SIBOS ISSUES Scan me to learn more about SWIFT@Sibos Final day & week in summary

A strange case Can Asian markets Buy-side of sleeping grab their chance unprepared for sickness to shine? OTC clearing page 4 page 5 page 6

The official daily newspaper of Sibos 2012 Osaka 29 October–1 November www.sibos.com

Closing plenary Moving beyond the crisis Banks reminded of social dimension by “The deeper the Nobel Laureate crisis the bigger the opportunity.” aking money should be a Professor Muhammad Yunus means, but it should not Mbe an end in itself, No- bel Peace Prize Laureate Profes- sor Muhammad Yunus reminded delegates at the closing plenary of Sibos 2012. “Making money is fine with me, but that’s not what we’re all about,” said the founder of Gra- meen Bank, chairman of the Yu- nus Centre and leading pioneer of microcredit. continued on page 2

Japan Day

“Japanese financial Moving beyond Japan institutions are in Can the country’s indigenous banks use their considerable financial a comparatively expertise and investment capital to support pan-Asian growth? superior position to foreign financial apan’s banks will have to ness opportunities await, created ry that he expected the country’s develop new business mod- by a changing demographic and banks to increase their regional institutions.” Jels if they are to compete a surge in the number of middle- presence as European institutions Yasuhiro Sato, Mizuho Financial Group against US and European finan- and high-income earners across withdrew from the market. “Jap- cial institutions in the Asia-Pacif- the region. anese financial institutions are in ic region. For those institutions Mizuho Financial Group CEO a comparatively superior position that can differentiate their servic- Yasuhiro Sato told the audience to foreign financial institutions in es and products, lucrative busi- at the Japan Day opening plena- continued on page 2

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sibos.com Sibos Issues 1 Closing plenary CLOSING PLENARY Moving beyond the crisis in which to grow. Instead, he ar- continued from page 1 gued, we should look at the world “Back in business” we have built, in which we have Yunus was given a stand- allowed poverty to flourish. “Un- Industry firmly focused on ing ovation following his inspir- less we fix our institutions, poli- future – SWIFT executives “SWIFT can help banks to ing speech in which he explained cies and conceptual frameworks, reduce compliance costs, how he fell into creating a bank poverty will not end,” he said. While Professor Muhammad Yunus spoke of the allowing them to focus and urged delegates to imagine a “The process that created pover- wider responsibilities of the banking sector, Sibos 2012’s closing plenary also gave senior SWIFT instead on growing their world without poverty. ty cannot end poverty.” But for executives to reflect on the industry’s readiness “The deeper the crisis the big- those who despair of meaningful to face the challenges and opportunities ahead. core business.” ger the opportunity,” he declared. progress on such a daunting task, Reviewing Sibos week in conversation Gottfried Leibbrandt, SWIFT with SibosTV anchor Kavita Maharaj, Alain Yunus reminded us how quickly Raes, CEO, EMEA, SWIFT and SWIFT deputy Bonsai trees things can change. Twenty-five chairman Stephan Zimmermann said Sibos – retaining a focus on engineering while also Originally a university professor years ago, the Berlin Wall and the 2012 had a “back in business” buzz, with being more engaged with the business.” of economics in his native Bang- Soviet Union still stood and In- delegates focused on the need for business without worrying about multiple standards innovation within the new regulatory framework. Driving innovation and protocols, and importantly, without driving ladesh, Yunus lent 42 people in dia could not rise above 4% GDP Zimmerman and Raes, who extends his remit Speaking after the closing plenary, SWIFT CEO additional investment,” he added. a neighbouring village a total of growth; in 20 years the Chinese to include Asia from 2013, thanked the region’s Gottfried Leibbrandt noted the strains placed At a time of far-reaching reform of global outgoing CEO, Ian Johnston, “for his committed on banks of concurrently tackling the three financial markets, the costs of handling change, USD 27 to keep them out of the and Indian economies are pre- however minimised by shared investment, are best hands of loan sharks. The im- dicted to be larger than all oth- offset through adding value to new and existing pact on the villagers encouraged er countries put together. Yunus “We are making more customers. To this end, SWIFT’s commitment to innovations that drive business opportunities for Yunus to find a longer-term so- expects Bangladesh to eliminate demands of technology to banks is clearly articulated at Sibos. lution. At first, he acted as guar- poverty by 2030. The Yunus support us in addressing “SWIFT is clearly seen as driving the antor for a loan from a campus- Centre was established to cam- our many challenges and innovation agenda, helped by Innotribe but also based bank, then created his own paign against poverty, promote demonstrated by new products and services opportunities.” such as Sanction Screening and Alliance Lite 2,” bank, which has now distribut- social business and forge relation- said Leibbrandt. “Banks are looking at SWIFT to ed more than USD 11 billion in ships with like-minded organisa- Stephan Zimmermann, SWIFT continue this drive for innovation around our core business, and to help facilitate discussions around loans. Through Grameen Bank – tions globally. the mid- to long-term future of the industry.” the name is derived from the Ben- Since setting up his bank, Yu- service” and noted that Osaka was the first Liebbrandt also paid tribute to the spirit gali for ‘rural’ or ‘village’ – Yunus nus has founded a further 60 Sibos in which delegates from Asia-Pacific made of community that had maintained SWIFT’s up the largest regional contingent. Moreover, a core challenges debated at Sibos: dealing commitment to Osaka in the aftermath of has pioneered the concepts of mi- businesses, all of which have been total of 1,700 Japanese delegates had attended with regulation; responding to market structure Japan’s natural disaster in March 2011 and crofinance and microcredit, mak- designed primarily to solve prob- Japan Day on the final day of the conference. evolution; and harnessing innovation. found its voice in support of delegates whose ing small loans to people in im- lems and cover costs, rather than “The shift from West to East is not only about “A large proportion of spend is being diverted homes had been affected by Hurricane Sandy. globalization – it’s about the rapid growth away from innovative new products and “All of this dialogue was set against the poverished communities without generate profits. Some have tak- of the domestic markets in Asia,” observed services, toward keeping up with this regulatory backdrop of Hurricane Sandy and the news of requiring collateral, for more than en longer to succeed than oth- Raes. “When domestic markets are growing so burden,” he said. “Banks are looking for significant disruption along the US east coast,” 30 years. In addition to lending ers. When he started selling solar quickly, they need the necessary infrastructure SWIFT’s support – we believe we can play an he said. “Many were thinking of friends and to support that growth. A modern financial important role in this space, helping to reduce family back at home. Such events serve to to the poor, the other distinguish- panels to provide Bangladeshi vil- market needs a modern financial infrastructure. compliance costs and allowing institutions to remind us of the strength of SWIFT’s Failure is ing factor of Grameen Bank is lagers with a source of night-time We can help Asia’s high- and low-value focus instead on growing their core business.” Not An Option culture that underpins all of the that 98% of its loans are to wom- light and warmth, Yunus was payments and securities market infrastructures Referring back to his opening plenary speech services we provide to the industry.” to leapfrog to the latest generation.” on “backwards compatibility”argued that new en. “Money that comes into the happy to sell five a day; the firm Zimmerman also noted a significant upshift in challenges posed by the consolidation and family via women makes so much now shifts more than a thousand the level of banks’ engagement with regulation evolution of market infrastructures did not more difference than when it en- a day. According to Yunus, these and regulators, a trend which perhaps could necessarily demand wholly new costs. “Banks serve all sides well due to the risks that can reuse existing connectivity to access ters via men,” he said. social businesses speak to the self- accompany technology-led opportunities, new and additional market infrastructures Those looking to solve pov- less instinct that sits beside self- such as the rapid increase in cyber-crime. For erty should not focus primari- ishness in human nature. Zimmerman, successful use of technology by “We can help Asia’s market ly on the poor, said Yunus, who The desire to leave your signa- banks required “special skill-sets”. “We are making more and more demands of technology infrastructures to leapfrog compared poor people with bon- ture behind on the planet is in- to support us in addressing the many sai trees: there is nothing differ- herent to human life, Yunus said. challenges and opportunities we face,” he said. to the latest generation.” “A successful CIO needs a whole range of skills Alain Raes, SWIFT ent or wrong with the seed, it “Making other people happy is and the ability to cope with great complexity just doesn’t have sufficient soil also happiness.”

Japan Day

Moving beyond Japan strong – by 2020. In a region char- century, driven largely by fi- Sato predicts a more prominent tory of Japan’s economic develop- continued from page 1 acterised by its disparate markets, nancial engineering and pro- ‘intermediation role’ for banks, ment, they can take a leading role even greater diversity amongst prietary trading, a post-finan- acting as “sophisticated risk-tak- in the development of financial terms of high liquidity and appro- emerging markets may result as cial crisis business model has yet ers”, providing risk money for markets in Asia.” priate levels of capital,” he said. a consequence of regional growth. to emerge. But Sato, who also new industrial development and Where there was once an unfa- Faced with such structural eco- chairs the Japanese Bankers As- social infrastructure. In this new How to regain trust vourable gap in the credit ratings nomic changes, Japan’s banks sociation, identified a couple of post recession world, “the abil- Echoing the sentiment of other of Japanese banks compared with will need to adapt their current trends that will help shape future ity to secure liquidity will be in- Sibos speakers, if banks are to be their western counterparts, it no business models, said Sato. banking models. dispensible,” he said. “Banks will at the forefront of developing the longer existed, he noted. At home, Japanese industry is Banks need to focus on real contribute to new industries, re- pan-Asian market, first they must undergoing what Sato describes customer demand, and shift their juvenate existing ones and con- regain the trust of their clients. World market as a “hollowing out”, driven by strategic thinking to accommo- tribute to the economic recovery.” Sato warned against delays in re- Macro dynamics are transform- a strong yen, strict environmen- date a market that is undergo- Japanese banks will both help sponding to events such as the re- ing both the nature of the region- tal regulation, labour restrictions, ing significant change, he said. drive economic prosperity through cent Libor rate fixing scandal and al market and the environment corporate tax and the tariff bar- In Asia, as elsewhere, there is an capital investment and assist the high profile insider trading inci- in which banks operate. “Asia is rier. If one adds the damage and ageing population; the chang- development of the regional finan- dents. Banks that responded rap- growing from being the world’s disruption caused to corporate Ja- ing demographic will have a ma- cial market, said Sato, leveraging idly at an institutional level to ad- factory to being the world’s mar- pan by last year’s natural disasters, jor impact on saving and invest- their experience of domestic mar- dress the weaknesses and failings ket,” declared Sato, citing forecasts then overseas corporate expan- ment behaviour. There will be ket development as they expand seen as endemic to the industry that Asia’s share of global GDP sion is unlikely to boost domestic an increased role for banks in regionally and globally. “There is would create a “tool for differen- will increase from 30% to more production or employment. the investment of capital in sec- a need for Japanese financial insti- tiation” against competitors, he than 40% within the next 20 years. tors serving the senior market, tutions to expand their world pres- said. Strong corporate govern- Growing economic prosperity New business model with a five-fold increase in capi- ence, particularly across Asia,” he ance, supported by a strong cor- is projected to double the ranks And what of Japan’s banks? Fol- tal investment in sectors such as said. “If Japanese financial institu- porate culture, was key. Fail and of middle- and high-income earn- lowing a 20% return on invest- pharmaceuticals and nursing care tions can introduce the experience it would prove fatal, he warned. A ers – currently some 900 million ment in the first decade of the forecast by 2020. they have gained through the his- “killer factor” for banks.

Publisher: Owen Fitzpatrick, SWIFT. Managing editor: Maria Eugenia Forcat, SWIFT.

Sibos Issues is written and produced by Asset International on behalf of SWIFT. Advertising contact: Dorothée Devillers, SWIFT: [email protected]; Tel: +32 2 655 4685 Printed by Fusion Media Ltd

Legal notice: SWIFT © 2012 Reproduction is authorised with acknowledgement of source. All other rights reserved. SWIFT, the SWIFT logo, Sibos, Accord, SWIFTReady, and SWIFTNet are registered trademarks of SWIFT. Photographs feature SWIFT employees, customers and partners.

2 Sibos Issues sibos.com

Japan Day A strange case of sleeping sickness Asian issuers could wake up Japan’s sleeping assets, but regulatory reform still needed to revive finance sector

ust as there are many ways by Japan’s finance sector. ture for Japanese banks acting as a to assess your health at the The caution reflected by this “bridge” between Japanese corpo- Jend of a four-day banking untapped mountain of savings rates looking to expand in Asia via conference (blood pressure, cho- is understandable in the context cross-border M&A and Asian and lesterol level, number of hours of 15 years of low-to-no growth multinational corporates active slept etc.), one can view the since the collapse of Japan’s as- across the region. But Hoshi also health of a country’s finance sec- set bubble in the late 1990s. But identified Asia’s need for long- tor from more than one angle. shouldn’t a world-class financial term infrastructure finance, which In Thursday’s Japan Day ses- centre be able to leverage domes- he felt would play to the existing sion, ‘The current state of play in tic assets and burgeoning inter- expertise of Japanese banks, “with the Japanese financial landscape’, national demand for capital? On the support of the Japanese export moderator Phred Dvorak, deputy top of the lack of confidence that credit agency”. Japanese banking Tokyo bureau chief for the Wall can strangle a country striving for experience could also be of value Street Journal, chose the latest growth, tax, regulation and scar- in the establishment of the ASE- Global Financial Centres Index city of talent were cited as rea- AN+3 bond market, he suggested. rankings, which placed Tokyo sons why Japan’s financial sector If Japan could not current- seventh, down from fifth in 2011. is currently characterised more ly attract global finance houses, That Asia’s low-tax internation- by potential than achievement. it could perhaps support the fi- al finance hubs, Hong Kong and nancing need of expanding Asian Singapore, had overtaken Tokyo Scarce resources firms through issuance of equi- was not front-page news. But for Tomoyoshi Uranishi, senior ex- “If politicians take the lead on ty or bonds in Tokyo, potentially South Korea’s Seoul (sixth) to ecutive officer, Tokyo Stock Ex- waking up those sleeping moun- outrank the Japanese capital was change (TSE), suggested that it deregulation, the FSA will follow.” tains of household savings, GE perhaps a more telling sign of the was hard for Japan to compete for Masaaki Kanno, chief economist, Japan, J.P. Morgan Capital’s Kanno added. declining wellbeing of finance in the business of international fi- The TSE’s Uranishi cited the world’s third-largest economy nancial institutions against low in- While agreeing that greater reg- pect regulators to reform them- the Tokyo Pro-Bond market, (Osaka, since you were wonder- come tax regimes in Hong Kong ulatory transparency and certain- selves. “If politicians take the lead launched in 2008, as an example ing, is ranked 21st). and Singapore, which had helped ty would improve Tokyo’s stand- on deregulation, the FSA will fol- of innovation that could stimulate But perhaps a more profound persuade a number of banks and ing as a financial hub, Masaaki low. Ultimately, this matter is in Japan’s financial markets.A mul- indication of the run-down state brokers to relocate away from To- Kanno, chief economist, Japan at the hands of the voters,” he said. ti-currency market that meets in- of Japan’s finance industry was kyo in recent years. But Seiji Yas- J.P. Morgan, said the blame did ternational accounting standards, noted by a number of panellists. ubuchi, president and CEO, GE not lie with the Financial Servic- Bridge financing the Pro-Bond market, Uranishi A high proportion of the country’s Capital, saw regulatory uncertain- es Agency (FSA). Noting the dif- Masayuki Hoshi, managing exec- predicted, would soon be issuing JPY 1,500 trillion in domestic ty and current employment laws ficulties that financial firms face utive officer, Mizuho Corporate its first RMB-denominated bond. household savings is “sleeping” in as inhibiting factors for foreign in- in obtaining positive regulatory Bank, nevertheless cited several “This is a good change for us that low-interest bearing accounts or stitutions, as well as a scarcity of approval for technology-driven reasons for optimism, based large- could be a step toward being a other low-risk instruments, rather “globally minded people with a product innovations, Kanno sug- ly on Japan’s proximity to Asia. global financial centre,” he said. than being actively intermediated good command of English”. gested it was unreasonable to ex- Primarily, Hoshi saw a bright fu- “We must try again.”

Japan day “The economic future rests on how governments deal with the “Japan is stuck in No country for old men fiscal issue,” he said, pointing to the country’s decade-long deficit financial stasis.” Are Japan’s insularity and former of 10% of GDP. “The problem Michael Spencer, Deutsche Bank is that Japan is stuck in financial successes preventing the country from stasis. It has enough savings to re- embracing the innovation that is necessary duce pressure on the government heterogeneous workforce would to deal with it,” he said. be a requirement for more inno- for renewal and growth? He compared Japan with Korea, vative countries, including the another market on the geograph- opening up of Japanese universi- omen, young people tions,” he said. “Are we serious ic periphery of Asia, dominated ties to overseas students. “If indi- and foreigners will be about diversity? Then set up 24- by family structures and more fa- viduals are not able to rise to the Wkey to Japan’s econom- hour day-care centres in Tokyo.” miliar with the idea of women in challenge, if there’s inertia, how ic future as it struggles to shed a Despite its broad remit, the leadership positions. “Japan is or- we do in next five years will deter- generation of corporate leaders session rapidly became a de- ganised around very large institu- mine how we look in 20,” he said. who had grown too comfortable bate on how best to foster inno- tions – banks and corporates,” he in better times, delegates were vation when market pressures said. “The economy is dominat- Losing their way? ing supported pro-active corpo- told in a Japan Day session on the are insufficiently strong to force ed by old men when it needs to Until diversity stimulates growth rate governance characterised by future of the country’s economy through change. focus on younger women. What at home, banks will be forced to investors’ willingness to replace and finance sector. “The key to productivity is in- we need is new thinking.” target overseas markets – belated- underperforming managers. In an outspoken attack on Japan’s novation, innovation, innova- Identifying the conditions for ly, in Japan’s case, since only 20% “I get the impression companies business establishment, Haruaki tion,” said Michael Spencer, innovation as excitement and of banks’ revenues come from that were innovative in the 1970s Deguch, president and founder of chief economist for Asia-Pacific surprise, Deguch said a more overseas business, compared with lost their way. Once they grow, Lifenet, the country’s only listed and co-head of global economics 60% on average for Japanese com- they get drawn into a comforta- web-based insurer, urged the gov- at Deutsche Bank. panies in other sectors. ble relationship between boards, ernment to deregulate labour mar- The result could boost innova- managers and banks,” said Spen- kets, introduce a quota system for Stasis versus surprise tion as banks operating abroad cer. “The question for many female executives and set up 24- Yet Spencer doubted wheth- come up against very different companies in the rest of Asia, as hour day-care for working mothers. er Japanese governments could business practices. “They’ll find they transfer to a new generation, “No other OECD country has summon the political will to the banks elsewhere have found oth- is whether they will remain cosy so few women in executive posi- push through necessary reforms. er ways to reach their custom- or whether outside pressure will ers and they will have to transfer force them into dynamism.” that ethic back into Japan,” said Moderator William Saito, “Are we serious about diversity? Then Spencer. founder of consultancy Intecur, In the meantime, market pres- went some way towards offering set up 24-hour day-care centres in sure would be crucial not only in an answer. “It seems to me that Tokyo.” Japan but across the region, he people working outside the estab- added, contrasting Asia with the lished system will have to drive Haruaki Deguch, Lifenet US, where market-based financ- the change,” he said.

4 Sibos Issues sibos.com Japan Day Can Asian markets grab their chance to shine? Intra-regional partnerships and further adoption of global standards will support the growth of Asia’s securities markets ith western economies with a system based on Europe’s continuing to dwindle, Undertakings for Collective Invest- Wa panel on the final af- ment in Transferable Securities ternoon of Sibos 2012 considered (UCITS) regime. The Monetary whether Asian securities markets Authority of Singapore launched a initiatives – particularly those em- consultation on the specifications anating from South East Asia - for an ASEAN passport in May. could capitalise. For the asset management com- Growth through munity, the growing mass of post- standards crisis regulatory reforms – many Looking to harmonisation of the of them spilling over from the US bond market in Asia, Tetsuta- and Europe – present challenges ro Muraki, senior executive man- in terms of how Asian buy-side aging director of Frontier Man- firms distribute their funds. agement and ex-chairman of the “Traction for solutions like an Asian fund passport is With investors from the west ASEAN+3 Bond Market Forum continuing to look for diversified (AMBF), highlighted Tokyo’s building.” sources of returns, Lawrence Au, ambition for fixed income trad- Lawrence Au, BNP Paribas head of Asia-Pacific and member ing growth in Japan, with a push of the executive board at BNP by the Tokyo Stock Exchange to tive vice president for Asia at con- Michael Vrontamitis, region- of its renminbi qualified foreign Paribas, noted the steps South adopt global standards to facilitate sultancy Celent, questioned pan- al head of product management, institutional investor scheme, East Asia is taking to simplify in- greater international investment. elists on whether the long-awaited transaction banking, Standard which allows China-based fund vestment inflows. Muraki also lauded the pro- ASEAN Trading link between the Chartered Bank, said it was too managers to form RMB-denom- “An asset manager that wants gress of the AMBF. “Phase one region’s equity markets would be soon to make a judgment on the inated funds that can be used to to launch a fund across Asia cur- of the initiative covered bond successful in facilitating cross-bor- long-term prospects of the ASE- invest in A-shares issued by the rently has to seek approval in trading practices across ASEAN der and international investment. AN Link, but added that “access country’s blue chips. each different country, which is markets and steps are now be- “While the ASEAN Link is pan- via a single point of entry was a “The big question is whether a very time-consuming and ineffi- ing taken to understand the is- Asian, it is still subject to na- step in the right direction”. China can cope with its immense cient process,” he said. “Traction sues associated with harmonising tional rules, raising questions as “If countries find they can’t at- transformation,” noted Vron- for solutions like an Asian fund regulation across the markets in- to whether it is really needed in tract investment themselves, they tamitis. “The future of the RMB passport is building and can help volved,” he said. Asia,” he said. better do it in combination with and access to the market is built to ease this burden.” Staying with ASEAN, session The link currently includes each other,” he said. “I also think on the performance of the econ- The concept of an Asian fund moderator Neil Katkov, execu- the Stock Exchange of Thailand, there will be more bilateral links omy. If China’s economy contin- passport was initiated by Austral- Burse Malaysia, and the Singa- between Asian countries.” ues to grow together with trade ia, and while countries including pore Exchange, which jointly rep- settlements, the demand for capi- Singapore and Malaysia support- “Can China cope resent a market capitalisation of Unpredictable influence tal markets products will increase.” ed the idea, others are yet to be with its immense US$1.4 trillion across 3,000 listed In China, despite slowing growth, Other panellists agreed, but convinced. companies. However, the partici- the internationalisation of the Au warned that “it would not A similar initiative, based in transformation?” pation of other markets, including RMB will help to stimulate ac- be smooth sailing” and to “ex- ASEAN (Association of South East Michael Vrontamitis, the Indonesia, Vietnam and the tivity. The Chinese government pect plenty of peaks and troughs Asian Nations), is further ahead, Standard Chartered Bank Philippines is not yet confirmed. has completed the second round along the way”. japan day their focus to the dollar and the euro to limit upward pressure on A phoney war? their currencies. Reserving judgement “The real question is whether Talk of a currency war ignores more the dollar will remain in its role fundamental issues concerning the or new currencies like the ren- minbi will emerge,” said Atsushi relationship between reserve currencies Takeuchi, head of the Centre for Monetary Cooperation in Asia and the controlled currencies of growth at the Bank of Japan, explaining economies that reserve currencies performed three functions: a medium of ex- hile there is no all-out preciate, amongst them the Bra- change, a store of value, and a currency war taking zilan real. Labelled a ‘protection- unit of account. “Other curren- Wplace, there are local ist’ move by Mantega, designed cies are emerging as a store of skirmishes and border incursions to devalue the dollar and increase “The real question is whether the value but not necessarily as a me- breaking out randomly around US export competitiveness, a dium of exchange or unit of ac- the world, according to Neal Liv- third round of quantitative eas- dollar will remain in its role or new count.” ingston, global head of transac- ing in 2012 has similarly been de- Trevor Williams, chief econo- tion services origination, Royal rided. More recently, the Bank of currencies like the renminbi will mist, wholesale banking and mar- Bank of Scotland. Japan’s decision to expand its as- emerge.” kets at Lloyds, believed the core The analogy was made in one set purchase programme has been Atsushi Takeuchi, Bank of Japan problem is that certain emerging of the final sessions of Sibos 2012, cited by Mantega as further evi- market currencies were being un- which asked: ‘Are we moving to- dence that a ‘global’ currency war naturally held down when they ward a currency war?’ The title of is taking place in which emerg- ented to domestic concerns,” said pact of successive rounds of quan- should be rising. the session drew upon comments ing economies are left struggling Livingston, with Europe, the US titative easing in the US, the euro “Currencies always fluctuate made in 2010 by Guido Mantega, to remain competitive against de- and the UK cited as prime exam- and the dollar would be expected because they reflect the domes- Brazil’s finance minister, after the preciating ‘export friendly’ re- ples of this. “These stimulus pack- to depreciate more sharply than tic situation relative to others,” US Federal Reserve undertook a serve currencies. ages are putting massive pressure they have to date. Marc Chandler, said Williams. “Those rising do second round of ‘quantitative eas- “We have some hugely accom- on the currencies of other econ- global head of currency strategy so because the purchasing pow- ing’ that year. The increased flow modative economies around the omies, such as Brazil,” he noted. at Brown Brothers Harriman, be- er of their citizens is going up and of dollars into the global economy world embarking on stimulus Given the depth of the financial lieves that growth markets like that’s a good thing. Countries like led many other currencies to ap- packages which are heavily ori- crisis in the Eurozone and the im- Brazil and China have shifted Brazil shouldn’t try to stop it.”

sibos.com Sibos Issues 5 securities Buy-side unprepared for OTC central clearing Delays, information overload and confusing regulations restrict ability to plan

ension funds and asset challenge is not an infrastructure managers are nowhere near problem: “They’re ready for cli- “The advantages of Pready for the central clear- ent clearing. The problem is get- ing of OTC derivatives, delegates ting the rest of the industry ready central clearing are were told on the final day of Sibos. when many of the required regu- Stemming from the Group lations aren’t even ready yet.” slightly less clear for of 20’s 2009 Pittsburgh sum- Takeshi Hirano, director of the buy-side than they mit, new swaps rules, including OTC Derivatives Clearing Ser- the Dodd-Frank Act in the US, vices at the Japan Securities are for the sell-side.” will push a greater portion of the Clearing Corporation, said the Paul Swann, ICE OTC derivatives market through buy-side in Japan needed more central counterparties (CCPs) time to prepare for clearing, add- with the aim of reducing systemic ing on the day of the panel ses- risk and increasing transparency. sion – 1 November – Japan be- William Filonuk, managing di- came the first country to adhere rector, global research and de- to the new G-20 mandate by be- velopment – capital markets at ginning the compulsory clearing the asset servicing arm of BNY of interest rate swaps. Mellon, said in the face of over- “CCPs need to establish the best whelming regulation and slipping way to protect the client, otherwise mandates, the buy-side is not yet they will not make it clear enough ready to implement the clearing to the buy-side why central clear- class was “probably not the best Global standards or bench- implications of the Dodd-Frank of OTC derivatives on CCPs. ing is important,” said Hirano. solution”. marks will prevent any “race to rules for markets beyond the US, “The advantages of central clear- “How many is the right number the bottom”, believed Hirano. while some Asian market partici- ing are slightly less clear for the Concentration risk will depend on how they serve the Yet, the move to central clear- pants are believed to be consider- buy-side than they are for the sell- The G-20 requirement for previ- market,” he said. ing also means the industry will ing withdrawing from conducting side,” added Paul Swann, presi- ously bilateral derivatives contracts Hirano warned that one CCP lose certain risk management OTC derivatives business with US dent and chief operating officer of to be cleared centrally has led to per asset class would amount to strategies which have hitherto counterparts to avoid becoming ICE Clear Europe, which clears speculation over how many CCPs overly concentrated risk, but em- been open to market participants, subject to US regulatory scrutiny. credit default swaps for European the industry will eventually need. phasised that quality of service argued Craig Pirrong, professor Pirrong warned that extrater- clients of US-owned InterConti- Some have predicted a dramatic should be the primary concern of of finance, Bauer College of Busi- ritoriality issues could lead to a nental Exchange. “The benefits increase in the amount of providers market participants. ness at the University of Houston. fragmentation of derivatives mar- for the buy-side are standardised while others forecast a contraction. Highlighting industry fears over “The move to CCPs is break- kets along jurisdictional lines: collateral and standardised docu- “In the short term, we will see collateral arbitrage, i.e. the possi- ing up participants’ ability to use “There’s a real danger that if par- mentation but this isn’t as obvi- more CCPs than are desirable,” bility that CCPs might allow lower netting,” he said. “But you need ticipants are not happy with the ous as, for instance, multilateral said Filonuk. “But medium to forms of collateral to win business, to look at the systemic risk as a terms of certain jurisdictions, netting for the sell-side.” long term we are likely to see a Swann said ICE was not interest- whole. Netting reallocates risk they will simply say ‘we’re not go- But while CCPs are furious- consolidation.” ed in any race to the bottom. but it does not reduce it.” ing to play in your sandbox’. This ly preparing for central clearing The more concentrated the “We are highly incentivised to A number of regulators from will eventually lead to less choice of the most liquid OTC deriv- better, was the opinion of Swann, make sure we have a safe model,” major G-20 countries have writ- of market participants and unan- atives, Swann asserted that the admitting one CCP per asset said Swann. ten to US watchdogs over the ticipated risk,” he said.

securities Panellists agreed that moves across major markets to a T+2 set- “We need to tlement timeframe are putting ex- Halfway up the hill ternal pressure on all parties in- help smaller volved in a transaction to automate While the industry has been working on their processes, since exceptions investment involve an undue call on manual management automating confirmations for over two resources. Gary J. Probert, man- decades, progress remains partial due to aging director, institutional cli- firms to ents group, Citi, pointed out that mixed priorities and preferences the value of ETC can be judged by automate.” the costs it addresses as well as the Jan Snitzer, Loomis, Sayles & Co TC is one of the longer-serv- head of direct securities services, pain it removes for those involved ing acronyms in the securi- Deutsche Bank, suggested that in processing trades. for downstream efficiency needs Eties processing industry, but in the absence of any mandatory Simon Haggerty, head, IB op- Deutsche Bank, securities lend- to be imbued in the front office. electronic trade confirmation and matching process, there are dif- erations, UBS, noted that, in his ing and money market trans- Even if matching rates increase, other aspects of pre-settlement ferent ways for institutions to put estimate, “Only 40-50% of flow actions were ripe for attention, however, a challenge still remains trade matching are yet to be taken pressure on counterparties to im- goes through electronic confir- while Haggerty pointed to bro- in the multiple ways of approach- for granted as an essential part of prove their matching rates. “We mation.” The results of a match- ker-to-broker flow. Jan Snitzer, ing the process, whether through the transaction chain. The title of rank our brokers annually,” he ing process are tangible. “Accord- chairman of securities industry a central utility or other third- a panel session, ‘ETC and Trade said, “and no one likes to be bot- ing to our figures, with affirmed body ISITC’s board of directors, party services. Though anticipat- Matching: From nice-to-have to tom of the table.” trades, 98% settle on time,” he and vice president, STP, Loom- ing consolidation at some point, necessity’, reflected the fact that, as noted. “With non-affirmed trades is, Sayles & Co, argued, “We de Maintenant noted that, “Dif- moderator Gert Raeves, research it’s more like 93%.” need to help smaller investment ferent things work for different director, capital markets, CEB management firms to automate.” clients.” The problem of user TowerGroup, put it, “ETC is not Pressure points To that end, ISITC launched a choice for intermediaries was not a new topic; a lot has been done, Each panellist saw different pres- matching initiative last year that lost on Probert. “There is an in- but there remains a lot to do.” sure points where improvements set out best practice for the in- tegration cost for using multiple The discussion pointed to in matching rates were most re- dustry. At the same time, she providers,” he said. well-established benefits from quired. For de Maintenant at suggested, some responsibility Despite evidence of regulation introducing efficient automat- fatigue elsewhere in the industry, ed matching processes, but there was even a suggestion that also highlighted a range of dif- “There is an integration cost for using regulatory intervention might be ferent priorities from brokers, multiple providers.” an effective catalyst, even if none fund managers and custodians. of the panellists was rash enough Gary J. Probert, Citi Thibaud de Maintenant, global to call for it outright.

6 Sibos Issues sibos.com IN CONVERSATION payments systems Nigeria embarks on Battling for the unbanked SWIFT overhaul CBN opens gateway to Banks betting on the “450,000 customers greater automation remittance market should every month represents not underestimate he Central Bank of Nigeria will use cross-selling potential.” SWIFT messaging in its real-time gross settlement (RTGS) system as incumbent service Osama Al Rahma, Al Fardan Exchange T part of a planned overhaul of the country’s providers financial infrastructure. The bank has signed model after losing float income created by up for implementation of SWIFT FINCopy anks will struggle to take on ex- manual payment processing. A govern- for its RTGS as the first step of a modernisa- change houses in the United Arab ment-backed wage protection scheme intro- tion of its domestic payment system. BEmirates (UAE) remittance market duced in 2009 to end cash-in-hand pay has The RTGS system will go live in 2014 despite a potential audience of almost sev- boosted pre-paid card volumes. With an eye and the central bank’s payments and mar- en million, according to Osama Al Rah- on future revenues, Al Fardan has formed kets infrastructure is expected to migrate ma, general manager of Emirates-based Al joint ventures to create a platform Al Rah- to SWIFT messaging in the coming years. Fardan Exchange. ma hopes will enable the exchange house to The Y-copy facility will automatically “Almost by default”, people with cash to re- offer mobile payments apps available even store, copy, authorise and forward mes- mit have tended to simply head for the near- fered by banks,” said Al Rahma. “Banks to relatively unsophisticated remitters. “The sages, eliminating administrative processes est of 130 exchange houses across the market. may have a lot of branches but we have model in the UAE has changed,” he said. needed to run the current X-copy regime, In Al Rahma’s view, many banks started 450,000 customers every month. That rep- The exchange will also target new sub- allowing for complete automation. taking the remittance business more seri- resents cross-selling potential. You’re talk- markets, including smartphone-sav- Key factors behind the central bank’s de- ous after the financial crisis because it has ing about a segment that may have nothing vy young people without access to cred- cision include improved efficiency through little risk exposure and generates fees. “But to do with banks but with money to save.” it cards, and additional overseas markets. automation, protection against fraud and it isn’t their core activity,” he said. “They The opportunity is clear: cash transferred hence reduced reputation risk for the coun- would need to deal with a large number of Innovation for the masses between the developed and developing try’s finance sector. Future benefits will in- people, which could push away customers Al Farden can form correspondent rela- world markets makes up a USD 400 tril- clude economies of scale and enhanced they can actually make money from.” tionships but may not handle customer lion market, with anticipated growth of connectivity to international counterparts. Yet in some cases, banks are using their deposits. Being regulated alongside the 8.1% in 2012. Banking and payments director Dipo exchange house competitors’ networks to UAE’s banks adds credibility to the ex- Al Rahma warns banks may also strug- Fatokun said the move toward straight- reach a significant and often unbanked changes, but Al Rahma recognises that gle to compete with exchange houses in through processing would mitigate the risk population. Al Farden maintains 100 cor- customer expectations of technology-led retail FX markets because their opera- of fraud and error as well as helping ad- respondent relationships, mainly with services will also increase. “Customers tional costs are higher. “The advantage of dress sanctions challenges. banks, some of which use its 40 branches now expect to see their cash in 30 min- an exchange house is that it works on a “The Nigerian central bank is the bank nationwide to sell products. utes,” he said. high-volume model. The spread isn’t that to the government. What we don’t want “We’re trying to add more value with But exchange houses are used to respond- big but it makes up between 40-50% of is sanctions imposed on government pay- mobile top-ups and savings schemes of- ing to change, adapting to a pre-paid card our income,” he said. ments by foreign banks,” Fatokun said.

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9475_The Bank for Banks - Inserat Sibos_2012_08_30_landscape_noViolator.indd 1 31/08/2012 09:01:22 sibos.com Sibos Issues 7 COMPLIANCE FORUM COMPLIANCE FORUM Complex landscape requires joined-up thinking Identifying the enemy within Financial crime analytics requires holistic approach New threats are weakening relationships, but a more coordinated compliance effort offers hope inancial crime events are not simple, ics and processes were just as important. often spanning multiple jurisdictions And this should involve the front office re the tougher regulations that have analytical work with all the data we ob- Fwith numerous transactions over as well. changed the business practices of tain,” said Jared. long periods of time. For this reason banks “An institution’s know your customer A correspondent banks also lead- need to be able to leverage the full value of (KYC) processes provide an opportuni- ing to an increase in hidden and illegal Cutting links analytics to enhance their ability to detect ty to collect information increase controls. transactions? The Compliance Forum The risks of retaining correspondents and prevent criminal activity, whilst man- The key is to be able to concentrate that panel on the future of correspondent were also a concern for the bankers who aging compliance and reputational risks, output into good analytics.” banking stressed the need to strike a bal- stressed that banks today are terminat- and cost. According to Tony Wicks, director of ance between good business and effec- ing relationships with those correspond- On the final day of Sibos 2012, the need anti-money-laundering (AML) solutions tive compliance. ents that have weak compliance processes for more cohesive analysis was discussed in at consultants Omnicision, the three According to the United Nations, or governance structures and do not meet a Compliance Forum panel session, ‘Ana- types of crime reduction analytics for fi- around one trillion dollars passed through their risk appetite in a quick and effective lytics application in financial crime – join- nancial institutions are: pattern analysis banking channels illegally last year. Con- manner. Increasingly aware of the threat of ing the dots’. for functions like sanctions filtering; risk cerns over the funding of terrorist and an increase in nested accounts that use the “Data is the fundamental building block assessment for KYC and the like; and other criminal activity are forcing regula- banking infrastructure for illegal purposes, of any procedure you want to put in place, behavioural analytics which help iden- tors to tighten their grip on correspond- banks are hungry for information and ad- so it is crucial you understand the data tify pre-determined patterns that repre- ent relationships. However, banks are vice on how to filter correspondent banks and how it can help you understand fi- sent risk. worried about the controls and processes effectively and how to avoid infiltration. nancial crime,” said Daniel Buckingham, “The problem is how to marry analysis they have to put in place to monitor hid- But will compliance be effective unless head of transaction monitoring at Bar- into human decision-making,” said Wicks. den transactions and the limitations of business and compliance departments un- clays. “Banking has become too complex due diligence to avoid the growth of ‘nest- derstand each other? “Partnership between for compliance to just look at a particular ‘Compliance silos’ ed’ accounts. Nested accounts involve a business and compliance is essential for product or client. You have to take eve- Part of the solution is to involve the com- sanctioned entity anonymously channel- compliance to be effective,” said Michael rything into account and unless you have pliance department more deeply in front- ling funds through a legal correspondent Cho, global head of AML compliance, the right underlying data, your analytics office functions and meetings, so that the bank of another foreign institution, in lieu Northern Trust. “Unless we work together, will be flawed.” team can better understand the institu- of having its own account. we are not going to create controls which When considering financial crime, it has tion’s business functions. Although banks are spending more are risk-based and could end up being ei- to be accepted that globalisation has be- “You need to sit at the business table. money and resources than ever on com- ther over cautious or unprepared,” he add- come irreversible and even small institu- This helps you create better solutions,” pliance, this doesn’t seem to mitigate the ed. “We should train compliance people tions are operating cross-jurisdictionally, said Michael Cho, global head of AML challenges around the implementation of in business and business people, includ- leading to issues of how information from compliance, Northern Trust, who add- compliance processes. “The biggest chal- ing sales professionals, should get train- multiple sources joins together. ed that the danger was always to get too lenge we are facing is in the implementa- ing in regulations and compliance,” said A lot of institutions focus on the de- caught up in ‘compliance silos’. “Screen- tion of know your customer (KYC) rules,” Philippe Vexlard, global head of corre- tection and investigation of scenarios as ing for suspicious activity, calculating said Jack Jared, strategy head, bank ser- spondent banking, BNP Paribas. He also they arise, but David Howes, global head fraud risk, complying with economic sanc- vices group, Citi Transaction Services. recommended that compliance should be of financial crime risk for the wholesale tions – at the end of the day we’re talking KYC processes today require more than coordinated at a corporate level, with all Banking division of Standard Chartered about information and understanding your just collection and identification of cus- branches and geographies following a sin- Bank, insisted that pre-emptive analyt- data effectively.” tomer data. “We are required to do more gle approach.

COMPLIANCE FORUM Managing the complex world of sanctions New service aims to “The increased costs of sanctions screening means banks need to alter their approach to tackle the cost and prove systems work, while keeping costs low by continually testing and tuning sanctions complexity of sanctions screening processes,” he said. screening Tuned in xpectations from regulators on deal- Sanctions Testing is a cloud-based applica- ing with sanctions screening pre- tion that continually monitors global sanc- Esents the need for banks to manage tions lists released by regulators, allows us- the associated costs while maintaining the ers to test their systems, generate alerts and integrity of their systems. reports and then fine tune for efficiency. A new Sanctions Testing product devel- “There is no silver bullet for maintain- oped by SWIFT and Omnicision, which ing an efficient system, but the risks can be Client commitment. helps firms deal with the added pressure minimised with a system that is continu- of regulatory scrutiny, while maintaining ous and predictable,” said Horobin. Global solutions. an optimal level of efficiency, was present- Looking at the details of the system, Nico- ed at a SWIFT Auditorium session on the las Stuckens, manager of anti-money laun- Total connectivity. last day of Sibos. dering and sanction initiatives at SWIFT, The complexity of sanctions screening con- explained how testing would first offer a tinues to grow. The number of names and high-level view and then allow users to drill aliases now totals over 40,000, with changes down and look at specific cases in detail. Visit us at Sibos booth 5C13. made to lists at least once a day. Add in the “Banks can use the results to adjust their need to apply ‘fuzzy logic’ – i.e., dealing with risk appetite, change their threshold of nuances to names and aliases – and the num- fuzzy logic and then download reports au- ber of combinations rises to over four billion. tomatically for regulatory compliance,” According to Ian Horobin, CEO and said Stuckens. “The application will of- founder, Omnicision, the operational cost fer greater control and self-management of related to sanctions is expected to double sanctions screening and offers a communi- by 2014. ty approach where issues are identified and shared via a component in the platform.” “The increased costs

“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, of sanctions screening including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, means banks need to Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured  May Lose Value  Are Not Bank Guaranteed. ©2012 Bank of America Corporation alter their approach to prove systems work.” Ian Horobin, Omnicision

CAD-08-12-0997 Sibos Ad v03.indd 1 8/27/12 4:22 PM 8 Sibos Issues sibos.com COMPLIANCE FORUM “One of the most pressing issues of our time.”

Despite a broad-ranging agenda, sanctions was never far from en our evidence-based approach, Fellow panellist Cassandra we have not been found to have Hewett, deputy group MLRO, the stage at Sibos’ inaugural Compliance Forum wrongly added anyone to the list.” group compliance (AML & Sanc- Nevertheless, he stressed, individ- tions), ANZ Bank added that f anyone still doubts the im- enforces economic and trade sanc- institutions willing to deal with uals and entities can and do get re- technology can be a great aid to portance of regulatory com- tions based on US foreign policy those designated banks as they moved from the list if they show the process of ensuring that mon- Ipliance to the sustained health and national security goals. Non- are increasingly blacklisted by dif- that they have ceased the activity itoring is effective. “KYC is the of the finance sector, they must US financial institutions have a ferent regulatory entities around for which they were designated. bedrock of any successful policy,” have passed up the chance to at- choice, said Adam J. Szubin, di- the world,” he commented. she said. tend Sibos’s first-ever Compli- rector of the Office of Foreign As- On the vexed question of ‘ex- National, regional, ance Forum. sets Control (OFAC): they can tra-territoriality’, Szubin noted global Priority No. 1 This two-day stream took on deal with blacklisted entities or US that while OFAC’s regulatory re- Following Szubin’s perspective While the second day of the issues as diverse as cyber-crime, financial institutions, but not both. mit directly covers US institu- on compliance with sanctions, Compliance Forum touched on a sanctions compliance and the Many of the questions directed tions, “We recognise the impor- the Compliance Forum leapt wider range of themes (see page challenge of handling the sheer at Szubin concerned Iran, with tance of correspondent access to continents and broadened its opposite), sanctions remained weight of post-crisis regulato- which financial and commercial the US.” US financial institu- perspective to look at Asia’s fight prominent on Wednesday. Dis- ry reform, in a variety of formats, transactions are subject to a range tions, he suggested, will not be against financial crime. cussing uptake of SWIFT’s Sanc- from case study to workshop to of US sanctions regulations. Szu- able to offer services to foreign David Howes, global head of tions Screening product, which panel discussion. bin pointed out that this was not institutions seeking to maintain financial crime risk, wholesale automates compliance with sanc- Many sessions were standing- a unilateral concern, since there ties to designated institutions. He banking, Standard Chartered tions, Brigitte De Wilde, head of room only, as industry profes- Bank, noted that from a strate- AML & sanctions initiatives at sionals who further fuelled the gy perspective, limiting an insti- SWIFT, noted that some central sessions with questions, clarifica- “We recognise the importance of tution to complying with national banks were looking to “develop tions and comments. Opening the correspondent access to the US.” regulations could complicate the country-specific approaches” to forum, SWIFT chairman Yawah Adam J. Szubin, US Office of Foreign Assets Control task of a bank operating global- compliance. Shah reflected the thoughts of ly or across a region. “In Asia, for In the forum’s closing session, many, observing, “Compliance is example, Hong Kong, Japan and De Wilde underlined that SWIFT one of the most pressing issues of were four United Nations Secu- pointed out that SWIFT’s action Singapore have the same regulato- would continue to support banks in our time. We are all working on rities Council resolutions con- in taking Iranian banks off the ry requirements as might be found this field, having already launched how to deal with increasing levels cerning Iranian nuclear activities network was a response to a man- in US and UK, but there is great Sanctions Screening and Sanc- of regulation.” as well as individual measures by datory requirement of the EU, al- variation across all the markets in tions Testing products, and would countries around the world. beit one that OFAC supported. the region,” he said. “If you oper- also look to broaden its services to Choose your partners OFAC has blacklisted 23 Ira- In response to a question from ate in more than one jurisdiction, help compliance with know your The Compliance Forum then got nian financial institutions for in- the floor, Szubin said that being you have to decide if you want to customer and anti-money laun- off to a compelling start with clear volvement in the country’s nu- placed on the OFAC list involved be consistent across all markets dering rules. “Banks are asking us and firm advice from the director clear project or, said Szubin, three to six months’ work in build- or take a case-by-case approach. to apply our expertise in the com- of the US Department of Treas- for support for terrorist groups. ing the case. Decisions can be Standard Chartered aims for one pliance area to expand our offer- ury agency that administers and “There are relatively few financial challenged, but, said Szubin, “giv- policy standard globally.” ings in this space,” she said.

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sibos.com Sibos Issues 9 taking Sibos to the EDGE

INNOTRIBE Forward to a fully banked future Is your bank people-worthy? Do you play enough?

f not for social innovation, banks cause it has to be sustainable,” said Yunus. would still only be serving princes The ROI on doing good might include sav- “Iand merchants today. I contend that ing the world, delegates heard, but nobody this session is all about an opportunity,” was being asked to give away money. said Felix Oldenburg, director, Ashoka We just need to think creatively. “We need Europe, introducing the session ‘The to push the possibilities and the bounda- Future of Doing Good: Banks for a Better ries. Charity exists only when creativity has World’ in the Innotribe Space on Thursday failed,” said Kartik Kaushik, managing di- morning. The two big take-aways of the rector, global head of business develop- session are: the unbanked represent a lot ment at Citi Transaction Services, also an of money; mobile connectivity brings the Innotribe enabler and a judge on the Startup unbanked within reach of banks. “There is Challenge. Emphasising during his presen- estimated to be USD2 billion hidden un- tation that he was speaking in a personal ca- der mattresses in South Africa,” said Brian pacity, Kaushik argued that banks should Richardson, CEO, Wizzit. still be thinking about new business models That money represents a serious business that allow people – all people – to participate. proposition, albeit one requiring innova- “Are we not in many ways the circulatory sys- tion. “Social enterprise is about new busi- tem of the world?” said Kaushik. ness models, not charity,” said M J Petroni, This gave a cue to the doctor on the pan- principal, Causeit, in an early interven- el. “We are privileged to live in a period of tion from the floor. First speaker Professor social, financial and environmental bank- Muhammad Yunus, chairman, Yunus ruptcy. It’s important that we work out Centre, and founder, Grameen Bank, also how to build a world that is socially and en- emphasised we were here to talk about busi- vironmentally sustainable,” said Professor ness. “Charity is a wonderful idea, but it has Carolyn Stephens, executive director, a limitation: the money doesn’t come back. Amazon-Yungas Observatory We call this a business be- of Biodiversity, Indigenous Health and Equity. One fea- ture of such a world would be that it is fully banked, where on to de- necessary via mobile devic- scribe how he was do- es. “Social entrepreneurship ing just that. Ben Powell, founder, Agora is not different from regular Partnerships, spoke about “unleashing the business, except that you’re power of entrepreneurs in the developing doing it with passion,” said world”. Wizzit’s Brian Richardson pointed Julius Akinyemi, entrepre- to the USD 500 billion global remittance neur-in-residence, The market in his account of how to get cur- Media Laboratory, MIT. rently unbanked money into banks by mo- How do we build such bile means. Faisel Rahman, director, Fair a world? Social entrepre- Finance, reminded us that there’s a sig- neurs offered opportu- nificant unbanked population in the UK, nities. “Imagine that we and Jeroo Billimoria, founder of Child and can fund the highest-po- Youth Finance International, spoke about tential human services introducing child-scale banking into schools. just like we fund a road “This is about extending the business – by the use of a bond,” model. The power of money can change “The power of money can said Steve Rothschild, the world,” said Yunus, as the session “Charity exists only when change the world.” president, Invest in closed to the sound of the Tears For Fears creativity has failed.” Outcomes – who went track ‘Mad World’.

10 Sibos Issues sibos.com Innovation’s next generation f Innotribe’s success is to be judged by the innovations it brings to the attention of the banking sector, it is fitting that its finale at Sibos should be the unveiling Iof 2012’s two Startup Challenge winners. Thursday afternoon saw the climax of the competition between ten entrepreneurs for the title Top Startup 2012 and USD50,000, plus five more ‘later-stage innovators’ bidding to be recognised as Top Innovator 2012. To judge by the questions they drew from the floor, all finalists were well on the way to forging valuable future partnerships. Among the ten startups that had made it through the regional stages to present in Osaka were mobile-banking entrepreneurs and innovators in mobile security; we were offered opportunities to invest in back-office and business-banking solutions. Social media featured, as did online financial advice. Finalists pitched one after another, in timed presentations from the podium. The five finalists competing for the title Top Innovator 2012 gave simultaneous, in- formal, ‘chat room’ presentations from different sections of the Innotribe Space. They offered us open-source risk-management technology, access to finance via social net- working, investment accounting for today’s challenges, automated receipt, conversion and payment of cross-border payments. Over 500 financial industry professionals, early-stage investors and startup ecosystem Happy winners! professionals had selected the fifteen finalists; now it was the turn of the delegates in the Innotribe Space. Votes were taken together, on a single ballot paper listing all finalists. Left to right: Audrey Tan and Min Lee of PlayMoolah First to be announced was Top Innovator 2012: David Rose of Gust, a New York- based global platform for connects entrepreneurs with sources of finance. “I am so which offers “a fun online platform for kids to learn about money”. “Children are delighted to have been chosen to receive this award,’ said Rose, speaking between in- your future customers. PlayMoolah gives them a secure engagement with money,” tense conversations with interested delegates. said co-founder Min Lee, accepting the prize. “Do the math! There are 2.2 billion Perhaps fittingly in Osaka, the winner of Top Startup 2012 was an Asian technolo- children in the world. You want to win their loyalty before another bank does,” add- gy firm dedicated to bringing finance to new markets: Singapore-based PlayMoolah!, ed co-founder Audrey Tan. A week of achievement and innovation saka cemented the place of inno- truth that the “connect- vation at the centre of Sibos – lit- ed world” is an increasing- Oerally, given the location of the ly fluid one in which giants Innotribe space in Intex’s open courtyard. can be toppled if they don’t More important, there was an overwhelm- keep up with the pace of ing sense that Sibos delegates would take change. the spirit of Innotribe back to their desks. But the message of the It began with a judo bout, in the Innotribe week was opportunity, not opening plenary (itself a first), in which a threat: there are tools and small and agile world champion used the methodologies whereby weight of a larger rival to floor him, re- change can be enabled within banks; and that there are new business models that are Digital Asset Grid among them, whereby peatedly, to illustrate the uncomfortable the connected world creates new opportu- both sustainable and potentially profitable. banks can wrest back ownership of the fu- Feedback from audience members in the ture from their non-bank rivals. Innotribe Space indicate that three prin- But to take these opportunities, in- ciples in particular stand out: the future stitutions must take an ‘open source’, of the finance sector belongs to technolo- that is inclusive, approach to innova- gy-driven firms that happen to have bank- tion. As Innotribe co-founder Kosta Peric ing licences; there are great opportunities says in his new book, ‘The Castle and to be found in providing banking servic- the Sandbox’, banks’ innovation teams es to the unbanked – but as a business op- “should be about enabling other people to portunity rather than a charitable activity; do innovation, not about doing innovation and that the tools are now emerging, the themselves”.

“We need to be engaged in the real economy, not financial games. I’d like nities that are there for the taking. Innotribe used the offbeat and the unusual to encour- to plant the age delegates to adopt a mindset for change. We made origami cranes as we learned seed that trade about the future of organisations, and we watched “punk money” created in seconds finance is part on Twitter. We learned that “real engage- of this.” ment” beats an over-emphasis on brand recognition. It’s the customer’s experience, Alexander Malaket, Opus not the bank’s promise, that matters. Advisory Services We heard that banks, in their present form, may not survive. But we also heard

sibos.com Sibos Issues 11 STANDARDS FORUM Simplifying the testing process A group of market participants is exploring how “If it’s expensive today, SWIFT’s MyStandards can be used to improve the it will be more so efficiency of standards testing tomorrow.” hether it is connecting to a mar- time before they understood the differences Sébastien Grèverie, Clearstream ket infrastructure, managing an in how they implement a standard. Wupgrade or ensuring client mes- To tackle the challenges thrown up by cost will be saved. Once there is transpar- sages can be processed straight through these differences, SWIFT launched My- ency, it could be possible to measure how without problems, testing messaging Standards earlier this year, a collabora- close an institution’s practice is to a bench- standards takes significant time and work tive web-based platform that facilitates the mark. “I can envisage a time when the en- for all parties. management of standards and related mar- tities that review RFPs will be asking ‘what And according to Sébastien Grèverie, ex- ket practice. It allows participants – banks, are your scores against this or that set of ecutive vice president, product manage- market infrastructure providers or end- messages or standards?’,” said Rothschild. ment, Clearstream, it is a burden that will users – to publish their standards schema only get heavier as regulatory change exerts and specifications in a neutral space. A pi- lot project is underway to see if MyStand- Early days greater pressure on the securities industry ards could be used as a collaborative tool For now, though, it is early days and simply in Europe. “If it’s expensive today, it will be to simplify and speed up testing. Theodore getting the documentation into a standard more so tomorrow. And we have to ask if it Rothschild, executive director, global mar- format is a step forward. David Bannister, will be humanly possible to get it all done,” ket infrastructures, J.P. Morgan, explained, editor, Banking Technology, moderating he said. To underline the complexity and “We obviously test standards end-to-end, the session, asked about the critical mass variety, Charles Dubarry, global head, di- but this is about how we do that. We’ve needed to achieve results. “If the big five rect channels and integration, HSBC, said been searching for a central way.” banks sign up, the rest will follow,” said banks could sit in meetings for two days at a Marc Delbaere, head of standards re- Dubarry, adding that the smaller banks search and development, SWIFT, suggest- would benefit from the investment by the “Testing must be end- ed that the testing process could be bro- larger players. In terms of timing, Grèverie ken down into its core elements. “Testing thought that a healthy level of participation to-end between the must be end-to-end between the parties, could be reached by Sibos in Dubai next but you could first test separately wheth- year, but that achieving common testing parties, but you could er the data exchanged is correct. We could and benchmarking would take much longer. first test separately take that part out and handle it in more ef- For SWIFT’s Delbaere, MyStandards is fective ways that at present.” a timely development for an industry fac- whether the data In theory, by comparing specifications ing so much change. “The first step is to and recognising the nuances and market standardise how you define your specifica- exchanged is correct.” variations in the way institutions implement tions. Then you can start to add value on Marc Delbaere, SWIFT standards upfront, considerable time and top of that with analysis and testing.”

STANDARDS FORUM Corridors of power Where to begin harmonising market practices for transactions involving non-Latin characters? Start with the busiest payment corridors first

hina’s policy decision to promote ISO 20022 is Unicode-aware. Among the use of its currency internationally negatives, many legacy systems do not Cis focusing attention on a problem. support it. If no Latin name exists for an entity, how can you match data in financial messages Be practical “Once the door to new markets and for regulatory reporting? The panel mostly agreed that a prac- was opened for me, I held it As Lisa O’Connor, director, RMB inter- tical approach would be to standardise open for my clients.” nationalisation, SWIFT, explained, “the the workarounds first, addressing the issue is not new but as there are more and payment corridors where the problem more transactions with one leg into China, is greatest. For example, the Offshore it is becoming more widespread.” CNY Working Group in Hong Kong has Citi Transaction Services helps Local market practices exist, of course been looking at how to achieve process- you and your clients realize – notably the Chinese commercial code, ing efficiencies. But Christian Wester- which uses groups of four numbers to rep- haus, global head of cash product man- global business ambitions. resent characters. But these are worka- agement and EMEA regional head of rounds and not standards, with no central product management, Deutsche Bank, Please visit us at Sibos, maintenance. argued that the many German compa- Global Payments Booth #5B10. >> As RMB trade has grown, so has the de- nies exporting to China should not be Trade Services bate around how to address the problem disadvantaged. Direct Custody and Clearing and the urgency to do so. Mike Tagai, in- Tackling it corridor by corridor, but dustry issues executive Asia, J.P. Mor- making sure to adopt a solution that is sibos.citi.com gan, said, “the bottleneck around compli- globally applicable and will work in other ance is where the discussions should start”. corridors, was the suggestion from Tagai. But he also sees an increasing requirement The standards community is just at the from clients. O’Connor pointed to the fact beginning of thinking about this issue, but, that China is working on its next genera- warned Stephen Lindsay, head of stand- tion payments system, so it would be time- ards development at SWIFT, time may ly to address the issue now. not be on its side. “The hegemony of Eng- A potential solution exists in Unicode lish as the international language of cross- © 2012 Citibank, N.A. All rights reserved. Citi and Arc Design is a registered service mark of Citigroup Inc. (freely available specifications and data border business is beginning to break for software internationalisation). On the down.” The search for a solution may yet plus side, Unicode works with XML and become urgent.

12 Sibos Issues sibos.com STANDARDS FORUM A standard to live up to ‘Let’s get practical’ appeared to be the central message to standards professionals in Osaka, where many had implementation on their mind

his year’s Standards Forum stretched over the four full Tdays of Osaka’s Sibos, span- ning 32 individual sessions and 70- plus speakers, providing a wealth of information and insight into the latest trends and developments. In its ninth year, industry pro- fessionals, standardisers and ven- dors alike met at the Standards Fo- rum’s dedicated stand, to discuss the most pressing standards topics. “The Standards Forum has been brilliantly supported throughout the week,” said Juliette Kennel, head of standards, SWIFT. “One of my personal favourites has been “The greatest challenge [for the ‘Rise and shine with Profes- sor Poppe’ sessions. We’ve been LEI] will be to implement asked if we can video that and put the regulators’ intention at a it on YouTube. I also loved the session on cars and standards for global level.” the automotive industry.” Saturo Yamadera, Bank of Japan Each morning, Tom Poppe, Standards expert at SWIFT, led engaging discussions on a num- ber of critical issues and gave a ‘Poppe’ Quiz on the final day. Topics included standards funda- mentals, gaining implementation insights and the intimate rela- Latin, local characters in mes- language which now has wide- nancial community’s standardi- luctance to legislate. But in Asia, tionship between market practic- sages, and using standards to im- ranging implications for privacy sation efforts. the ASEAN+3 Bond Market Fo- es and standards. prove in-house interoperability. and security on the internet due Yamadera is particularly active rum (ABMF), comprising policy- In the centre of Hall 3, the In a particularly insightful to its ever-changing and arguably in the development and promo- makers and market participants, Standards Forum’s exhibition ‘Food for thought’ entitled ‘Stand- unsupervised nature. tion of the Legal Entity Identifier is doing it differently, engaging space itself became a comforta- ardisation models: The jungle In a call to arms at the start of (LEI). Unlike the European and policy-makers early and pursuing ble, casual and engaging mecca versus the walled garden’, a pan- a Tuesday morning session, Roy American experience of standard- harmonisation of regional mar- of standards activity. el discussed better ways to devel- DeCicco, managing director at isation as a largely private sector kets incrementally. “In the Standards Forum we’ve op standards. For standards to be J.P. Morgan and a member of the exercise, Asia’s central banks of- The ABMF is collecting mar- been able to create a natural space useful, it was argued, developers Payments Market Practice Group, ten play an important role, ac- ket information on issuance and where people feel comfortable needed to strike the right balance said, “it is time for concrete action” cording to Yamadera, who serves transactions and identifying and we’ve had excellent attend- between retaining control over in terms of payment market infra- as the secretariat of ISO/TC68 transaction flows to try and in- ances at our sessions,” said Ste- the standard’s development and structures adopting ISO 20022. committee of Japan. crease STP in the region. Next phen Lindsay, head of standards allowing the wider community to In an accompanying session, development, SWIFT. “Clearly, contribute; hence the jungle ver- ‘Why securities market infrastruc- there is a lot of appetite to learn sus walled garden metaphors. tures are adopting ISO 20022’, “If we don’t adopt meta standards, about standards even though the “With the pace of innovation it was noted that while payment then unwanted standards will become topic can be quite complicated now – in areas such as social markets players were still tread- at times. A highlight for me was media – if we don’t adopt meta ing with caution, those in the ubiquitous.” having SWIFT CEO Gottfried standards, then unwanted stand- securities market were forging Drummond Reed, Respect Network Leibbrandt at the forum talking ards – such as Facebook’s Open ahead. During the session, some about his earlier role as head of Graph – will become ubiquitous early adopters encouraged other Yamadera argued strongly in will come a standard issuance standards and saying how much and the standard de jure. And participants to shed inhibitions favour of continued coordination document set. fun it was.” these standards do not provide and embrace the standard as ear- between the private sector and “We’re starting with the easi- the adequate data sharing or the ly as possible. regulators, pointing out the Fi- er issues first, then we’ll take the Not your standard fare privacy and security which con- “Foreign investors account for nancial Stability Board LEI Im- next ones in sequence. We’re lim- On many a delegate’s menu were sumers and banks both need,” 60-70% of the trading volume in plementation Group was working iting the scope to small areas for the ‘food for thought’ sessions, said Drummond Reed, co-found- Japan and foreign financial ser- closely with private sector experts harmonisation,” said Jason Lee, which ranged across a number of er of Respect Network, referring vices firms are showing strong through its Private Sector Prepar- adviser to the office of regional topics, including the use of non- to Facebook’s user development interest,” said Shunichiro Unno, atory Group. LEI is slated to go economic integration at the Asian director, post-trade services, Ja- live in March 2013. Development Bank, explaining pan Securities Depository Centre. “The greatest challenge [for harmonisation will happen but it “ISO 20022 covers all our post- LEI] will be to implement the will happen slowly. My favourite standard trade service needs in a standard- regulators’ intention at a global The ninth year of the Standards ised manner.” level,” said Yamadera. Forum reflected the maturity and realism of the practice of stand- Sibos delegates were asked to name their LEI challenge A bonding experience ards implementation in the indus- favourite standard from any walk of life. Eric This year’s host nation provided At a Standards Forum session on try. Across the ‘Eye-opener’, ‘Up a raft of best practice examples in Wednesday on the harmonisation close and personal’ and ‘Business Veronneau from BPCE, said his favourite standardisation. In a thoughtful of Asian bond markets, the Asian panel’ sessions , the core message standard was the French kiss, because it has Monday afternoon interview with versus western experience was of ‘Let’s get practical’ was never Richard Sterneberg, consultant, also analysed in terms of fixed- far away. naturally been adopted by everyone and has GPlus, Satoru Yamadera, the income markets. When Europe- “The standards family know each lots of different market practices. “Standards head of the International Stand- an banks attempted to eliminate other well and it has been great to ardisation Group, Centre for In- Giovannini’s 15 barriers to Eu- be together here in Osaka,” said is a family. And which family did not start with formation Technology Studies at ropean clearing and settlement, Kennel. “Next year will be our a French kiss?” Veronneau quipped! the Bank of Japan, explained his they came up against a more in- tenth anniversary, so I expect we’ll involvement in the Japanese fi- tractable barrier: government re- have a party. See you in Dubai.”

sibos.com sibos Issues 13 TECHNOLOGY FORUM Keeping in the loop From the smallest piece of unstructured data to the most powerful CIOs, all technological life was represented in Osaka

he finance sector’s reliance egorised it as an ‘enabler’. “Ap- on technology may grow by proaching a problem from a data Tthe day, but the effective har- perspective means you’re assum- nessing of technology throws up as ing the problem is technological many problems as solutions. The to begin with,” Fulmer said. “And Technology Forum at Sibos 2012 usually it isn’t. We’re spending a did not shrink from the big ques- lot of money to meet regulation tions. To what extent can technol- but we’re spending it in different ogy really help banks to shoulder places. There may be 200 or 300 the regulatory burden? In the wake little projects within a bank, spent of new models like cloud com- in different ways to give the regu- puting and virtualisation, should lators what they want. But man- we replace legacy systems? And agers should take a step back and as new risks emerge, how to out- look at how they want to run the think the cyber criminals? business efficiently.” And what of the CIO? A chief Speakers in the first panel in- information officer is no long- sisted that technology could only er just an IT head but a stra- ease growing financial regulato- tegic thinker who understands ry pressures once information be- what technologies are needed to came more structured. Catherine support the business in ten of 15 Bessant, global technology and years’ time. What skills are need- operations executive at Bank of ed to perform this wider brief? America, took a different position in her technology keynote. The Complex data fact that risk management has tak- The Technology Forum kicked en prime place in the technology off on Monday, asking ‘Can tech- investment decisions of financial nology carry the regulatory bur- institutions is evidence that tech- “We need strong technical infrastructure to offer den?’ A panel chaired by Simon nology has to – and does – carry Topping, head of KPMG Finan- the regulatory burden, contend- consistent customer service globally and also meet cial Services’ Regulatory Centre ed Bessant. Having accepted that of Excellence in Asia Pacific, ob- there is no alternative to seek- regulatory obligations.” served that a new focus on data ing technological solutions, meet- Douglas Maclean, HSBC and a ‘C-suite’ rethink were both ing the challenge of the regulato- needed before technology could ry burden lies in managing data itory Trust & Clearing Corpo- “The loop is no longer owned focused on these two parameters,” help solve compliance woes. effectively. “The most important ration, said, “US banks are now by the bank. Whenever losses he added. Speakers also stressed “The first challenge is that regula- thing is construction and manage- sharing about five events a day have occurred it has not been be- the need for commitment and in- tors expect systems to not only be ment of data,” she said. “We have between 4,500 institutions and cause of our systems. The loop volvement of ‘C-suite’ executives able to handle more complex data to be at the cutting edge when it this number is doubling every 18 is now owned by the custom- in technology decisions. but also to stress test that data,” comes to data – its architecture, its months.” Clancy warned that the er,” said Bannatyne, adding that said Topping. “For the first time, construction and even its very use.” risks – especially those coming more and more people were con- Front page news there are direct regulations requir- from participants involved in es- necting from phones to pay their Any discussion on changing face of ing global systemically important Fighting the odds pionage and war – will consume bills. Clancy said banks must technology would be inadequate institutions to have new data for Tuesday’s session on cybercrime more of banks’ time in the future. turn “from farmers to hunters” to without considering the changing macroeconomic analysis, and cur- saw the industry pledging to Talking about the risk exposure, defend themselves and their cus- role of a CIO. What kind of peo- rent systems have not necessarily adopt a united front in the effort David Bannatyne, executive gen- tomers against online attacks. ple will be heading up IT in our been built for that purpose.” Re- to fight back against a rising ride eral manager, banking and pay- Banks have always debated financial institutions in future? jecting the notion that technology of incidents. Explaining the grav- ments services, National Australia whether to overhaul legacy sys- The session on brave new leaders is an answer to regulatory burden, ity of the situation, Mark Clancy, Bank, said, “We’re no longer open tems. With daily reports of soft- of IT saw speakers stressing the Lee Fulmer, CTO, cash manage- managing director of technology just nine to five. We are at risk 24/7 ware glitches on trading platforms need for senior IT executives to ment, J.P. Morgan instead cat- risk management at the Depos- from sources all around the globe. and cyber attacks blamed on the deliver operational excellence in vulnerability of legacy technolo- a world of ever-growing demands gy, the Technology Forum took and relentless volatility. The CIO a measured look at infrastructure must be able to interpret the ever- longevity. A well-attended session more complex world of technolo- took an interesting turn when gy for his or her senior colleagues speakers agreed that, rather than and, importantly, dispel the myths aiming to completely overhaul and show where the value lies that their legacy systems, financial ser- will help move the business for- vices firms should look at trans- ward, observed the speakers. Su- formation as a way of addressing san Hwee, head, group technology customer demands or regulato- & operations at United Overseas ry obligations. “Just because they Bank, said, “CIOs need to deci- are old, we don’t need to replace pher and look through the smoke them,“ said Douglas Maclean, screens – some of which are cre- chief operating officer, payments ated by vendors.” But she also & cash management, HSBC. “We stressed the importance of the do, however, need strong tech- CIO’s role as systems architect nical infrastructure to offer con- and engineer. “At the end of the sistent customer service globally day, if the engineering isn’t right, and also meet regulatory obliga- your institution will be on the front tions. Transformation should be page of the papers,” she warned. “We have to be at the cutting edge when it comes to data.” Catherine Bessant, Bank of America

14 Sibos Issues sibos.com CORPORATES FORUM Forcing the pace of change Asian economic growth is putting the region at the heart of innovation as corporates look to optimise cash and trade flows

his year’s Corporates Fo- rum brought a wealth of “Exporters want Tnew information and opin- ions to the fore, with Asia’s con- faster payment tinued growth providing in- and less paper, so creased opportunities for banks to fuel innovation and efficiency. our suppliers who The growing percentage of global trade occurring in Asia are using BPO continues to drive closer ties be- love it.” tween corporates and banks in the Yumiko Hoshino, Ito-Yokado region to optimise cash flows. At the same time, SWIFT has been supporting improved connectivi- years, with a potential migra- ty between counterparts in the re- tion from single-agent banks to gion and beyond through greater a SWIFT solution. use of international standards. SWIFT’s global director of fi- Indeed, SWIFT’s Bank Pay- nance engineering, Wolfgang ment Obligation (BPO) has re- Ratheiser, said in capital-restrict- ceived growing attention as a ed countries, visible, not trapped, means to streamline trade and cash was needed, although setting supply chain financing alongside, up cross-border cash solutions in and often in place of, tradition- Asia posed many challenges. al instruments such as letters of “We found many banks in Chi- credit (L/C). na and even in Japan couldn’t Meanwhile regional and glob- support it. When we tried a mul- al corporate are challenging the ti-bank solution, we found 15 so- prevailing regulatory and bank- lutions that couldn’t work with ing infrastructure barriers to effi- member. Corporates now com- also a major force for change of Commerce (ICC) is expected each other,” Ratheiser said. cient liquidity cash management prise 10% of all SWIFT mem- within global – and indeed Asian to officially approve the interna- Even in countries with well-de- processes in Asia. The largest of bers, with Asia representing – banking. tional rulebook, but it the service veloped banking infrastructures, these are pressing for new ways strong growth in connectivity and Companies have already begun is already winning favour for its there are still teething problems, to manage multiple banking rela- the adoption of global standards using BPO for import transac- ability to reduce the disputes that and pooling and netting arrange- protocols like ISO 20022. tions, matching data in SWIFT’s can arise from L/Cs. ments often remain future goals centralised data matching engine, André Casterman, head of rather than present realities. Asia’s ascent the Trade Services Utility, to fur- banking and trade solutions for Treasurers must negotiate vast- The first panel of the Corpo- ther eliminate legacy processes. SWIFT, said although the me- ly different regulatory and tax re- rates Forum discussed how glob- Yumiko Hoshino, executive of- chanics of the BPO rules are in- gimes and in some Asian markets, al trade flows should adapt to ficer, overseas department at Ito- terbank and operated by SWIFT, such as China, where conflicting the ascent of Asia in global com- Yokado, a Japanese department the true value proposition of the regulations make compliance es- merce. store operator which is one of the BPO allowed importers and ex- pecially difficult, while in Ko- Michael Guo, partner and first companies to use BPO, said porters to mitigate risks and to rea, cash flow practices haven’t managing director at the Boston the instrument would be an inte- get on-demand financing. changed in a decade, despite a Consulting Group, said there was gral part of doing business in Asia. “We started the week with the wealth of technological shifts. a need for practices that place a “Exporters want faster payment ICC briefing and it is now recog- One option for treasurers to premium on trust in banking re- and less paper, so our suppliers nised that the ICC adoption of streamline corporate processes is lationships. who are using this love it. But it the BPO is a true game changer,” to establish shared service centres. “The diversity of countries with- can be difficult to persuade some said Casterman. Shunsuke Araki, general man- in Asia also requires banks to of our more conservative export- ager of global cash management adapt their regional offerings to ers to try it,” Hoshino said. Flow changes services at the e-business division suit their needs, which is both a The legal basis for BPO trans- Corporates’ regional cash flow of Mizuho Corporate Bank, told key challenge and opportunity for actions will be ironed out in April, infrastructures may also un- a Wednesday session that cor- banks,” Guo said. when the International Chamber dergo major changes in coming porates with a turnover of USD A major force for change in 1.3 billion and more than 10 sub- Asian corporate finance will be the sidiaries would be best placed to increased use of Chinese currency “When we tried a multi-bank solution, move to such a model. for international trade settlement. we found 15 solutions that couldn’t Some firms, likeS ingapore- “Banks must be As Asia accounts for 35% of glob- based International SOS, seek to al trade by 2020, up from 20%, work with each other.” benefit from outsourcing some of aware of where there will be a major uptick in Wolfgang Ratheiser, SWIFT their treasuring functions, aiming the financial use of the RMB for trade finance, to achieve greater visibility across which will in turn drive growth in five core institutions and more supply chain overall commercial usage. than 80 other banking relation- “Banks must be aware of where ships across the world. needs to be in the financial supply chain needs The company is in the first conjunction with to be in conjunction with the cus- phase of a project to relocate tomer supply chain,” said James some treasury functions to two the customer Emmett, global head of trade centres: one in Singapore; the and receivables finance at HSBC, other in Prague, in line with the supply chain.” who predicts that 40% of HS- global scope of its business. James Emmett, HSBC BC’s China-based clients plan to Cash flow management may make more use of RMB for trade be a more varied pursuit in Asia tionships, accessing services glob- within the next year. than the west for the time being, ally without becoming over de- but the sheer weight of payment pendent on any one provider. BPO revolution volumes and supply chain finance To this end, SWIFT’s Corpo- The recently introduced BPO, transactions, driven by Asian eco- rate Advisory Group has already which sits in the space between nomic growth, is likely call forth seen the admission of its 1,000th open account and the L/C, is less frictional practices.

sibos.com sibos Issues 15 BUSINESS INTELLIGENCE BUSINESS INTELLIGENCE Can data unlock the door to a new era? Under the microscope The big beasts in the transaction banking Watch Insights tool aims to help banks jungle are exploiting the power of data to scrutinise and quantify the value of their provide better products and services to correspondent relationships customers hen banks are planning services, Wells Fargo Bank, said new set of business infor- tributing most and the level of their banking business that co-relating data from differ- mation tools from SWIFT reciprocity with different cor- Wstrategies, they know ent sources is important. “While A helps banks to monitor respondents or partner banks. one key to solving their problems looking at customer experience an- “The role of banks and analyse their flows and rank Concentration risk with individ- lies in understanding data. In the alytics, it is important to co-relate their performance against peer ual correspondents may also be panel, ‘Global transaction bank- the data in our systems, with that could change banks in the same country. Peer analysed. ing – In need of business insights’, available in social media and fi- from provider bank data is anonymised. The four dashboards are ‘cash speakers delved deep into core is- nancial market infrastructures like Watch Insights for Corre- and payments’, ‘trade finance’, sues relating to exploiting data for SWIFT,” said Doolittle. of products and spondent Banking is the first of ‘correspondent network man- business purposes, including ac- a series of offerings tailored spe- agement’ – which allows users to cessibility, availability, credibility In the right hands services to trusted cifically for different market seg- analyse and manage their over- and usability. “When we use data, While reiterating the benefits of advisor.” ments. “Watch Insights talks in all correspondent relationships – we have to look upon it as a very analytics in decreasing credit risk David Gall, National Australia Bank the language of your business, and ‘operational efficiency’, for good detective. We have to ask the and improving liquidity positions, without jargon,” said Francis monitoring the quality of nostro right questions to get the right an- speakers also stressed the need to business banking, National Aus- Martin, head of business intelli- and vostro flows. Astrid Thors- swers,” said John Ball, global head sift data carefully to obtain great- tralia Bank, cited the example of gence solutions, SWIFT. Watch en, market manager, SWIFT of sales – cash management, finan- er customer insights. Banks are how his bank helped a large retail Insights for securities, corpo- explained that it can help, for cial institutions, Deutsche Bank. also using dashboards and reports customer with 300 stores in Aus- rate banking and compliance example, to identify where high In an era where regulations are created from the available data tralia to grow its business by ex- are also planned, depending on levels of non-structured messag- driving the need for transparency to increase operational efficien- tracting and de-identifying data market feedback. es, rejects or queries are occur- – while demand for real-time pro- cy and monitor liquidity positions. from payment flows. According The new Insights tool compris- ring. Pricing is tiered. cessing and reporting are increas- Philippe Vexlard, global head of to him, such initiatives suggest an es a set of dashboards that pro- ing – there is a rapid increase in correspondent banking, BNP Pari- evolution in the role banks play vide highly visual and interac- the amount of data produced. To bas, suggested that interpreting the in supporting corporate and in- tive data derived from the user “Watch Insights manage the regulatory changes data is only half the battle. “It is stitutional customers. “The role bank’s SWIFT message flows by and also bolster profits, banks are not just about getting insight; how of banks could change from pro- product, currency and country talks in the looking for deeper data insights do we make sure that these insights vider of products and services to and updated monthly. language of your into customer relationships, trans- reach right hands in right time so trusted advisor,” explained Gall. Since year-to-date and pre- actions, revenues, credit risks and that the corporate and small and Though there are many challeng- vious year data is available, it business, without liquidity positions, viewed from the medium business customers can es around commercialising data, is possible to track nostro and perspective of customer, product take advantage of these insights?” the discussion pointed to a future vostro relationships over time jargon.” or geography. However, George David Gall, executive general in which banks will offer services and analyse the level of activ- Francis Martin, head of business intelligence Doolittle, head of global payment manager, working capital services, based on data insights. ity, which countries are con- solutions, SWIFT

BUSINESS INTELLIGENCE

uitous of all traffic messages, SWIFT developed a global index A visual revolution of economic activity, which said Boico, differs from other indices, Business intelligence tools are providing both sentiment- and fact-based, in a number of respects. banks with much-needed insights The Index service covers two el- ements: a nowcast of the current n and around the Osaka’s In- To explore this trend, this quarter’s activity and a forecast of tex Centre, the predominance year’s Sibos ran a series of the quarter ahead. Comparing the Iof smart devices was clearer linked sessions which explored Index to official OECD figures, than ever. At Sibos 2012, wheth- banks’ use of data to better un- Boico argues that the SWIFT In- er they were presenting, listen- derstand their clients, counter- dex had proved its worth. “In Q1 ing or arguing the toss, delegates parts and their own business. In we nowcast 1.75% growth, the were doing it in conjunction with the two sessions reported above, OECD figure came in at 1.70%,” handheld information technolo- bankers explained the grow- he said. For Q2 the nowcast was gy. In particular, many were aug- ing importance of understand- in the region of 1.5%. The OECD menting the Sibos experience ing business activity and trans- figure came in a few percent- by calling up relevant informa- action flows at a granular level age points higher but was sub- tion sources to validate or inves- to make the right product devel- sequently revised down to 1.6%. tigate further the comments they opment and client strategy calls Boico presented the latest figures: heard at the conference. But of in the spheres of correspondent “We’re in a visual revolution which a nowcast of 1.2% growth for all course banking professionals do and transaction banking. But in OECD countries for Q3 and a not only behave this way at Si- reality the application of today’s means that the insides are at your forecast of 1.1% for Q4, which he bos, they also do it at the office. data analysis tools can yield val- described as “anaemic”. And they are demanding much uable insights across the indus- fingertips.” Boico announced that in ad- more accurate, sophisticated – try and for a variety of purpos- Francis Martin, Head of Business Intelligence Solutions, SWIFT dition to the global index that is and above all visual – tools with es, from the snapshot to the currently produced, four new in- which to dig into the data, not deep dive. SWIFT’s launch of dices will be released in Q1 2013: least because business decisions ‘Watch Insights for Correspond- of charge by simply subscribing to The idea for the Index grew out one for the EU 27, and one need to be supported with hard ent Banking’, for example, is the the SWIFT Index online. of the value of the data for inter- each for the USA, UK, Germa- evidence in the uncertain envi- first of a series of offerings tai- SWIFT payment messages re- nal use. “From our own experi- ny. “This covers 85% of OECD ronment in which the finance in- lored specifically for different flect a wide range of economic ac- ence, we knew we were a good GDP,” he added. dustry finds itself. market segments. tivities. Counting the number of mirror, but were we a barome- Using the same methodolo- “We’re in a visual revolution payments over a period can pro- ter? Would it be possible, look- gy, he demonstrated what the re- which means that the insides are Performance indicator vide an accurate measure of eco- ing at SWIFT traffic, to forecast sults would be for Japan if such at your fingertips. That makes the And on Tuesday, Andre Boico, nomic activity. “For some time, what would happen in the broad- an index were published. They big difference and that is what is head of pricing and business analy- we have been looking at the cor- er economy over the next few showed a Q3 nowcast of 2.8% really different this year at Sibos sis, SWIFT, explained to delegates relation between SWIFT traffic months?” said Boico. growth and a Q4 forecast of 2.5%. for Business Intelligence,” says that the SWIFT community can and the broader economic en- The answer proved to be yes, “The SWIFT Index can clearly be Francis Martin, Head of Business get a reliable view of recent and im- vironment for our own internal definitely. Taking the MT103 viewed as a measure of the heart- Intelligence Solutions at SWIFT. minent economic performance free planning purposes,” said Boico. customer transfer, the most ubiq- beat of the global economy.”

16 Sibos Issues sibos.com SIBOS ISSUES Week in summary

Opening plenary

akeshi Kunibe, president and CEO of Sumitomo Mitsui Banking Cor- Change now to survive Tporation (SMBC), opened Japan’s first Sibos with a welcome and a warning. Acknowledging Osaka’s mercantile his- Banks must recognise need to evolve – Takeshi Kunibe tory and innovative present, Kunibe said that it was fitting that SWIFT should SWIFT to support banks through “backward compatibility” chose “a city with a culture of accepting new ideas” in which to discuss how banks can leverage technology to build better ser- vices for customers. But he also suggested that continued economic and regulatory uncertainty should not be used as an ex- cuse to put off tough decisions. “Responding to change is key to surviv- al,” said Kunibe. Quoting Ian Bremner’s “The near-term ‘Every nation for itself’, he added: “The most obvious near-term losers in the G-ze- losers will be ro era will be those who refuse to recognise the new reality and the need for change.” Identifying the three key sources of those who refuse change impacting banks as post-crisis reg- ulatory pressures, macro-economic un- to recognise the certainties and technology innovation, the CEO of SMBC said commercial and in need for change.” particular transaction services would be Takeshi Kunibe, critical in securing the ­future of banks. Sumitomo Mitsui Banking Corporation On the regulatory front, the combined effect of Basel II and national laws such as the US’s Dodd-Frank Act was to move banks from excessive risk-taking and to- ward commercial banking and annui- ty businesses such as transaction services. continued on page 18 big issue debate

“A ‘one-size-fits-all’ Seize the Asian type of regulation or the extra-territorial opportunity application of rules could unintentionally Asian growth represents a significant opportunity for destabilise the the banking sector, indigenous or otherwise financial system.” hanges in consumer demand, in- Nobuyuki Hirano, Bank of Tokyo-Mitsubishi UFJ vestment flows and capital mar- C ket structure are indicators of the size of the ‘seismic shift’ taking place across Asia. For participants in the Tuesday Big Issue Debate about the im- plications of emerging growth markets this added up to a diverse set of busi- ness opportunities for the banking sec- tor, though ingenuity and a willingness to embrace technology will be perqui- Global regulation sites to success. KV Kamath, chairman of ICICI Bank, said that banking continued to be a fast- growth industry in India, not only to sup- could be lost in port the aspirations of the country’s bur- geoning middle class, but also to help

continued on page 18 translation “Technology is driving Asia’s voice resonates in the global regulatory debate banking in Asia and other emerging he backlash imposed on the finance panellists at the Big Issue Debate on the sector by western-led regulators pos- implication of emerging growth markets. markets to a new Tes a risk both to Asian growth and It called for a global financial regulato- paradigm.” the ability of western banks to profit from ry framework that recognised contrasting KV Kamath, ICICI Bank it. This was the message enunciated by continued on page 18

sibos.com Sibos Issues 17 Opening plenary

‘Change now to...’ continued from page 17 Global franchise The need to respond to threats Sluggish western growth would “Competing and opportunities is real for force Asian economies to depend both banks and SWIFT. Not- more on domestic demand, re- in the ing the speed at which technol- quiring banks to support com- dynamic ogy services are migrating to mercial transactions within the cloud-based delivery options – region. Moreover, technology de- securities including those used at his chil- velopments were providing busi- environment dren’s school – Leibbrandt said nesses of all kinds with increasing- SWIFT had often been viewed ly detailed insights into consumer brings out by clients as a cloud-like ser- behaviour. With approximately our best.” vice. six billion mobile phones in use But he also pointed out that globally and 30 million smart de- Gottfried Leibbrandt, SWIFT the cooperative needed to be vices sold annually in Japan alone, alert to technology develop- Kunibe argued that beyond the ments both to ensure the coop- clear opportunity represented by have a Compliance Forum,” he curities and trade repositories for erative’s relevance into the fu- mobile payments, banks should “SWIFT must observed. OTC derivatives transactions, as ture as well as those that might use newly available data flows to Recalling his first Sibos, as co- well as the moving target of sanc- pose a more malevolent risk. better understand customer hab- remain global, head of McKinsey’s European tions compliance, Leibbrandt said ”Cyber-crime makes our val- its and develop future generations neutral and trusted.” payments practice in Atlanta in SWIFT would make banks’ infra- ue proposition stand out. At the of financial services. Yawar Shah, SWIFT 2004, Leibbrandt, suggested that structures “backward compatible”, same time, we must work hard- “Commercial banking should the parting shot of Heidi Miller letting them choose their own tech- er to ensure we are safe from at- be at the heart of our business,” – “SWIFT, what have you done nology investment deadlines. tacks,” he said. said Kunibe, adding, “We must vices also ran through the SWIFT for me lately?” – had left an im- In conversation, Leibbrandt Shah also noted the threats to upgrade our transaction banking plenary, in which chairman pression. Echoing Shah, he said also looked to new areas of growth the integrity of SWIFT’s global capabilities.” Yawah Shah and CEO Gottfried that SWIFT’s infrastructure and for SWIFT. Noting SWIFT’s role franchise from a changing regu- Kunibe concluded his wel- Leibbrandt gave brief opening capabilities could help banks to in helping Asian banks integrate latory environment. come address with a tribute to presentations before being joined comply with the diverse raft of fi- local standards as they moved in- “We are a trusted and neutral the spirit of collaboration among for a Q&A session by SibosTV nancial regulatory change with- creasingly onto the global stage third party that exists to con- banks, both in Japan and global- anchor Kavita Maharaj.­ out having to invest vast sums at – assisted now by enhanced ca- nect and to serve banks,” said ly. The concerted efforts of Japa- In Shah’s assessment of wheth- a time of revenue uncertainty. pabilities in Kuala Lumpur and Shah. “It is our job to ensure nese banks in the aftermath of the er SWIFT is delivering econom- “Wouldn’t it be nice if all this Singapore – he also argued that SWIFT remains global, neutral March 2011 natural disaster had ic value to members, he claimed new stuff would fit your lega- the reforms in the securities and and trusted.” proved the soundness of country’s lowering banks’ costs and risks cy systems, rather than having derivatives markets also present- Summing up SWIFT’s value financial system, he said, noting through the development of new to build new connections?” he ed significant opportunities. proposition, Leibbrandt recalled also that Japanese banks would shared services and the provi- asked. “Only SWIFT can offer “Competing in the dynamic se- the comment from one satisfied “never forget” the support shown sion of reliable access to counter- a reusable, single window onto curities environment brings out customer: “SWIFT is the rea- by SWIFT and its member banks. parts was as much a part of the your financial world … As the our best,” Leibbrandt said. “It is son I can sleep at night.” And SWIFT proposition as bringing world becomes more complex, a vast space that is under pressure we will continue to work hard, Delivering value down message pricing (see oppo- SWIFT becomes more relevant.” through the downsizing of invest- he assured the audience, “so our An emphasis on supporting site, Keeping the promise). “For Pointing to new market infra- ment banks, but it is an area in customers have more reasons to banks’ efforts to develop new ser- the first time ever, at Sibos we structures such as TARGET2-Se- which we can help.” sleep peacefully at night.” big issue debate

‘Seize the Asian ...’ continued from page 17 “Interdependence between east and include the unbanked population from a western bank” among in its growth story. Noting the re- Singapore’s sophisticated and west must be cent rapid expansion of consum- aspirational consumers, he er loans – first for mortgages and also pointed to varying oppor- more of a two-way cars and increasingly for con- tunities across a region of 10 street.” sumer durables and credit cards nations and 600 million peo- – Kamath identified India’s un- ple. Tay said that Indian and Simon Tay, Singapore Institute of International Affairs banked as the next new growth Japanese banks were already opportunity, placed in reach by alive to the new business that technology. could emerge from the grad- rial application of rules could You can’t reach 600 million ual liberalisation of Myan- unintentionally destabilise the people in 600,000 villages by a mar. A more immediate pros- financial system,” he said.R egu- traditional branch network, he pect for growth was Indonesia, lators must strive to develop flex- said, but you can if you employ he said, citing its liberal bank ible regulatory frameworks that an agent in each village that has ownership rules, its resource match each country’s or each re- access to an internet-enabled wealth and its huge popula- ‘Global regulation...’ continued from page 17 meet all the funding requirements gion’s situation.” smart device. “The connectivi- tion, which was fuelling con- and cannot offset the negative im- Simon Tay, chairman, Singa- ty exists today: bandwidth and sumer demand and infrastruc- pact,” said Hirano. pore Institute of International Af- device costs have come down ture investment. stages of development between While noting the broader po- fairs, concurred that despite an while speeds have increased,” mature and fast-emerging econo- tential of nationally-imposed reg- eastward shift in power and ex- he said. “Technology is driv- Figure it out mies, while also warning that reg- ulations such as the Volcker rule pectations, the setting of the rules ing banking in Asia and other Asian concerns over the effect ulatory and policy trends in the in the US and other ring-fencing and standards that govern inter- emerging markets to a new par- of post-crisis regulatory reform west could slow the pace of GDP measures proposed by the Vickers national finance remains a large- adigm.” stem in no small part from an growth in the east. Commission in the UK to restrain ly western affair. Arguing that the While acknowledging that awareness of a remaining over- the provision of money to the real instinct of the region’s regulators prevailing trends in individual dependence on the USD that Negative impact economy, Hirano suggested that was still to follow the lead of the countries’ capital adequacy re- has lingered since the Asian cur- Nobuyuki Hirano, president, the internationally-agreed rules on west, Tay said that Asian regula- gimes mean that banks with an rency crisis of the late 1990s. Bank of Tokyo-Mitsubishi UFJ, capital adequacy under Basel III tion was struggling to find its own established presence in Asian This is changing, but the capi- said that the simultaneous shrink- could have particularly tough con- voice. “Medicine prescribed to markets hold an advantage over tal markets expertise of west- ing of banks’ balance sheets with sequences for Asia. There may be western banks may not be appro- those that had yet to be granted ern banks and their ability to the imposition of fiscal tightening no room for complacency on the priate for Asian banks,” he said. a licence, panellists were clear channel investment from west to reduce US and European gov- robustness of Asian financial in- Tay insisted that decoupling of that Asia is “open for business” to east are still required. While ernment debt levels would, by re- stitutions, but falling in line with east from west – from a regulatory to global banks. Simon Tay, Tay acknowledged a “need to ducing demand among western new capital rules could stymie or wider perspective – should not chairman, Singapore Institute allocate capital more efficiently,” consumers, have a vast effect on Asian growth due to the detrimen- be the aim of Asian policy-makers, of International Affairs claimed Kamath agreed that there was emerging markets. He also not- tal knock-on impact on the sup- but he suggested that a little more that opportunities were diverse “a huge appetite for infrastruc- ed that banks were already slash- ply of SME loans, trade and infra- balance might be to the benefit in the ASEAN region, in par- ture in ASEAN.” ing loans to emerging markets. structure finance in the region. of all. “Interdependence between ticular. “Banks must figure out how to “Even if local banks were to take “A ‘one-size-fits-all’ type of east and west must be more of a Noting there was still “a buzz seize these opportunities,” he over those assets, this may not regulation or the extra-territo- two-way street,” said Tay. about having a credit card asserted.

18 Sibos Issues sibos.com big issue debate Let banks support growth Post-crisis regulations may dampen growth, limit expansion of trade Cooperation among industry and watchdogs key to recovering client trust

egulators and banks should find Early warning Risk spreads consistency of approach between jurisdic- common cause in restoring custom- The restoration of banks to a position of Citi’s Vanni d’Archirafi shared Bindra’s tions. Desirable or not, some level of reg- Rer trust as a key step toward stim- trust from which they can oil the wheels of concern that the burden of regulation could ulatory fragmentation was inevitable. With ulating and supporting economic growth, economic growth is not a one-step leap of harm the ability of transaction banks to ser- many new capital markets likely to spring Sibos delegates were told in the Big Issue faith, but must be rebuilt, piece-by-piece. vice corporate and institutional clients, not- up soon in new locations in response to Debate on regulation that asked: will glob- One building block highlighted by Wright ing two risks in particular. shifts in global economic power, this is the al transaction banking survive. was a closer collaborative approach to pre- By imposing greater levels of transparen- right time to ensure commonly accepted Banks need to pursue a more customer- vention between regulators and bank- cy on banks without applying similar stand- principles are established, said Wright. centric path and eliminate the behaviours ers. “We need a deeper cooperative effort ards to the shadow banking system, recent- “We have a choice between local or re- that have undermined confidence over the to identify emerging risks. The industry ly introduced regulations would not serve gional rules in which everyone decides for past half-decade. But regulators also have should warn the regulators,” he said. By re- the principles of financial system stabili- themselves, leading to cries of unfair com- their work cut out, identifying risks earlier ducing the flow of scandals, Wright added, ty because services and liquidity would in- petition, or we can agree to a global frame-

Left to right: Moderator – Barbara Ridpath, International Centre for Financial Regulation. Panellists – Francesco Vanni d’Archirafi, Citi; Jaspal Singh Bindra, Standard Chartered; David Wright, IOSCO and creating a framework to underpin the evitably leak to an under-regulated sector. work within which there has to be freedom conditions for financial system stability, “Our focus should be “Migration from a hub-and-spoke model to to adjust,” he said. “Yes, there has to be but recognising the need for local interpre- on how we use the point-to-point connectivity can be more ef- flexibility, but if you want a free-for-all, tation of universally accepted principles. ficient for clients but it can allow risks to I’m not in that camp.” Although the Big Issue Debate took on capital of the bank to spread more easily,” said Vanni D’Archirafi. Wright also accepted that European and a suitably significant question, ‘Regula- Furthermore, he added, greater transpar- US-based regulators should look closely at tion – will global transaction banking sur- serve the client.” ency, though laudable, does not come cheap. the regimes that did not suffer major up- vive?’, panellists roamed beyond their brief Francesco Vanni d’Archirafi, Citi Increased visibility of intra-day liquidity – heavals in 2008, not only in Asia and the in mapping a path from today’s still-un- necessary for the working of the capital mar- other emerging markets in Latin America, certain post-crisis environment to a future the banking industry would rob politicians kets and the funding of banks – could reduce but also Australia and Canada. “Why were in which banks contribute fully to the eco- of the justification for new, ever tougher availability, forcing increased reliance on nomic growth of the countries in which and more complex laws as well as more in- pre-funding and collateralisation. “There has to be a they operate. vasive oversight by regulators. “The role of banks is to enable countries To regain trust, Francesco Vanni While a more customer-centric approach to grow to their full potential,” he said. “If quantum leap in d’Archirafi, CEO, Transaction Services at might go a long way to avoiding the mis- we take intraday liquidity out of the sys- Citi, suggested that banks had to, if not re- takes of the past, banks are having to han- tem and everything becomes collateralised, trust and cooperation invent themselves, then at least re-orien- dle a regulatory regime that, in many ways, we create a business opportunity but also a between regulators.” tate their priorities firmly in direction of would appear to be making it harder for risk. If there is not enough good quality col- David Wright, IOSCO their customers. banks to add value to clients. lateral for all the financing needs around the “Where the culture is strong, the bank will Standard Chartered’s Bindra noted the world we may be in for another surprise.” be sound,” he said. “Our focus should be on challenges of operating across a fragment- there fewer problems in those markets? how we use the capital of the bank to serve ed regulatory environment complicated Were their rules simpler? I don’t want to the client every day. I want the communities further by the extra-territorial effects of na- “Asian priorities are go back to the dark ages, but these are im- in which we operate to be stronger because tional rules, but his greatest concern was portant questions,” he said. of our presence. After all, it is society that the impact of Basel III capital adequacy re- about supporting The regulatory burden on banks might be gives banks the licence to operate.” quirements on the supply of trade and long- growth in the real heavy but the watchdogs’ in-tray is far from Responding to moderator Barbara Rid- term finance solutions. These are precise- empty, suggested Wright, who signalled path, CEO, International Centre for Fi- ly the types of transaction banking services economy and financial that much still needed to be done to rea- nancial Regulation, Jaspal Singh Bindra, most needed by emerging markets in the lign incentives within banks, as well as to group executive director and chief execu- Asian region and beyond, he said. More- inclusion.” reinforce board-level oversight. Faced with tive officer, Asia for Standard Chartered, over, the failure of regulators to recognise Jaspal Singh Bindra, Standard Chartered a choice between 500 years of experience said that recent events had left the public the unintended consequences of stricter from at 10-strong board or 10 poodles, said with a perception of banks as irresponsible, capital adequacy regulation was evidence to Quantum leap Wright, too many banks choose Fifi. incompetent and unethical. While govern- Bindra that the emerging markets were not IOSCO’s Wright acknowledged the limi- A higher quality of dialogue between ments, regulators, credit ratings agencies being granted their proper place at the glob- tations of the global regulatory toolbox in regulators, Wright suggested, would ulti- and others had also made mistakes, said al regulatory table. creating a framework that allowed banks mately be just as important to the indus- Bindra, “It’s in everyone’s interest that “The developed world’s priorities have to serve their customers while promoting try moving beyond the crisis as improved confidence in banks is restored.” been the question of ‘too big to fail’ and greater transparency and stability; noting communication between rule-makers and “I would not absolve the regulatory managing an orderly deleveraging of balance also the challenge of balancing global prin- banks. Noting the potential for tensions community from responsibility,” said Da- sheets; Asian priorities are about supporting ciples and local need. between worldwide resolution rules and vid Wright, secretary general of the Inter- growth in the real economy and financial in- Without globally enforceable sanctions laws imposed to shore up national banking national Organisation of Securities Com- clusion. Any regulatory regime built around and courts of arbitration, peer review systems, he said, “There has to be a quan- missions (IOSCO). “There is more than western priorities cannot be expected to have transparency “and prayer” were among tum leap in trust and cooperation between enough blame to go round.” uniform implementation globally,” he said. the forces that could be applied to ensure regulators.”

sibos.com Sibos Issues 19 IN CONVERSATION

Fiscal cliff AHEAD

ubs global chief economist Larry Hatheway warns that us gdp could drop over 3% if the budget crisis remains unresolved, driving the US economy back into recession

“The IMF is able to walk away from an intervention in a crisis and still retain credibility to intervene in the future, something a central bank cannot do. Larry Hatheway, UBS

There are nevertheless grounds for hop- is at a 20-year low,” he noted, “partly as a ing that the worst will not materialise. Asked result of low long-term interest rates and about the fiscal difference between the two reinforced by the number of foreclosures.” presidential candidates, Hatheway focused on the likely impact of the deadlock in the Euro troubles event of a victory of either. Should Obama Crossing the pond, Daniel asked for win, said Hatheway, he would most like- Hatheway’s views on the future of the ly try to arrange a temporary delay of a few euro. Here, he argued strongly that the months in the application of the law to ena- costs of a break up would be significant- ble negotiations to continue in Congress on ly greater than helping Greece out. He ex- a viable solution. Should Romney win, he pressed some reservations, however, about noted, the situation would be slightly com- the role the ECB was currently playing in plicated by the fact that he would not take the recovery process, which he described office until the New Year, but would then as acting as a quasi-IMF. “The IMF is able be able to implement retroactive action. to walk away from an intervention in a cri- Left to right: Emmanuel Daniel, The Asian Banker and Larry Hatheway, UBS Should the terms of the act be triggered, sis and still retain credibility to intervene in they may therefore be of limited effect. the future, something a central bank can- elegates who chose to attend the two- moment we are heading for a fiscal cliff,” Through much of the ensuing conver- not do,” he said. ‘In the EU the conse- hander between Emmanuel Daniel, he said, referring to the end of 2012, when sation, Hatheway responded to Daniel’s quence of such action could threaten the Dthe founder of The Asian Banker, the terms of the Budget Control Act of questions on a panorama of economic con- existence of the ECB itself,” he said. and Larry Hatheway, global chief economist 2011 are scheduled to go into effect, end- cerns, giving limited grounds for optimism Was there any good news? Yes, said of UBS, were treated to an absorbing mac- ing a range of temporary tax cuts and trig- about global prospects. Hatheway. Growing integration of the roeconomic tour of present global concerns. gering spending cuts agreed as part of the On quantitative easing in the US, ASEAN region had exciting possibilities as The first stop was the US election and debt ceiling deal of 2011. Hatheway observed that implementation of did the return of Mexico as a competitive its implications, now barely a week away. “I agree with Chairman Bernanke that if the current programme focuses mostly on economy, but he seemed to imply, there The key question for economists is wheth- we go over the fiscal cliff, we risk a drop mortgage-backed securities, where it ap- remained enough for those determined to er it will lead to an end to the long-running in GDP of maybe 3.5% that will kick the pears to be have had a measurable impact. fret about the global economy to worry budget gridlock, said Hatheway. “At the economy back into recession,” he said. “The debt service ratio of US households with reason. ECB charts steady course in the face of headwinds The European economy will recover gradually, but further de-leveraging and a need for reductions in debt and deficits mean that growth will be subdued

uring an ‘In Conversation’ Coeuré insisted that all the session on the Wednesday ECB’s actions in defence of the Dof Sibos, Silvia Wadhwa, euro have so far been in line with correspondent, CNBC Europe, its primary focus. “Our mandate tried hard to get Benoît Cœuré, has not changed,” he said, “it is “We have all member of the Executive Board, still to maintain medium-term European Central Bank, to ac- price stability.” In the event of evi- the instruments knowledge that the European po- dence of inflationary pressures, he litical class had been found want- said, “we have all the instruments needed to ing and that the ECB had been needed to withdraw liquidity from withdraw liquidity left to pick up the pieces, but he the economy if necessary.” refused to take the bait. He agreed with Wadhwa that from the economy Coeuré reinforced his caution the announcement of Outright by suggesting that the external Monetary Transactions (OMT), if necessary.” environment was not support- the ECB’s latest sovereign bond Benoît Cœuré, ECB ing the European recovery, given buying programme, as a tool had slower growth among important removed much of the break up risk trading partners. “The Eurozone from the market. He stressed that can only count on its own forc- the new programme would focus es,” he said. on the short end of the yield curve. “Where do you see the worst The absence of such action could fires?” asked Wadhwa. Coeu- itself have threatened price stabili- ré again refused to point fingers. ty, said Coeuré, insisting, however, “All developed economies have that, “Countries must still adjust.” concerns over long-term rates of Asked by one Japanese delegate growth coupled with fiscal chal- whether Europe faced a lost dec- lenges,” he suggested. “Never- ade similar to the one Japan had theless, he said, looking at the suffered, his reply was firm. “We fundamentals, the Eurozone is are working to avoid that, he said, he added, the ECB could only go underpinnings of the project are a former French finance minister: in many respects in better shape “because a lost decade means a so far. “We are providing man- political,” he said. In conclusion, “Give me good politics and I will than the US and Japan. lost generation.” Nevertheless, agement of the currency, but the Coeuré pointed to the saying of give you good finance.”

20 Sibos Issues sibos.com securities

Danger of OTC clearing risk “Instead of 10-15 ­being moved downstream? pockets of Are CCPs really the answer to reducing risk in the OTC derivatives market? risk held at

s global markets edge clos- that requires a taxpayer bailout. empt from the new swaps rules, banks, we er to a new regulatory land- “Instead of 10-15 pockets of such as sovereign entities, insurers are moving Ascape for OTC derivatives, risk held at banks, we are mov- and corporate firms, in addition to questions remain as to whether ing to 20-40 pockets of risk at the exotic products that CCPs will to 20-40 the new world will result in a saf- banks and CCPs combined,” he have difficulty in valuing and there- er environment or simply shift risk said. “If the plan is to give CCPs fore can’t be cleared – referred to pockets of from banks to clearing houses. the same job as banks, in terms by Singh as a “time bomb”. risk at banks This year’s Osaka conference of risk mitigation, there better be Exemptions and exotic prod- explored this issue with a new good economics behind it.” ucts combined could represent and CCPs debate format known as the Si- Possible ways to increase the a large part of the market and bos Colloquium, sponsored by ­effectiveness of central clearing, means banks will still hold signif- combined.” the SWIFT Institute, which pit- said Singh, would be to funnel icant risks on their books. Manmohan Singh, International Monetary Fund ted the views of Manmohan Sin- cleared swaps through a single “If everyone posted collateral there gh, senior economist at the Inter- CCP that would be backed by a would not be a need for CCPs,” national Monetary Fund, against host of central banks. The prima- said Singh. “Those firms that have Godfried De Vidts, director of ry benefit of this structure would exemptions to the rules creates an By taking steps to reduce the risk ing carried out by the SWIFT In- European affairs at ICAP. be the greater possibility for net- asymmetry, which means the risk exposure associated with bilateral stitute, a new initiative created to Emanating from the Group ting, i.e. the ability to reduce the remains in the system.” counterparties and CCPs, banks better link academic research with of 20’s 2009 Pittsburgh summit, collateral needed against con- can decrease margin requirements financial market realities. The ses- the new swaps rules will push a tracts by setting them off against Proactive on risk and the regulatory capital required sion was introduced by SWIFT portion of the OTC derivatives related products. However, the Taking the stand after Singh, for new rules like Basel III, con- CEO Gottfried Leibbrandt, who market through central counter- complexities associated with this ICAP’s De Vidts agreed that tributing to the decrease in system- said the aim of the scheme is to parties (CCPs) with the aim of model mean it has not been con- moving OTC derivatives from a ic risk that regulators crave. “answer those deeper questions reducing systemic risk. sidered by regulators. bilateral world to a cleared one “Margin and capital for OTC that are not easily solved.” Singh estimated the cost of this “Another alternative would be would not eliminate the associ- derivatives do address the risk From 2013, the Institute will of- risk to be USD 2 trillion, which for CCPs to interoperate, but this ated risks, but noted that a num- in the system but don’t address fer 12 grants per year for research comprises the under-collateralised is unlikely because clearing hous- ber of solutions are emerging that the underlying cause,” said De projects targeting issues related to portion of swaps held by banks. es have targeted niche markets would help to limit the dangers. Vidts. “Banks should be proac- transaction banking. This follows But he warned that the new and the differences between na- One of these cited by De Vidts tively looking at what’s happen- on from the grants already issued rules would only transfer the risk tional bankruptcy laws pose chal- is TriOptima’s triBalance tool, ing in this market and looking for in 2012, which include research to a new type of entity, rather lenges,” said Singh. which attempts to reduce portfo- ways to reduce risks.” on the challenges associated with than reducing it, and could even- Complicating the situation fur- lio risk exposures across bilateral The Colloquium session was internationalisation of the RMB tually lead to another situation ther, are the firms that will be ex- transactions and cleared swaps. designed to promote the work be- and how to reach the ‘unbanked’. No resolution yet on risk transfer Market structures under no illusions on elimination of risk, call for balancing act by regulators

he securities market infrastructures Euroclear CEO Tim Howell said certain Collateral arbitrage fora at this year’s Sibos started on aspects of risk can be eliminated. “The Given the concentration of risk through Ta sobering note with Global Custo- more CCP netting, the more efficient CCPs, the question of default was ex- dian editor-in-chief Dominic Hobson not- things will be,” he said. “The infrastruc- plored further. Howell said some infra- ing that central counterparties (CCPs) by tures allow you to mitigate risk to some structures could be amalgamators of risk. their nature concentrate and redistribute degree, but saying CCPs are the answer is The panelists then tackled the matter risk in the financial system rather than re- simplistic. It’s a balancing act for regula- of collateral arbitrage, which could have duce it. These “fragile” entities are tasked tors. It’s a case of helpful competition and a significant impact on leverage. Hobson with finding additional capital as regula- risk mitigation.” noted that if a party fails to deliver collat- tors want them to have “skin in the game”. Diana Chan, CEO of EuroCCP, agreed eral the event becomes systemic. While CCPs net transactions against each that there is a means to reduce risk through Howell replied: “There, you would look other, trading large numbers means great- netting. “Bilateral is a riskier transaction,” to the infrastructure as liquidity sources. er demands for liquidity, Hobson said. said Chan. “CCPs always work through But if you’ve got the assets, it’s second Hobson said clearing brokers would strug- their collateral and they won’t risk their order.” gle to make their margins completely while own capital to take risks. If there is a prob- Howell added: “It’s difficult to have CCPs would suck the margin of collateral dry. lem then they take action to manage a de- rules for collateral arbitrage. There is a We’re putting cash and collateral in the hands fault situation. There needs to be a reso- cost for mitigating risk, high capital and of the thinly capitalised institutions, he added. lution regime for CCPs to protect against the people.” financial institution failure.” Broaching the subject of client failure, No action plan “The notion that there Sergei Sinkevich, managing director, pri- Chan argued that more needs to be done “CCPs inject liquidity into the system on is not enough collateral mary market and globalisation, Moscow to prepare for that risk in terms of liquidi- the way up and withdraw it precipitate- Exchange, said: “The risk-reward ratio is ty. “Trust in the system, intervention from ly on the way down,” Hobson said, add- is not justified.” an issue. How much risk appetite these central bank, CSD and centralisation – it ing that CCPs are a worrying panic trans- Diana Chan, EuroCCP CCPs have is also important. We need to is not all bad and we do have a place where mission mechanism in the financial system. look at risk policies for CCPs. Interoper- infrastructure comes together,” she said. Rather than eliminate risk, CCPs concen- mous trading – ultimately speculative trad- ability among these CCPs could help in Hobson pointed to the risk of concentra- trate risk and redistribute that risk to their ers are going to be drawn to the market. mitigating risks.” tion saying that netting allows brokers to clearing members, creating a risk hurri- “We’ve yet to put together an action plan Gubert then asked whether the current do more trades knowing they do not have cane. Broker-dealers have to find variation in the case of a failure of a CCP and a cen- market infrastructures are safe or wheth- to take responsibility. “I’d like to see more margin, but we are not eliminating the risk tral securities depository (CSD),” said er defaults were inevitable. Howell replied firewalls to make things more containable.” of default – we are repackaging default as Hobson. that while defaults are inevitable, they do Chan commented that CCPs should liquidity risk, Hobson insisted. CCPs are Opening up the discussion, John Gu- not derail the system. “There will be a have special status as they are closing out going to eat a lot of collateral, adding to bert, chairman of UniCredit’s global se- shortage of collateral but regulation would positions. “There could be a virtual posi- trading costs, he warned, observing that in curities services executive committee, be a good outcome,” he said. tion ahead of other creditors and there is theory brokers are free to pile on as much asked panelists from the CSD and CCP Chan said: “The notion that there is not interest not just in the US,” she said. leverage as they can because they know world to comment on the sustainability of enough collateral is not justified. Collater- Chan concluded that the situation is who will ultimately pay. Multilateral net- these market infrastructures and wheth- al transformation and more dispersing of tending towards interoperability. “We are ting at CCPs even helps them to cut the er they felt the situation was catastroph- risk not through one provider but maybe too blasé about risk. We need transparen- capital cost of over trading as does anony- ic, given Hobson’s comments about risk. several could be a good solution.” cy and resolution for CCPs.”

sibos.com Sibos Issues 21 securities Market prepares for new era of trade reporting Reporting of OTC derivatives trades has begun in earnest in the US, but complexities in other regions are yet to be solved.

“Reporting will affect all types of market participants and the differences between the rules across jurisdictions needs to be looked at.” Karel Engelen, International Swaps and Derivatives Association

myriad of trade reporting require- example, market participants are still un- ments stemming from impending sure how to report a trade in a German in- A OTC derivatives regulation will terest rate swap, conducted between a Sin- pose challenges for all market participants gaporean and US institution. and span all asset classes. A panel of experts closely involved in de- Moving forward veloping and operating trade repositories Leading the way is the Commodity Fu- for derivatives offered Sibos delegates an tures and Trading Commission, the US insight into what to expect across the var- regulator that has oversight for index- ious regions in a Monday afternoon ses- based swaps, with reporting for credit de- sion entitled, ‘Trade repositories – Tack- rivatives and interest rate swaps launched ling new regulatory requirements for OTC on 12 October, with other asset classes derivatives’. set to follow in January. Japan, Singapore, The goal of regulators is to use trade re- Hong Kong and Australia are preparing positories to increase transparency in the de- their respective trade reporting rules for rivatives market and mitigate systemic risk. introduction in 2013. “The main work on trade repositories will A key difference between US and Eu- need to be done by the largest 20-30 deriv- rope, which is reforming swaps trading via atives dealers, but reporting will affect all the European market infrastructure regula- types of market participants and the dif- tion, is a requirement by the latter to report ferences between the rules across jurisdic- listed, as well as over-the-counter, trades. said testing of his facility would begin with- best practice for derivatives trade reporting. tions needs to be looked at,” said Karel Europe is expected to start reporting de- in two weeks. “Swaps traders, clearing houses, trade re- Engelen, director and head of technology rivatives trades by 1 July 2013, and Jesús He added REGIS-TR was looking for positories and trading venues will all re- solutions at the International Swaps and Benito, managing director of REGIS- value-added services to further help the quire a complex network of connections to Derivatives Association. TR, a European trade repository formed market prepare for the new rules. each other,” Benito said. “There is room One major concern, noted Engelen, will through a joint venture of central securi- SWIFT and ISDA are currently collab- to innovate and offer new solutions that be dealing with cross-border trades. For ties depositories Iberclear and Clearstream, orating on a white paper to help establish will help to ease this burden.”

22 Sibos Issues sibos.com securities Collateral management and T2S top priorities Looking ahead to European market infrastructure in 2020

reater cooperation be- “When institutions are not able to “Money should be able to be tween jurisdictions, clear- be direct participants, then issues held using one account globally,” Ger standards and more ef- arise,” said Voormeulen, explain- said Gem. ficient ways to manage collateral ing that for payment systems to op- are the keys to improving Eu- erate in a safe environment, par- T2S on track rope’s market infrastructure, ac- ticipants need to be able to access Central to the future of market in- cording to a panel of central bank real time gross settlement (RTGS) frastructure in the single market and securities services providers. systems as direct participants with is TARGET2-Securities (T2S). “We are migrating full communities, Introducing the Wednesday proper oversight and protection. According to Marc Bayle, T2S not just technical systems.” morning discussion on what Euro- By 2020, European market infra- programme manager at the ECB, Marc Bayle, European Central Bank pean infrastructure might look like structure would have more ancil- the central bank is making great by 2020, Benoît Cœuré, member lary systems to settle RTGS based strides in delivering T2S. of the executive board of the Eu- on central bank money, predicted “The project is going well. We in the same country or not. A sin- parties will know who will mi- ropean Central Bank (ECB), said Jochen Metzger, head of the pay- are nearing completion of the de- gle set of rules, standards and tar- grate when. the union was committed to being ments and settlement department velopment stage. At the end of iffs will be applied to all transac- Irene Mermigidis, managing di- a single market and it was impor- at Deutsche Bundesbank. September we were 87% com- tions, reducing the complexity of rector of Link Up Markets, the con- Regulatory and market changes plete and by the end of the year today’s market infrastructure.” sortium of inter-connected Europe- could result in a shortage of quality we are on track to realise 100% Recent advances include the an CSDs that recently signed up to “Investment collateral, warned Florence Fontan, completion,” said Bayle. “We are signing of the T2S framework use SWIFT to connect to T2S, be- head of public affairs, BNP Paribas now focussed on testing the soft- agreement – endorsed by the lieves that more streamlined com- managers will Securities Services. In this scenario, ware and hardware, with a view ECB’s governing council in No- munication between post-trade have to better collateral management would be a to going live in 2015 in euro. T2S vember last year – which set up market infrastructures will bring key requirement by 2020. is a multicurrency system and a new governance structure that service level benefits to clients. manage their “Investment managers will have kroner will be added by 2018.” embraced 23 European central “We provide a single gateway in to better manage their exposure Launched by the Eurosystem, securities depositories (CSDs). terms of connectivity into secu- exposure and and reduce the need for collater- T2S will provide a single har- “The framework agreement sets rities market infrastructures. By reduce the need al as well as allocate the right col- monised venue where almost all out the contractual rights and ob- having CSDs connecting to the lateral to the right requirements,” traded securities circulating in ligations of the Eurosystem and hub, they no longer need a spa- for collateral.” said Fontan. Europe can be settled against each contracting CSD, and cov- ghetti model of dedicated con- Florence Fontan, BNP Paribas Securities Offering a viewpoint from the euro – and potentially other Eu- ers the development and opera- nectivity links with all that im- Services ICSDs, Joël Mérère, executive ropean currencies – with stand- tion of T2S,” said Bayle. “It reg- plies. It also allows CSDs to offer director of Euroclear France said ardised communication protocols ulates the scope of the controlling consistent service levels amongst tant to look forward, beyond the it was certain that by 2020, there and harmonised market practices. powers of the CSDs relating to our members,” Mermigidis said. financial crisis in which Europe would still be competition be- “Today, settling securities trans- the outsourcing of their settle- Further process efficiency and presently finds itself. tween central and commercial actions in Europe is fragmented ment function to the Eurosystem, communication gains are expect- Coen Voormeulen, division di- banks and Mark Gem, member along national borders and cost- as well as issues like liability, pro- ed to result from the fact that rector, De Nederlandsche Bank, of the executive board at Clear- ly in cross-border situations,” ob- tection of intellectual property T2S will adopt ISO 20022 – a said Europe presently had a heav- stream Banking, said it was im- served Bayle. “Under T2S, it will rights and confidentiality.” standard that spans financial ser- ily tiered system between direct portant that the “hard links” be- make no difference – in technical, The ECB team is now also fi- vices to provide greater informa- and indirect participants when it tween the triparty agent and the risk and cost terms – if end-inves- nalising the detailed migration tion reciprocity between all sec- came to collateral management. assets were broken. tors and the securities traded are strategy and within a few weeks tors of the industry. Market infrastructures juggle costs and volumes How far can securities market infrastructures lower costs in the face of lower volumes and greater fragmentation?

he second session on secu- Ownership implications rities market infrastructure “[Equity] trading volumes may not Panellists addressed the question Tat Sibos addressed the cost of whether market infrastruc- of securities settlement amidst an come back any time soon, but OTC tures should be user-owned or ever-changing regulatory land- derivatives on exchange can create user-governed and which option scape, characterised by low trans- would result in cheaper transac- action volumes and CCP netting. more volumes.” tions. “A utility that is not mar- Against this backdrop, Glob- Robert Scharfe, Luxembourg Stock Exchange ket-owned is like a plane without al Custodian editor-in-chief and a pilot,” said Scharfe. “We need panel moderator Dominic Hob- pan, Nomura, commented on the changed under MiFID with more to justify our investment by get- son asked panellists from the cus- region’s role in sustaining securities competition in terms of organised ting the benefits of competition todian, broker-dealer and infra- business. “For broker-dealers, in- trading facilities (OTFs) and mul- and a utility.” structure community for their vestment bank margins are going tilateral trading facilities (MTFs). “There is a preference for a thoughts on whether transaction down,” he said. “Our exchange and Exchanges, however, have a pubic competitive environment, which volumes would rise. Robert Schar- custodian customers want lower institutional role. Instead of cherry- drives price,” said Flanagan. fe, CEO, Luxembourg Stock Ex- commissions. Asia is the bright spot. picking they need to cover the full While vertical and horizontal change, gave an upbeat view of It will provide customers for us all.” range of securities. “Luxembourg “Consolidation will happen,” he models for infrastructure integra- the landscape from the Grand is flexible here,” he commented. predicted, “and consolidation tion exist in Asia, he noted, “Pref- Duchy. “We have 45,000 stocks Costs of fragmentation In the European post-trade are- will link up markets.” erence differs from country to listed for trading,” he said. Trad- Panellists addressed the cost im- na, Förs noted that while he does Where does the custody busi- country as each is at a different ing volumes may not come back plications of a lack of harmonisa- not yet see competition, the en- ness go in an environment of T2S stage of development.” any time soon, but OTC deriva- tion among market infrastructures. vironment in Europe is changing and increased regulatory change? However the challenges of the tives on exchange can create more Providing the Asian perspective, in terms of how CSDs will op- “Global custody demands will in- present environment are prior- volumes,” he said. In contrast, Flanagan remarked that, “Asia has erate in a post-T2S world. “In crease as they take on more risk for itised, panellists acknowledged Goran Förs, head of global trans- different capital markets in each 10 years, the custody part of the beneficial owners,” said Fors. “We that maintaining the status quo action services at SEB, described location. I’m hopeful that stage- business will be much closer to need to see change on how we price for securities infrastructures the reduction in volumes as dam- by-stage things will improve and what CSDs do,” he predicted. things as a result. Sub-custody will is not an option. “Exchanges aging. “They won’t come back in liquidity will grow with an oppor- Förs queried the need for four also change in the next 10 years. need to reinvent themselves as the future,” he commented. tunity for new exchanges.” separate CSDs in the Scandi- We’ll handle more of the compli- broker-dealers adapt to funds Christopher Flanagan, co-chief In Europe meanwhile, Scharfe navian region alongside greater cated asset servicing, particularly and OTFs,” Flanagan com- administrative officer for Asia ex-Ja- saw the role of exchanges as having fragmentation in trading venues.­ with FATCA coming on-stream.” mented.

sibos.com Sibos Issues 23 securities

forced dialogue, and more interoperability frastructures that provide those servic- Dark clouds loom for CSDs between CSDs and those kinds of topics, es. “Settlement was not the problem, but but there was no commercial need or polit- asset servicing is where most of the costs Will regulation make European market infrastructures efficient? ical will to make the change. So for all the and risks lay,” said Brown. “T2S will in- criticism of T2S, if you look at the cultur- troduce costs, but asset servicing is where al change, the philosophical change, in the the gem will be. CSD providers, like our- “There are dark clouds for way that they view their role and the way selves, have the ability to serve those as- that they view their role collectively, it’s a sets like a custodian. T2S will provide an CSDs, because while the big change since 2006.” opportunity to lower costs. We’ll have the infrastructure has been Andrew Rand, head of direct securities financing and custody, and we can facili- resilient, the tendency has services EMEA, Global Transaction Bank- tate costs on the funding side. been to regulate everything.” ing, Deutsche Bank, agreed with Brown’s “There is a concern about the separa- Phillip Brown, Clearstream comments on the importance of private in- tion of banking and settlement under T2S. dustry involvement in the regulation of the But we provide USD 75 billion of secured post-trade space, but noted that the role of credit on an average day and USD 100 bil- the CSD – whether it will be an infrastruc- lion on an above-average day. If that is re- ture or a competitor – is unclear. “What we moved, the market has to fund itself. If you would like to see is a forced rationalising of try to fix that, you create a bigger problem CSDs in Europe. MiFID managed to break than the one you are trying to solve.” down the monopolies on trading, but CSDs Rand argued that CSDR gives CSDs li- are fragmented. They have not communi- cense to become moneymakers. “They SD Regulation [CSDR] and TAR- for CSDs and custodians that need to adapt. cated their plans on how they will service the don’t have the expertise, and they could GET2-Securities [T2S] can meet The panel on the changing securities industry under the new regulations.” go head to head with custodians,” he said. Cmany of the requirements of the se- landscape debated whether Europe’s post- To this, Brown said: “We have changed “This could be risky.” curities industry, but it needs to be deliv- trade infrastructure could be more effi- from being a safe-keeper in 2005 to a ser- McEvoy however, was not concerned ered with a commercial influence, said Phil- cient without these regulations. Graeme vice provider. CSDs have reduced settle- by Rand’s cautionary note. “If there is a lip Brown, member of the executive board McEvoy, global head of shared services ment fees by 30%, they created the tri- simplistic post-trade solution where CSDs of Clearstream. and banking operations at Morgan Stan- party repo market and they have a central could provide front-to-back solutions, we Brown and representatives from the sell- ley, predicted there will be an opportunity role in trade registration and collateral un- should look at it,” he said. “Market partici- side and buy-side assembled on a panel to for CSDs too, notwithstanding the provi- der EMIR. But there are dark clouds for pants should have an option of how to con- debate the changes facing their businesses sion of cross-border settlement coming, to CSDs, because while the infrastructure nect to T2S. If our collateral could be priced under CSDR and T2S, including whether broaden their offering in much the same has been resilient, the tendency has been through a single vehicle would be good.” regulation would lead to more efficiency in way that Clearstream and Euroclear have. to regulate everything. A separation of the Consolidation and further mutualisation the post-trade space and whether T2S is “In the absence of regulation, private en- banking from the settlement functions among CSDs was inevitable under the the panacea for Europe’s fragmented set- terprise could also create that connectiv- could impact our costs.” new settlement paradigm, panelists agreed. tlement landscape. ity among nations,” McEvoy said. “But Commenting further on whether T2S “With 26 CSDs in Europe, they don’t have CSDR will separate the banking functions you’ve already seen what could happen and CSDR would help the buy-side, McE- the scale to go it alone on T2S and sur- of a CSD from the core settlement function. without T2S – it allows Europe to demon- voy replied: “T2S is not the solution, but a vive,” said Brown. Like T2S, it will make life difficult for some strate there is an opportunity to add more framework. It is a start. It enables connec- Commenting on competition driven by CSDs, which will have to ascend the value to the single market by the provision of tivity for a single market infrastructure, but CSDR, Rand said: “Competition is a good chain through asset servicing as the regulation connectivity. We would like to think the I have several choices to connect. The ques- thing. We will have some CSDs enter, and drives further competition and heaps pressure market could get there by itself without the tion is, do I decide today or do I let the in- some will exit. The development pipeline on these infrastructures to reduce their settle- regulator, but sometimes it needs a push.” frastructure evolve until go live?” comes at a cost.” ment costs as they move toward T+2. “We would like to see new entrants,” com- Under T2S and CSDR, consolidation Impetus for change The prize mented McEvoy. “The CSDs have not among Europe’s 26 CSDs is inevitable as Brown added: “It’s too easy to beat up on Under post-trade infrastructure regula- broadened their offering. … We wouldn’t only those CSDs with the strongest value T2S, and if you look at where we are rel- tion, the prize will lie in asset servicing as want the competitive model to be changed proposition will survive. Furthermore, T2S ative to where I think we would be, we’re the markets consolidate into one settle- if we didn’t think CSDs could ascend the has attracted criticism through several de- way further down the line, because what ment infrastructure landscape. Tax dif- chain. CSDs have not been forthcoming lays and the likelihood that it will take away it’s done is force some recalcitrant CSDs ferences within Europe mean that CSDs with their development in this regard and CSDs’ settlement revenue by allowing fi- to collectively address a commercial chal- have to provide post-trade services such what their services will comprise. The regu- nancial institutions to connect directly to lenge they face as a result of their settle- as tax and reporting once trades have set- latory business case will present itself when the new infrastructure, and increase costs ment revenues evaporating under T2S. It’s tled. This could benefit an ICSD or in- CSDs say what their plans are.”

Light at the end of the corporate actions tunnel Japan, Australia and Italy are leading the way in solving inefficiencies associated with corporate actions

eak links in the cor- “Some issuers do want to form rate actions system was not be- But this is not to say that reg- joined forces to enhance corpo- porate actions process links with their relevant central yond repair. ulators cannot be engaged once rate actions information via the Wchain have long pre- securities depositories and data “The various standards groups the post-crisis push for more sta- bourse’s Tokyo Market Informa- vented the efficient transmission providers, but others don’t un- have done well to bring automa- ble financial markets has settled. tion system. of time-critical information be- derstand why this is necessary or tion to corporate actions, such as “Regulators are always keen for Hiroshi Nakamura, director tween issuers and investors. beneficial for them,” he said. encouraging the adoption of stand- their market to be efficient, to at- of JASDEC’s corporate plan- Speakers at a session on the Cittadini added that while ards like ISO 20022, but progress tract and facilitate investment,” ning department, said that by Wednesday of Sibos looked at there is a need for homogeneity has been slow,” said Chapman. said Colin Brooks, global head June 2014, JASDEC would begin how the industry could move for- throughout the corporate actions “Technology solutions are emerg- of sub-custody and clearing at sharing information flows with ward, noting recent advances in a process, competing interests have ing, but progress would be acceler- HSBC. “A good corporate ac- the TSE operating an improved diverse range of countries. restricted progress. ated by a clearer business case and tions system is an important part service, having adopted straight- Until now, a raft of standards Another substantial barrier regulatory involvement.” of reaching this goal.” through processing and intro- initiatives to streamline corpo- is the heavy technology invest- But the sheer volume of nation- duced ISO 20022 standards. rate actions have not always been ment needed by issuers to auto- al and global regulatory initiatives Sources of optimism Brooks added that at least 11 linked together, while a culture of mate complex legal documents already in train mean that corpo- Some nations have taken matters other nations around the Asia- blame among those involved has that underpin many corporate rate actions is highly unlikely cor- into their own hands, with Citta- Pacific region were making im- also hampered progress, said ses- actions, with Justin Chapman, porate actions to make its way up dini giving an overview of Mon- provements to corporate actions, sion moderator Virginie O’Shea, global head of industry manage- the reform agenda anytime soon. ti Titoli’s new MT-X system, with Australia making significant analyst at Aite Group. ment, operations and technology, Moreover, new laws and infra- which offers a single communi- progress. The main challenge, according Northern Trust, pointing out that structure projects may have unin- cation channel that simplifies the “The Australian Securities Ex- to Paolo Cittadini, chief execu- such high outlay presents new tended consequences. For example, delivery of information between change has mandated the use of tive officer of Monte Titoli, Ita- risks for those involved. TARGET2-Securities, an effort to issuers and intermediaries. ISO 20022 standards for issu- ly’s domestic post-trade services harmonise the European settlement In Sibos 2012’s host nation, ers seeking a listing and has also provider, is establishing effective Business case environment, could introduce yet the Japan Securities Deposito- managed to get the backing of its lines of communication between But despite these obstacles, pan- more players in the corporate ac- ry Center (JASDEC) and To- regulator, offering an ideal model the different entities involved. ellists believed the current corpo- tions chain over the coming years. kyo Stock Exchange (TSE) have for others to follow,” he said.

24 Sibos Issues sibos.com payments Pressure mounts on banks and payment systems to reduce risk A push by regulators to improve the way risks are managed calls for a rethink in the way core payments infrastructures are managed

reater pressure from reg- payment system to help banks un- tion that would encourage banks as with our goal to open up our tions and know-your-customer ulators for firms to raise derstand liquidity flows by giving to change their behaviour when system to a wider range of banks,” requirements,” he said. Gcapital buffers and in- them access to detailed data that it comes to payments”. said Steve Nichols, chief executive crease collateral has put payments offers a view on intraday liquidity. Legacy systems were also a director of Payments New Zealand. Stress testing infrastructures under the spotlight, Further work on helping problem in the retail space, a For CLS, the multicurrency cash calling for more efficient payment banking supervisors to moni- problem that New Zealand has View from the east settlement system that recon- systems mechanisms. tor banks’ intraday liquidity risk tackled by replacing its 50-year The focus for Asian firms is led by ciles USD 4.7 trillion worth of A session comprising speak- management is being carried old overnight system – which the increase in both intra-regional transactions daily, stress-testing ers from the bank and payments out by the Bank for Internation- led to a build up of risk through- flows and from payments emanat- against multiple points of failure and settlement space on Wednes- al Settlements. Session moder- out each day – with a new in-day ing from the west destined for Asia, is high on the agenda, especially day morning detailed how chang- ator Peter Lightfoot, managing mechanism that settles a mini- according to Bock Cheng Neo, in the wake of Hurricane Sandy, es could impact well-established director for intraday liquidity, mum of five times a day. head of group transaction banking which has devastated New York practices and improve liquidity markets, RBS, said the focus of “The move to an in-day system at OCBC Bank. A particular trend and resulted in the migration of management. the consultation would result in has helped us to reduce the poten- among Asian banks, he believed, its US operations to London. “The debate on payment sys- “a huge increase in data collec- tial build up of systemic risk as well was a greater focus – and concern “A key part of our risk manage- tems has arisen because of a shift – over the health of western banks, ment efforts have been to ensure from the liberal liquidity regime which has led to a streamlining of we are able to withstand the de- imposed by regulators to a more cross-border partners. fault of a large settlement mem- intolerant one,” noted Chris He added that Asian institu- ber,” said Naresh Nagia, chief risk Salmon, executive director and tions should not underestimate office, risk management at CLS. chief cashier at the Bank of Eng- the impact of US regulatory ini- “This includes working individu- land. “This has raised the bar, tiatives. “Asia-based banks need ally with our members to find al- piling pressure on banks and pay- to work with their compliance ternatives for NOSTRO bank fail- ment systems to reduce risk.” departments to tackle new sanc- ures and third-party risks.” A key issue Salmon identified was the lack of post-merger in- vestment by banks, with a reli- “The debate on payment systems has ance on CHAPS for processing arisen because of a shift from the payments between different enti- ties rather than investing in an in- liberal liquidity regime imposed by tegrated system. The Bank of England is using its regulators to a more intolerant one.” expertise in running a high-value Chris Salmon, Bank of England

payments If you can’t beat them ... “Until Indian banks think The future of payments in emerging markets lies not with banks or like nimble telcos but (probably) both. non-banks,

veryone knows you can “In India, card usage has been non-banks will make money from offering “The best solution ‘just going to explode’ for 10 years go and eat our Epayments services to the now. I hope it happens at some unbanked – but no-one seems for each market time – my career depends on it,” lunch.” quite sure how, it emerged from he said. “But banks in India tend will be unique to Jairam Sridharan, Axis Bank a panel convened Monday to to have an incumbent mentali- discuss emerging payments op- that market.” ty. Until Indian banks think like portunities in rapidly developing Neeraj Aggarwal, Boston Consulting Group nimble non-banks, non-banks and business at payment provid- Breaking even economies. will go and eat our lunch.” er Cielo, pointed to deals struck In the meantime, even those who Neeraj Aggarwal, partner and dia and near-ubiquitous pre-paid between banks and three out of see unbanked payments services managing director at Boston Con- cards in Brazil. Potential partnerships four of Brazil’s largest telcos. Yet as potentially profitable in the long sulting Group, in his introduction Jairam Sridharan, SVP of retail In fact, some panelists – and he insisted there had to be value term are currently struggling to identified four payments models banking at Axis Bank, contrasted much of the audience, judging for both parties beyond providing break even. If there is to be long- potentially involving banks: busi- Brazil, where card usage has been by a straw poll – saw non-banks the plumbing. term value for banks in emerging ness correspondent relationships; growing at an annual rate of 28% such as telcos, retailers and inde- “You don’t need a telco to reach markets payments, it will be in pre-paid cards; M-wallets; and for the past five years and all par- pendent payments providers less customers on their cellphones – upselling to savings accounts and mobile branchless banking. But ticipants in the value chain made as competitors than as potential you need an app,” he said. “You credit, or – as Sridharan suggest- all of them would have to break money, with India, where banks joint-venture partners. have to ask who owns the app and ed – selling both payments servic- through what he described as had insufficient incentive to in- Eduardo Chedid Simões, exec- how you manage it if the partner- es and non-financial products and “the quality-cost paradigm”. vest in the cards market. utive vice-president of products ship splits up in five years’ time. services such as lottery tickets. “The traditional trade-off be- Everyone’s facing the customer – Where none of the panel saw tween quality and cost – between but through what?” value was in the payments plumb- the branch network and the call In the Russian market, where ing or – at least in the short term centre – no longer applies,” he “In Brazil, 20% of the population is un- – in low-value payments. said. “The economics need to be banked and telcos and other mar- “In Brazil, everyone’s losing reviewed.” everyone’s ket participants face the same money on low-value tickets,” said Panellists agreed that any of the losing money regulatory barriers to entry as Chedid Simões. “Banks and telcos new models for growth markets banks, it’s a question of multiple tried to do it alone and failed. The would change the payments land- on low-value players trying (and possibly fail- joint ventures have a big challenge scape – but market-by-market ing) new models, according to ahead of them. We’re looking for rather than in a regional sweep. tickets.” Vladimir Tatarchuk, first depu- different models all the time.” “The best solution for each mar- Eduardo Chedid Simões, Cielo ty chairman of the board at Al- Tatarchuk agreed. “In Russia ket will be unique to that market,” fa-Bank. “Everyone is trying to it’s too early to decide on a mod- said Aggarwal, pointing to the understand what the market will el,” he said. “It’s too early to tell influence of existing conditions look like,” he said. which of them might work.” such as mobile penetration in In-

sibos.com Sibos Issues 25 payments Banking on wholesale change Success in transaction services depends on choosing right model

“Transaction math of the global fi- nancial crisis so were banks should many banks, according to embrace Bharat Sapreshkar, glob- al head of bank services at technology and Citi Transaction Services. Banks that retrench will be what it allows us replaced by those whose cli- to do.” ents’ international demands are growing. “A new breed Bharat Sapreshkar, Citi Transaction Services of banks will fill the vacuum, big regional players expand- ing beyond their existing ter- The market and the lower end of the ritories and also picking up Boston Consulting MNC market’s plain vanilla trans- ‘orphan’ clients,” he said. Group offered its expertise on action banking needs, Storz sug- four key transaction banking gested that business models should Effective innovation sessions at Sibos on Tuesday. be based on a ‘design to cost’ or When market share is fluid, Find out more on the views they ‘design to flexibility’ approach, but banks must innovative; but when discussed via: http://www.swift. ou can no sooner future- ing from Asia. With other reve- not both, before leaving moderat- resources are scarce, they must com/dsp/resources/documents/ proof a business model nues collapsing from higher risk, ing duties to his colleague, Stefan do so frugally. Susan Skerritt, ex- BCG_The_Transaction_Banking_ Ythan bullet-proof a con- more capital-intensive business- Dab, senior partner and managing ecutive vice president, BNY Mel- Advantage_Oct_2012.pdf tinent. But you can take a long, es, the incentive to position your director of BCG. lon, said not every idea needed to hard look at prevailing landscape transaction banking services to be a game-changer. “Innovation make the difference, not just the and adapt your business model to capture this growth is palpable. Cost of change can be incremental,” she added. big innovations,” he said. work with the grain not against it. According to Storz, a high pro- Carlos Gutierrez-Salan, global “When it comes to making inno- Encouraged by Dab to con- Opening yesterday’s session, portion of market share is in play head of cash management and fi- vation effective, you have to be sider the impact of regulation on ‘Building future-proof operat- due to the mistakes and miscon- nancial institutions, Banco San- rigorous and disciplined.” wholesale transaction banking ing models in wholesale transac- ceptions of the incumbents. Un- tander, emphasised the fluidity Noting the importance of part- models, panellists worried about tion banking’, Niclas Storz, part- differentiated coverage, inability to of the MNC market when he re- nerships that bring local and glob- rising costs of providing consum- ner and managing director of meet core client requirements and ported the recent enthusiasm of al expertise together, Tom Mc- er payment and trade finance ser- The Boston Consulting Group – contrary to popular industry belief large corporates for standards- Cabe, head of global transaction vices, and reduced use of corre- (BCG), explained the opportu- – the lack of scale advantages to op- based solutions. “Since the crisis, services at Singapore’s DBS bank, spondent relationships. nity. He predicted that whole- erating a major transaction bank- clients have wanted to minimise pointed out that an iPad-based “Transaction banks should no sale transaction banking revenues ing franchise were the top three the cost of changing bank provid- educational app on working capi- longer think of their services as would grow by 170% between failures identified by Storz. Noting er,” he observed. tal management had proved par- a product. They should embrace 2011 and 2021 to USD 509 bil- that around 80% of revenues are If large corporates were pro- ticularly successful on sales calls. technology and what it allows us lion, half of these revenues com- driven by the top end of the SME tecting themselves in the after- “It can be the small things that to do,” added Sarpeshkar.

payments point of sale, simply type in their mobile and pin numbers to trig- ger a transaction. Convergence Banks must get smart will mean that users will soon not know whether a payment was ef- Mobile payments are taking off, but it’s not too late for banks to stake their claim fected via the internet or via a tel- ecom network, he said. ave fast-moving telcos sit alongside retailers, telcos, On the acquirer side, PayPal and e-commerce provid- handset manufacturers, operat- has sought to upgrade its services Hers already sown up the ing system providers and app de- through the acquisition of a firm burgeoning market for mobile velopers. CBA has worked hard that uses GPS technology to en- payments, leaving slow-moving wooing merchant acquirers, as- able shoppers to view a retailer’s banks on the sidelines? Apparent- serted Rosmarin. When exist- entire inventory, in an attempt to ly not, yet. ing POS terminals presented a help more traditional firms com- The banks’ biggest asset is their barrier to accepting mobile pay- pete with the likes of Amazon. trusted role in the intimate rela- ments, CBA developed a seven- Both Schatt and Rosmarin also tionship people have with their inch iPad-like POS device that noted the potential for mobile money. “We’re there at the point acquirers could customise to cre- payments to supply the retailer of sale (POS),” said Kelly Bayer ate their preferred customer ex- with very detailed levels of infor- Rosmarin, executive general man- perience, by downloading one mation on consumer behaviour. ager, business product and devel- of many available apps. Rosma- But how to lure the reluctant opment for Commonwealth Bank rin hoped to attract 20 develop- customer in the first place? NTT of Australia (CBA), in Wednesday ers, two months after the device DOCOMO, the Japanese telecom afternoon’s panel session, ‘Place was launched, 600 had registered. firm, has been providing mobile your bets on mobile payments’. To date, it is the smaller acquir- payments since it launched an e- In a country with a very high er that has perhaps been the big- wallet in 2004. Roughly 15 mil- smart phone penetration rate, gest supply-side beneficiary of e- lion DOCOMO customers make half of CBA’s internet bank- commerce: firms that might once “What wins in payments is efficiency, mobile payments at least once a ing clients access their accounts have had to wait months or even week, according to Dr Kiyoyuki via mobile devices. The bank’s years to accept card payments convenience and security.” Tsujimura, president and CEO, Kaching iPhone app is a mar- suddenly found a shortcut to a Kelly Bayer Rosmarin, Commonwealth Bank of Australia DOCOMO Engineering. Why? ket leader down under, but CBA global audience via internet-pay- Convenience and discounts. One has not found the need to partner ment services such as PayPal. Ac- PIN and chips al connectivity to help banks win popular e-coupon carried by DO- with a telco. “What wins in pay- cording to Laurent Desmangles, Dan Schatt, general manager back remittance market share COMO customers can be re- ments is efficiency, convenience partner and managing director, of financial innovation, PayP- and find new ways to reduce deemed at McDonalds, with the and security,” she said. The Boston Consulting Group, a al, insists that the firm that many cash and check transaction vol- fast-food firm benefitting from new generation of payments pro- banks feared would take their umes. Having long moved into precious market research data. Acquiring acquirers viders is now enabling micro-ac- lunch is now a partner in the e- the mobile space; Schatt said The mobile payments market Of the many elements in the mo- quirers to accept electronic pay- and m-payments space, using the 80% of PayPal customers that may be offering fries, but banks’ bile payments value chain, banks ments within 10 minutes. internet payment network’s glob- used the service at the physical have not yet had their chips.

26 Sibos Issues sibos.com regulation Are regulators targeting the wrong risks? Even supporters of the G-20 regulatory agenda agree implementation will create additional risks

egulators’ current narrow been on liquidity. There’s a dan- necessarily be a bad thing, said The trouble with timing tion. “The ambitious timeframes focus on systemic risk could ger that they ignore other forms Jun Mizuguchi, assistant com- A second concern pertains to a concern me,” said Parkinson. “In Rprovoke two unintended of risk. What about operational missioner at the Japanese Fi- need for regulation that is de- the US, where they’ve slipped be- consequences. The first is that risks – and cyber-risks?” asked Jo- nancial Services Authority, who tailed enough not to allow a mar- hind the Dodd-Frank timeframe, regulators act to mitigate some han Pissens, deputy director at the pointed to concerns that west- gin on discretionary implementa- there’s pressure from Congress risk but ignore others just as perti- National Bank of Belgium, who ern-style regulation in the Jap- and the public, which tends to nent. “Their focus since 2008 has warned yesterday of the potential anese market would dry up li- see any delay negatively. The re- for regulatory arbitrage and the quidity. “You need to have ality is that [a slower pace] will emergence of shadow banking. some sort of adaptation based result in stronger – not watered- The second is to encourage a on local needs,” he said. down – regulation.” trend identified by a questioner More broadly, Virginia Noron- Despite their caveats, past and towards ‘de-globalisation’ of pre- ha, head of investment products present regulators defended the viously global transaction banks, at Hong Kong’s Securities & Fu- G20 agenda as a third way be- driven by regulators’ fear that any tures Commission (SFC), re- tween disorderly bank failure and bank failure will ultimately be a jected the suggestion that mar- bail-out. Yet no session on regu- problem foisted on taxpayers. kets such as Hong Kong looked lation would be complete with- “De-globalisation makes do- to the West for guidance on ro- out mention of unintended conse- mestic systems more concen- bust regulation. The SFC is cur- quences – and in this case it came trated,” said Patrick Parkinson, rently evaluating its response to from the former Federal Reserve managing director at Promonto- a consultation on OTC deriva- banking regulator. Parkinson, ry Financial Group and a former tives and considering the intro- joining the affray over the Volk- US regulator. duction of specific licenses for er Rule’s extraterritorial dimen- clearing and other financial ser- sion, warned of the risk that for- Local variations vices functions. eign banks would pull out of the However global the regulation, “We have no option but to for- market and increase the concen- it depends on domestic regula- mulate our regulatory approach tration risk regulators were seek- tors for implementation – which, globally,” she said, adding: “Reg- ing to avoid. of course, generates a risk of lo- ulation is not driven from west or Similarly, Pissons warned that cal variations. This wouldn’t east. We learn from each other.” a successful CCP structure could itself pose risks by creating a sin- “There’s a danger that they ignore “If all your eggs are in one basket, gle point of failure. “You need to be sure one structure will survive other forms of risk. What about you’d better be sure it’s a strong if the other fails,” he said. “If all your eggs are in one bas- operational risks – and cyber risks?” basket.” ket, you’d better be sure it’s a Johan Pissens, National Bank of Belgium Patrick Parkinson, Promontory Financial Group strong basket,” agreed Parkinson. Doremus Deutsche Bank 301557 Sibos HP Autobahn VERSION 2 272x184mm Proof 4 24-09-2012

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sibos.com Sibos Issues 27 at the end of the day…

Fix of the year # Found on Twitter A night to remember Sibos #Sibos There’s no better way to get your fi- nal Sibos Fix than at the official wrap- Ivan Schneider @ivantohelpyou 3m up party and this year’s was one of the Wanted: An Army of Compliance Officers http://www.enterpriseefficiency. com/author.asp?section_id=905&doc_id=253804 … #sibos best. At the foot of the majestic Osaka SAP_SCN @SAP_SCNBrasil 12m Castle, this year’s venue was Osaka- So true. RT @sgourley: Best quote so far - “the bank of the future will be jo Hall. The wine and beer didn’t a technology company with a banking license” #sibos #innotribe stop flowing as party-goers dined Declan Barry @Declan_InvestNI 16m on exquisite At the airport on the way home, great response from #sibos and a lot of Japanese food, work done. I am now going to sleep for a month. #creamcrackered including a smor- ulous host nation, in- Marc Braet @marcbraet 37m gasbord of delicious cluding geisha parades and an exciting tai- #sibos is over ! 32 meetings in 4 days. It was great .... 2013 will be very sushi. Wherever you ko drum performance. It was the perfect busy @IntixNv (@ RAMADA OSAKA | ラマダホテル大阪) looked was elabo- end to a wonderful week in Osaka and we Standards Forum @standardsforum 57m reusability at its best:most of our cardboard furniture is now a souvenir rate entertainment now look forward to some fabulous nights to take home for standards aficionados! #sfosaka #sibos celebrating our fab- in Dubai next year. eunice @_eunicefoong_ 1h Things that I took back from #sibos 2012 – regulation, technology, mobile and moving from the west to the east!! Cya #sibos 2013 in Dubai. Kirk Wylie @kirkwy 3h Sibos past, Sibos future… On behalf of the whole @OpenGamma team, congratulations to Gust for winning the #sibos #innotribe startup challenge innovators category! Reflections on Osaka 2012 Phil Windley @windley 4h I never did get the hang of using one of these The session I enjoyed the most was Monday’s SWIFT Institute with your pants on. #innotribe #sibos pic.twitter.com/9Z2K4bCu Colloquium: Making OTC derivatives safe. The entertainment I en- joyed the most was the Murex gathering at Osaka Castle Geihinkan, with a great contrast between a peaceful geisha show and the powerful taiko drum. Next year in Dubai I’m most looking forward to contin- Salil Ravindran @TimesRGud 6h uing the continuity of relationships with clients and prospects. Frédéric If #Sibos made the cake, the Japanese topped it up with their hospitality Alcaras, Murex Earthport @Earthport 7h Enjoyed #Sibos #Osaka. Lots of lively debates and meetings on the The sessions I most enjoyed was everything Innotribe! The entertain- future of #payments and the #banking industry ment I enjoyed the most was make your own sushi at the Standards Forum. Next year in Dubai I’m most looking forward to the heat! And a big turnout from people in the region. Ioana Guiman, Allevo

The session I enjoyed the most was the Compliance Forum opening address with Adam J. Szubin, director of the Office of Foreign Assets Control at the US Department of the Treasury. The entertainment I enjoyed the most was the Sumitomo Mitsui Banking Corporation re- SECURITIES SERVICES ception at the Rihga Royal Hotel. Next year in Dubai I’m most looking forward to another great week of nearly 100 meetings with clients and FOR OUR FINANCIAL prospects. Claus Wagenblast-Franck, Danske Bank INSTITUTION CLIENTS The session I enjoyed the most was the first part of the securities mar- WE OFFER A PLATFORM COMBINING ket infrastructure forum. The entertainment I enjoyed the most was SETTLEMENT INSTRUCTIONS AND CUSTODY WITH the SunGard party. Next year in Dubai I am most looking forward to DIRECT ACCESS TO 28 MATURE AND EMERGING MARKETS meeting more delegates. Axel Pierron, Celent

The session I enjoyed the most was ‘In conversation with Benoît Cœuré’. The entertainment I enjoyed the most was the opportunity to network and catch up with colleagues and clients. Next year in Dubai I am most looking forward to furthering the debate on the implementa- tion of T2S. Siegfried Vonderau, Deutsche Bundesbank

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Snowflake, the legendary Wells Fargo 6,200+... pony, was in town again this year. Every Delegates makes Osaka 2012 official- year Snowflake appears in a slightly differ- ly the largest Sibos in Asia-Pacific to Societe Generale Securities Services is a marketing name for the securities services businesses of Societe Generale and its affi liates ent model, making her one of the most de- worldwide. Societe Generale is regulated and authorised by the French Autorité de Contrôle Prudentiel and Autorité des Marchés date. Financiers.This material has been prepared solely for information purposes and does not constitute an offer to enter into a contract. sirable collectibles in the Sibos exhibition. Not all products and services offered by Societe Generale are available in all jurisdictions. Please contact your local offi ce for any further information. 2012 Societe Generale Group and its affi liates. © GettyImages - FRED & FARID She was stabled on the Wells Fargo stand.

HD 28 Sibos Issues sibos.com SG_SIBOS_134X186_INSTITUTIONS FINANCIERES_FOR OUR FINANCIAL_RESEAUX SOCIAUX.indd 1 14/09/12 17:57