Capital market players were not spared, their activities also being victims of the pressure relating to the health crisis. Regulatory changes and reinforcement of crisis management systems and tools will therefore have to be planned in order to guarantee the continuity of their activities.
For this purpose, we interviewed Mr Joffray Guiavarch, CEO of STRATEO bank who shares with us the lessons to be learned to understand the challenges, the level of optimism and the response strategies within the financial services sector in the face of the constraints related to COVID-19.
With significant banking experience, Joffray Guiavarch has spent his entire career within the group Crédit Mutuel Arkéa. His cross-functional career has enabled him to occupy positions in various functions: Finance, Human Resources, Internal Control, Risk Management to take the reins of the General Management of STRATEO bank today.
Can you tell us about your institution and your activities?
Strateo is the Swiss branch of Arkéa Direct Bank which is itself the entity that brings together the online banking activities of the Crédit Mutuel Arkéa Group. It is a pure player in online brokerage and investment.
Our job is to provide clients, individuals but also professionals, with a trading platform on which they are able to directly place their stock market orders, as well as access to a very wide range of financial instruments listed on around twenty world markets.
We also offer savings solutions in the form of medium / long term investment plans. Our clients are generally informed clients, who make their investment choices independently. Strateo does not give advice. We just provide clients with tools, "tips" for passing their orders, and financial information to help them make their choices. Clients who do not have the time, skills or simply the inclination to manage their investments on their own can turn to wealth managers who do it for them. In this case, Strateo acts as custodian bank on behalf of these managers.
As a major player in the online trading and investment sector, what are your observations about the current economic climate?
What predominates today is uncertainty. Uncertainty about the date of exit from the health crisis, even if the first vaccinations point to the end of the tunnel in 2021, and uncertainty about the repercussions of the economic crisis, the effects of which we are only just beginning to perceive. States have all supported and continue to support their economy at arm's length, delaying the moment when it will be necessary to pay "the bill". It is quite obvious that the repercussions of this health crisis will end up affecting part of the economic fabric of the countries strongly affected by the Covid, with bankruptcies to be expected and the social plans that go hand in hand. The question that arises is the extent of the looming economic crisis. For us Europeans who are very affected by the pandemic, we risk taking several years to recover. It may be necessary to wait ten years or more for certain sectors to return to a level of activity comparable to that of 2019. This pandemic will also have the consequence of accelerating the fractures: a fracture between the companies which have been able to take the turn of the digital and others; divide between the countries of the old world and those of the new world (Asia mainly) which overall managed the crisis much better than us Europeans, and the Americans; Finally, there is a divide between those who work in the sectors of the future and those who work in sectors that are losing momentum or are destined to disappear.
What impacts have you observed on your activity since the start of the health crisis linked to COVID 19?
We, online stock brokers, are among the rare players in the world of banking and finance to have taken advantage of the exceptional situation we have been experiencing since March 2020. The tremors experienced by the financial markets at the start of the year when economic players became aware of the consequences that the Covid-19 pandemic would have on the world economy, as well as the containment measures taken by several states around the world, generated a craze that we had not known since the 2000s. Individuals were again interested in the stock market and naturally turned to players allowing them to trade online at attractive prices. This observation is valid throughout Europe and beyond. In the end, we are going to have an exceptional year, both in terms of new customers and volumes of activity. Beyond this atypical year, there remains uncertainty that this movement will continue. Household wealth will be affected by the economic crisis and hence their ability to save.
Individuals are again interested in the stock market and naturally turned to players allowing them to trade online at attractive prices.
How have your relations with the regulator (FINMA, ESMA) evolved in this context of the health crisis?
Given the containment measures decided or recommended by the states and our objective to protect our employees as much as possible, we deployed teleworking at the end of March. As a preventive measure, we have activated our business continuity plan by prioritizing essential activities. We have kept FINMA, the Swiss regulator, informed. In the end, after two days, we were operational and able to provide all of our services, so there was no impact for our customers.
Unlike some of its competitors, Strateo has no credit activity. Thus we did not have to manage the distribution of loans guaranteed by the state, nor to pass preventive provisions for the risk of default. The entities that offer credit have been and still are in close contact with their supervisory authorities.
What modalities did you have to implement to ensure the continuity of your activity in this context?
As I indicated, like the vast majority of companies, we have had to deploy telework on a large scale. In addition to the purely technical aspects to be settled (ordering equipment, setting up VPNs, managing network traffic, etc.), the security aspects, it was necessary to review the organization of certain processes, management methods and tools, and to ensure support for employees in order to minimize the stress associated with this exceptional situation. All this in record time. In the end, all these efforts will not be in vain. Indeed, the world after Covid will never be the same as the one before. Most companies have seen that, in the end, teleworking, even if it is not the alpha and omega of work organization, is a mode that has many advantages as long as it is well supervised and that the tools are adapted to the new needs of employees. Teleworking will continue beyond Covid, part-time in most companies because we have also seen the effects of the loss of social ties for a large part of people.
Teleworking will continue beyond Covid, part-time in most companies because we have also seen the effects of the loss of social ties for a large part of people.
We are experiencing a new confinement, inducing new stress on the entire economic sector; What are the lessons learned from the first confinement (by public authorities, businesses and banking players) which would allow better management of this second episode?
I don't really feel legitimate in giving advice on the best way to handle a lockdown. Everyone did what they could, states and economic players alike. The situation is new and terribly complex. Everyone learns by walking and learns from what went well and what went wrong. To cope with the second wave of the pandemic, states had to decide on measures that both preserved the health of citizens without bringing the economy to a complete halt. This is the big difference with the first episode during which a large part of the economic sectors had been stopped. In everything you have to find the right balance and I think that objectively, the situation is fairly well managed because, except for a few sectors unfortunately sacrificed, it suggests the possibility of a rapid restart.
What do you think are the prospects for businesses and individuals?
As I said, states have taken steps to ensure as much as possible a rapid restart once the pandemic has been brought under control. The solidarity mechanisms put in place also make it possible to limit the financial impact of this crisis for households. But it is obvious that it will take time to return one day to the situation before.
How (and within what limits) can banks support businesses in this context?
Banks have a fundamental role to play in several ways: playing the role of transmission belt to irrigate businesses with economic support mechanisms (guaranteed loans, renegotiation of maturities, etc.), continue to support the growth of companies by providing them with the resources they need or by entering capital (investment capital) but also supporting companies towards the digitalization of their activities. Banks are first and foremost technology companies and there is no reason why they cannot make the skills acquired in this area available to their corporate clients. However, there are limits. In response to previous financial crises, banking regulators have imposed safeguards on banks to limit risk taking. It was necessary but we are realizing that an excess of caution kills the taking of risks. However, we must not forget that taking risks is the very essence of the banking profession. Fortunately, some regulators have started to ease the pressure.
Banks are first and foremost technology companies
In conclusion, I would say that the major lesson that I draw from this extraordinary situation that we are going through is that what may seem impossible in the eyes of a good part of the internal structures of the company, cannot not always, and we must always trust women and men to adapt and find solutions to new problems. When we look back at this crisis in a few years, I think the prevailing feeling is that we have done pretty well, although in the present moment we tend to only see the negative aspects.
"The view of the pros"
A series of interviews proposed by Temeritati Consulting
Temeritati is a player in transformation and operational efficiency, particularly in financial services.
We attach particular importance to the proximity with the professionals of our sectors of intervention by: understanding as well as possible their daily challenges and ensuring the relevance of our recommendations.
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