Banking continues to remain one of the biggest challenges for foreign exchange (forex) brokers. Recently, GBE Prime, a regulated broker and liquidity provider, announced that it had formed a banking relationship with Raiffeisenbank.
Speaking to Finance Magnates, Ben-Florian Henke, Head of GBE Prime, a brand of GBE Brokers, explained that the broker did not just select Raiffeisenbank because it is the second largest bank in Austria, but also because it is a financially strong partner that is, in Henke’s own words, down to earth and stands for trust, especially in German-speaking countries.
“Compliance with regulatory requirements has become one of the greatest challenges for the banking industry, which is directly attributable to the dramatic increase in regulatory fees in relation to income and credit losses since the financial crisis of 2008,” Henke outlined to Finance Magnates.
“There are a growing number of regulations that banks and credit unions must comply with; compliance with these regulations can be a significant drain on resources and often depends on the ability to correlate data from different sources.
“Today’s consumer is intelligent, smarter and more informed than ever before and expects a high level of personalization and convenience from their banking experience. Therefore, in addition to obtaining a license, it is very difficult for a broker to partner with a bank that handles customer funds in the way we need them to be for our customers.”
European Regulations Need to Adapt
Henke of GBE Prime, which offers institutional liquidity to brokers, banks, funds and asset managers, argues that Europe needs restrictions that are more flexible and can adjust to different ratios of possible leverage worldwide.
“Especially in Europe, the landscape for brokers has changed in such a way that private customers can no longer be offered a certain flexibility for higher leverage and are therefore looking for brokers on non-European continents.”
Whilst Henke believes that EU regulator ESMA has brought some sensible changes, such as regulation regarding best execution, but the basic idea of reducing leverage has, overall not been good for clients.
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“Because it pushed them into the offshore business. So, since 2018, customer protection for Europeans has deteriorated because customers turn to brokers in other countries in their search for higher leverage and operate there without such protection. This means that there is also a significant loss of customers in the direction of Asia, Africa, Australia, etc… I would like to emphasize that GBE brokers does not have offshore structures, as we are focused on German speaking retail clients and institutional clients in general.”
GBE Prime: ESMA Has Weakened Europe
During his interview with Finance Magnates, Henke went as far as to say that the product intervention measures implemented by ESMA have weakened Europe’s status as a location for business.
“The last regulations have weakened the business location, Europe. The alternative to this would be equal rights between all countries worldwide. Either in such a way that all higher levers are reduced or those in Europe are increased again. The main thing is that a balanced market situation prevails and nobody is further disadvantaged,” Henke elaborated.
“I simply hope that the regulations will focus on customer needs in the future. This naturally includes, in addition to security for the capital and excellent execution times, better information about customer risks and obviously higher leverage, because that is what the customer desires.”
The Downside of COVID-19
As Finance Magnates has reported extensively, overall, brokers within the forex and CFD industry have benefitted from the coronavirus pandemic, with heightened volatility resulting in increased trading activity.
This, in turn, has lead to stronger volumes and revenues for brokers. However, according to Henke, the pandemic has not been without its downsides.
“Economically, I personally do not know any broker who made a bad deal during the pandemic or who would complain about a significant increase of the trading volume in the industry nor a high volatility,” Henke continued.
“Of course there are also some negative effects, for example, the now missing personal customer contact, which is currently only possible via online platforms, telephone or email. Furthermore, the active customer acquisition through exhibitions, which exist online but works much better face to face.”