ABN AMRO Research Articles

Transaction Monitoring Netherlands: Fighting financial crime through data collaboration and advanced analytics

This paper discusses the experience of Transactie Monitoring Nederland (TMNL) — a collaboration between ABN AMRO, ING, Rabobank, Triodos Bank and De Volksbank, established in July 2020 to enhance financial security and compliance within the Dutch financial sector. The paper explores TMNL’s impact, the key lessons learned from its implementation and operation, best practices and its potential future role in safeguarding the integrity of the financial sector. As the paper explains, there is a growing consensus that more can be done to strengthen the framework for fighting financial crime through public–private partnerships and increased data/information sharing. To this end, TMNL works to identify potentially unusual transaction patterns that are not visible to individual banks in isolation, underscoring the significance of collaboration and information sharing among financial institutions (and with other key players in the prevention ecosystem), and developing a united front against financial crime. The paper calls for the integration of artificial intelligence and machine learning in identifying complex patterns and anomalies in transaction data and emphasises the need for this to happen in a secure, sustained and viable fashion. It also underscores the ongoing need for regulatory adaptability, arguing that as financial crimes evolve, regulatory frameworks must be dynamic to address emerging challenges effectively. In conclusion, the paper provides valuable insights into the successful implementation of collaborative compliance efforts and the continuous adaptations required to combat financial crime.

Naomi Yarrow

Naomi Yarrow earned the CQF in 2006. Naomi started her career as a Quant in the product Control Valuations Group at ABN AMRO Bank before working her way up to her current role as Head of Capital Risk Oversight at NatWest Group. We spoke to Naomi to find out more about why she decided to pursue a career in quant finance, her advice for people looking to advance in quant finance roles, and the most rewarding things about working in the field.

Geldmaat: An example of ATM pooling in the Netherlands

Geldmaat was established by ABN AMRO, ING Bank and Rabobank in 2019. After three years of working together, the three banks retired their respective automated teller machines (ATMs) on 1st October, 2021, replacing them with a network of ATMs owned and operated by Geldmaat. By combining forces to create Geldmaat, the banks have ensured that cash will continue to be available and accessible over the coming years. Nevertheless, the future of the cash chain in the Netherlands remains a topic of much discussion. This paper explains the transition process, from the initial steps in the pooling process to the rollout itself, in addition to the services now offered by Geldmaat. It then goes on to discuss the future of the cash infrastructure in the Netherlands.

Assessing the Commercial impacts of mergers and acquisition: a case study of RB and ABN Amor

The focal point of this study is to appraise the benefit (or loss) of the Illustrious Bank of Scotland (RBS) after it procured the ABN AMRO during the monetary emergency of 2008. Likewise, a few subjective information has been used to examine the upper hand and the board methods of the RBS Plc. This specific consolidation has overall better the strategic advantage of the RBS Plc. that they could have to expand their presence in the immaculate business sectors. RBS Plc ought to give empowering monetary climate to ABN AMRO to recapture its lost productivity. The EPS and P/E proportion are better after the consolidation which is giving an obvious sign great monetary wellbeing and better functional execution of banks included. The bank's expense of capital is fundamentally higher than different rivals on the lookout and thusly bank should make a move to diminish its expense of capital like capital rebuilding, taking into account profit choice. To coordinate with the bookkeeping works on being trailed by the ABN AMRO bank, RBS ought to take on the IFRS rehearses. Generally speaking, this consolidation and securing has been acknowledged joyfully by an enormous part of workers and its future possibilities likewise appear to be encouraging. Watchwords: Imperial Bank of Scotland, ABN AMRO Bank, Bank Consolidation and Obtaining.

Financing Commodities and Human Rights: The Case of ABN AMRO in the Palm Oil Sector

Financing Commodities and Human Rights: The Case of ABN AMRO in the Palm Oil Sector

ABN AMRO’s Impact Statements – A Case Study on Making Societal Value Visible

Many companies talk about their social and environmental contributions, but very few make them visible. This is typically attributed to lack of methods and data. But ABN AMRO has taken the bold step to produce insightful impact statements, including an Integrated P&L, which show that it can be done. This case study analyses how ABN AMRO got to produce its Impact Report, what is in there, and what its impact could be. The main obstacles seem to be mindsets rather than data and methods.

Strategic risk, banks, and Basel III: estimating economic capital requirements

PurposeBasel III regulations require banks to protect themselves against strategic risk. This paper aims to provide a comprehensive and measurable definition of this risk and proposes a framework to estimate economic capital requirements.Design/methodology/approachThe paper studies the literature and solicits expert opinion in formulating a comprehensive and measurable definition of strategic risk. The paper postulates that the economic capital for a bank’s strategic risk should be estimated using the cost of equity as the profitability threshold, rather than zero and develops a simulation-based framework to estimate economic capital.FindingsThe framework closely matches the actual economic capital outlay for strategic risk from our case study of ABN AMRO. It is shown that a bank’s strategic growth plans can fall into one of two scenarios based on risk-return characteristics. In one scenario, the required economic capital outlay will increase, and decrease in the other.Practical implicationsThis framework is generalizable and makes use of widely accepted and used practices in banks, making it readily implementable in practice. It does not introduce errors resulting from model selection, parameterizations or complex calculations.Social implicationsSociety would be worse off in the absence of banking and lending services. Banks need to take risks to grow and stay competitive. The framework facilitates better strategic risk management, protecting banks from collapse and reducing the need for taxpayer-funded bailouts.Originality/valueThe paper provides a measurable and practitioner-verified definition of strategic risk and proposes a simple framework to estimate economic capital requirements, a crucial topic, given the threats and increased levels of strategic risk facing banks.

Dutch banking culture six years after the fall of ABN AMRO bank

This article presents the results of a survey among more than six hundred bankers in the Netherlands about banking culture. It addresses the question why trust in banks remains so low (45% of clients trust banks in the Netherlands). The key findings indicate that the problem is not so much immoral bankers or a few rotten apples but rather the dominance of a competitive banking culture. The findings suggest that clients? trust may be regained when banks leave behind their focus on performance targets, financial incentives, and behavioral regulation and move instead to a caring culture with a focus on relationships and open discussion of ethical dilemma?s.

Strategic Risk, Banks, and Basel III: Estimating Economic Capital Requirements

Purpose: Basel III regulations require banks to protect themselves against strategic risk. This paper provides a comprehensive and measurable definition of this risk and proposes a framework to estimate economic capital requirements. Design/methodology/approach: The paper studies the literature and solicits expert opinion in formulating a comprehensive and measur- able definition of strategic risk. The paper postulates that the economic capital for a bank’s strategic risk should be estimated using the cost of equity as the profitability threshold, rather than zero and develops a simulation-based framework to estimate economic capital. Findings: The framework closely matches the actual economic capital outlay for strategic risk from our case study of ABN AMRO. We show that a bank’s strategic growth plans can fall into one of two scenarios based on risk-return characteristics. In one scenario, the required economic capital outlay will increase, and decrease in the other. Practical implications: Our framework is generalizable and makes use of widely accepted and used practices in banks, making it readily implementable in practice. It does not introduce errors resulting from model selection, parameterizations, or complex calculations. Societal implications: Society would be worse off in the absence of banking and lending services. Banks need to take risks to grow and stay competitive. The framework facilitates better strategic risk management, protecting banks from collapse, and reducing the need for taxpayer-funded bailouts. Originality/value: The paper provides a measurable and practitioner-verified definition of strategic risk, and proposes a simple framework to estimate economic capital requirements, a crucial topic given the threats and increased levels of strategic risk facing banks.

Business efforts, opportunities, and limits addressing the poor: A Brazilian case study

Businesses have many opportunities to foster sustainable peace. To illustrate the possibilities and limits of businesses reducing violence, we describe the case of ABN AMRO in Brazil and its social program in Novo Lino, one of the poorest municipalities in the country characterized by high levels of violence toward children. With ABN AMRO's support, Novo Lino was able to significantly improve the living conditions of abused children assisted by the social project and raise awareness of children's rights protection. However, despite the corporation's efforts, the project ended after ABN AMRO withdrew its financial support. This case study intends to stimulate discussion on the roles and possibilities of corporations in the social context of extreme poverty. We conclude that businesses need to adopt an integrated approach that simultaneously addresses the several factors related to extreme deprivation and reduces the likelihood of violence in situations of extreme poverty.

Factor-Based Investing

The asset management industry has seen a strong development of factor-based investing. The central idea is that each asset can be seen as a bundle of underlying factor sensitivities. A factor-based investing approach provides better insight into the risk decomposition of the investment portfolio’s assets and potentially leads to better investment decision-making. In this paper we explore how investors should take account of underlying factors driving their portfolio returns. We show that underlying factors explain the majority of return variation among assets. We find there are times that a given factor sensitivity offers exceptionally high or low rewards in all assets exposed to it. These circumstances lead to an opportunity for market timing. We propose a pragmatic and intuitive approach for identifying and measuring underlying factors in a portfolio via a heat map. We argue that investors seeking to adopt a factor-based approach use it in conjunction with traditional asset allocation, rather than as a substitute. In addition, we provide suggestions on how to embed the factor-based approach within an existing investment process. Finally, a word about our relationship with ABN AMRO. The research project on factor-based investing is part of ABN AMRO Private Banking’s continuous process to challenge, and thereby to improve the investment process with new insights in the financial markets and investment approaches. Therefore we were given the task of writing this report.

IndusInd Bank (A): A Turnaround Story

In early 2008, IndusInd Bank (A), which had been faring poorly for several years, decided to bring on board a team led by Romesh Sobti, then managing director of ABN Amro Bank in India. The case outlines the challenges faced by the new team in attempting to turn around the bank. Students are invited to think through a turnaround plan for the bank.

European Banking Union C: Cross-Border ResolutionnFortis Group

In August 2007, Fortis Group, Belgium’s largest bank, acquired the Dutch operations of ABN AMRO, becoming the fifth largest bank in Europe. Despite its size and its significant operations in the Benelux countries, Fortis struggled to integrate ABN AMRO. Fortis’s situation worsened with the crash of the US subprime market, which impacted its subprime mortgage portfolio. By July 2008, Fortis’s CEO had stepped down, its stock had lost 70% of its value, and it was on the verge of collapse due to a severe liquidity crisis. The governments of Belgium, Luxembourg, and the Netherlands quickly came together and agreed to inject funding into the bank to keep it afloat. However, the deal fell apart when the Netherlands reversed course and nationalized Fortis’s Dutch assets. As a result, Fortis underwent an uncoordinated resolution, bifurcated along national lines. This case permits examination of this attempt at a cross-border rescue of a failing systemically important financial institution, analysis of why the effort failed, and consideration of how it might proceed differently under current regulations.

Consolidation of the Banking System in Europe: The Acquisition of ABN AMRO

The widely publicized banking takeover battle sustained by the British Barclays and a consortium led by the Royal Bank of Scotland that included the Dutch Fortis and the Spanish Santander, for the Dutch ABN AMRO, took place during six months, from March through October of 2007. The myriad legal and economic complexities involved and the mammoth size of the transaction (more than $100 billion) that made of it the largest banking industry M&A ever, illustrates the kind of operations that are likely to reconfigure the European banking scene during the coming years. After an intense period of M&As of EU banks at a domestic level, that was, arguably, detonated by technological, political and economic factors, it is only during most recent times that cross-border transactions have represented a significant participation in the consolidation process. ABN’s acquisition and later carve out represented a cap to the series of transactions that took place in recent years and will likely keep the top place for years to come. In the following sections, this paper discusses the recent trends towards increasing concentration in the EU, the most important cross-border M&As of banks and finally the acquisition of ABN AMRO. The paper closes with conclusions on what this mega-transaction represented and how will it likely influence the future evolution of that region’s banking industry.

Leading a multinational is history in practice: The use of invented traditions and narratives at AkzoNobel, Shell, Philips and ABN AMRO

This article states that the distinctiveness of business history and its convincingness can be improved by the concept of invented tradition and narrative. After a theoretical overview it suggests that the narrative approach explains the way leaders operate in practice. It argues that with a narrative approach one sees that history is used by business leaders in four different ways: as a source to create traditions and symbols as means of communication, as a way to understand and strengthen the identity of the organisation, as means to create corporate memory and as a tool to connect past, present and future. The examples are taken from a Dutch oral history project on management behaviour at multinationals.

The Takeover of ABN AMRO and Its Effects on Latin American Banking

Throughout the 1990s and well into the first half of the new century, there was intense activity in Mergers and Acquisitions (M&As) in the commercial banking industry of Western Europe. The frequency of M&As diminished when the 2007–2009 financial crisis hit the markets. One of the last of these activities that took place before the full explosion of the 2007–2009 financial crisis was the cross‐border takeover that a consortium made up of Royal Bank of Scotland (RBS–England), Fortis (Belgium–Netherlands), and Santander (Spain) carried out of one of the largest banks in the world, ABN AMRO (Netherlands). A few months later, the write‐offs of significant amounts of subprime mortgage securities had affected the balance sheet of RBS and Fortis, with severe strategic consequences. The financial crisis forced RBS and Fortis to withdraw from Latin America but also represented a golden opportunity for Santander to further strengthen its already solid position in the region. This article offers a detailed discussion of these events and concludes with a reflection on the need to further investigate the economic consequences of the participation of foreign banks in emerging countries.

Differentiating Adopters and Non-adopters of Smart Cards: Comparative Analysis of Public, Private and Foreign Sector Banks in India

Progressive development in the field of information technology (IT) has brought in remarkable changes in the products as well as methods of payment and settlement system in the banking sector. In India, various types of payment systems are functioning apart from the traditional payment systems where the instruments are physically exchanged and settled manually. Smart cards are a new form of retail payment instrument, installed to facilitate retail transactions through electronic means. In 1999, the Reserve Bank of India issued guidelines to the banks regarding introduction and usage of smart cards. Smart cards are currently being issued by several banks in India which have tied up with Financial Information Network and Operations Ltd. (FINO). The IDBI bank has introduced its smart card called MoneySmart; Corporation Bank has issued CorpSmart; and Bank of India has issued its e-purse cards. PNB, SBI, ABN Amro, ICICI Bank, Bank of Baroda and some other banks have also launched smart card-based banking solutions (Kaur & Kaur, 2008). The main objective of this study is to identify the factors that may vary between the adopters and the non-adopters of smart cards in Indian banks. Banks that have adopted the cards may have different characteristics from those that have not yet adopted the cards. In other words, with the exploration of various characteristics of the banks, the study tries to differentiate between the adopter and non-adopter categories of the banks regarding smart cards with respect to their profitability, size, competitive advantage, efficiency, asset quality, financing pattern, diversification, cost of operations, etc. The empirical results evidently reveal that the banks providing smart cards differ in their characteristics from that of the banks that have not yet adopted it. It shows that the banks that adopted smart cards are larger in size, more efficient, pay lesser wages, and have more industry advantage and thus, in terms of some characteristics, outperform the non-adopter banks.

An empirical study of the pricing of reverse floating interest rate‐linked products

PurposeReverse floating interest rate‐linked structured products are important innovative products for investors to achieve a relatively high yield at low interest rates, and the reasonable pricing of such products is an important factor to influence investors' needs and issuers' profits. The purpose of this paper is to empirically analyze the rationality of the pricing of reverse floating interest rate‐linked products.Design/methodology/approachThis paper combines the Itô's Lemma and introduces the Black‐Derman‐Toy (BDT) model into the time‐varying volatility to build a binary tree interest rates BDT model under the time‐varying volatility, and to establish the pricing model of reverse floating interest rate‐linked products. Dozens of product data of ABN AMRO Bank and other world‐renowned banks or financial institutions are empirically analyzed.FindingsThe results show that the average pricing of these products is high, and the expected rate of return of the product is lower than the same period of the Five‐year US Treasury Bill rate.Originality/valueThis paper has combined the theory and practice together. The research method described in this paper is of significance to the pricing of interest rate‐linked structured products, and the pricing method of binary tree BDT model to solve the term structure of interest rates and estimation problem of volatility term structure of interest rates.

Management Insights

Management Insights

ABN Amro Clearing Sydney Pty Ltd (formerly known as Fortis Clearing Sydney Pty Ltd) v Primebroker Securities Ltd (recs and Mngrs Apptd)(in liq)

ABN Amro Clearing Sydney Pty Ltd (formerly known as Fortis Clearing Sydney Pty Ltd) v Primebroker Securities Ltd (recs and Mngrs Apptd)(in liq)