Sibos

Week in review 2015 in review Week Issues he official daily newspaper of Sios Singapore - ctoer

Future of Reinventing Responding Renminbi: An industry Money: banks for the to risk Not if, ripe for “We’re all in digital age page 10 but when transformation this together.” page 7 page 14 page 18 page 4

PUBLISHER’S LETTER

Something for everyone

Dear Sibos 2015 delegates

Let me begin by thanking you for making this year’s Sibos in Singapore the iggest event we have held in the sia-acific region and the second iggest Sibos ever. A total of 8,213 of you walked through the doors of the Marina Bay Sands Expo and Convention Centre over the four days of Sibos 2015, and I trust that your experience was a valuable and enjoyable one. Our aim is to make Sibos relevant to the broadest spectrum of the financial community. his year’s record-reaing figures suggest we’re getting something right, but we continue to seek improvements and value your feedback. We realise that most people attend Sibos for a variety of reasons, which is why we try to meet your high expectations both from a content perspective – providing high-level big issue debates on the Internet of Things, disruptive risks and the internationalisation of the RMB as well as more granular and interactive discussions and workshops – and in terms of opportunities to sit down with customers and network with peers. Of course, Sibos is not purely a once-a-year experience. We hope that you take home with you some new ideas and perspectives that can help improve your performance and that of your organisation in the year ahead. To that end, this wrap edition of Sibos Issues contains summaries of the main sessions and industry themes explored at Sibos 2015, highlighting the main points of discussion that may inform your future decisions. e loo forward to finding out next year how your usinesses have progressed and how the industry has evolved and – importantly – how Sibos can further support your needs. We are already well advanced in our planning for Geneva. Look out for more details on www.sibos.com, and of course the first edition of Sios ssues.

Best wishes Sven Bossu, head of Sibos

Publisher: Sven Bossu, SWIFT Managing editor: Alan Rowan, SWIFT Sibos Issues is written and produced by Asset International on behalf of SWIFT Advertising contact: Stephanie Gerniers, SWIFT; [email protected]; +32 2 655 4734 Printed by Innovative Print Solutions Pte Ltd Legal notice: SWIFT © 2015 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.

Sibos, powered by SWIFT. Sibos Issues 1 www.sibos.com www.swift.com CONTENTS

PUBLISHER’S PAYMENTS LETTER The payments Something for conundrum everyone page 33 page 1 SECURITIES FUTURE OF MONEY Firms plot route out “We’re all in this of perfect storm together.” page 36 page 4 COMPLIANCE FORUM BIG ISSUE DEBATE: Banks, regulators INTERNET OF grapple with THINGS evolving challenges Reinventing banks page 38 for the digital age page 7 CORPORATE FORUM BIG ISSUE DEBATE: Singapore feels full DISRUPTION, force of trade winds GEOPOLITICS, AND page 41 FINANCE Responding to risk DIVERSITY page 10 Not just a numbers game BIG ISSUE DEBATE: page 44 RMB Not if, but when ASEAN page 14 Balancing act page 47 PLENARIES An industry ripe for SWIFT INSTITUTE transformation Finance under the page 18 microscope page 50 MARKET INFRASTRUCTURES WORKSHOPS FORUM Picture this Creativity behind page 52 the scenes page 21 GAME CHANGERS Are you ready for TECHNOLOGY the next great leap FORUM forward? Getting relevant, page 54 staying safe page 24 SIBOS 2015 SINGAPORE STANDARDS FORUM IN NUMBERS What’s the secret of Page 57 standards success? page 27

INNOTRIBE Reaching for a digital future page 30

Sibos, powered by SWIFT. Sibos Issues 2 www.sibos.com www.swift.com Wondering where Sibos is next year? (Here‘s a subtle hint.)

As one of Switzerland’s finest exporters of quality services, we are delighted that Sibos 2016 moves to our neck of the woods (and lakes and mountains…!).

And we look forward to welcoming all of you to what will certainly be a brilliant Sibos in Geneva.

See you next year!

Securities Services FUTURE OF MONEY We’re all in this together. Digital innovation can transform credit provision – but only if solution providers collaborate to embrace real-world change.

“What is the next big trend in our lives? The next big disruption will be at the heart of the finance industry, which is credit,” said Udayan Goyal, co-founder and co-managing partner, Apis Partners, opening Innotribe’s 2015 ‘Future of Money’ session. To ensure a ‘crossfire’ of ideas on the future of credit, the speaker panel was split between bankers and ‘disruptive’ technology providers, who were placed on either side of a packed conference room. “The people you see on this stage are fundamentally disrupting credit, but the big pools of capital sit within the global institutions,” said Goyal referring to panellists on the other side of the room. But was this about the disruption or the are starting to engage in this industry, we Rules of engagement transformation of credit assessment and have Google, Amazon, Apple. Standing still provision? Goyal went on to propose “co- is not an option,” said Goyal. What is needed A number of messages were emphasised opetition” as a model for the future – the – and what the session amply delivered – is throughout the session: bankers need to idea that we can compete and collaborate not so much a confrontation, as active and work together and together with innovative at the same time. “There are innovators on creative engagement between very different startups (and with others, such as telcos); both sides who are making that happen. Also, actors and speakers, all with substantive bankers also need to recognise that they outside this room, there are the telcos, who contributions to make. can be innovators too. And innovators need

Sibos, powered by SWIFT. Sibos Issues 4 www.sibos.com www.swift.com FUTURE OF MONEY

There is a need for collaboration between the various actors, not just startups and banks, but also governments and regulators, incubators and tech channels.

Claire Calmejane, director of innovation, Lloyds Banking Group

to recognise that they need banks as much company, figuring out who to partner with, as banks need them, not least because who to learn from, who to invest in, who to banks offer scale. Claire Calmejane, director partner with in strong or weak networks, of innovation at Lloyds Banking Group, you may be missing the boat.” said: “We have a strong view about the We have to work together, possibly with need for collaboration between the various unexpected partners, possibly in unfamiliar actors, not just startups and banks, but also ways. But work together on what? “It’s governments and regulators, incubators really about data and analytics, and it’s and tech channels such as Google and about committing a lot of resources, and Facebook.” In short, we’re all in this if you’re not focused on that, you’re together. Steve Ellis, group head, innovation not going to be relevant in five years, group, Wells Fargo, said: “The smartest perhaps even in three,” Ellis added. By people in the world don’t work for your this mid-point in the session, delegates company. If you’re not looking outside your had already heard short presentations

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Sibos,SOGE_1509_SIBOS_ISSUE_WARP_UP_GTB_SGSS_180x118.indd powered by SWIFT. 1 Sibos Issues 5 www.sibos.com www.swift.com22/09/2015 12:04 FUTURE OF MONEY

hard part is not making the loan; the hard part is getting the money back.” And that was where the creative engagement really broke out. The innovators asserted the Partnering is the way ability of their credit-scoring methodologies that this will play to correlate behaviour with a tendency towards repayment; the global bankers then out, probably more led the discussion on the full range of issues than you think. that will have to be addressed prior to the banking industry’s widespread conversion Steve Ellis, group head, innovation group, Wells Fargo to the tech-enabled future for credit scoring. There were contributions from Neal Cross, chief innovation officer at S an, eda told, could be applied to small- to medium- Glyptis, head of EMEA Innovation Centre, sized enterprises, retail customers and Mellon, nu atwardhan, gloal chief even those currently excluded from credit. innovation officer, Standard hartered an, iscussing the typically moile-owning and Angus Scott, head of product strategy unaned, who y definition cannot offer and innovation at Euroclear. SWIFT’s any credit history, oo Malolos, managing eirandt also triggered an important director for Asia at credit-scoring solutions discussion with the simple question: “Are we provider ignifi, said “e gather rich data allowed to use all this data?” on how individuals use their phones, when they send an SMS, when they call, for how Beyond innovation long, how often they recharge. With that, we use machine-learning algorithms to develop This was a session that went beyond from the innovative technology-based behavioural models as a basis for credit innovation. elegates heard practical, real- service providers about new data-driven scoring.” s Malolos pointed out, ignifi’s world discussion around: privacy issues; approaches to credit. Notably, we heard methodology rests on its own relationships regulatory blocks to change; prospects for that technology could not only bring new with telcos, as well as on individuals’ policy/governmental buy-in to what the efficiencies, ut could also e customer- relationships with telcos. future of money could be; legacy issues friendly. Alexander Graubner-Mueller, The use cases were convincing; around technology, process and products founder and CTO, Kreditech, said: “From a these innovators are already developing already held by customers. We were also customer point of view, it is very painful to commercial relationships and have already reminded that innovation isn’t ust the apply for credit. It’s hard to explain why the raised significant finance. ottfried preserve of startups. In his closing remarks, process and the documents are necessary eirandt, , SF, sitting among the addressed to the innovators, Ellis said: when the customer can buy anything online innovators, capped their presentations “Online banking was created by banks, and so very simply.” with a challenge. eirandt said “he was mobile. The behaviour analysis you’re For Kreditech, a simple, pain-free credit doing is very interesting, as is using data in application process can be achieved via the brand-new ways, but I think partnering is the use of big data for credit scoring. Graubner- way that this will play out, probably more Mueller said: “We use machine learning to than you think.” The startups are making work out which of up to 20,000 data points a valuable contribution, but the future have predictive power.” The application of will arrive at a pace dictated by the banks’ big data to credit scoring, delegates were ability to address their real-world issues, he suggested. At the outset, via a short video presentation, we had been warned of the “massive advances in technology, coupled with a profound cultural shift” in the years We use machine ahead. y mid-session, it was clear that learning to work both banks and startups were engaging very actively with that challenge. y the out which of up to end, the speakers on the two sides of the ’crossfire’ had pretty much hammered out a 20,000 data points way forward. Ellis concluded: “Hundreds of have predictive millions of customers are looking towards the future. That future is probably going power. to be much more of a blend than we’ve Alexander Graubner-Mueller, founder and CTO, Kreditech thought.” n

Sibos, powered by SWIFT. Sibos Issues 6 www.sibos.com www.swift.com BIG ISSUE DEBATE – INTERNET OF THINGS Reinventing banks for the digital age Banks must transfer the trust of traditional client relationships to the virtual world, while s develop new partnerships, internally and externally.

How should banks respond to the rise of smart internet-connected devices? And are their core platforms fit for the challenges of the digital age hese were among

the business-critical questions posed by Cathy Bessant, moderator Cathy Bessant, chief operations chief operations and and technology officer, an of merica technology officer, Bank of America Merrill Merrill Lynch, to some of the industry’s most Lynch senior technologists in the first ig ssue Debate of Sibos 2015. ith nearly five illion devices already connected – a number that could increase five-fold y the end of the decade the so-called nternet of hings is changing how business is done and how lives are lived, Sios delegates were told as the lights went up in the plenary room. f no single, clear answer or formula emerged during the next minutes, the wide-ranging discussion served to highlight the scale of the challenge that faces ans’ chief information officers s in eeping pace with the advance of digital commerce. “he nternet of hings is a huge opportunity for the financial services industry ut we have to do it right. From a customer perspective, connected devices and businesses have to be secure, reliable

Sibos, powered by SWIFT. Sibos Issues 7 www.sibos.com www.swift.com BIG ISSUE DEBATE – INTERNET OF THINGS

As banks, we have to erae finte because there are a lot of valuable ideas that we can make scalable and reliable.

Oliver Bussmann, group CIO, UBS

and trusted, so we have to think very banking with no downtime will put a lot of “As banks, we have to take ourselves carefully about how we handle this,” said stress on our ecosystem. The whole way of out of the black box where we can protect Oliver Bussmann, group CIO at UBS. working within a bank will have to change to everything and emrace fintech, ecause keep pace,” he said. there are a lot of valuable ideas that we can Wired for success Most banks agree that this transition make scalable and reliable in our world,” said can’t e achieved in isolation, and financial Bussmann. For all service providers, the advent of technology providers are expected to play a As in any business, hiring the right people the Internet of Things ultimately means key role in coming up with innovations and will be critical to success, but that doesn’t embracing new and enhanced ways of testing new concepts on the industry. mean simply poaching smart technologists connecting with customers, as those Patrick Maes, ANZ Bank’s chief technology from rival banks. In fact, panellists agreed customers adopt a widening range of smart officer and general manager for strategy there is a need to source talent from other devices. In a banking context, that means and planning, global technology services industries and create a multi-disciplinary finding ways to transfer the trust that comes and operations, said the Australian bank talent pool. with a physical business relationship into the is building a series of partnerships with Gorriz, who joined Standard Chartered virtual world. universities, incuation centres and fintechs from the automotive industry earlier this “In the past, trust was always built through to solve some of the digital challenges it faces. year, having previously been CIO at Daimler, personal relationships, but this concept is “I don’t think any bank in the world can said business domain knowledge is even not sustainable because it doesn’t scale and call itself a digital bank yet – there are more important than technical knowledge people are no longer so fixated on people. fundamental problems we have to deal with if a bank wants to attract a broad variety of There is now a different element of trust such as security and 100% availability before commercial customers. we have to uild, which is the fulfilment we become a digital industry. We need to The role of the CIO itself is also changing of expectations – our customers expect collaorate with fintechs and academics if as banks typically expect their technology reliability in technology and are willing to we are to solve these problems,” said Maes. and information functions to drive the digital pay for it,” said Michael Gorriz, group CIO at transformation. While the CIO would still Standard Chartered. Culture of innovation retain the functional role of managing a nsuring a sufficient level of bank’s IT architecture, he or she must also technological reliability in a banking system he culture of innovation among fintechs now deliver transformative change. that has historically operated through and their willingness to test multiple ideas “The IT function is the backbone of the human interaction is an almighty challenge is something from which banks could bank and we have a huge responsibility to that could involve rewiring the entire learn, Gorriz added. In an environment in make sure everything runs smoothly. But infrastructure, Gorriz added. which everyone is measured against key we also have to be change agents, which “No one knows what the future will performance indicators, it is difficult to means understanding regulatory and bring – which devices will be wired and which recognise the merits of testing a new idea technology changes in the ecosystem and transactions will be done by these wired unless it has been proven to be commercially translating that into our business,” said devices – but the notion of real-time, 24/7 successful. Bussmann.

Sibos, powered by SWIFT. Sibos Issues 8 www.sibos.com www.swift.com BIG ISSUE DEBATE – INTERNET OF THINGS

The role of the IT organisation is helping the individual businesses build the apps and the customer experience they need.

Patrick Maes, chief technology officer, an

Open dialogue

n open dialogue etween technology and organisation is not so much about doing the the extent that they could even explain the usiness functions is critical to achieving any technical wor, ut helping the individual business or IT strategy to their children. ind of transformation, panellists oserved. businesses build the apps and the customer “I ask my business people to understand While banks might historically have operated experience they need. That’s a completely the IT investment plan in detail, and on the with a clear set of expectations aout how a different way of woring,” said Maes. flipside we have to understand the usiness ring-fenced department should support the t Standard hartered, orri elieves the plan the regions in which we an and the usiness, that mode of operation is changing. relationship etween usiness and can only customer segments we serve. f that wors, “More is now eing done y the e truly productive if oth functions tae the everyone owns the plan together and we can usiness itself, and the role of the time to properly understand the other – to wor towards the same target,” said orri. n

The notion of real- time, 24/7 banking with no downtime will put a lot of stress on our ecosystem.

Michael Gorriz, group CIO, Standard Chartered

Sibos, powered by SWIFT. Sibos Issues 9 www.sibos.com www.swift.com BIG ISSUE DEBATE – DISRUPTION, GEOPOLITICS, AND FINANCE Responding to risk In a world full of risks, how should banks take account of the forces that are reshaping their operating environment?

The combined weight of lower revenues, higher expenses and capital constraints are putting tremendous pressure on financial institutions, according to a former senior banker and leading technologist. In a panel discussion designed to identify and examine the major threats – regulatory, geo-political and technological – to individual institutions and the industry as a whole, the collective impact of post-financial crisis regulatory reforms was deemed the most significant ris, aleit with warnings on the need for banks to retain strategic and operational flexiility to account for disruption from other sources. Returns at risk

lythe Masters, former chief financial officer of JP Morgan’s investment bank and now CEO of Digital Asset Holdings, told delegates at this year’s Sibos conference that banks face a “persistent downturn” in their rates of return on equity (ROE). Noting that banks’ ROE levels are as much as 30-40% below pre-crisis levels, Masters said: “Even the world’s est gloal financial institutions are not generating long-term rates of return on equity that exceed their marginal cost of raising capital. That is not a sustainable situation. We are in a low revenue-generating environment: relatively low interest rates and Any ‘c-suite’ executive is faced with an credit spreads, and there are no opportunities ierative o findin as to irove for proprietary trading or principal investing.” Masters said that the high and rising cost levels. environment was in part due to the challenge Blythe Masters, CEO, Digital Asset Holdings

Sibos, powered by SWIFT. Sibos Issues 10 www.sibos.com www.swift.com BIG ISSUE DEBATE – DISRUPTION, GEOPOLITICS, AND FINANCE

You have to put this in the context of the US-China relations … The chemistry between Obama and Xi Jinping is quite good.

Wu Jianmin, member of the foreign policy advisory group, Chinese Foreign Ministry

of complying with increased regulation, president paid a state visit to the US recently coming 12 months, adding that awareness of singling out increased capital requirements and it was a very successful visit. cyber-security threats was inadequate. “The among the many reforms implemented since “The chemistry between the two leaders world is vulnerable. There is the possibility . “ny ‘c-suite’ executive is faced with (US President Barack Obama and Xi Jinping, that a really clever lone wolf might get an imperative of finding ways to improve president of China) is quite good. Against lucky and do tremendous damage just ROE levels. That [challenge] and the fear of such a backdrop, the danger you mentioned for kicks. Secondly, there is the organised cyber-attack and the resultant operational and the possibility of a miscalculation – I cyber-attacks and cyber-espionage that instability are probably the two most don’t believe it.” all sides indulge in to varying degrees,” he pressing issues eing faced y maor firms,” Furthermore, Ambassador Wu said said, speaking a matter of days before she said. observers should not be overly worried UK telecoms group Talk Talk admitted to about the stability of the Chinese economy, a cyber-security breach that could put Balance of power which has come under scrutiny this year due customers’ credit card details at risk. to slowing GDP growth levels and high levels Noting the involvement of state actors hile there are many potential flashpoints of government det. He said “t the national and terrorist organisations in cyber-security across the globe, the international relations day reception on September 30, when three breaches, Guest highlighted that a “cyber agenda continues to be dominated by the quarters of the year were already over, my ” could still e a matter of significance. He gradual shift of geo-political influence prime minister said China’s growth rate said: “It is nothing like having bombs dropped toward China, as it supersedes the United would be around 7%. Compared to double on you or a real shooting war, but we haven’t States as the world’s largest economy. digit growth, it’s not too bad. People tend to worked out what the rules of the game are as Panel chairman and Financial Times chief exaggerate hina’s economic prolems.” we don’t yet have a cyber Geneva convention.” foreign affairs columnist Gideon Rachman asked Wu Jianmin, member of the foreign Vulnerable to attack? Harnessing blockchain policy advisory group to the Chinese Foreign Ministry and former ambassador to Masters’ comments on the risks to the Masters whose firm is developing solutions the United Nations in New York, whether financial services industry from cyer- based on cryptographic techniques and developments in the South China Sea could attacks were echoed on the platform. distributed ledger technology to tackle ecome a significant source of political Fellow Big Issue Debate panellist Robert inefficiencies in existing financial marets tension between the two countries. Guest, foreign editor of The Economist, told processes – also sought to dispel some of He said “ thin you have to put this in delegates that managing cyber-risks was the myths on the potential impact of new the context of the S-hina relations. My likely to be a big source of tension over the technologies.

Sibos, powered by SWIFT. Sibos Issues 11 www.sibos.com www.swift.com BIG ISSUE DEBATE – DISRUPTION, GEOPOLITICS, AND FINANCE

We haven’t worked out what the rules of the game are; we don’t yet have a cyber Geneva convention.

Robert Guest, foreign editor, The Economist

Blockchain, or distributed ledger Masters said it was important to Blockchain could have huge implications technology, has been repeatedly labelled distinguish between the origins of a for how companies keep records of as disruptive, but Masters said while, technology and how it is likely to be deployed financial transactions ecause they would inevitably, there will be newcomers who within the financial services industry more now be able to share a common prime gain market share by taking advantage roadly. “here isn’t a maor financial record without worrying about security of technology, that isn’t what necessarily institution that hasn’t begun to devote or accuracy risk. This has implications not constitutes the disruption. She said: “In considerable resources to this. If you put only for how financial transactions are this context, the disruption really means aside the origins of this technology (the conducted, Masters suggested, but also maor changes in the way in which firms development of crypto-currencies) and how they’re regulated. “As the potential operate their businesses. In that sense, what instead think about the underlying technology for the deployment of the technology we are seeing in terms of the evolution of to create a kind of payment mechanism, has become more widely understood, technology in financial services is a very then you realise that the fuss was all about regulators are becoming quite enthused eneficial thing.” something very asic,” she explained. aout its potential,” she said. n

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United Overseas Bank Limited Co. Reg. No. 193500026Z BIG ISSUE DEBATE – RMB Not if, but when S inclusion and capital account flexiility are the next big steps on the world stage for the Chinese currency.

The internationalisation of the renminbi (RMB) is a long-term project, a transformation that will continue to take place over a number of years, guided by very deliberate and carefully calibrated adjustments in policy by the Chinese authorities. This gradualism does not mae the shift any less significant for the gloal economic and financial infrastructure, and it seemed highly appropriate that the closing set-piece debate at this year’s Sibos should consider the RMB’s current position on its journey and its mid-term future. The RMB had moved into fourth place in the ranings of volumes of financial transactions by currency, replacing the Japanese yen, according to SWIFT data from August. Although it has since slipped ac into fifth position, ehind the yen, estimates are that RMB-denominated assets worldwide could increase by USD1 trillion, if China succeeds in having its currency recognised by the International Monetary Fund (IMF) as a reserve currency and invited into the Special Drawing Joining the club Reserve (SDR) ‘basket’. The IMF is currently reconsidering China’s bid, having previously anellists at Sios ’s final ig ssue basket?’ The answer is yes. Is the IMF is a declined to grant reserve status. Debate, ‘Remnimbi: the Real Game Changer’, lender? Is the world going through a cyclical The Chinese government has taken a were unanimous in their expectation the depression? Yes. Will the IMF need more variety of steps in recent months, not just current bid would be successful. funds? Yes. Will the US Congress allow more to adjust its currency management regime, Dr Andrew Sheng, a distinguished fellow of US funds for the IMF? Maybe. So it’s very but also to liberalise several aspects of its the Asia Global Institute, a think-tank jointly important that the RMB joins the reserve club. financial service industry, to enale easier founded by the Fung Global Institute and the The People’s Bank [of China] is willing to give access to Chinese securities to overseas University of Hong Kong, said: “The question RMB to support special programmes. I’d be investors. is, ‘Does the world need the RMB to join the very worried if the RMB doesn’t join the club.”

Sibos, powered by SWIFT. Sibos Issues 14 www.sibos.com www.swift.com BIG ISSUE DEBATE – RMB

Does the world need the RMB to join the basket? Yes.

Dr Andrew Sheng, distinguished fellow, Asia Global Institute

was inevitable, and also agreed that further structural adjustments would need to be taken by China. Amol Gupte, regional head of treasury and trade solutions for Asia- acific at iti, said deeper offshore marets and further easing of capital controls will be critical. “Most indications point to the IMF including the RMB into the basket; and I believe that having greater capital account flexiility will aid in this process. f people go into a currency, the ability to get out of it will be important to them. That’s what a reserve currency is. This is the start of the journey and I believe we will get there.” He added: “Developing deeper offshore bond markets will also be key to helping investors find a range of asset opportunities.”

The fact that the United States has perspective? Absolutely. It is widely used and Gathering pace? already said it would not object to the I’m quite convinced that there’ll be a whole move, Sheng added, provides a significant raft of measures that the Chinese will do to Panellists also considered the timing and indication the IMF is ready to accept RMB. mae sure that the right oxes are ticed the means of increasing capital account “The US won’t object, if the IMF doesn’t and the RMB will join the IMF’s basket.” flexiility. avid iao, president and object,” he said. “China is a USD 10 trillion Fellow panellists concurred with Sheng China, HSBC, said: “Categorically ‘yes’ to economy, The RMB is a major currency. For that RMB participation in the SDR basket should and will the IMF allow RMB into RMB to join the SDR basket, 70% have to vote in favour. “The IMF considers the RMB from a ‘freely usale’ perspective, and an export perspective. s it satisfied from an export

Developing deeper offshore bond markets will also be key to helping investors find a range of asset opportunities.

Amol Gupte, regional head of treasury and trade solutions for sia-acific, iti

Sibos, powered by SWIFT. Sibos Issues 15 www.sibos.com www.swift.com BIG ISSUE DEBATE – RMB

If you open up the debt market, you will be allowing long-only, stable liquidity into China.

David Liao, president and CEO – China, HSBC

“We wanted to see how the market will react to the RMB depreciation. It was panic. That’s why the opening up of our capital account cannot be done all at once,” he said. “We’re not in a rush to open the capital account. It should be a controlled process. A lot of people say, ‘If you want this, you have to open up your capital account’. But the SDR basket.” But he reiterated the an economy stands in the world. It really it’s not up to the IMF or anyone else. It’s “imminent need to open up” China’s capital should e reflected in that importance. lot our government that controls it. If we can’t account, suggesting that – despite recent of central banks would want that legitimacy control it, then we won’t do it.” equity market volatility – prompt action was from the SDR, to let them hold RMB.” Chen nevertheless agreed with his fellow required to open up the capital account in However, Chen Wen Yi, deputy general panellists that it is “logical” for the RMB to a manner that would allow the balancing of manager, global trade services, Bank of join the IMF’s SDR basket as part of China’s capital flows. China, sounded a note of caution on the growing participation in global economic “Global investors are generally timing of changes to China’s capital account and financial maret infrastructures. underweight on China, because of the policies. He said the Chinese government “efinitely the MF will and should allow the access issues. If you open up the debt is unlikely to move too fast towards such RMB into the SDR basket,” he said. “China market, you will be allowing long-only, liberalisation, especially following the doesn’t want to demand. China wants to stable liquidity into China,” said Liao. “The market reaction to its devaluation of the collaborate. We want to play together, to Shanghai-Hong Kong Stock Connect is not a RMB earlier this year. develop together.” n bad way to open up equity investment, but that could be widened. For the bond market, the major access is currently by central banks. That should open up wider.” Liao anticipates such a move by the Chinese authorities to allow “more stable, long term money into the Chinese bond market” as early as next year, and concluded: “You need a currency to represent where

Opening up our capital account cannot be done all at once.

Chen Wen Yi, deputy general manager, global trade services, Bank of China

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5895 DandH 248x180mm Ad 1st.indd 1 10/11/2015 11:03AM PLENARIES An industry ripe for transformation The message from Singapore is that the future is bright for those that embrace innovation and collaboration.

Sibos 2015 was ‘bookended’ by speeches from two pillars of the local banking community who share a global perspective and a belief in the power of technology. While Piyush Gupta, CEO of DBS Group, opened this year’s conference by urging banks to better understand how technology is changing their clients’ expectations, Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), closed it by outlining how Singapore intends to harness technology innovation to ensure it would maintain its position as a gloal finance hu. From different angles, both speakers also acknowledged the macro-economic and demographic shifts that are tipping the global balance of power toward Asia. The rise of China, the increasing integration of ASEAN member states, and the growth of spending power of Asia’s middle class require a response from banks and estalished finance centres alie. hat response will be more effective and more relevant to customers by fully leveraging the tools and the collaborative ethos of the digital age. Transformation, not disruption

We are still on the cusp of the Asian Gupta impressed many delegates with his grasp of detail and statistics, but it was century. his over-arching message that may last Piyush Gupta, CEO, DBS Group longer in the memory. Current macro-

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Common standards and seamless data sharing are in the spirit of openness and collaboration.

Ravi Menon, managing director, Monetary Authority of Singapore

economic headwinds are real and may lead ‘Singles Day’, Chinese internet giant Alibaba’s banking sector – trust, responsibility for and to setbacks, “but we are still on the cusp of equivalent of Cyber Monday, outsold its US expertise in operational infrastructure, risk the Asian century”, he declared, pointing fore-runner by four times. Gupta further management skills and the platform for to three “immutable” mega-trends that underlined the combined power of branding collaboration by SWIFT – leave banks well- would drive the region relentlessly forward and innovation by noting that a mutual fund equipped to deliver in the digital age, he said. in the coming decades: demographic launched by Alibaba was the world’s fourth Paving the way for his Singaporean peer, growth; infrastructure development and largest after just eight months, despite no Gupta closed with a few words on the future urbanisation; and market integration, ‘bricks and mortar’ presence. of his hometown in the digital age. Having notably across the ASEAN countries. He then offered five examples of amply delivered on its founding vision of In particular, the dynamism of technology driven change that would force creating a first-world infrastructure in a demographic growth would, said Gupta, would banks to reassess how to add value to clients third-world environment, how would this “propel Asia from being the factory of the – the higher volumes and personalised “very unlikely nation” thrive now that many world to increasingly being the marketplace experience of mobile technology, the others have done the same? That same of the world”. And don’t worry about China: inclusion of the sharing economy, the combination of strategy, discipline, execution its economy is already so large that it will still potential insights and analysis from big and raw human spirit would be harnessed to be effectively putting an economy the size data, the capacity opportunities of cloud create “the world’s first truly smart nation”, Germany on the map every 4.5 years, even at computing and the transparency offered asserted Gupta, leaving us a few short days reduced rates of GDP growth. In this context by distributed databases. These should be to anticipate Menon’s blueprint. of shifting economic power, how best should opportunities not threats to banks, or, in banks serve their clients? Gupta’s terms, forces of transformation Seamless, interoperable For one, they should realise that their not disruption. Yes, the changes effected and open biggest growth opportunities lie with digital by these innovations will be profound and natives. This is especially true in Asia, perhaps unsettling, but “the best placed “Innovation and technology will be critical where the average age of the population is people to be able to make this change and to the future growth and success of 28, compared to 36 and 39 in the US and to leverage this change are the people in Singapore’s financial sector,” Menon told the Europe respectively. Their willingness to this room”, insisted Gupta. The skills and closing plenary, as he outlined MAS’s plan transact online is reflected in the fact that capabilities of a mature and sophisticated for a ‘smart financial centre’. For Menon,

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smart means a commitment to innovation, someone via their email address, social submission could support seamless data demonstrated by S$225 million investment network account or other proxies. sharing. By allowing systems to interact that MS will mae over the next five years, Alongside use of common standards, without human intervention, APIs allow under the Financial Sector Technology and Menon saw seamless data sharing and open users to seamlessly merge multiple data nnovation Scheme. More specifically, it APIs as critical architecture underpinning sets from different sources into a single rich means creating a seamless, interoperable a smart financial centre. “e must get data set. Open APIs will soon allow corporate and open infrastructure for that delivers the basics right in data management,” he clients to process payments without human easy access to financial services. remared. ith more data eing collected intervention, while MAS has plans to use Some of the building blocks are already every day and more powerful tools being open APIs to reduce the cost of regulatory in place. Singapore boasts a 24/7 instant developed to analyse and interpret it, banks reporting. “ur vision is for data to flow payments platform based on ISO 20022 and other financial service providers need seamlessly in both directions between message standards which delivers services to ensure their data is clean, efficiently systems in the financial institutions and from 19 banks. FAST (from ‘fast and secure aggregated and intelligible – “machine- MAS,” said Menon. transfers’) is already mobile, instantaneous readable as well as machine-usable” – to Of the many lessons that delegates from and ubiquitous, and its use of ISO 20022 better understand and respond to evolving across the banking industry could take means the proliferation of digital wallets and client needs. home from Singapore, Menon reiterated just other services has avoided the frustrations Menon acknowledged more effective one: embracing innovation and technology of fragmentation. But plans are afoot to data analysis comes at a cost. “One way to is insufficient. “hat is more important is make it even more convenient. “Participating improve access to data without raising costs the spirit of openness and collaboration. banks are studying a mobile addressing significantly would e for the industry to Common standards and seamless data system. This means that you will be able to pool relevant data together,” he explained. sharing are in this spirit,” he asserted. “They make payments through FAST as long as hile concerns over confidentiality and will enale us to maximise the enefits you know the payee’s mobile number,” said market sensitivity have held back data of digital and mobile technologies, reap Menon, who then called for an all-in-one sharing among financial institutions, Menon enormous cost efficiencies and extend our addressingDoremus system Deutsche that allows Bank users Sibos to pay Issues argued118x180mm that wider 302633 use of openProof APIs 02 for08-09-2015 data reach and understanding.” n

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Sibos, powered by SWIFT. Sibos Issues 20 www.sibos.com www.swift.com MARKET INFRASTRUCTURES FORUM Creativity behind the scenes Innovation abounds in multiple markets as infrastructure operators respond to regulatory reform and customer demand.

This year’s Market Infrastructures Forum touched on numerous issues facing infrastructure providers and users, from the potential implications of Europe’s TARGET2- Securities (T2S) through to the evolution of payments and securities markets across the sia-acific region. ey running theme was that innovation in the market infrastructure space could most often be found beyond the headline-grabbing claims made on behalf of disruptive technologies. In a panel on innovation in securities market infrastructures, Euroclear CEO Tim Howell said many observers failed to appreciate the sheer scale of innovation currently being undertaken in the sector. “We’ve been innovating more in the sense of continuously improving ourselves, rather than the sort of disruptive innovation that people typically think of,” he explained. The roles and responsibilities of market infrastructure operators and the high barriers to entry mean central securities depositories and central counterparties are unlikely to experience the kind of challenges from disruptive innovators faced by banks, added Howell, but that does not mean the When a market infrastructure innovates, it sector is standing still. pushes everyone to develop new products Innovation begets and services based on the improved innovation infrastructure. Numerous examples of ongoing innovation, GV Nageswara Rao, CEO, National Securities Depository of India whereby market infrastructure operators are constantly evolving their services, were evident throughout the Market revenue possibilities for Indian institutions. In the opening session of the forum, Calvin Infrastructure Forum. “The Indian payments system was managed Tai head of global clearing (Asia), at Hong AP Hota, managing director and CEO of by the central bank until 2010,” he said. Kong Exchanges and Clearing, explained the National Payments Corporation of India “When NPCI was set up it began dealing with how the launch of the Shanghai-Hong Kong (NPCI) detailed how migrating responsibility retail payments as a not-for-profit monopoly Stock Connect in November 2014 had led to for retail payments market infrastructure and was able to extend card payments ongoing efforts by the exchange to adapt from the Reserve Bank of India to a dedicated considerably. We went from having 54 banks to the influx of demand for trading hinese organisation has opened up new service and offering card payments to over 500 today.” securities. “In China there are no failed

Sibos, powered by SWIFT. Sibos Issues 21 www.sibos.com www.swift.com MARKET INFRASTRUCTURES FORUM

In China there are no failed transactions, so we’re enhancing Hong Kong’s systems to deal with this.

Calvin Tai, head of global clearing (Asia), Hong Kong Exchanges and Clearing

transactions, so we’re enhancing Hong Kong’s technology. NPP already has 12 banks their stakeholders. The enhanced role of systems to deal with this. We are looking at involved and, following an agreement on maret infrastructures since the financial making changes in areas such as pre-trade the implementation approach, will focus on crisis, the risk of data corruption and the checking and risk management systems to building during 2016, testing in 2017, and a ever-increasing threat of cyber-crime ensure we don’t share member losses at the go-live date expected in late 2017. are just some of the reasons justifying central counterparty level,” Tai said. The Australian model is seen as being additional investment in resilience and The Market Infrastructures Forum also particularly innovative as banks will be able operational excellence. A key theme of the heard from Paul Lahiff, chairman of the to use the NPP as a service layer. Effectively, panel discussion was the use of innovative New Payments Platform (NPP) Australia, this will provide a platform on which banks solutions such as ‘non-similar facilities’ which is responsible for coordinating the can construct and deliver a range of new to expand and reinforce the resilience of introduction of real-time payments across real-time products and services. In theory, all market infrastructures in a cost-effective the country. While real-time payments ans using will e ale to significantly manner. Panellists also discussed the lessons already exist in a number of jurisdictions, the enhance their offerings to consumers. that could be learnt from other industries – Australian project, which is being introduced One of the most popular MI Forum military, aviation, energy and healthcare – in in conjunction with SWIFT, is seen as one of sessions was Monday morning’s exploration which complex infrastructures need to be the most forward-looking, due to its ability to of issues relating to operational resilience, protected from multiple operational threats, support a wide range of future services and reflecting the rising importance of this area while delivering a range of critical services to its use of ISO 20022 and SWIFT messaging for market infrastructure providers and a diverse client base.

T2S enables us to mobilise collateral in Europe, but it could also enable other jurisdictions to access Europe in a better way.

Mattias Papenfuß, chief operating officer, learstream

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T2S to go global? investors more efficient solutions and allow Securities epository of ndia, that an development of new products,” he added. important role for maret infrastructures Meanwhile, down on the Sibos exhibition ould S provide the impetus for other was the facilitation of innovation among floor, delegates at an open forum heard regions around the world to implement their payments and securities service providers. how one of the world’s most amitious own harmonisation reform “S is a uniue “he whole maret can only innovate infrastructure proects in recent years, the solution for a specific situation in a particular when maret infrastructure gets involved,” S pan-uropean securities settlement region,” said apenfu. “ther regions might he said. “hen a maret infrastructure platform, initiated y the uropean entral need different ideas and we can’t see S as innovates, it pushes everyone to develop new an , could offer enefits to maret a one-sie-fits-all solution.” products and services ased on the improved participants eyond its home continent. ac in the formal conference sessions, infrastructure.” Fellow panellists agreed that Mattias apenfu, chief operating officer of oard memer ves Mersch was also y developing new technologies and new learstream, said “S enales us to moilise positive aout the potential for the S ways of interacting with maret participants, collateral in urope, ut it could also enale model to inspire other regions to create an maret infrastructure operators will continue other urisdictions to access urope in a etter integrated settlement platform as a asis to have a maor influence on how payments way.” apenfu added that Ss had a role for offering greater efficiency to investors, and securities service providers innovate to to play in providing services to ring S’s during his session with SF the enefit of end-users. enefits to the international maretplace. S ottfried eirandt. oth far-reaching regulatory change will first extend eyond the core euro-one and the pursuit of greater operational countries to northern urope, said ran Client support efficiencies y users have profound Fors, head of sales and maret development, implications for financial maret asset servicing, S. “enmar is already mong all the examples of maret infrastructures. hether at the operator or taing steps to oin S as a non-euro country infrastructure innovation, delegates service provider layer, the aility to support and potentially we could see orway and attending the Maret nfrastructures Forum and respond to innovation will e critical to Sweden oin y . n terms of enefits, were reminded y ageswara ao, the continued smooth running of payments greater uropean harmonisation will give managing director and of the ational and securities marets. n

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Sibos, powered by SWIFT. Sibos Issues 23 www.sibos.com www.swift.com TECHNOLOGY FORUM Getting relevant, staying safe Banks must deliver compelling technology-based services to the end-user, while also ensuring resilience and security in an age of cyber-crime.

We’ve all been there – waiting for an elevator among a crowd of strangers, all absorbed in their smartphones, checking their email, Facebook, Twitter, Instagram, or WhatsApp. That’s the scenario that Commerzbank group chief information officer Stephan Mueller asked delegates to consider at the packed Technology Forum on the first morning of Sios. t’s the acid test of relevance in a digital age, and a question Commerzbank has studied closely: how to penetrate the small group of apps that consumers access on a daily basis? “It’s very important that we become really relevant to the consumer on mobile devices – we have to be part of that space and deliver indispensable information and tools. When our customers wake in the morning, we need to be one of the apps they chec first,” said Mueller. For most banks, this is still a work in progress and it requires a multi-disciplinary approach that brings together innovative content and functionality with efficient and secure ac-office processes and identification mechanisms. he first step for oth users and providers may be to become more comfortable with the asic concept of digital identification. This extends beyond the use of usernames and passwords to access apps and websites, and into the more psychological domain of creating an online identity. As noted by Sean Gilchrist, managing director of commercial digital at Lloyds Banking Group, many of us use multiple identity documents for different processes in When our customers wake in the morning, the physical world, which typically allow us we need to be one of the apps they check to maintain a clear distinction between our social and professional lives. That distinction first doesn’t exist online. Stephan Mueller, group chief information officer, ommeran

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But this won’t evolve in a sustainable way through a single entity; it has to be a collaborative venture,” said Parmar. As game-changing as blockchain may ultimately turn out to be in the evolution of financial technology, few Sios delegates will have left the two-day Technology Forum in a wholly optimistic mood, as its agenda balanced discussion of opportunities offered by technology innovation with sobering analysis of the attendant threats. In particular, a number of sessions touched on the difficulties of maintaining constant availaility for users, as well as the impact of cyber-crime. While the need for 24x7 availability is now widely recognised, preventing downtime isn’t straightforward, as incidents are an inevitable consequence of rapid change to technology and infrastructure, which is one of the few constants in the digital world. Creating a culture that focuses on building resilience into applications from the outset is seen to be critical, as is managing capacity. “An important part of resiliency is capacity and scalability. Moving away from dedicated physical hardware for applications into a more virtualised environment is therefore essential. Banks need an elastic infrastructure that allows them to scale without compromising availability,” said Torsten Pull, CIO of core component An important part of resiliency is capacity technology for global transaction banking at and scalability. Deutsche Bank. Existential threat Torsten Pull, CIO of core component technology, global transaction banking, Deutsche Bank The prevalence of cyber-attack poses an “In the digital world, everything is much R3, which counts 22 banks as its members, even more menacing threat to system more accessible by everyone, and you can’t highlight the industry’s growing commitment availaility. ans and financial maret compartmentalise life as easily as in the to blockchain. infrastructures operate as part of large physical world. People are now becoming “The key question is how to get from and complex networks, so if cyber-crime much more protective of their data, and innovation to invention – we have been can compromise those networks by that’s where the challenge of digital identity looking at use cases for distributed ledgers, intercepting payments and transactions, really starts,” said Gilchrist. but they need to come with business cases. it poses a grave ris to financial staility, That’s quite challenging and it’s better to warned Coen Voormeulen, director of the From innovation to do it together as an industry rather than in cash and payment systems division at De invention isolation,” said Mueller of Commerzbank, one Nederlandsche Bank. of the R3 banks. “t’s very important that financial Inside many of the world’s largest banks, That view was shared by Rashik Parmar, institutions gather proper intelligence the rise of blockchain now consumes the lead cloud advisor for Europe at IBM, about cyber-threats, enhance their internal attention of technologists as the industry who argued that the centrally distributed testing and make sure they are in a position begins to explore the potential security and nature of blockchain could allow banks to to recover from integrity attacks quickly efficiency enefits that might e afforded y rebuild the transparency and trust that has and safely. In many cases, this needs more distributed ledger technology. been eroded from the banking sector in attention at the board level than it is getting,” While many banks have been conducting recent years. said Voormeulen. their own research, it is widely agreed that “Blockchain is really about taking any Here again, there could e enefits in banks need to work together to identify and process that spans multiple organisational greater collaboration and information- develop specific use cases for distriuted boundaries and creating a transparent, trust- sharing to combat the threat of cyber-attack. ledgers. New explorative consortia such as based ledger with a high level of security. Speakers and delegates shared the view

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Cyber-security is an existential threat if we don’t get it right.

Murray Walton, chief ris officer, Fiserv

that there is no competitive advantage to the coming wees. ut speaers at the who can come up with mechanisms to e gained from uilding stronger defences echnology Forum suggested that the properly price and model cyber-risk. than rivals, and that sharing details of even industry still has a long way to go to properly “e are the first generation of aners minor threats could pave the way to their understand and deal with the threat. to deal with this threat category and it’s an elimination. yer-resilience is not ust aout securing existential threat if we don’t get it right. f yer-ris has risen fast up the industry’s systems and sharing intelligence nor is it financial staility and customer confidence agenda in recent years to eep pace with only aout testing recovery mechanisms are eroded, and if the integrity of our evolving threats. n international group and maing sure usiness can’t e stalled channels cannot e fully trusted, then our of regulators chaired y oormeulen will for longer than a few hours. t also reuires industry ecomes something less than it has pulish detailed guidance on cyer-resilience new ways of thining aout technology and always een,” said Murray alton, chief ris for financial maret infrastructures in usiness, and the recruitment of experts officer at technology vendor Fiserv. n

Sibos, powered by SWIFT. Sibos Issues 26 www.sibos.com www.swift.com STANDARDS FORUM What’s the secret of standards Engagement with stakeholders is success? critical. Nell Campbell-Drake, vice-president, retail payments office, With so many ISO 20022 projects Federal Reserve Bank reaching implementation, the Standards Forum offered a timely opportunity to reassess tactics and strategy.

Over the four days of the Standards Forum For those that can remember the would certainly have seemed a luxury. at Sibos 2015, the four central themes of near impossibility of persuading senior Regulators mandating use of standards and regulation, harmonisation, implementation management of the business case for market infrastructures hard-wiring them and innovation took turns in the spotlight as greater use of standards, today’s challenges into market practice are signs of progress. standards practitioners wrestled with the task might e seen as a F first-world prolem. But speakers at this year’s Standards Forum of ensuring standards play their part in the A decade ago, the problem of harmonising underlined that the task ahead is mission- post-crisis reshaping of the banking industry. 80+ ISO 20022-based implementations critical: standards offer the banking industry

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ISO 20022 gave us the tools to overcome legacy system issues.

Michel Stubbe, head of financial operations services division, European Central Bank

a means of meeting post-crisis regulatory Common principles For entirely new projects, such as the requirements cost-effectively, as a well as European Central Bank’s (ECB) TARGET2- a platform on which to build new services, Too much consultation can stop a project Securities (T2S) single securities settlement such as real-time payments, and compete ever getting off the ground, too little means platform, there is no market practice to be with disruptive fintechs. f the opportunity is it fails to gain popular acceptance. But followed for many processes, giving those not grasped, banks could be hamstrung by if we can establish broad agreement on responsible for designing T2S relatively free reporting and other compliance challenges, market practice, we’re not starting from rein to create new best practice. From this while rivals usurp their client relationships. scratch with every implementation and we perspective, ISO 20022 serves as a platform Despite a growing recognition of the know we’re building on common principles, for innovation, bringing new capabilities such importance of standards, it still seemed which allow us (and those that follow) to as auto-collateralisation to participating appropriate on the opening morning in leverage the initial investment. To that markets. But Marc Bayle, chairman of Singapore to consider ‘Why standards should end, Tuesday’s ‘Standardising the standard: the T2S board, was also keen to point out be a boardroom topic’. Panellists asserted the need for global ISO 20022 market the scope for direct T2S participants to that the c-suite should understand the practice’ session asked delegates to join recoup their investment in ISO 20022 via power of standards as an enabling factor one of five roundtale discussions on the the standard’s expanding use in regulatory that can drive competition and innovation. best route to establishing a common basis reporting (e.g. under MiFID II) and data “Boards don’t want to talk about the lengths for the many ISO 20022 implementation analysis, leading to improved regulatory of message fields, ut they do care aout projects, current and planned, across oversight, potentially lower compliance competitive advantage,” said moderator the payments and securities sectors. costs and enhanced monitoring of system James Whittle, director of industry policy On the securities side, Axelle Wursmer, functionality and resilience. at Payments UK. But is board-level buy-in head of transversal projects and SWIFT In contrast to the ECB’s trail-blazing enough? Many stakeholders need to be coordination at BNP Paribas Securities use of ISO 20022, the US central bank will involved in any market infrastructure change Services, said market infrastructures were definitely e looing to leverage the S built on common standards. Gerald Lyons, strong drivers of harmonisation whose 20022 harmonisation principles followed by chairman of Payments UK, admitted that existing documentation often already laid other implementation projects, if and when Britain’s biggest payments user – the UK out market practice, while Bob Masina, it uses the standard following its present government – was rarely thought of as a head of technology and operations at the review of the US payments system. Nell client, while Alec Nacamuli, global payments Australian Payments Clearing Association, Campbell-Drake, vice-president at the retail executive at IBM, posited that neither but participating as a standards payments office of the Federal eserve an, technology providers nor major corporates practitioner, emphasised informal and said a stakeholder group was still in the were adequately consulted in the creation of formal dialogue and early engagement with process of assessing the merits of ISO 20022 the Single Euro Payments Area. stakeholders. for domestic US use – “engagement with

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stakeholders is critical” – but acknowledged the potential for the standard to support efforts to reduce cost, improve maintenance and testing schedules. Supporting regulatory objectives

While post-crisis reforms have leveraged standards to achieve greater oversight over previously opaque processes – notably the use of legal entity identifiers s in derivatives transaction reporting – Wednesday’s Standards Forum agenda showed the interplay between standards and regulation to e fluid and multifaceted. Derivatives reporting rules are subject to ongoing refinement to improve the uality of data collected by regulators, while the impending MiFID II will extend ISO 20022-based reporting to the vast majority of Europe’s securities transactions. But the ‘A little less conversation, a little more action’ session debated whether, beyond reporting requirements, a more prescriptive approach to standards would suit regulators’ purpose more effectively. As outlined by Jana istoria reators set ot te Mackintosh, manager at the UK Payments Systems Regulator, the UK is looking to reireents and e ond orseves enable open API-based access to the UK disoverin or on oeit in te banking system to enable payment service providers to offer innovative new services a e od and anae data

e.g. illing, reconciliation, an oective Mike Tagai, global market infrastructure executive for Asia, JP Morgan that could be achieved through use of ISO 20022, although not necessarily through the imposition of detailed technical requirements. This discussion was followed by two Brothers. “ISO 20022 gave us the tools to requirements present further opportunities presentations which highlighted the use of overcome legacy system issues. We can adapt for banks. “Historically, regulators set out standards to meet regulatory requirements the taxonomy to our own requirements, but the requirements and we found ourselves in a more traditional sense – one top-down, still use standard definitions,” explained discovering our own complexity in the way the other bottom-up – both illustrated ISO Michel Stue, head of financial operations we hold and manage data. Many institutions 20022’s ability to resolve diverse challenges. services division at the ECB. could exploit further efficiency in that According to Roman Chernov, executive discovery process,” he said. director, ROSSWIFT, a pilot scheme will start nfinised siness Leveraging standards in correspondent in Q4 2015 for an ISO 20022-based solution banking was an urgent need for several for cross-border currency transaction Thursday’s agenda took in the further delegates. he sense of unfinished central reporting, as a result of collaboration steps needed to improve reporting beyond business was heightened by a question between Russian banks and corporates. the contribution of LEIs, as well as the from the floor aout whether the Meanwhile in Q2 2016, the ECB plans to go challenges of adapting ISO 20022 to Harmonisation Charter signed earlier in live with a new reporting regime for euro- support the internationalisation of the RMB. the week would really achieve its objective denominated money market transactions, With such a wide sweep of topics covered of keeping the plethora of ISO 20022 thus providing critical market intelligence and consensus reached on future steps, implementation projects on the same on market activity and the effectiveness one might have expected a tone of self- page. It will help, said Siegfried Vonderau, of the implementation and transmission of congratulation in the closing panel, ‘Making head of TARGET2 and T2S services monetary policy in the euro area. The annual ISO 20022 work for you’. management at Deutsche Bundesbank, but money maret survey has proven insufficient Instead, there was a palpable sense of a coordinated release management regime since 2008, due to the impact on the much achieved, much more still to do. Mike for new versions of ISO 20022 would also European money market of new behaviours Tagai, global market infrastructure executive be welcome. At the Standards Forum, there in the wake of the collapse of Lehman for Asia at JP Morgan, said reporting is always work in progress. n

Sibos, powered by SWIFT. Sibos Issues 29 www.sibos.com www.swift.com INNOTRIBE Reaching for a digital future A week spent at Innotribe challenges ones assumptions, but reinforces belief in the power of technology – and people – to change the world for good.

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The first Monday of Sios was a record-reaing day for nnotrie. Standing room only at the opening session might not have raised an eyerow among nnotrie veterans, ut even with an overflow space there was not room to accommodate all that wanted to attend ‘ew ids on the locchain’. he ever-popular ‘Future of Money’ had already een moved to the largest availale conference room and is now ig enough to merit its own article, on page . “his is where exciting things happen” said Mario uino, principal, Mcinsey Solutions, addressing the opening session his forecast was to prove impressively accurate. nnotrie in Singapore egan with a message from last year’s closing eynote speaer, eter Hinssen “nnotrie is great, ut you need to e at the core of the discussions not on the side.” Faian andenreydt, head of marets management, nnotrie and the SF nstitute at SF, said “ow we are at the core of the exhiition and also at the core of the SF strategy. nnovation is Blockchains enable us to do something the usiness, it’s not an after-thought. t maes sense to design what you want to fundamentally new: create a registry of e as an institution.” e shouldn’t fear ownership that no single entity controls. missing out on innovation we should worry less aout disruption and recognise Dan O’Prey, founder, Hyperledger that innovation is positive. andenreydt’s invitation set the tone for four days of New ideas, new kids from itcoin to the locchain and eyond. discovery y the end of hursday, we had “he ury is still out as to whether locchain, or met millennials, taled aout refugees, “e are moving from complete diselief to the anything that represents a locchain, will e spoen with roots, discussed real-time engagement of oth newcomers and ans,” the solution to every uestion that we have,” analytics, and found innovative ways to moderator Mar uitenhe, gloal head of he acnowledged. evertheless, the ‘new ids’ reach new marets. n short, we were transaction services, , told delegates of the session’s title used their presentations reaching for real opportunities of an attending ‘ew ids on the locchain’. n to assert the potential of distriuted ledger achievale, sustainale future. this era, uitenhe explained, we are moving technology, among them an ’rey, founder

The digital revolution has shaped a new generation of digital natives. But this is not just affecting young people. Digital behaviour is highly contagious.

Aldo de Jong, co-founder, laro artners

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We are entering the cognitive systems era.

Jonathan Young, programme director, Watson Group, IBM

technology provides a means of access and thus provision. Do Sibos delegates believe the unaned and financially excluded represent a profit opportunity worth pursuing? Digi-voting suggested 93% of session attendees thought exactly that. Searching for answers of Hyperledger acuired recently y lythe we don’t yet have and will have to adapt in Tuesday’s ‘Re-inventing Regulation’ session Master’s igital sset Holdings, who would order to successfully engage with. “oday ased what would regulation loo lie if win the nnotrie Startup hallenge is aout designing the future,” said htar we could start from scratch nswer very on ednesday. “locchains enale us to adshah, chief catalyst, atalytic nnovators different. y the end of the day, we had do something fundamentally new create a roup, at uesday’s opening. “he digital passed a milestone: more delegates had registry of ownership that no single entity revolution has shaped a new generation of already attended Innotribe this year than controls and can be shared by the relevant digital natives,” de Jong told participants in during the whole of Sios . h, and the counterparties to eliminate the need for the millennials worshop, adding “ut this immy Money stall in the networing space reconciliation,” he said. is not just affecting young people. Digital outside the lender served , coffees lso among the new ids was oyce im, behaviour is highly contagious. Social on Tuesday alone. Wednesday morning – executive director, Stellar.org, a not-for- networs have changed how we stay in touch.” this was ‘nnovation Mind-Shift ay’ gave profit platform aimed at expanding access to nside nnotrie’s worshop room, us the answer to a ey uestion, in the financial services, who would also spea in nicnamed ‘the lender’, with its session, ‘Why Banks need FinTech Hubs’, the ‘Financial Inclusion’ session on Tuesday. proection wall, sitting among delegates but also provided the ideal scene-setter for “e focus on increasing financial access for raising tablets to capture projected charts, the afternoon’s events, for which the stage people who live on , or , per day. hat posting the highlights on witter while was set for the presentations made y the is a community of two illion people,” said simultaneously participating, it wasn’t hard to finalists in the nnotrie Startup hallenge. im. n addition to this untapped maret, we elieve that we are all rapidly ‘going native’. n n ‘Machine ntelligence ay’ hursday would also hear aout a gloal population of that first session on uesday, we were learning we were welcomed y M esearch and displaced people, who collectively represent not only how to present aning services atson, past winner of the ‘eopardy’ S a maret roughly the sie of taly. e would to the millennial generation, ut also how show. “e are entering the cognitive systems hear from representatives of another to redesign services for the people we are era,” said Watson’s assistant, Jonathan difficult-to-reach maret millennials ecoming. ey principles aning services Young, programme director, Watson Group, who reuire “meaningful personalised should e “easy in, easy out”, ecause digital M. ater, we were to meet epper, the experiences” from their ans, according to natives don’t like to feel trapped; they should cheery little ‘social root’ currently woring ldo de ong, co-founder, laro artners and be simple, and give the customer a sense of with Softan Moile in apan. he day co-moderator of uesday’s worshop session control ans should aove all “e genuine”. featured discussions on banks’ potential use ‘ngaging with the Millennial eneration’. further principle that millennials feel a of thinking machines – for analytics, yes, but strong sense of community engagement – also, customers actually lie interacting with Digital contagion suggested a clear lin etween millennials and roots. hen we taled aout the correct use the day’s other primary focus: the unbanked. of technology in a people-centred economy, Thematically, Innotribe’s daily agenda sought “veryone enefits from an economy that including the potential risk of unemployment. both to guide us through areas undergoing includes everyone. I’m not inviting you to “Machines are not the answer,” author experiencing change and innovation and to give to charity; I’m inviting you to participate ndrew een told us in his closing eynote. undermine our assumptions. Monday was in a usiness opportunity,” said osta he answer is to e found in the choices we designated ‘latform ay’, ut its afternoon eric, deputy director, financial services for mae and in how we use our machines and sessions in particular highlighted many the poor, Bill & Melinda Gates Foundation, our tools to improve our finances and our sources of disruption to platforms. Tuesday addressing the ‘Financial xclusion’ session. lives. “he future is unavoidale, ut there was ‘Society ay’ ut this was ‘society’ in Financial services providers enefit from isn’t a single future and we ourselves have to im’s and de ong’s sense of customers that rising prosperity, eric argued, and digital choose the future we want.” n

Sibos, powered by SWIFT. Sibos Issues 32 www.sibos.com www.swift.com PAYMENTS The payments conundrum s ans respond to competition for rising volumes, the need for speed will have to e tempered y security considerations.

Sios confronted the most significant conundrum facing ans’ payments usinesses how do you deploy new technologies to deliver faster payments services in a manner that taes account of client demands and the post-crisis constraints on capital, as well as the processes, expertise and systems developed over the years to provide payments safely in line with regulatory reuirements. hile all the maor ans in attendance at the ‘e-inventing correspondent aning’ panel were in agreement that payments need to e faster in future, they also underlined that payments services are uilt on many other factors esides speed. t the top of ans’ concerns was the need to maintain the security levels achieved y existing services, and the mandated regulatory scrutiny they apply to each transaction. n a rapidly changing world where crypto- currencies and new consumer payment mechanisms are coming to the fore, and companies such as maon, er and liaa tae pride in the speed at which they can deliver to customers, ans are now under pressure to eep up. ayments traditionally tae days rather than hours to e processed, especially when crossing orders etween domestic payment systems, and delegates were een to hear how maor ans plan to streamline and accelerate the transaction process. Listening to the customer

“maon can move atoms to my home in We must be faster, cheaper, quicker. hours from the moment place my order, ut Larry Sobin, head of correspondent aning and S payment and clearing, arias

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The complimentary services that are being developed are helping to solve some of the problems banks have been facing.

Mark Troutman, regional head of sales for sia-acific, global payments and cash management, HSBC

a bank can’t move electrons in two days,” said ecoming heavily involved in financial services, also things that are ineffective and unclear, Christopher Wasden, executive director, The providing instant transactions to consumers and we do need to think about them,” said Sorenson Center for Discovery & Innovation and small usinesses. lthough such firms Ebru Pakcan, global head of payments and at the University of Utah. “Consumers are are daring to innovate and try different receivables, Citi. “Some of them are there driving this, saying ‘I’m having a certain techniques, Wasden conceded that they are because they have always been there and experience with Amazon, Uber etc, so why not subject to the same kind of regulatory that is not a good enough reason. We need can’t I have that same digital experience in oversight as maor financial institutions. to listen to our customers and figure out banking? Why is banking giving me the same Nevertheless, other panellists agreed what it is we want to change, and how to experience I had 30 years ago?’” on the need to review their payments change it. Innovating and disrupting our own Relishing his role as challenger to the processes and meet the evolving needs of services to address evolving client needs status quo, Wasden, pointed to the situation in their customers. “While there are really good is probably the best strategy for the entire China where major technology companies are things about our banking system, there are industry to stay competitive in the payments space against growing competition.” Larry Sobin, head of correspondent banking and USD payment and clearing at BNP Paribas, suggested the pace of change to payment services would not be determined by banks alone. “We must be faster, cheaper,

Innovating and disrupting our own services to address evolving client needs is probably the best strategy for the entire industry.

Ebru Pakcan, global head of payments and receivables, Citi

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“A careful review of the value chain will offer a number of trade opportunities.”

Joon Kim, head of global trade product, BNY Mellon

quicker, but at the end of the day there are a demographics and dynamics of global trade force in January 2017, under Basel III. Ahead number of touch points in transaction banking and positioning themselves in that space.” of this impending requirement, SWIFT and that take place after you login on your iPad Joon Kim, director and head of global the Bankers Association for Finance and or iPhone,” added Sobin, noting the multiple trade product at BNY Mellon, said banks Trade (BAFT) are exploring how the industry links and the volume of transactions in the needed to take a holistic view of trade can form one common position regarding payments chain not seen by the end-user. corridors, focusing on “understanding the operational implementation and meet the Panellists also commented on the value chain, woring capital efficiency and challenges head on. changing nature of security processes that optimisation”. He added: “Although overall At the session, ‘BCBS liquidity monitoring must be embedded in the payments chain, global trade volumes have been relatively tools: status, challenges, industry in line with evolving rules and regulations in flat, a careful review of the value chain collaboration, global implementation’, a different jurisdictions, to protect clients from will offer a number of trade opportunities, poll found that 66% of audience had not cyber-security risks in particular. including standby letters of credit, risk yet been issued with a national reporting mitigation, pre-shipment financing, template from their regulators. A lack of Opportunities through warehouse or inventory finance, supply chain clarity surrounds the requirements and BAFT growth and uyer financing, and reimursement.” has subsequently written to 27 member As the global payments market continues states of the Basel Committee to ask for Other payments sessions during Sibos 2015 to grow, banks are facing a rise in competition more details. steered delegates towards the developing from non-bank providers, some of which “If the industry, in good conscience, asks trade corridors which are providing are now moving into emerging markets, for clarification and the industry does opportunities for banks to serve corporate leveraging their digital technology expertise not get suseuent clarification, then we clients in new ways. An uptick in global trade to improve the customer experience. really need to take it upon ourselves to put has increased the amount of cross-border Mark Troutman, regional head of sales together [a template] and then play it back payments since 2009, with growth in imports for sia-acific, gloal payments and cash to the regulatory agencies,” said Tod Burwell, and exports across China, India, Latin management at HSBC, sees competition president and chief executive officer, F. America and Africa acting as the catalyst as a healthy indicator of rising payment A separate session, ‘Intraday reporting: for an overall increase in ‘south-south’ trade volumes. “There are many merchants online how has the industry progressed?’, gave between regions traditionally considered as selling cross-border into America,” he said. banks the opportunity to consider the emerging markets. “The complimentary services that are being current state of regulatory dialogue, as “Two-thirds of growth in cross-border developed are helping to solve some of the well as industry initiatives to reduce the payment transactions in 2014-2024 will be problems banks have been facing.” operational costs of compliance. Matthew driven by emerging markets. Combined with Loos, executive director and senior product the growth in emerging marets trade flows, Taking the initiative manager, treasury services at JP Morgan, this will drive future trade finance needs,” said: “There are still remaining issues that said Daniel Cotti, founder and managing Another challenge for banks addressed in need to e addressed, ut an important first director, Cotti Trade and Treasury. “All banks the Sibos 2015 payment stream is the advent step has been achieved in getting the time need to be very aware of the changing of intraday liquidity reporting coming into stamp in the liquidity reports.” n

Sibos, powered by SWIFT. Sibos Issues 35 www.sibos.com www.swift.com SECURITIES Securities services firs ot rote ot o eret stor apidly changing maret threatens old models, ut offers new ways to add value to clients. The industry has ade a ot o eort Securities services firms remain in the to provide a safe, eye of a ‘perfect storm’ created y multiple stae inrastrtre waves of regulatory change and macro- economic uncertainty, and have little choice Marc Robert-Nicoud, , learstream ut to reassess their existing models. his was a recurring theme throughout the driven operational changes – including securities sessions at this year’s Sibos, with new intra-day liquidity, asset safety and the tone set by in the opening session, transparency, and financial crime compliance ‘loal trends in securities marets how to reuirements and leveraging technological return to a path of growth’. advances at the same time as minimising the Faced with swirling headwinds, “t the same time,” he added, “the risk of cybersecurity breaches. As panellists custodians, agent banks and other securities expectation is we will continue to invest in noted, changes to usiness models are services firms must complement traditional the business, and continue to grow. That is necessary, but not at the expense of the capabilities by developing new revenue the perfect alancing act. How do you move custodian’s reputation for safety and security streams, potentially uilt on advances in fast enough in a volatile environment and upon which client relationships are built. technology and data analysis. have controls in place not to compromise he challenge within this transformation asset security” Sources of disruption period, according to Deutsche Bank’s global Agreeing with Singh’s assertion that “the head of institutional cash and securities days of selling simple custody solutions are The increasingly urgent pursuit of growth and services, Satvinder Singh, is staying long gone”, fellow panellists said they were profitaility y securities services firms has relevant to clients. his is no easy tas amid looing at ways of meeting client demands heightened interest in technology innovation, a powerful storm stoed up y a potent while pursuing the uest for profitaility. as well as new forms of collaoration. Several comination of low interest rates, margin The global custody business has changed panellists agreed that the service providers and fee compression, maret infrastructure significantly in recent years, with providers have had to change their mindset in terms of changes, increased regulatory reuirements, expected to meet evolving client demands their offerings and their dealings with each and the impact of disruptive technology. for example, facilitation of gloal allocation other. But there was less of a consensus view strategies – while adjusting to regulatory- on the application of disruptive technologies in the post-trade securities environment. Blockchain technology has been touted as way to streamline certain processes and improve efficiency, ut Marc oert-icoud, CEO of international central securities e das o sein depository S learstream, urged caution on the adoption of new technologies, sie stod commending the value chain created y sotions are on CSDs and custodians. “e can use new technology to mae it one securities services more efficient, ut we need to recognise that the industry has made a lot atvinder in global head of institutional cash and securities services, Deutsche Bank of effort to provide a safe, stable infrastructure

Sibos, powered by SWIFT. Sibos Issues 36 www.sibos.com www.swift.com SECURITIES

that holds people’s money. That’s something Collateral we need to keep in mind. While it can always be improved, we have a safe and well-functioning management industry,” said Robert-Nicoud. has become like Another headwind facing the securities services industry is the complexity around electricity: if you’re collateral management and clearing not connected, you requirements, which has risen sharply, primarily due to post-crisis regulatory efforts will not play. to reduce systemic risks. The conversation Jo Van de Velde, head of product management, Euroclear has moved onto a more practical plane from previous years, when much debate centred on assessing the scale of a collateral shortage, as management has become like electricity: if both sell-side and buy-side demand increased. you’re not connected, you will not play,” he said. As the regulatory implementation clients due to balance sheet restraints imposed timetable ticks on, it is apparent that by the Basel III capital adequacy regime. Integration in Asia sufficient collateral is availale to meet In addition to mandated central clearing new requirements, but it is nevertheless a for liquid OTC derivatives, increased margin In a tacit acknowledgement of the wide- scarce resource. As such, there is a sense requirements for non-cleared OTC derivatives ranging changes wrought by post-crisis of urgency – especially on the buy-side – as will begin to come into force in September reforms, Sibos 2015’s securities stream asset owners and managers adjust to the , potentially causing a significant spie closed with a discussion on capital markets central clearing of OTC derivatives and in the amount of collateral the buy-side will harmonisation which addressed the a new regulatory framework for margin need to post. Once again, the message from challenges of creating a coherent and requirements for non-cleared products. speakers at Sibos securities sessions was efficient operating framewor for maret for uy-siders to have roust and efficient participants that limits fragmentation while Beat the deadline collateral management processes in place – accommodating local rules, demands and either outsourced or in house – well ahead of innovation. In particular, the ASEAN link Panellists recommended prompt action by regulatory deadlines. between Southeast Asian countries and securities market participants to ensure the “The problem on the buy-side is much less Stock Connect between Hong Kong and appropriate collateral management solutions around collateral optimisation,” said Jo Van mainland China were pinpointed as projects and clearing broker relationships are in place, de Velde, head of the product management with the potential to deliver much-needed well ahead of regulatory deadlines. division at international CSD Euroclear. harmonisation to a fragmented region. “You shouldn’t underestimate how long it “Their problem is the use of very manual In these initiatives, the desire to support takes to get onboard with a clearing member,” processes. Once you start clearing via CCPs, and broaden investor opportunities had proved said Gerard Smith, director collateral services you’re talking about daily margin calls, a powerful agent of change. Nevertheless, at LCH.Clearnet, a central counterparty (CCP). intra-day calls, and dispute management Stephanie Marelle, regional head of clearing “If you are thinking about leaving it to the last processes. Today, all that is done over a and custody at BNP Paribas Securities Services, minute, that is not a good idea.” couple of days on the buy-side, but tomorrow suggested much work still remains on market The OTC derivatives clearing mandate it will need to work like clockwork.” integration. “ligning definitions is the most handed down by the G-20 in 2009 has Post-crisis reforms have had a profound difficult part, that is, accepting the fact that been enacted at different speeds across impact on the motivations and priorities your market will need to change and converge jurisdictions. Beyond the biggest institutional of collateral market participants, Van de to be compatible with another market and investors, many uropean uy-side firms Velde suggested. “What was once primarily agree common standards,” she said. aren’t beginning to clear before the related a sell-side-driven activity around financing nother high-profile example of clearing obligation under the European Market is today very much risk oriented. Collateral harmonisation in Asia has been mutual fund Infrastructure Regulation rules come into force recognition across jurisdictions, which already late in 2016. Many are yet to secure a clearing permits Hong Kong funds to be sold to retail broker, but this is rapidly becoming an uphill customers in mainland China. Similarly, the task as banks are less willing to onboard new creation of passports across ASEAN countries is also gaining traction, allowing funds to be sold across borders. Marelle indicated that these examples of progress on cross-order cooperation provided a sound basis for further integration in the years ahead. Markets are not likely “We are very strong supporters of cross-border initiatives. Markets are not to grow in isolation. likely to grow in isolation, so cross-border initiatives – such as passports – deserve our Stephanie Marelle, regional head of clearing and custody, BNP Paribas Securities Services commitment,” she said. n

Sibos, powered by SWIFT. Sibos Issues 37 www.sibos.com www.swift.com COMPLIANCE FORUM ans reators rae it evovin aenes s financial crime threats develop, banks continue to explore new ways to manage compliance risks and costs.

In a year that saw international terrorism and geo-political tensions top the news agenda, government policy and regulation has continued to evolve, with inevitable conseuences for the gloal financial services system. Keeping pace with rules to combat terrorist financing and money laundering was front of mind for delegates at this year’s Sibos Compliance Forum in Singapore, but other themes – notably the roles that utility solutions and innovative technology can play in meeting client needs in a highly regulated banking environment – also came to the fore. errorist finanin

Je-Yoon Shin, president of FATF (Financial Action Task Force), the inter-governmental body tasked with developing and co-ordinating policies to combat money laundering and terrorist financing, iced off proceedings y outlining how its agenda has been shaped by recent global terrorist activities. He said: “The game has changed for terrorism financing. he S slamic State of ra and the evant phenomenon shows there is a new type of terrorist organisation with uniue financing streams. S’s

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s finanin differs to terrorist threats that we have previously faced.

Je-Yoon Shin, president, FATF

transparency session expressed a hope that regulators would respond positively to a set of financial crime compliance principles recently published by the International Securities Services Association by aligning their expectations with industry proposals. De-risking

nother maor compliance trend affecting an and other financial institutions’ gloal operations continues to be the trend toward de-risking their balance sheets, in response to the asel capital and liuidity framewor presence on the internet and social media Securities transparency as well as rising financial crime compliance has allowed it to convert information into reuirements. n response to these regulatory tangile funds. How S’s financing wors he screening of payments against sanctions shifts, some institutions have pulled ac differs to terrorist threats that we have lists is less advanced in securities circles from high-ris or high-cost operations, previously faced.” than it is in the wider payments world, limiting usiness relationships with clients Shin explained that the G20 had asked according to panellists and delegates at this who don’t generate sufficient returns to FATF to focus on “global collaboration” to year’s conference. offset the increase in regulatory costs. enhance the transparency of payment An audience poll showed that 52% of ac ared, head of usiness compliance, systems, which in turn, should lead to a the audience currently screen securities correspondent banking group, treasury & reduction in terrorist financing. FF has transactions; but a further 22% were trade solutions at Citi, acknowledged the started work through its regional units to intending to egin screening over the coming usiness impact of higher compliance costs strengthen standards and introduce new months, and a uarter had no plans to “We have looked at the portfolios of our reuirements. t is also now developing new begin screening. Panellists at the securities customers and looed at the relationships guidance on how est to supervise firms, given the various financial sanctions, which have een imposed in recent months.

A lot of correspondent banks are being let go because they couldn’t provide sfiient revene to cover the costs we are facing.

Jack Jared, head of usiness compliance, correspondent banking group, treasury & trade solutions, Citi

Sibos, powered by SWIFT. Sibos Issues 39 www.sibos.com www.swift.com COMPLIANCE FORUM

It is very unclear what would happen if an alternative payment provider went insolvent.

Carolyn Burke, vice-president, international cards and Canadian payments regulatory initiatives, Royal Bank of Canada and realised that a lot of them were just not paying their way. At the individual level, a lot of correspondent banks are being let go, not because they have a higher risk, but the fact is they couldn’t provide sufficient revenue to cover the costs we are facing.” There is no doubt that de-risking has become a complex issue. It is driven not ust y profitaility, ut also y liuidity revealed that data privacy still remains a if a company went insolvent; consumers requirements, compliance costs, and challenge to adopting the utility model. could have their credit scores affected. The reputation risk, among other factors. Lam Nevertheless, speakers acknowledged other very high risk is market conduct as Chee Kin, group head of compliance at the importance of SWIFT’s KYC Registry as a consumers won’t necessarily know who takes S an, underscored the difficulties secure way to exchange and store documents control of their money.” arising from competing strategic priorities, required for KYC compliance. Panellists Burke said that the rapid growth of noting that, ultimately, all banks are “in observed that further dialogue between some fintech rands should also e a cause the business of producing returns from a the industry and regulators is necessary to for caution, due to how these entities are shareholder perspective”, adding that it address privacy concerns, thereby potentially regulated globally. “Fintech has grown was unrealistic to think otherwise. If banks’ paving the way for greater use of utility- enormously. What is frightening is that returns are adversely affected – whether based approaches to compliance. because some of these entities are not seen by “a capital overhead, derivatives from a as financial institutions from a regulatory trading business or operational requirements Emerging technologies point of view; the principals are not required resulting from compliance rules” – they are to be screened. I even have to be screened likely to be scrutinised, Lam said. Financial crime compliance is regarded as a when I want to coach my daughter’s soccer Shin said the FATF would look more moving target for banks and regulators – and team, so I think the bar is perhaps, too low,” closely at factors influencing de-rising y not only because of changes to sanctions she explained. banks. “The scale of this issue is not known. regimes and terrorist threats. A lively debate Most of the evidence has been anecdotal at this year’s Compliance Forum came from Looking forward and despite numerous surveys, empirical the sessions covering payments which evidence of the phenomenon remains highlighted how new technology-based As this fourth Sibos Compliance Forum scarce,” he said. “We are doing what we financial services were raising compliance underlines, financial crime compliance is can to clarify how our standards should be questions. From crypto-currencies to now a permanent part of banks’ operating implemented effectively.” Apple Pay, the new ways in which banking landscape. Panellists at this year’s customers are transferring their cash are conference suggested that changes in bank’s Utilities opening up new fields for investigation y behaviour would lead to less enforcement compliance experts. activity by regulators in future. But they also Attendees of the session ‘Utilities: one Carolyn Burke, vice-president, noted that new challenges were arising as a year on’ heard how utility-based solutions international cards and Canadian payments result of the move to faster payments and are key to addressing some of the issues regulatory initiatives at Royal Bank of Canada, globalised business models. resulting from financial crime compliance said her bank’s recent risk assessment of While banks are gaining a better requirements. An audience poll found that alternative payment providers had identified understanding of compliance challenges 43% of banks are using industry utilities, oth potential financial and maret conduct and regulatory expectations, panellists with 31% in talks to do so, and a further 16% risks for users of such services. acknowledged a need for a still better grasp planning to start using such utilities in the Speaing on the financial riss, ure of how to manage compliance-related risks coming year. A further delegate vote also said: “It is very unclear [what would happen] resulting from sanctions. n

Sibos, powered by SWIFT. Sibos Issues 40 www.sibos.com www.swift.com CORPORATE FORUM Singapore feels full force of trade winds n a paced agenda reflecting maor regulatory and macro- economic shifts, the challenges of digitising trade services too centre stage.

The Corporate Forum at Sibos has gone from strength to strength in recent years as more firms see higher levels of automation and efficiency in their treasury and finance operations. And this year was no exception to the long-term trend, with a record numer of corporates attending in Singapore. In the opening debate of this year’s orporate Forum, delegates were ased aout their priorities for , with the maority highlighting woring capital and supply chain finance as top issues capital management and securing funding were also high on the list. eter ong, founding chairman of the nternational ssociation of In the trade space, CFOs and Corporate Treasurers (China) and a director at w, said such priorities were to we’ve not been e expected in the current economic climate. fast followers of “hat corporate treasurers are looing for is the aility to grow a usiness in a corporate demand. slow demand environment,” he explained, That is changing. “hey need to e ale to release cash, ut regulation is also causing increased costs to Sriram Muthukrishnan, regional sia-acific head of usiness development, gloal trade receivales finance, do this.” HSBC

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Corporate treasurers are looking for the ability to grow business in a slow demand environment.

Peter Wong, founding chairman, nternational ssociation of Fs and orporate reasurers hina

n addition, some corporates are also struggling to fund working capital effectively. amian lendinning, treasurer at Lenovo and president of the Association need to do more to engage with and improve banking at Unicredit. Bisagni said his own of orporate reasurers of Singapore, their service offering to corporate clients. division has been heavily engaging with its said “e’re experiencing an all-time low in “n the corporate space, we’re not seeing corporate clients to convince them of the funding costs, ut we should rememer that services improve with the digital age in the enefits of new digital platforms, ut said mispricing of assets has led to a situation same way as in the consumer space,” said both sides need to get involved to really help where many corporates have not kept their Mohamad in erwish, treasurer at eleom these services become mainstream. working capital under control.” Malaysia and president of the Malaysian One key area which has been problematic He was also concerned about what the Association of Corporate Treasurers. for both sides is a lack of standardisation in focus on working capital tells us about the This contrast would be a common theme cash and trade services to corporates, with prospects for the global economy. “You tend through this year’s orporates Forum, with a variety of different platforms on offer and to focus on working capital because you are many corporate speakers saying they felt some products that are even being used in not confident aout the future,” lendinning banks were not making the same kind of different ways by different banks and clients. warned. progress in applying digital technology to nderstandaly, this has led to reduced their corporate banking services that has efficiency and has een confounding efforts Digital divide helped to revolutionise retail banking over to migrate clients onto new platforms and the past 10 years. Panellists representing services. Although the BPO is based on It is understandable that corporate banks called for treasurers to become S , the universal financial message treasurers should look to their banking more involved and engaged with the new framewor, its aility to migrate trade partners to assist them in managing these digital products and services that had been finance from the paper to the digital age has challenges, ut, as was heard at a panel on developed in recent years, such as the been compromised by different approaches the digitisation of trade services, ans also an ayment ligation , the S to implementation, delegates heard. -ased electronic payment instrument, “BPO is being used in slightly different developed y SF and the nternational ways y corporates from region to region, Chamber of Commerce. and this can create a prolem. Similarly, “Many corporates are reluctant to listen, when it comes to digital documentation, and demand for the BPO is still low. We clients are using a variety of systems, are not advertising widely, ut still the including olero and others, and this maes corporates are not showing as much interest it more complicated. Corporates are getting as we’d lie in ,” said ianfranco isagni, on oard, ut they’re doing it in their deputy head of corporate and investment own way and this maes it more difficult

Banks are dealing with a swathe of regulations that aren’t very clear and it is hurting the customer experience.

Damian Glendinning, treasurer, enovo

Sibos, powered by SWIFT. Sibos Issues 42 www.sibos.com www.swift.com CORPORATE FORUM

functions, enovo’s lendinning said that the current regulatory environment was also hampering ans’ aility to react to corporate customer needs. “ans are dealing with a swathe of regulations that aren’t very clear and it is hurting the customer experience,” he said. “e also have non-an firms lie liaa in hina that are doing things the aning industry isn’t allowed to do ecause of regulation.” he hinese internet giant has een carving out a niche as a major lender in the SME space and securitising the loans to free up its alance sheet. lendinning added that regulators should e aware that the cost of regulation and fines for non-compliance were ultimately eing met y the aning industry’s customers. mong many other regulatory reuirements, the cost of compliance with now-your-customer rules was cited as particularly onerous for both banks and their clients. w’s ong added “pening We’re not seeing services improve with a bank account can take three months for a the digital age in the same way as in the corporate due to , and this needs to e streamlined without hurting the customer.” consumer space. ne tae-home from the two days

Mohamad bin Derwish, treasurer, eleom Malaysia of this year’s orporates Forum was that, while tools do exist to digitise trade finance, the pace of change has een for banks to respond,” explained Sriram las to loo at this. e have accepted we too slow. orporates want more tools Muthurishnan, regional sia-acific head don’t now what the trade finance landscape from their banking partners and better of business development, global trade & will loo lie in two or three years’ time. communication on how it affects their receivales finance, HS. here are lots of disruptive technologies usiness. evelopment and harmonised use He also acnowledged that ans could coming up like blockchain and others,” of standards will e ey to increasing uptae do etter in terms of their engagement with Muthurishnan added. of digital trade finance and Sios corporate treasurers and the slow pace of may have helped provide the impetus for service improvement of recent years. “n the Cost of compliance staeholders to get together. he real test trade space, we’ve not een fast followers of will e to see what progress has een made corporate demand. hat is changing though ooing at the wider operating environment on resolving the above issues by the time and many banks are setting up innovation for corporates’ finance and treasury Sios reconvenes in eneva next year. n

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Sibos, powered by SWIFT. Sibos Issues 43 www.sibos.com www.swift.com DIVERSITY Not just a numbers game A deeper understanding of diversity will be critical to customer and employee acquisition and retention.

“Why diversity? Why at Sibos?” asked I don’t think women Lisa Lansdowne-Higgins, vice president, card operations & supplier management, necessarily want to Canadian banking operations at the Royal be placed in roles Bank of Canada, one of the 17% of female speakers at this year’s conference. “When because they’re a you look at organisations that have diverse quota or a number. workforces, you see better performance.” Lansdowne-Higgins cited research Cheryl Buss, managing director, showing the improvement in performance global clients, Africa, Barclays achieved by organisations that employ gender and ethnically diverse teams can amount to more than a third, and concluded: “Diversity is no longer a ‘nice to have’, it’s a strategic imperative.” Banaji, the Richard Clarke Cabot professor The evidence that drawing a workforce, of social excellence at Harvard University, a including at senior management level, renowned and widely published psychologist, from a wide talent pool will improve the who has been conducting research in this overall quality of employees is so clear field for years. and long-standing that it might seem Banaji’s work has shown that people obvious to the majority. But there is more overwhelmingly associate work-related to ensuring workplaces offer chances to terms lie ‘office’ and ‘des’ with male names, employees and applicants based on talent, when tested at speed, while doing the same rather than race or gender. with women’s names and domestic words. Three quarters of men tested do this, and Unconscious bias of women, regardless of their attitudes to gender equality. Even decision-makers with sincere Perhaps the most bizarre example commitments to equality and diversity of unconscious bias in action is in the are likely to engage in some form of statistically observed fact that hurricanes “unconscious bias”, explained Mahzarin given female names kill more people than

Sibos, powered by SWIFT. Sibos Issues 44 www.sibos.com www.swift.com DIVERSITY

When you look at organisations that have diverse workforces, you see better performance.

Lisa Lansdowne-Higgins, vice president, card operations & supplier management, Canadian banking operations, Royal Bank of Canada

those given male ones, because people promoting processes, without the relevant “In a few years, Americans went from being perceive them to be less of a threat. “It’s executives necessarily realising. “We think 84% uncomfortable with a gay co-worker possible that when we are told: ‘Hurricane that the best people in the world will apply to 90% comfortable,” she said. “Bring your Edith is coming’ we are not attentive,” said for the jobs we advertise.” she explained. behaviour in line with your values.” Banaji. “But we are more responsive when “But that’s an unfounded assumption. We the same hurricane is named Bruce! We need to get better at imagining better ways Leverage differences don’t always act in our own self-interest to recruit the best talent and to keep it.” and this happens because our minds are Fortunately, change can gain its own The enhanced business performance ‘boundedly’ rational, not perfectly rational.” momentum. According to Banaji, changing that a diverse workforce brings is due to Banaji claimed this unconscious bias attitudes to matters of diversity can be the more than just better overall quality of plays a role in companies’ hiring and catalyst for people to examine their biases. staff. A diverse range of employees also

Bring your behaviour in line with your values.

Mahzarin Banaji, Richard Clarke Cabot professor of social excellence, Harvard University

Sibos, powered by SWIFT. Sibos Issues 45 www.sibos.com www.swift.com DIVERSITY

If your employees understand how people from their countries or cultures will react to certain things, then leverage that!

James Sun, owner, Amano

helps to provide companies with a better Scarlet Sieber, SVP of open innovation and individual” and “the return on diversity understanding of a wider client base, ecosystem building at Spanish bank BBVA, is only realised when companies create according to James Sun, the owner of social said the millennial generation is beginning to a culture of inclusion – empowering the networking app Amano. expect diversity from its workforce, and shun contribution and potential of each employee “To understand diversity is to understand organisations that don’t offer it. “It’s not just towards a set of shared business goals”. the complexities of human behaviour, and a matter of putting a pool tale in the office Cheryl Buss, managing director, global clients, consumer behaviour,” he explained in his and expecting they’ll come,” she warned. Africa, Barclays, touched on the issues of presentation, ‘Despite what you heard, “They’re shifting away to the Googles and quotas, which she considered “necessary to colour does matter!’ “Let’s leverage our Ubers. They see young motivated people challenge the thinking behind unconscious differences as an asset. If your employees who give them power and that’s attractive bias”, whilst warning they should be understand how people from their countries to them.” instituted sensitively, as: “I don’t think or cultures will react to certain things, then women necessarily want to be placed in roles leverage that!” Combatting stereotypes because they’re a quota or a number.” A company CEO of Sun’s acquaintance Martine Irman, vice chair and head of separated out his sales force into various EY tax partner Amy Ang also stressed global enterprise banking at TD Securities, groups based on factors including the importance of creating workplace commented: “Quotas should not be seen nationality, so as to work together on environments that welcome a wide variety as an end-game to really capitalise on the strategies to sell into their own national of people, rather than seeming to be a ‘club’ long-run enefits of a diverse leadership, or cultural groups. This, said Sun, was for particular types of employees. “A lot it requires a shift in mindset and attitudes evidence of using diversity constructively, of women thin of the financial services within organisations.” rather than it simply being a matter of the industry as aggressive and that they may Concluding the sessions, SWIFT diversity “politically sensitive”. need to conform to certain behaviours in and inclusion programme lead Vincent Sun ecame the first merican-sian to order to be successful,” she said. “I think Deneumostier echoed Banaji and Sun’s feature on Donald Trump’s ‘The Apprentice’ you can be authentic and don’t have to be conclusions. “Diversity is much more than TV show, and claims his adverse experience someone you’re not.” Based in Singapore, having the right numbers of minorities or was what made him a diversity advocate ng has participated in a women in finance women,” he said. “It’s about making sure “there and then”. “If you’re not paying networking breakfast initiative, alongside that it’s embedded everywhere and allows attention to diversity, your company will be peers from a variety of banks, as part of an organisation to answer customer needs behind,” he concluded. “If your company efforts to help combat stereotypes. in an efficient way. t helps us to do the isn’t thinking about this, they’ll be behind.” For Community Business CEO Fern right thing for our community. And, in an Speaking in the panel discussion ‘How to Ngai, diversity is the means to “recognise organisation, if we’re aware of our biases, it create and sustain a diverse talent pipeline’, the unique traits and perspectives of each will help us to overcome them.” n

Sibos, powered by SWIFT. Sibos Issues 46 www.sibos.com www.swift.com ASEAN Balancing act Supporting clients’ cross-border needs remains a challenge for banks as regulatory harmonisation lags demand.

December 2015 is a landmark month in the development and integration of the Association of Southeast Asian Nations S. t mars the official start of the ASEAN Economic Community (AEC), which commits its ten member nations to the free movement of goods, services, capital and labour across national borders to further promote economic growth and stability in the region. AEC also represents an intention to coordinate more closely on macro- economic and financial policy, as well as a more integrated approach to infrastructure, communications and industrial integration. Not all the aspirations outlined in the 2007 ASEAN Economic Blueprint will be met by the end of the year. For example, a number of ASEAN’s second-wave members – Cambodia, Laos, Myanmar and Vietnam (CLMV) – will need more time to up their borders. Non-tariff barriers remain in place in all ASEAN countries. Nevertheless, the advent of the AEC should mark a step change in terms of ASEAN’s role in the global economy and in its ability to build on existing trading lins to the enefit of usinesses and consumers within its member nations. Many of the achievements, aspirations and challenges for the were reflected in the presentations and workshops held on ASEAN day at Sibos 2015 in Singapore. The view from the c-suite – as represented by Wee Ee Cheong, deputy chairman and CEO It would be the work of half a generation of UOB, and Samuel Tsien, CEO of OCBC – before the One ASEAN concept can be was cautiously optimistic on the prospects for meaningful progress, despite macro- adopted as it was originally proposed. economic headwinds. Samuel Tsien, CEO, OCBC

Sibos, powered by SWIFT. Sibos Issues 47 www.sibos.com www.swift.com ASEAN

We must work together, focus on what we do best and build connections across the region.

Lisa Robins, regional head of global transaction banking, sia acific, eutsche an

A compelling case , descried financial integration as “a changes that would allow ASEAN SMEs to completely different ballgame”, noting access lending services on a cross-border “The case for integration is compelling. differences in market conduct rules, basis, noting the disparities between his ASEAN’s member states are too small supervision and governance. Harmonisation organisation’s own SME funding initiatives individually to be effective players on the efforts are under way. Under the ASEAN in various member states. An ASEAN-wide global stage, but together their collective Banking Integration Framework, approved credit transfer scheme – which would allow strength is far greater than the sum of the earlier this year, ans that otain ualified SME borrowers to take their rating to banks parts,” said Wee. Both CEOs asserted that ASEAN Bank (QAB) status, will be able to set in other ASEAN countries – would further ASEAN members are much better placed up in neighbouring countries and operate help channel funding to growing firms, to deal with adverse conditions – such as a on the same regulatory basis as local banks. added hris Humphrey, executive director of Chinese slowdown or currency depreciation However, many details for the scheme are the EU-ASEAN Business Council. against the USD – than in the Asian crisis of yet to be agreed and are likely to be subject Private initiative has also overtaken the late 1990s, pointing to strong reserves, to bilateral negotiations. public policy in the ASEAN payments flexile currency regimes, increased central Like other businesses, many banks sector, with internet-based payments bank coordination and robust capital levels already serve clients across the region providers, remittance services and bank in the region’s banking systems. and deal with the lack of regulatory offerings evolving to meet cross-border Progress on trade integration is more harmonisation as best they can. But a needs, notably in the consumer sector. advanced than financial integration ecause number of panellists in Liew’s session and Panellists said the ‘closed loop’ nature of the economies and financial marets of the afternoon workshops called for more such offerings limited their utility, observing ASEAN member nations are currently at official action to support or supplement that greater standardisation in regulation different stages of development. It might private initiatives. Thomas Tan, head of relating to the supply of payment services be “premature” to talk of one ASEAN, said global transaction banking at Malaysia’s – including data privacy rules – would help Tsien, but bilateral trading relationships M, said the region’s mid-tier firms and the evolution of region-wide payment would gradually deepen and broaden, giving SMEs needed cross-border banking services services. Humphrey added that an ASEAN- rise to a network as countries opened up to much earlier in their development than wide payment system would e eneficial to other countries at similar maturity levels. He historically, and hoped that achieving QAB both large multinational corporates (MNCs) suggested it would be the work of “half a status would allow banks such as his own and SMEs. generation” before the One ASEAN concept more freedom in the location of operations he difficulty of alancing memer can be adopted as it was originally proposed and deployment of expert staff to meet client states’ own interests with the pursuit of but the path is set. demands in a more cost-effective fashion. regional integration was a recurrent theme The question of how an integrated across ASEAN Day. The World Bank’s financial maret should evolve to serve an Cross-border initiatives Martinez lamented the apparent desire of increasingly integrated ASEAN trading and even the least advanced ASEAN member supply chain network was addressed by a Speaing in the S financial and states to develop their own capital markets panel of senior transaction bankers. Session economic integration workshop, José de infrastructure, rather than leverage those moderator Liew Nam Soon, managing una Martne, a senior financial economist of their neighbours, while the EU-ASEAN partner, S financial services at at the World Bank, called for regulatory Business Council’s Humphrey noted that

Sibos, powered by SWIFT. Sibos Issues 48 www.sibos.com www.swift.com ASEAN

Banks have a major role to play in supporting logistics opportunities for their clients.

Songpol Chevapanyaroj, head of global transaction banking, Krungthai Bank

trade deals remained largely a bilateral Long-term project projects that further improve ASEAN’s matter, with member states competing supply chain links – both initiatives between against each other for foreign divest S financial maret integration is a member states and ‘The Belt and Road’ investment via tax incentives. long-term project. As Lisa Robins, regional projects funded by China – are among the Nevertheless, Songpol Chevapanyaroj, head of global transaction banking, Asia most appealing to foreign investors. As such, head of global transaction banking at acific at eutsche an, noted, progress it may be that banking services that support Krungthai Bank, acknowledged the need toward harmonisation will not be linear. The these projects will be the ones that are the for Thailand – traditionally a low-cost cross-border infrastructure projects that first to enefit from heightened efforts y business operations and logistics hub are tying the region together are piquing S’s financial regulators to harmonise for large corporates’ ASEAN operations the interest of eutsche an’s M and market practice and access. – to evolve its strategy in response to institutional investor client base, but they “Banks have a major role to play in increased integration of ‘upper ASEAN’ are only slowly recognising ASEAN as a supporting logistics opportunities for their CLMV countries. “No one country can do collective opportunity. Higher levels of clients. Today, we are already developing everything. We must work together, focus intra-regional and ASEAN-China trade have the products and services to further support on what we do best and build connections been the key drivers of economic growth supply chain efficiency in the S region,” across the region,” he said. over the past decade and the infrastructure said Robins. n

Sibos, powered by SWIFT. Sibos Issues 49 www.sibos.com www.swift.com SWIFT INSTITUTE inane nder te irosoe New perspectives on key industry challenges are being explored through academic research projects, funded by the SWIFT Institute.

“Payment system regulators around the world are grappling with the challenge of ere as een a both promoting and controlling innovation ot o interest in te in payment systems,” says Jane Winn, professor of law, University of Washington oain t te Law School, whose ongoing research eoe o no are project, under the revised working title ‘Governance of Competition and Innovation not ttin a sort in Payment Services’, is funded by The tiesae on tis SWIFT Institute. The project will focus on recent developments in the US and EU. Winn istair ine professor of financial economics, Loughborough University continues: “Under conditions of intense global competition to harness innovation for economic prosperity, governments eator onits are struggling to find the right lend of regulatory mandates and collaboration with “Sometimes, regulators have conflicting private organisations to achieve their goals.” interests,” says Weinstein, discussing the Promoting innovation requires crucial issue of communication between governments to encourage competition, while regulators. “The same country might have promoting the diffusion of innovation in highly two regulators who disagree over who has regulated markets requires coordination on jurisdiction.” The research will ask: what standards and risk management. In Winn’s are the est strategies for firms seeing to terms, private self-regulatory organisations operate in multiple markets to ensure that they face similar challenges and possess skills that minimise their compliance risks in the OTC governments could leverage. Examples of investigated by academics with funding derivatives market? The topic is a live one, with private global regulators in payment services support from the SWIFT Institute; research brokers, investors and market infrastructure include the payment card networks or papers are due for completion in advance providers all caught up in the many differences standard setting organisations such as W3C, of Sibos 2016, and will inform the discussion between how US and European regulators the Internet standards consortium. Successful in Geneva. Typically, these are global issues introduced G20-mandated reforms to the private global governance organisations significant to the finance industry and derivatives markets over the past half-decade. create an ‘ecosystem’ populated with diverse to society in general, for which academic Differences arise from many sources, including stakeholders, which must interface with research can play a role in identifying existing securities laws, legislative timetables, multiple legal systems, observes Winn, and potential solutions. The project ‘Transatlantic market practice and regulatory priorities. adapt to a wide range of regulatory initiatives. Extraterritoriality and the Regulation of Weinstein continues: “In the US, OFAC (the How might a public-private partnership Derivatives’, undertaken by Stuart Weinstein, ffice of Financial ssets ontrol has een approach to payments governance work? professor and head of Coventry Law School focused on financial-crime compliance. he Winn is due to report in Q2 2016. at the UK’s University of Coventry, examines Europeans are more focused on the protection The evolution of global payments the regulatory conflicts and challenges of investors.” There may be a convergence markets is one of a number of issues that might lead to inconsistencies for firms here, Weinstein suggests, with European debated at Sibos 2015 that are being further operating across borders. regulators moving towards a US view, but the

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Governments are “A key question we are investigating is whether the blockchain will be a one- strin to find time game-changer that transforms the the right blend of front office and the ac office and the relationship between them, or a gradual regulatory mandates evolution, first used in a few marets and and collaboration growing from there,” says Milne. “There has been a lot of interest in the blockchain, with private but the people who know are not putting a organisations to short timescale on this.” Milne distinguishes “permissionless” locchain, as exemplified achieve their goals. by the technology underlying Bitcoin, which anyone can join, and “permissioned” Jane Winn, professor of law, niversity of ashington aw School blockchains with controlled participation. Their research already indicates that almost all financial maret practitioners envision diversity can lead to greater creativity and using a permissioned blockchain to connect more innovation.” e can expect to find participating institutions. This gives a degree creativity and innovation on the agenda for of regulatory credibility that a random Sibos 2016, and diversity is a route to both. collection of Bitcoin miners would not have. research poses another question: will so-called While these projects take on some of US regulatory “overreach” mean that certain Gradual evolution the maor challenges facing the finance markets such as the US will be excluded from industry, they are only a sample of the OTC derivatives global trading? “The dialogue The SWIFT Institute has also funded research research initiatives currently being continues,” says Weinstein. into the future use of the blockchain by the funded by the SWIFT Institute. Another In Singapore, as in Boston in 2014, Sibos finance industry. he groundswell of interest key focus is the use of big data in the delegates also spoke about workplace in this topic was evident in Singapore: a more- finance sector, with one proect looing diversity, including gender diversity. The than-capacity audience attended the Innotribe at how financial institutions are using ig SWIFT Institute is funding the research session ‘ew ids on the locchain’. s data analytics within their governance project ‘Women in Finance: A Global its working title – ‘The Impact and Potential operations, and another exploring the legal Perspective’, conducted by Renee Adams, of Blockchain on the Securities Transaction and regulatory implications of the use and professor of finance at the niversity of ew ifecycle’ suggests, the research proect commercialisation of such analytics. Another South Wales, and Tom Kirchmaier, researcher, taes a specific focus, ut also manages recent research project has undertaken financial marets group, ondon School of to address broad strategic issues as well. a critical and empirical examination of Economics. The project is part of a longer- Working on the project are Michael Mainelli, existing financial data collection processes term study into boardroom gender diversity both emeritus professor of commerce and and standards, while another, just getting gloally, and is the first to focus specifically trustee at Gresham College and executive under way, considers automation and on finance industry oardrooms. “omen chairman of en, a ondon-ased thin dematerialisation in the securities market don’t come through onto these boards,” says tan, and listair Milne, professor of financial through the development of CREST, the Kirchmaier. “It’s a pipeline problem.” economics, oughorough niversity. UK settlement utility owned by Euroclear. Women are under-represented in f you can’t wait for eneva to find out the STEM (science, technology, engineering, conclusions of the research, log into www. mathematics and finance oardrooms more swiftinstitute.org for regular updates on significantly than in other sectors, representing research and related events. n “an economically significant leadership gap”, as the current draft of the research puts it. Under-representation of women is most mared in three industrial sectors financial services, manufacturing and natural resources. A number of possible explanations for this gap are identified in the research, among them The same country flaws in educational provision for girls gloally might have two – “We don’t teach these girls proper maths,” says Kirchmaier – and “biases or impediments regulators who to work-life balance that make it harder for disagree over who women to achieve leadership positions in STEM & F sectors”. has jurisdiction. But the research’s provisional conclusion Stuart Weinstein, professor and head, is clear: “With the right people on the board, oventry aw School

Sibos, powered by SWIFT. Sibos Issues 51 www.sibos.com www.swift.com WORKSHOPS Picture this New workshops offer a ‘deep dive’ and a new perspective.

In addition to ‘traditional’ conference aways’ for delegates. This involved picking sessions, Sibos 2015 saw the introduction out and illustrating his pithier quotes (“If of a number of workshops, with the aim of you are riding a dead horse, dismount”), exploring the landscape at a more granular or using arresting imagery to convey the level and taking a deeper dive into industry concerns expressed by managers (and the challenges. Typically held in the afternoon best way to overcome them). – across most of the familiar Sibos streams – And when speakers were asked to identify these workshops gave moderators, panellists the kind of technology jobs that would be and delegates a full hour to delve into a most in demand when Sibos 2020 comes particular subject. around (blockchain technologist, digital One such workshop was ‘Technology architect, chief innovation officer, ig data and talent – what’s needed to strengthen scientist, cyber-security expert), Tan quickly your workforce’, a Technology Forum illustrated those job titles in a fashion that session in which four speaers from finance would stay in the memory long after the sector firms shared their experience and detail of the discussion had faded. opinions on how best to recruit and retain Audience participation was a major part high-quality staff in order to support their of all the workshops held in Singapore, with companies’ growth in a rapidly changing delegates encouraged to take full advantage – and increasingly technology-dependent – of the panellists’ expertise. In ‘Technology industry. and talent’, a key area of delegate interest As moderator Julia Streets led the was the role of human resources (HR) panel through the key points of the session, teams in supporting change. As speakers specialist illustrator Brenda Tan gave highlighted the strengths, weaknesses her own unique, graphical take on the and future priorities for HR best practice challenges facing finance sector recruiters (including KPIs to support a ‘fail fast’ culture), and employers. For example, when Frank Tan synthesised the key points for easy Noten, general manager, ICT – ORT, at KBC digestion. Group, explained his approach to changing The workshop concept may evolve as his organisation from a hierarchical delegate feedback is evaluated ahead structure to a more dynamic network – from of Sios . ut if the flurry of end-of- which experts with different skills were worshop selfies taen in front of an’s drawn for specific proects an interpreted whiteboard are a reliable indicator, the magic his comments to reinforce the key ‘take- markers will be out in force in Geneva! n

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Sibos, powered by SWIFT. Sibos Issues 53 www.sibos.com www.swift.com GAME CHANGERS Are you ready for the next great leap forward? In Singapore, 2015, Sibos TV gave a platform to four ‘game changers’ that are challenging accepted wisdom in the finance industry.

A game changer can come in many forms: The more dynamic an idea, a technology, a company, a person, or a combination of these and other factors. an environment, the What makes something a game changer is its more important it is transformative impact, its power to effect a quantum leap in understanding or execution. to have maps that To illustrate and inform, Sibos TV presented can guide us through a series of interviews conducted each day by Channel NewsAsia presenter Steven Chia and prevent pitfalls. with a focus on innovation and change in the Alan Laubsch, director, Financial Network Analytics banking industry. he first ‘game-changer’ was discussed y Alan Laubsch, director of Financial Network Analytics, who outlined the need for a new much better at sensing and responding to approach to risk management for banks and changes, and using networked intelligence. other financial marets participants. “he From an organisational perspective, we need world is getting ever more complex and to be much more nimble,” said Laubsch. fast paced. That changes the way we make The most potent risks are not necessarily decisions and manage risk. Traditional the most obvious. Dots on the horizon can methods used in stable environments just ecome ig lac clouds very uicly. “oo don’t wor anymore. oo many different at the periphery, look outside the network,” pieces are interacting with each other,” he urged ausch. “ans can e internally said. oday’s complexities mean that even focused because they are big, complex the most sophisticated risk models, run on institutions, but there might be something the most powerful computers, are still unable going on in the outside world that changes to predict outcomes relialy. “e need to e everything.” Laubsch uses the example of

Sibos, powered by SWIFT. Sibos Issues 54 www.sibos.com www.swift.com GAME CHANGERS

The opportunity for efiien ain is tr reattain

te asters , igital sset Holdings

‘roo-advisors’, which are eing currently ecome widely adopted,” said Masters, of change to the financial marets that deployed to respond to a niche segment of acnowledging the challenges of maing can mae the case for the adoption of new investment customer ueries, to illustrate changes to the complex and costly legacy technologies increased capital reuirements potentially rapid change that could tae systems that underpin so much of the spiralling technology maintenance costs due some ans unawares. “nce a disruptive wholesale financial marets. evertheless, to higher volumes, speed and regulatory innovation gets a foothold, the solution can she asserted “he power of this technology reuirements lower revenues changes in soon ecome more powerful. he emergence is significant enough to change the way maret practices reuired y regulatory of artificial intelligence in finance could e financial maret infrastructure operates.” reform, notaly in the derivatives marets incredily disruptive,” he said. hy is this time different ccording and operational ris, especially from threats s an investment aner in the s, to Masters, there are at least five drivers cyer-security. “ elieve distriuted ledger ausch was responsile for uilding technology has the aility to address all five complex ris models, which he now concedes of those dimensions of pain eing faced y perhaps did not tae sufficient account of financial maret participants,” she said. suseuent changes in reality. n today’s istriuted ledgers are shared, replicated, even more complex environment, ans’ decentralised transaction networs ased approach to ris management needs to e on open source internet protocol that draw highly responsive to sudden changes in the on cryptographic techniues to secure the operating landscape. “f he has access to information recorded on those ledgers. From oogle Maps, an er driver who has never een to ondon can eat a caie with years of experience ecause he nows where the road closures are. he more dynamic an environment, the more important it is to have maps that can guide us through and prevent pitfalls,” he said. Eighty percent of the Power of technology risaers in aa are sendin uesday saw attention turn to the game- changing potential of distriuted ledger one via oie technology more commonly nown as the locchain that supports transactions finania servies in itcoin and other crypto-currencies, as is is a ae explained y lythe Masters, of igital sset Holdings. “ust ecause a technology aner is new and clever doesn’t mean it will Dr Atiur aan governor, central an of angladesh

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a market infrastructure perspective, instead of all parties to a transaction keeping their own separate records, distributed ledger technology could deliver a ‘golden’ account of transaction history that acts as a single Large Chinese source to multiple independent parties. If we can share the same transaction record and technology agree on its validity at the outset, “there is companies are really an enormous opportunity to reduce errors, reduce time spent resolving errors, and for pushing into the transaction data to be accessed in real-time, finania indstr secure fashion at different locations and by different legal entities,” said Masters. and changing the “he opportunity for efficiency gain is truly market. breath-taking.” Zennon Kapron, CEO, Kapronasia Inclusive policies

Economist and current governor of the Alibaba’s online payments service, Alipay, central bank of Bangladesh Dr Atiur Rahman was able to reach 1 billion users within joined Chia on Wednesday to explain how China’s borders, all of whom transacted in the country’s economy had thrived against very similar ways. expectations since the financial crisis. Alibaba has already expanded Rahman has been recognised as the 2015 geographically, into the Indian market, but sia-acific central aner of the year y he overall these three giants have so far grown Banker magazine, for his work to stabilise from dominant positions in their core sectors and strengthen Bangladesh’s economy. In this by offering a wider range of related services to effort – for which, he says the country’s policy existing customers. Alibaba already has a big makers and entrepreneurs should share the small businesses, women entrepreneurs, presence in SME lending, while Tencent now acclaim – one game changing factor was the digital service providers, from all around the enables users to book cinema tickets, taxis or courage of the central an as the financial economy,” said Rahman. invest in wealth management products using crisis wreaked havoc around the world – to n the final day of Sios , ennon the firm’s core payments capailities. adopt new technologies and inclusive Kapron, CEO of Kapronasia, an independent What are the opportunities for foreign policies. “Demand from the external world research and consulting group, explained competitors? The scale of the domestic was weaening due to the gloal financial the differences in how fintech innovation is Chinese market and the relative lack of crisis, so our only option was to expand our reshaping hina’s financial services maret, competition to date has been an advantage domestic market. We could only do that by compared to more established jurisdictions. for domestic fintechs, maing it difficult for reaching more people through conventional n orth merica and urope, the fintech prospective entrants to gain market share. means and by the use of technology,” he story is typically seen as one of innovative The top three mobile payments providers in explained. startups developing niche solutions to China account for 95% of the market, said To help small businesses get over their perceived needs not catered for by existing apron. fficial policy continues to offer concerns about using mobile banking, financial institutions. n hina, large internet- protection to domestic firms, he added, Bangladesh issued guidelines in 2011, paving ased technology firms such as liaa pointing out that, unlike other regulators, the way for 28 million new bank accounts. (commerce), Baidu (search) and Tencent the first priority of hinese regulators is to “Eighty percent of the rickshaw-pullers (chat) are creating broad-based ‘platform ensure the country can adjust safely to a in Dhaka are sending money via mobile plays’. “These large Chinese technology lower growth trajectory than it has seen in financial services. his is a game changer. companies are really pushing into the the last two decades. The central bank provided the lead, bringing financial industry and changing the maret,” eyond hina, much fintech activity is the banks and the other service providers said Kapron. centred on the emerging innovation hubs on board.” At the same time, says Rahman, of Singapore, Hong Kong and Sydney. “The the central bank encouraged banks to reach Scale advantages challenge lies in moving outside those out to new customers also through existing markets,” said Kapron. “Southeast Asia might channels for monetary policy reasons. The One reason for this difference, says Kapron, be seen as a distinct economic region, but combination of conventional monetary policy is a matter of scale. To go from 150 million the countries within it are very different in with inclusive financing has delivered to a billion users, US-based PayPal had to terms of their spending habits and also the growth rates in the Bangladesh of 6% over adopt an international strategy, which meant maturity of their finance industries. hat’s the last six years and is forecast to rise to doing business in different languages and a challenge for oth fintechs and ans, ut 7% this year. “This growth isn’t based on with different cultures, each with different nevertheless China and Asia are the big a few corporations, it’s based on farmers, patterns of consumer behaviour. In contrast, growth story globally.” n

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