The UK economy grew by 2.1% in August, marking the fourth consecutive month of economic expansion following its record slump of 20.4% in April.

However, this growth was slower than the expansion of 8.7% seen in June and 6.6% in July, according to new figures released on Friday by the Office for National Statistics (ONS). Economists had forecasted a monthly growth of 4.6%.

The slowdown comes in spite of a boost for the hospitality sector through the government’s Eat Out to Help Out scheme, which helped to lift output in the food and accommodation industry by a staggering 71.4% in August. Discounts for over 100 million meals were claimed through the scheme.

“The combined impact of easing lockdown restrictions, Eat Out to Help Out Scheme and “stay-cations” boosted consumer demand,” the ONS noted.

More than half of the UK’s economic growth during August stemmed from the food and accommodation industry. Meanwhile, the manufacturing sector grew by 0.7% and the construction sector grew by 3%, respectively 8.5% and 10.8% lower than February figures.

The economy as a whole remains 9.2% smaller than pre-pandemic levels. The latest release from ONS is likely to put an end to hopes of a V-shaped recovery for the UK’s economic output.

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Analysts have warned that the UK’s economic recovery is likely to peter out further as new COVID-19 restrictions come into place, the furlough scheme ends by November, and concerns of a no-deal Brexit grow more pressing.

“Although the UK remains on course to exit recession in the third quarter, the looming triple threat of surging unemployment, further restrictions Wand a disorderly end to the transition period means the recent rally in economic output is likely to be short-lived,” said Suren Thiru, head of economics at the British Chamber of Commerce. “The government must stand ready to help firms navigate a difficult winter, beyond the Chancellor’s recent interventions.”

Financial services firms operating in the UK have shifted more than $1.6 trillion worth of assets and around 7,500 employees to the European Union ahead of Brexit, with more likely to follow in the weeks ahead, according to a report from Big Four accountancy firm Earnest and Yong (EY).

Tracking 222 of the largest financial firms maintaining significant operations in the UK, the EY report notes that around 400 relocations were announced in September alone amid uncertainty about the City of London’s continued access to the bloc in 2021.

EY also noted that there was very little movement in the first half of 2020, owing to the emergence of the COVID-19 pandemic and its impact on the banks. Businesses are now accelerating plans to relocate staff and operations from the UK ahead of its exit from the EU on 31 December and a possible second wave of COVID-19 lockdown measures forcing borders to reclose.

Since the UK’s vote to leave the EU in 2016, 44 financial services firms in London have created 2,850 new positions in EU nations. The biggest business gains have been seen in Dublin, Frankfurt and Luxembourg.

“As we fast approach the end of the transition period, we are seeing some firms act on the final phases of their Brexit planning, including relocations,” said Omar Ali, UK financial services managing partner at EY.

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“The time has now passed for firms to rely on short-term equivalence assessments that would align to EU rules, and the sector’s attention is increasingly focused on the longer-term outlook,” Ali added.

Major US banks with operations in the UK have begun to transfer their assets to the EU, such as JPMorgan, which has moved about $230 billion to a subsidiary in Frankfurt. Goldman Sachs has also planned to relocate over 100 London staff.

Tens of thousands of British citizens living in the EU have received notices from their UK-based banks warning them that their accounts will be closed by the end of the year, The Times has reported.

Major banks including Lloyds, Barclays and Coutts, have sent letters British account holders living in the EU with a warning that they will no longer receive service when the UK’s EU withdrawal agreement ends at 11pm on 31 December 2020.

Several thousand Barclays customers living in France, Spain and Belgium have already been given notice that their Barclaycards will be cancelled on 16 November.

In the absence of a Brexit deal, individual UK banks will now have to decide which EU nations they want to continue to operate in. As each of the 27 member states has different rules regarding banking, it will become illegal for UK banks to provide services for customers in these states without applying for new banking licenses.

Lloyds Bank has confirmed that it will no longer operate in Germany, Ireland, Italy, Portugal, Slovakia and the Netherlands; customers in these countries will have their accounts closed on 31 December. Coutts has also confirmed that its EU customers will have to make “alternative arrangements”, and Natwest and Santander have stated that they are “considering their options”.

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Nigel Green, CEO and founder of deVere Group, slammed  the decision of banks to withdraw from EU nations and “abandon” their customers there.

“Once again, traditional banks are outrageously failing their clients who now need to take urgent steps to continue to be able to access, use, and manage their money,” Green said. “The move by these banks will be a major inconvenience to many tens of thousands of Brits living in the EU.”

“I would urge expats to now seek a financial services provider that already operates under pan-European rules,” he continued.

Kris Sharma, Finance Sector Lead at Canonical, explores the value of open source technologies in steering financial services through times of disruption.

In a post-Brexit world, the industry is facing regulatory uncertainty at a whole different scale, with banking executives having to understand the implications of different scenarios, including no-deal. To reduce the risk of significant disruption, financial services firms require the right technology infrastructure to be agile and responsive to potential changes.

The role of open source

Historically, banks have been hesitant to adopt open source software. But over the course of the last few years, that thinking has begun to change. Organisations like the Open Bank Project and Fintech Open Source Foundation (FINOS) have come about with the aim of pioneering open source adoption by highlighting the benefits of collaboration within the sector. Recent acquisitions of open source companies by large and established corporate technology vendors signal that the technology is maturing into mainstream enterprise play. Banking leaders are adopting open innovation strategies to lower costs and reduce time-to-market for products and services.

Banks must prepare to rapidly implement changes to IT systems in order to comply with new regulations, which may be a costly task if firms are solely relying on traditional commercial applications. Changes to proprietary software and application platforms at short notice often have hidden costs for existing contractual arrangements due to complex licensing. Open source technology and platforms could play a crucial role in helping financial institutions manage the consequences of Brexit and the COVID-19 crisis for their IT and digital functions.

Open source software gives customers the ability to spin up instances far more quickly and respond to rapidly changing scenarios effectively. Container technology has brought about a step-change in virtualisation technology, providing almost equivalent levels of resource isolation as a traditional hypervisor. This in turn offers considerable opportunities to improve agility, efficiency, speed, and manageability within IT environments. In a survey conducted by 451 Research, almost a third of financial services firms see containers and container management as a priority they plan to begin using within the next year.

Open source software gives customers the ability to spin up instances far more quickly and respond to rapidly changing scenarios effectively.

Containerisation also enables rapid deployment and updating of applications. Kubernetes, or K8s for short, is an open-source container-orchestration system for deploying, monitoring and managing apps and services across clouds. It was originally designed by Google and is now maintained by the Cloud Native Computing Foundation (CNCF). Kubernetes is a shining example of open source, developed by a major tech company, but now maintained by the community for all, including financial institutions, to adopt.

The data dilemma

The use cases for data and analytics in financial services are endless and offer tangible solutions to the consequences of uncertainty. Massive data assets mean that financial institutions can more accurately gauge the risk of offering a loan to a customer. Banks are already using data analytics to improve efficiency and increase productivity, and going forward, will be able to use their data to train machine learning algorithms that can automate many of their processes.

For data analytics initiatives, banks now have the option of leveraging the best of open source technologies. Databases today can deliver insights and handle any new sources of data. With models flexible enough for rich modern data, a distributed architecture built for cloud scale, and a robust ecosystem of tools, open source platforms can help banks break free from data silos and enable them to scale their innovation.

Open source databases can be deployed and integrated in the environment of choice, whether public or private cloud, on-premise or containers, based on business requirements. These database platforms can be cost-effective; projects can begin as prototypes and develop quickly into production deployments. As a result of political uncertainty, financial firms will need to be much more agile. And with no vendor lock-in, they will be able to choose the provider that is best for them at any point in time, enabling this agility while avoiding expensive licensing.

As with any application running at scale, production databases and analytics applications require constant monitoring and maintenance. Engaging enterprise support for open source production databases minimises risk for business and can optimise internal efficiency.

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Additionally, AI solutions have the potential to transform how banks deal with regulatory compliance issues, financial fraud and cybercrime. However, banks need to get better at using customer data for greater personalisation, enabling them to offer products and services tailored to individual consumers in real time. As yet, most financial institutions are unsure whether a post-Brexit world will focus on gaining more overseas or UK-based customers. With a data-driven approach, banks can see where the opportunities lie and how best to harness them. The opportunities are vast and, on the journey to deliver cognitive banking, financial institutions have only just scratched the surface of data analytics. But as the consequences of COVID-19 continue and Brexit uncertainty once again moves up the agenda, moving to data-first will become less of a choice and more of a necessity.

The number of data sets and the diversity of data is increasing across financial services, making data integration tasks ever more complex. The cloud offers a huge opportunity to synchronise the enterprise, breaking down operational and data silos across risk, finance, regulatory, customer support and more. Once massive data sets are combined in one place, the organisation can apply advanced analytics for integrated insights.

Uncertainty on the road ahead

Open source technology today is an agile and responsive alternative to traditional technology systems that provides financial institutions with the ability to deal with uncertainty and adapt to a range of potential outcomes.

In these unpredictable times, banking executives need to achieve agility and responsiveness while at the same time ensuring that IT systems are robust, reliable and managed effectively. And with the option to leverage the best of open source technologies, financial institutions can face whatever challenges lie ahead.

The value of the pound fell against the dollar and euro over the weekend, as news emerged that UK ministers were planning new legislation to undercut key provisions of the EU withdrawal agreement, giving rise to fears that the UK will face an end-of-year “no deal” Brexit.

The Financial Times first reported that the “Internal Market Bill” would undermine the legal force of areas of the agreement in areas including customs in Northern Ireland and state aid for businesses, risking a potential collapse of trade talks with the EU. Downing Street later described the measures as a standby plan in case talks fall through.

Political backlash followed as Michelle O’Neill, Northern Ireland’s Deputy First Minister, described any threat of backtracking on the Northern Ireland Protocol as a "treacherous betrayal which would inflict irreversible harm on the all-Ireland economy and the Good Friday Agreement". Scottish First Minister Nicola Sturgeon also stated that the legislation would “significantly increase” odds of a no-deal Brexit.

The pound was down 0.6% against the dollar by 10am on Monday for a total slide of 1% against the dollar in the past 5 days. The pound also slid 0.5% against the euro for a total of 0.7% in the same period.

The value of the pound is now equivalent to $1.319, or €1.1145.

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The eighth round of Brexit talks is set to begin on Tuesday, aimed at forming a deal that will allow companies in the UK and EU to trade without being hindered by customs checks or taxes.

The news follows Prime Minister Boris Johnson’s imposition of a 15 October deadline for securing a Brexit deal, recommending that both sides “move on” if no such agreement is reached by that date. The proposed deadline would come far ahead of the slated end of the transition period on 31 December 2020.

Richard Harmon, Managing Director of Financial Services at Cloudera, discusses the importance of relevant machine learning models in today's age, and how the financial sector can prepare for future changes.

The past six months have been turbulent. Business disruptions and closures are happening at an unprecedented scale and impacting the economy in a profound way. In the financial services sector, S&P Global estimates that this year could quadruple UK bank credit losses. The economic uncertainty in the UK is heightened by Brexit, which will see the UK leave the European Union in 2021. In isolation, Brexit would be a monumentally disruptive event, but when this is conjoined with the COVID-19 crisis, we have a classic double shock wave. The duration of this pandemic is yet to be known, as is the likely future status of society and the global economy.  What the ‘new normal’ will be once the pandemic has been controlled is a key topic of discussion and analysis.

It’s not easy to predict the unpredictable 

In these circumstances, concerns arise about the accuracy of machine learning (ML) models, with questions flying around regarding the speed at which the UK and EU will recover relative to the rest of the world, and what financial institutions should do to address this. ML models have become essential tools for financial institutions, as the technology has the potential to improve financial outcomes for both businesses and consumers based on data. However, the majority of ML models in production today have been estimated using large volumes and deep histories of granular data. It will take some time for existing models to be re-estimated to adjust to the new reality we are finding ourselves in.

The most recent example of such complications and abnormalities, at a global scale, was the impact on risk and forecasting models during the 2008 financial crisis. Re-adjusting these models is by no means a simple task and there are a number of questions to be taken into consideration when trying to navigate this uncertainty.

ML models have become essential tools for financial institutions, as the technology has the potential to improve financial outcomes for both businesses and consumers based on data.

Firstly, it will need to be determined whether the current situation is a ‘structural change’ or a once in a hundred years ‘tail risk’ event. If the COVID-19 pandemic is considered a one-off tail risk event, then when the world recovers, the global economy, the markets, and businesses will operate in a similar environment to the pre-COVID-19 crisis. The ML challenge, in this case, is to avoid models from becoming biased due to the once-in-a-lifetime COVID-19 event. On the other hand, a ‘structural change’ represents the situation where the pandemic abates, and the world settles into a ‘new normal’ environment that is fundamentally different from the pre-COVID-19 world.  This requires institutions to develop entirely new ML models that require sufficient data to capture this new and evolving environment.

There isn’t one right answer that fits every business, but there are a few steps financial services institutions can take to help them navigate this scenario.

How to navigate uncertainty with accurate machine learning

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When facing a crisis of unprecedented size such as this one, it’s time to look inwards and review the technology investments in place and whether crucial tools such as ML models are being deployed in the best way possible. Financial institutions should face this issue not as responding to a one-off crisis, but as a chance to implement a longer-term strategy that enables a set of expanded capabilities to help prepare them for the next crisis. Businesses that put in time and effort to re-evaluate their machine learning models now will be setting themselves up for success.

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