Banks Can Handle Europe's Debt Woes

SIBOS ISSUES Scan me to learn more about SWIFT@Sibos Thursday 22 September 2011

Panel rules out Brazil up Surviving the RTGS ‘big bang’ and running regulation page 6 page 6 whirlpool page 8

The official daily newspaper of Sibos 2011 Toronto 19-23 September www.sibos.com

Big Issue debate Banks can handle It’s good to talk, and even Europe’s debt woes better to listen Emerging market growth to create wealth of opportunities for banks “Liquidity, espite an uncertain eco- America Merrill Lynch (BAML), management nomic backdrop, there said the fundamental reapprais- of financial Dare many potential sourc- al forced on banks by a difficult es of growth for banks – even as macro-economic outlook and institutions, they confront the cost of regulato- mounting regulatory changes ry change – Sibos delegates were could have benefits to banks and funding told in yesterday’s Big Issue de- their customers alike. and risk bate 2. A key factor, according to “Just because I’ve served clients panellists in the session ‘Where’s in a particular way for 15 years, management the growth in 2012 and beyond?’, have I really stepped back in the has all is proactive client engagement. In- deed, both the search for growth “If you listen improved opportunities and efforts to con- trol the growing cost of regulation to clients and since the could be materially furthered by reposition you can collapse better customer dialogue. Noting that he now spends as take expense out.” of Lehman much of his technology budg- Paul Simpson, head of global et on compliance as he laid out transaction services, BAML Brothers.” three years ago on developing new products and services and last two years and asked whether Rick Waugh, president and CEO, Scotiabank accessing new markets for cli- it’s the optimal way to serve the ents, Tim Keaney, vice chairman client going forward?” he pos- and CEO, asset servicing, BNY ited. “Clients often have great Post-2008 changes in the banking system have left Mellon, said customers found it views on how you should change hard to accept the potential con- your service models. If you listen the industry better equipped to withstand Europe’s sequences of the current “tsuna- to clients and reposition you can mi of regulation”, such as high- take expense out.” Taking the sovereign debt problems er costs or longer lead times. “If example of the slow withdrawal you educate clients on how costs of checks from the domestic US are escalating you can have a ra- payment environment, Simpson A lack of regulatory leadership means that bank and corporate tional conversation,” he added. said banks had to ensure that cli- “It’s frustrating that, when we talk ents were on board when taking liquidity will remain locked upStandfirst text about what’s driving my costs, cost out of their processes to ad- the end-investor is disconnected just to a harsher business climate. loomberg reported on 13 ing on its debt in the next five The European debt question from the benefit.” “You have to be willing to can- September ta Greece had years – much of this debt held by will be high on the agenda at Paul Simpson, head of glob- nibalise yourself,” he said. “If Ba 98% chance of default- Europe’s large banks. continued on page 4 al transaction services at Bank of continued on page 2

Advert red.indd 1 02/08/11 09:17 sibos.com Sibos Issues 1 sibos 2011 What’s on It’s good to talk, and even better to listen Thursday 22 September continued from page 1

Plenary 16:00-17:00 Plenary room

Closing plenary In conversation with … 09:30-10:30 Conference room 1 In conversation with Piyush Gupta, CEO and director of DBS Group Holdings and DBS Bank

Main conference sessions 09:00-10:30 Conference room 3 Innotribe focus session: future of money – is there still a role for banks? 09:30-10:30 Conference room 2 “When there is a “We’ve got to “I expect countries “Clients often have Commodities: are increased trading and speculation change affecting regain the trust such as India to great views on destabilising the global economy? our clients, it is an that we lost as do much better in how you should 11:00-12:00 Conference room 2 opportunity.” an industry a few future in terms of change your Securities reference data: is your strategy up to scratch? years ago.” growth.” service models. 11:00-12:00 Conference room 3 Tim Keaney, vice chairman and CEO, John Coverdale, head of global MD Mallya, managing director, Paul Simpson, head of global asset servicing, BNY Mellon transaction banking, HSBC Bank of Baroda transaction services, BAML Exchange consolidation: charting the downstream impact 11:00-12:00 Conference room 1 you have a big flow of revenue around global portfolios like I’ve of global transaction banking, al transaction banking products. Mobile payments – is it too late for based on a historical business never seen before,” said BNY HSBC, and MD Mallya, chair- “Asian economies are typically banks? and you’re not willing to take that Mellon’s Keaney. “And when man of the Indian Banks’ Associa- growing at least three times the step, you’re not going to be able there is a change affecting our tion and managing director, Bank rate of the West. That’s bring- 14:00-15:00 Conference room 3 to change your business model. clients, it is an opportunity. Cli- of Baroda, indicated that the op- ing with it a great deal more af- Buy-side operations: as their global You have to have a partnership ents are very willing to sit down portunities from banks stemming fluence and aspiration,” he said. models evolve, what do investment approach because it’s hard to and talk about what we can do in particular from Asia’s growth “That knocks onto trade and managers need from their service change something when a client differently to help them – usual- were likely to continue apace. wealth services, therefore people providers? has been doing it the same way ly that will result in a good prod- “The contribution of emerg- will start investing in ETFs and 14:00-15:00 Conference room 2 for 25 years.” uct idea that clients are willing to ing markets to global GDP has similar products. Not just in Asia, Market infrastructures: new pay for.” increased substantially in re- but also Latin America and po- principles for financial market Power shift BAML’s Simpson pointed out cent years,” said Mallya. “In In- tentially the Middle East and Af- infrastructure markets, the While advocating active engage- that it is not just the banks’ larger dia, we see potential in the in- rica, they’re not dealing with leg- expected response to better ment with clients, panellists sug- clients that are pursuing opportu- frastructure and services sectors. acy regulation and infrastructure, mitigate risk? gested that institutional and cor- nities in emerging and develop- Even having achieved consistent so can build anew.” porate customers were already ing markets. “We’ve seen huge GDP growth rates of 7.5-8%, I But he warned that banks could Conference room 1 14:00-15:00 leading banks toward the oppor- growth in commercial banking expect countries such as India to not take growth for granted. First, Internationalisation of the tunities created by the shift in and middle market clients going do much better in future in terms they had to build the confidence Renminbi – the implications for economic power from developed over to the developing countries of growth.” of their customers. “Without the the global industry to emerging markets. and looking at growing new busi- banks, there is no safe interme- “Clients rely on us now more ness opportunities,” he said. Fulfilling aspirations diary. That is what we exist for. Standards Forum than ever for responsiveness on Looking at the shift in invest- HSBC’s Coverdale said that con- We’ve got to regain the trust that (Standards Forum stand) questions around risk, evalua- ment and business flows from tinued high rates of growth were we lost as an industry a few years 09:30-09:45 tions, custody of assets. Custom- the perspective of the emerging feeding into greater demand in ago. If we don’t, the world is go- Education session – the ISO 20022 ers expect immediate answers markets, John Coverdale, head Asia and beyond for tradition- ing to have a very difficult time.” cooking class 09:45-10:30 Breaking down silos 10:45-11:30 T2S case study: SWIFT Standards T2S delay “a huge disappointment” gets closer to its customers 11:45-12:15 ECB decision postpones cheaper equity trading costs in Europe Education session – how to get your new and improved messages im Keaney, vice chairman T2S programme board intend- T2S nevertheless represented faster? and CEO, asset servicing, ed to recommend that the pro- “It helps drop the “the first step in further harmo- BNY Mellon, said he felt ject be delayed by “more than nisation that will really dramati- 12:30-13:30 T cost of owning Food for thought – vets vs. rookies: “a huge sense of disappointment” three months and less than a cally restructure the cost base” of not your standard face-off following the confirmation by the year”. equities and securities trading in Europe. “It European Central Bank (ECB) Designed to centralise securi- helps drop the cost of owning 14:00-14:45 that the launch of its pan-euro- ties settlement in Europe, T2S that benefits equities and that benefits every- LEI in practice zone settlement platform, TAR- has already been postponed once everybody.” body,” he said. 15:00-15:45 GET2-Securities (T2S), would and was due to go live in 2014. The delay comes as the ECB Tim Keaney, vice chairman and CEO, asset Closing of the Standards Forum be delayed. The decision on the further delay and national central securities On Tuesday, Jean-Michel Go- is expected to be confirmed next servicing, BNY Mellon depositories were due to enter a Innotribe (Innotribe space) deffroy, director general, pay- month at a meeting of the ECB’s final round of discussions on the 11:00-15:30 ment systems and market in- governing council. further legal and tax reform in governance and operational ar- Innotribe celebration frastructure, ECB, said that the Acknowledging the need for the euro-zone, Keaney said that rangements for T2S.

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

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2 Sibos Issues sibos.com With all of today’s economic ups and downs, isn’t it nice to know there are still some values you can count on?

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CCP Clearing International Custody Securities Finance Global Fund Services Shareholder Services Solutions for the future. Now. Banks can handle Europe’s debt woes continued from page 1

the 2011 annual meeting of the Board of Governors of the World Bank Group and the Internation- al Monetary Fund (IMF), which takes place in Washington DC immediately after Sibos on 23-25 “What we’re seeing is a lack September. Rick Waugh, president and of the right policy decisions, CEO of Scotiabank, interviewed creating uncertainty.” for yesterday’s ‘in conversation’ session, will be in Washington DC for the annual meeting along with peers from the internation- al banking community. There is a tangible difference, he observes, surrounding the current crisis compared to when the two groups met at the height of the global fi- nancial crisis in 2008 and 2009. “This year, we do not have a since the collapse of Lehman Waugh suggested big corporates “Canadian banks had good sovereign debt or say you could true financial crisis on our hands. Brothers,” he said in an interview could be part of the European so- capital before, during and after not hold sovereign debt.” Now we are dealing with gov- with Business News Network an- lution but their reticence to assist the global financial crisis,” he In his eyes, the financial servic- ernment and sovereign debt and chor Howard Green. came from an uncertain regulatory said, pointing to their global rep- es industry had been healing well a lack of policy,” said Waugh, a He insisted the sovereign debt future, making these healthy entities utation for prudence and respon- until the Greek debt crisis erupt- self-confessed veteran of three woes of Europe were not a sol- think twice before parting with their sible capital management. “Reg- ed earlier this year. capital: “Until we have good lead- ulators cannot manage banks. “What we’re seeing is a lack of ership [from regulators and politi- They can supervise them but to the right policy decisions, creat- “Big national banks are still sitting on cians] a decision cannot be made.” proscribe technology and com- ing uncertainty,” he said. a lot of cash, as are big corporates… Waugh believed the global pensation is wrong. The vari- The mandate for regulators economy was facing hitherto un- ous crises over the last few years was to create safe banks, but until we have good leadership a seen and significant challenges have not happened due to a lack the mandate for banks was to originating partially from a lack of proscribed regulation. We’ve grow. Waugh believed the two decision cannot be made.” of clarity from regulators. He lik- had [proscribed regulation] for functions could operate togeth- Rick Waugh, president and CEO, Scotiabank ened the situation to a patient years now.” er as long as banks were not be- entering an Emergency Room: ing told how to deliver growth: global economic crises and 41 vency issue: “Countries cannot go “You need someone to stabilise Lack of good policy “Where is the regulator’s experi- years in the industry. bankrupt – they do not just dis- the patient first, then you can He blamed a lack of “good pol- ence to do this?” He believed any possible eco- appear the way corporate entities think about healing them.” icy” for Europe’s current sover- However, rather than prop- nomic slump which could result can. The large European banks For Waugh, how to address eign debt woes and is calling for ping up financial institutions from issues surrounding European do not lack capital, they are just – the issue of adequate capital less regulatory proscription. with asset relief programmes, and US debt would not be as steep rightly – reluctant to part with it.” and liquidity was the key ques- Waugh insisted European Waugh believes banks should as during the global financial crisis – tion. And the answer required banks who had held the sov- be “allowed to fail in an order- the shock absorbers were now bet- Leadership crisis good, prudent, balanced, prin- ereign debt of countries like ly way.” Shareholders and man- ter and the world had learnt valua- “Big national banks are still sitting ciple-based regulation – some- Greece, Ireland, Italy and Spain agers should “pay the price”, ble lessons from the past few years. on a lot of cash, as are big corpo- thing that did not come from had done nothing wrong: “They he said, if institutions could not “Liquidity, management of fi- rates. Bank customers are in good the regulatory trend of proscrib- were doing what the regulators meet their obligations and main- nancial institutions, funding and shape – better than in 2008 [be- ing criteria to the financial ser- required. Nowhere did [regula- tain the operational effective in risk management has all improved fore the credit crisis],” he said. vices industry. tion such as] Basel put caps on the market place. Tapping into the great unbanked Giving back to the community The potential of microcredit is beginning to be realised, but the dangers must also be understood helps young homeless wide and involves around USD 30- lending in socially responsible areas, “Consumer 40 billion worth of assets. including microfinance. The result credit is not The area is growing but there is that microfinance institutions vie are dangers associated with mi- for the same customers, who then microcredit and crocredit, particularly if the na- borrow beyond their means. ture of the business is not fully this distinction understood or if the industry is Cultural disparities very often gets not adequately controlled. While there are microfinance For instance, von Stauffenberg investment vehicles for devel- forgotten.” noted that in countries like South oped investors to participate in Damian von Stauffenberg, founder and Africa, there are companies that the growth of the industry, large chairman, MicroRate are in the business of lending that banks and savings cooperatives “like to dress themselves in micro- have failed to get directly involved From L to R: Francis Vanbever, CFO, SWIFT; delegates through the world of credit clothes.” because of cultural disparities. Susette Clunis, executive director, Touchstone; Roger Durepos, chair, Canadian National microcredit during the CSR In these instances, the firm “Banks and savings firms simply Member Group breakfast on Wednesday. does not care how the loan is cannot get away from demanding An industry focused on ena- used, only about the collater- collateral to back up loans, which he Touchstone Youth Cen- roviding access to capital bling the poor to generate their al held against the loan, usually the poor simply do not have,” tre has received a dona- for the large swathes of un- own wealth, microcredit offers in the form of salaries, which of said von Stauffenberg. “Banks Ttion of EUR 10,000 from Pbanked people across de- working capital to unemployed course the poor do not have. see the profit opportunities in mi- SWIFT, and a matching donation veloping countries has experi- individuals in developing coun- “Consumer credit is not micro- crocredit, but the overwhelming from the Canadian National Mem- enced impressive growth over the tries through small loans, typical- credit and this distinction very of- majority have failed miserably.” ber Group, to help its work with last few years, but managing the ly between USD 300-500. ten gets forgotten,” he said. The opportunity for those al- homeless young people in crisis. potential pitfalls of the microfi- “Having access to capital allows The MicroRate chief also empha- ready involved in microcredit, Touchstone’s mission is to help nance industry is crucial. poorer people to grow their source sised the dangers of flooding micro- however, is substantial. young people make immediate This was the key message of revenue in an entrepreneurial way finance companies with cash. This “I wouldn’t be surprised if 10- and positive change in their lives. from Damian von Stauffenberg, and therefore improves their stand- has been a problem in India, follow- 15 years from now, some of the The centre provides an emer- founder and chairman of Micro- ard of living,” said von Stauffenberg, ing the establishment of the govern- niche microfinance institutions gency shelter, drop in centre and Rate, a ratings agency for micro- adding that microcredit is used by ment’s ‘priority sectors’, which re- are among the largest banks in the outreach support, including help finance institutions, as he took around 40-50 million people world- quires banks to place 40% of their world,” claimed von Stauffenberg. with housing and employment.

4 Sibos Issues sibos.com

STANDARDS FORUM Panel rules out RTGS ‘big bang’ A cut-off point for ISO 20022 implementation will avert a SEPA-style scenario

f you want to know how not to apply ISO systems, implementation of ISO 20022 will The panellists agreed that some form of client services and payment operations 20022, look at SEPA. “As long as it’s be incremental. “In a world of discontinu- of migration period was probably a nec- at the Canadian Payments Association. Ioptional, you won’t see much of a pick- ous change we need to embark on gradual essary evil, but that raised another issue: “New systems need to be interoperable – up,” said Hansjörg Nymphius, chairman of change because the RTGS systems that exist harmonisation. Without it, variations on and ISO 20022 leads the pack.” the Euro Banking Association and direc- are fit-for-purpose,” said Paul Inglis, head of the theme will lose reliability, stability Yet the convergence of high- and low- tor of market infrastructures, product man- the payments industry at ANZ Bank. and speed. “We need a synchronised ap- value payments systems creates another agement, global transaction banking, at “You have to start somewhere,” he add- proach,” said Nymphius. “Let’s stick to complexity. Whereas low-value systems Deutsche Bank. “There needs to be a hard ed. “You start with market infrastruc- one version. Only then will we get the ben- are largely domestic, RTGSs are inter- efits of ISO 20022.” linked. It isn’t clear how they might be de- In the meantime, as James Whittle, head coupled to allow for divergent timeframes “New systems need to of standards at the UK Payments Coun- for implementation. be interoperable – and cil, observed, it’s one thing to have a vision Meanwhile, the end-point is the sticking but quite another to find a business case. point. “Perhaps we can’t go for the big bang ISO 20022 leads the Banks will ask: what will it give us that we option but we need to keep the coexistence don’t already have? Whittle warned against period short and well-defined, and make pack.” regional format variations. sure there’s an end to it,” said Nymphius. Mike Hoganson, director of client services and payment operations, Canadian Payments Association What panellists agreed on was that the “If we’re embarking on a new stand- distinctions between high- and low-val- ard, let’s make it one standard – not var- ue payments had blurred significantly and iations of the same one – and lay down end-date. Otherwise, it will never happen.” would likely blur further. “New systems a maximum timeframe. Make the transi- Speaking at a panel session on use of ISO will cater for both ends of the payments tional period too long and it’ll die before 20022 in high-value payment systems, Nym- spectrum,” said Mike Hoganson, director it’s born.” phius took a hard line on built-in delays. The session’s subtitle might have been ‘The time is now!’ but in fact it seems the time is probably some way off. “Some- tures, then our own legacy systems, and times we’re planning, sometimes we seem then mitigating issues. But we’ll ultimately ISO 20022 offers a route for to be talking about it and sometimes we reach a tipping point.” seem to be talking about talking about it,” The problem with gradual change is that said moderator Harry Newman, head of you risk ending up with the SEPA scenario, low-value payments banking initiatives at SWIFT. in which the lack of an end-date deprives One problem is that multilateral netting the project of momentum. One audience The journey towards aligning low-value payment and real-time gross settlement (RTGS) sys- member pointed out that a central bank tems currently used to process high-value had backed the introduction of ISO 20022 systems across geographies is just beginning payments are far from obsolete. In Austral- for RTGS but then suggested its use be ia, which recently decided to retain its legacy made voluntary. anet Estep, president and CEO, North American Clearing House J(NACHA) succinctly summed up the key challenge in achieving alignment of low-value payments systems across bor- Brazil up ders: “If we were to start with a clean slate we would probably all take a different ap- and running proach and that approach would probably look very much alike for us all. … Our Brazil continues its steady non-bank competitors are starting with a clean slate,” she warned. “So if we have rise, but infrastructure is technology as an enabler of change, when “User expectations for do we make a leap to use that technology its next challenge to do something more innovative?” payment transactions Streamlining legacy payment infrastruc- he Brazilian economy has skyrocketed tures is a work in active progress in the include that they should in the last two decades and the coun- UK and in Canada. James Whittle, head be safe and secure.” try has asserted itself as a key invest- “There is a need for of standards, UK Payments Council, de- T Janet Estep, president and CEO, NACHA ment destination for international investors. infrastructure projects scribed the UK payments infrastructure as Panellists for the session ‘Brazil: the fu- fit for purpose, but not as streamlined as ture starts here’ were positive on Brazil’s to move forward, it could be, with bespoke schemes that do al clearing houses by the end of this year,” prospects for the future, but highlighted not use the same standards. “We have a Gustav Vega, President and CEO, ACH a number of issues that need to resolved, particularly in airports, vision to migrate to ISO 20022 as a com- Colombia, told the audience. particularly in relation to infrastructure. railways and ports.” mon standard in our environment. There Murilo Portugal, CEO of Febraban, a David Mann, regional head of research, Americas, is consensus around that, but it is a jour- Steps on the journey Brazilian banking trade body, was quick Standard Chartered Bank ney,” he told the audience. Obstacles to be negotiated by the indus- to highlight that Brazil’s growth was not Moderator Guy Legault, president and try on the migration journey included cost, cyclical but a part of a permanent change Guerra added that a “flourishing” rela- CEO, Canadian Payments Association, accommodating the needs and business that had been backed up by macro-eco- tionship with China would also help Brazil explained that in Canada, a government- drivers of a diverse group of participants nomic policies that proved resilient during maintain the momentum it needs to reach initiated review of the payments infrastruc- and users, and the complexity of migration. the global financial crisis. its potential. ture is also moving towards ISO 20022 as Regulatory projects could be helpful in de- “The Brazilian economy is now achieving The continued growth of the economy a common standard, and there is also dis- livering incremental change, said Whit- higher output rates than it was pre-crisis,” he however, will depend on the development cussion about migrating from a bilater- tle. Research suggested the cost of realis- said. “The basic macro-economic framework on Brazil’s infrastructure, noted David al system (70% of payment volumes are ing common payment standards in the UK has been maintained throughout changes in Mann, regional head of research, Amer- with the five largest banks in Canada) to was around GBP 300 million. government over the last 20 years.” icas at Standard Chartered Bank, who an ACH model. One question facing the industry was To ensure that Brazil achieves its full po- highlighted that the latest Global Compet- ACH Colombia, less burdened with leg- how to collaborate more, given the com- tential, Pedro Guerra, managing director itiveness Report ranked Brazil 89th out of acy infrastructure, is also looking to the plexities in each geography. Interopera- for Citi Brazil, said that USD 300 billion 139 countries. future. In March this year, Colombia be- bility only becomes relevant once user ex- worth of investment per year would be re- “There is a need for infrastructure pro- came a SWIFT member and is also a new pectations are aligned across geographies, quired over the next decade. jects to move forward, particularly in air- member of the International Payments observed Estep. “User expectations for “This investment will partly be driven by ports, railways and ports,” he said. “A lot Framework Association, which works for payment transactions include that they the banks, but I expect a big portion of this of these issues need to be resolved but interoperability by leveraging existing net- should be safe and secure,” she suggested. to come through capital markets,” he said. the upcoming World Cup and Olympics works and international standards such Sharing information and best practices on, “The ability to attract foreign investors will sports events will help to accelerate some as ISO 20022. “In Latin America, we are for example, financial crime, was one step be a major part of this.” of these projects.” looking to form an association of nation- on the journey.

6 Sibos Issues sibos.com Raise expectations.

Today’s marketplace is a catalyst for opportunities, and BNY Mellon can help you make the most of them. We have the unique perspective that comes from taking care of over a fi fth of the world’s assets. So we can provide better insights and the right solutions to help your business reach its highest goals.

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Products and services may be provided in various countries by the subsidiaries, affi liates and joint ventures of The Bank of New York Mellon Corporation. Each is authorised and regulated as required within each jurisdiction. This does not constitute an offer or solicitation of securities or services or an endorsement thereof in any jurisdiction or in any circumstance that is otherwise unlawful or not authorised. BNY Mellon is the corporate brand for The Bank of New York Mellon Corporation. Statistics pertaining to assets under custody worldwide are as of February 2011 by globalcustody.net. ©2011 The Bank of New York Mellon Corporation. All rights reserved. Surviving the regulation whirlpool Bold initiatives on both sides of the Atlantic are reshaping the global securities landscape – but is your business ready?

t is no secret that the world’s securities which many developed economies used markets are facing an intense barrage of to rely is probably over for the foreseeable “Markets are Ilegislation on several fronts. In the US, future, Mark Gem, member of the board Dodd-Frank stands poised to sweep away at Clearstream International, the clear- famously bad at banks’ proprietary trading desks and up- ing and settlement subsidiary of Deutsche root the bulk of OTC derivatives onto new- Börse Group, suggested a need to focus on predicting the ly-created central clearing platforms. In Eu- the opportunities opened up by new regu- rope, MiFID II and the European market lation. Securities processing, for example, next crisis.” infrastructure regulation will redefine the might have to reinvent its value proposi- Mark Gem, member of the board, rules for trading activity for many asset tion to take account of changing business Clearstream International classes, while globally, Basel III will impose and regulatory realities. However, fellow substantially higher capital requirements on panellist Paul Bodart, EVP and head of the world’s financial institutions. EMEA operations, asset servicing at BNY Speaking in the session ‘Securities regu- Mellon, was more cautious. lation: How to turn threats into opportuni- ties,’ Patrick Colle, general manager at BNP Regulatory mist Paribas Securities Services, expressed confi- “I’m still not clear whether the costs will dence that regulation would create new busi- be bigger than the revenue we’ll gain from people with direct experience of trading in if the private sector can resolve the issue.” ness opportunities, but voiced concern about the opportunities that regulation is open- the financial markets to help us better under- However, despite the best intentions of the cumulative effect of multiple rounds of ing up,” said Bodart. “Regulators want to stand the activities we are expected to gov- market participants and regulators alike, regulation on economic productivity. understand what is happening in the mar- ern,” said Matt Reed, assistant chief counsel sometimes the future cannot be easily read, Citing studies by the Bank of Internation- ket. They are seeking masses of informa- at the SEC. “Expectations are so much high- as Gem at Clearstream admits. “Markets al Settlements, which predicted that Basel tion, but if we do not develop appropriate er than they used to be. We hope that build- are famously bad at predicting the next cri- III would have a significant negative im- standards, the result may be a monster.” ing up our own expertise will give us a fight- sis,” he said. “It often becomes blinding- pact on global GDP growth, Colle add- US regulator the Securities and Ex- ing chance to make sense of the markets we ly obvious what the signs were, afterwards. ed that the impact of the new regulation, change Commission (SEC) has devoted have been tasked with overseeing,” he said. But at the time, communities are often en- when combined with Europe’s aging popu- much of its attention since the financial Reed explained that the SEC does some- tirely oblivious to the danger.” lation, its relatively weak economic perfor- crisis to reducing systemic risk in the deriv- times mandate standards to help define Pointing to the ancient tragedy of Cas- mance and rising levels of debt, could place atives market, increasing transparency and market practice, but suggested that the pri- sandra, the Trojan princess who was gift- a dampening effect on the region’s econom- access to market data, as well as assessing vate sector had an important role to play in ed with the ability to foretell the future but ic potential. “I would like to see a full global the options for a consolidated audit trade. ensuring that securities markets continue doomed never to be believed, Gem sug- analysis of the costs and benefits of the new Yet the regulator has itself been forced to to operate smoothly. “The consolidated gested that human nature often underes- regulation, so that we can better balance change by the sheer scope of global re- audit trail, for example, is not really an ap- timates the risks ahead – a fitting warning, and adjust the prudent financial measures forms and changing market expectations. propriate problem for us to solve,” he said. perhaps, to those who would only see cost that we will be required to take,” he said. “At the SEC, we have been actively hiring “We have tasked the exchanges to come up in the regulation that is currently forming Arguing that the market growth on economists, analysts, mathematicians and with a solution. It is better for the market to reshape the world’s financial markets. Reforming North American risk Canada and the US have different strategies for handling market risk. Who is right?

ecurities markets around the globe are struggling to get to grips with “We shouldn’t Sconsolidation, harmonisation, risk management and operational efficien- assume cy. While Canada’s strong fiscal policy al- moving lowed it to escape from the 2008 financial crisis relatively unscathed, US regulatory trades to change looms large on the horizon. a central Currently in the final stages of review be- fore implementation, the US Dodd-Frank counterparty Act seeks to move as large a proportion of reduces risk.” OTC derivatives as possible onto centrally Kelly Mathieson, business cleared platforms called ‘swap execution fa- executive, global custody and cilities’. Yet some market participants are clearance, J.P. Morgan sceptical that such an approach will work. “We shouldn’t assume moving trades to a central counterparty (CCP) reduces risk,” said Kelly Mathieson, business executive, market means I have fewer clients than I global custody and clearance, J.P. Morgan. did in 2008,” said Stephanie Wolf, head “CCPs have certainly reinvigorated the dis- of Americas financial institutions treas- Commodities: cussion about risk, but just shifting to a ury sales, Bank of America Merrill Lynch. CCP in itself does not resolve the issue.” “That means the risk is actually more con- from origin to destination While much of the focus in securities mar- centrated. We’re having to watch out for kets since 2008 has been on risk manage- the potential risks lurking in our business ment and regulation, Jose Placido, CEO at more carefully than ever before.” Financial Experts in Food & Agribusiness. Royal Bank of Canada Dexia Investor Ser- International cooperation may provide vices, believes that reform can only achieve part of the answer. Ian Gilhooley, president Wherever you are in the global food chain -producer, trader, processor so much. “The main concern for us is and CEO at Canada’s national securities or retailer- Rabobank is uniquely qualified to help you succeed. As the whether we can work out what risks we are depository, CDS Clearing, praised the links world’s leading F&A bank Rabobank offers outstanding expertise and facing, before it is too late,” he said. “Eve- that have been forged between his organisa- financing solutions at each link in the chain. From financing harvest ry single participant in the market needs to tion and its US equivalent the Depository and inventory to hedging against volatile commodity prices or take responsibility for their own actions.” Trust & Clearing Corporation. “We need optimally structuring capital. Visit our stand (J 107) at Sibos. Continuous risk assessment may already to deal with all kinds of unpredictable chal- be a fact of life for many of the world’s top- lenges, such as the extreme market volatility www.rabobank.com tier financial institutions. Yet counterpar- seen in August this year,” he said. “Work- ty risk is not easily tamed, nor is it nec- ing together to manage the risks is probably essarily decreasing. “Consolidation in the better than operating in competition.”

8 RABOSibos 486 advIssues 134x186 sibos.indd sibos.com 1 23-08-11 11:36 Buy-side disillusioned by OTC reforms The new derivatives markets may be safer but they’re likely to be more costly too

hile some banks are looking for- Jason Vitale, global head of foreign ex- ward to a period of innovation change prime brokerage and FX OTC Win the over-the-counter (OTC) clearing at Deutsche Bank, said before “I’m not derivatives market, pensions funds worry the latest regulation, the OTC derivatives they could lose billions in yield, with no market had been highly centralised. Post- even sure better protection from new laws. regulation, it appeared the financial mar- I can do New regulations will require a shift from kets structure would become more com- trading derivatives over-the-counter to plex and not necessarily easier to traverse. business trading them on an exchange, the intro- “We are moving to a fragmented model duction of centralised clearing and the in- which is more complex than originally en- with troduction of reporting to derivatives trade visioned,” said Vitale. “However, where the UK repositories. The rules come in the form of there are challenges comes innovation.” the European market infrastructure regu- As a result of disconnects and challeng- branch lation (EMIR) and reforms to the Markets es embedded in proposed OTC deriva- in Financial Instruments Directive (Mi- tives regulation, Vitale expects innovation of an FID II) in Europe and the Dodd-Frank to “skyrocket” in the next five-to-ten years. American Act in the US. But they have received a Others saw the complexity in less posi- very mixed response in the marketplace. tive terms. Guus Warringa, board member bank In a round able discussion yesterday af- and chief counsel for Dutch pension fund ternoon, four participants – representing a manager APG Asset Management, said anymore.” bank, an exchange, a regulator and a pen- the new obligations had made trading de- Guus Warringa, chief counsel, APG Asset sion fund – agreed that reform was in in- rivatives more opaque for the buy-side. Management vestors’ interests. “We cheered at the original aims to pro- Derek West, a director at Québécois tect the buy-side, but the result has been provincial regulator l`Autorité des Mar- we don’t know where we stand. We have chés Financiers, said regulators were try- been thrown in with other counterparties ing to shed light on derivatives, promote a as ‘risky’ even though we don’t feel we Warringa also criticised regulators for Muthukrishnan Ramaswami, president of level playing field and try to protect con- pose any threat to the market.” creating confusion over extra-territoriality the Singapore Exchange, said it was impor- sumers from the “next crisis”. He believed the implementation of the in the different regional approaches. tant to make progress by establishing con- “The industry was looking for legal cer- new regulations and new costs of deriva- “I’m not even sure I can do business with formity to safer levels of risk in derivatives. tainty. They didn’t have it before and we tives trading would mean pension funds the UK branch of an American bank any- “We need first to come to consensus. Then are working towards providing it,” he said. could “lose billions in yield”. more,” he said. we can move on to implementation,” he said.

Innotribe Counting the cost of failure Innotribe@Sibos asks the difficult questions Market doubtful on real-time trade confirmation benefits Banks put on the spot over new economies, corporate he total automation of trade confir- concluded that this move wouldn’t make culture and “a better world” mations is generally viewed as a key sense, partly because of the costs involved.” Tstep toward reducing the risk of set- Although she acknowledged that real- he emergence of new economies and The discomfort for banks didn’t end tlement failures. time confirmations would ensure that re- new currencies is already happening. there. During a highly interactive and pow- But while there are benefits to same-day cords reflect trader activity accurately, a T“The good news for the banks is that erful session on corporate culture, Sean trade affirmations, a panel of Sibos par- more important factor, according to Mary they can be influential in creating the next Park, managing director and founder, An- ticipants on Wednesday raised doubts as Stone, head of global investment opera- ones. The bad news is, it will happen wheth- themis Group, asked, “I have no idea how to whether a decrease in settlement fails tions, GE Asset Management, is transpar- er they do it or not.” Art Brock, co-founder anyone thinks they can run a bank from the would be one of them. ency on broker fails. of the Metacurrency Project, was just one top down, with all the complexity banks of many speakers in the ‘new economies’ have. Why would anyone want to be CEO “Best execution from session during Innotribe on Wednesday to of a big bank? There’s only downside.” hammer home this point to the banks: “It’s But doesn’t IBM manage with such a brokers should also top down structure, it was asked? So is it just the banks that are struggling? incorporate operational “We don’t need the banks There was good news again though, in the aspects.” reminder that we all have it in our power to to become Facebook.” change the organisational structures of our Mary Stone, head of global investment operations, GE Asset Management Doc Searls, Alumnus fellow, Berkman Center for Internet companies for the better. As Mark Dow- and Society, Harvard University ds, CEO, Brainpark, said: “Organisational charts don’t really exist. We drew them – we One issue to remember, noted Scott going to happen, with you or without you.” can redraw them.” Sandler, COO for J.P. Morgan’s Worldwide Innotribe attendees were bombarded Securities Services division, is that trades with information about a bewildering array Banks for a better world confirmed on the same day can still fail. of ‘new economies’ – and could be forgiv- The challenges continued during the ses- “Straight-through processing for trade “This way you can view the patterns of en for struggling to identify their place, if sion on ‘Banks for a better world’. A social confirmations will help reduce the chance ‘bad’ brokers and feed this to the front of- any, in this emerging world. Blogger Chris economy is operating alongside the main- of some risks such as duplicates, but the fice,” she said. “Best execution from brokers Skinner sought some clarity, asking wheth- stream economy, and while there are gaps impact of this on the risk of fails is less should also incorporate operational aspects.” er the financial community can still branch in the former, its power cannot be denied. clear,” said Sandler. As Europe considers migration to a T+2 out beyond the ‘transactional economy’ to The message was, the banks can “either get Alastair Almeida, head of financial insti- settlement regime, with the European become more relevant. Doc Searls, Alum- disintermediated or offer some resources, tutions at CIBC Mellon, said the lack of a Commission set to release proposals in the nus fellow, Berkman Center for Internet talent and advice” – at the very least. compelling argument had so far prevent- coming weeks, the debate around trade and Society, Harvard University, offered There was also a strong call for the ques- ed Canada from moving to real-time trade confirmations will be reignited. some words of reassurance. tion of how the banks can facilitate dia- confirmations. However, participants remained scepti- “What the banks are doing at the transac- logue between the social and mainstream “We considered same day matching to cal of Europe’s motives, with Ruben Lee, tional level is providing the infrastructure economies to be debated on the main ple- remain competitive, as the US considered CEO of the Oxford Finance Group, em- that we need. We don’t need the banks nary stage at Sibos. “This should be on the moving to a T+1 settlement cycle,” he said. phasising that there the move lacks a clear to become Facebook.” However “they do main agenda – and SWIFT can facilitate “However, after consultations, the industry business case and data to support the move. need to do what they do better,” he said. it,” one participant said.

sibos.com Sibos Issues 9 Forum for corporates Cash solutions need to get back to basics Integration, not innovation, will be the key to optimising corporates’ capital management

director of trade and internation- warned that the development of al financial institutions at BMO, more integrated cash manage- pointed out that, especially in the ment offerings meant corporates retail sector, suspicious suppliers would face a trade-off between will trust a bank as a neutral pre- control and efficiency. “You get senter of the benefits. more STP if you combine pay- So working capital offers a ments and FX but you won’t prime opportunity for banks to be able to track down every FX intermediate themselves in the fi- transaction,” he said. nancial supply chain – but with In the meantime, what’s hold- an appropriate sense of their role. ing back the development of bank “Banks are not the centre of the working capital solutions? The an- supply chain – they’re just partic- swer could lie in the structures and ipants,” said Wohlgeschaffen. mindsets of both corporates and “Corporates are looking for banks to present banks. “Bankers are all over the Simplicity is key place – and I don’t blame them. solutions, not for game-changing innovation.” When they emerge, working cap- Some go to the procurement head, David Vermylen, global credit manager, BP Petrochemicals ital solutions will be – in a word others to treasury, yet others to the – basic. “There’s a lot of scope CFO or CEO,” said Vermylen. for banks to get good at the ba- “But the corporate needs to be sics – pooling, cross-border trade ready as well. CFOs need to have ot more products but Despite apparent uncertain- (mittelstand) corporates were and cash forecasting,” said Joyce. been thinking through the strat- more integration is what ty about the capital management holding on to EUR 120 billion in “This isn’t rocket science. Banks egy and tactical options and pull Ncorporates need to make tools available to them, corpo- trapped liquidity, and that an 8% need to be stressing how basic ca- together people within the group the most of their cash, conclud- rates’ interest in cash manage- reduction in working capital fac- pabilities can help them reduce around it. When they do, the ed a Wednesday panel on work- ment is on the increase. David tors – including not only the cash operational costs.” bank can step in – preferably with ing capital optimisation. Vermylen, global credit manag- side but the sale of receivables – Vermylen agreed that banks an integrated approach.” Moderator Axel Miller, part- er at BP Petrochemicals, pointed could increase turnover by 10%. tended to focus on sophisticated Vermylen’s take on banks was ner for corporate and institution- out that over the past couple of Yet corporates have yet to solutions when corporates want marginally more sympathetic than al banking and global transaction years, blue-chips had spearhead- make the most of working capi- relatively simple ones. “There are their take on themselves. Despite banking at Oliver Wyman, point- ed a focus on working capital as tal in the supply chain – for ex- a lot of products out there. Cor- an increase in requests for propos- ed out that even as the cost of part of a push for shorter cycles ample, using it as an alternative porates are looking for banks to als, BNP Paribas global head of capital increases, cash-rich corpo- to bring down the cost of funding to credit insurance in the reduc- present solutions, not for game- GTS Pierre Veyres said banks re- rates are still relying on overdrafts and improve cash forecasts. tion of concentration risk, or as changing innovation,” he said. mained fragmented, with separate for liquidity. “It raises questions Markus Wohlgeschaffen, head a sweetener for corporates per- Although the panel agreed that cash and trade siloes. “It’s mov- about whether banks have done of global trade finance and ser- suading their suppliers to invest new-generation working capi- ing in the right direction but it still their job in presenting working vices at UniCredit, cited research in supply chain technology. Sa- tal solutions would be integrated isn’t clear that banks understand capital solutions,” he said. suggesting German mid-sized rah Joyce, executive managing across cash and trade, Vermylen the needs of corporates,” he said. Collaborate to compete? Collaborate to change! The challenges facing corporate banking are too great for individual banks and corporates to handle on their own

his is a time of change a single data pipe, single data “What we’re starting to realise is for bankers and their cor- connection,” said Anita Pras- that there’s a paradigm shift in Tporate clients, delegates ad, general manager, US Treas- thought: collaboration can lead to heard at Wednesday afternoon’s ury – Capital Management, Mi- innovation.” Watson also made session ‘World class corporate crosoft. This point was taken the point that, although the im- banking: collaborate to better forward by Shauneen Brud- mediate reaction to a corporate’s compete, or just compete?’ Mod- er, executive vice president, op- RFP might be “war” between erator David Robertson, partner, erations, Canadian banking, banks, the outcome was often a Treasury Strategies, opened by Royal Bank of Canada. Bruder sharing of the business between saying: “Our clients of all sizes said: “We need to think differ- those banks – thus, collaboration. are globalising profoundly. In ently about how we’re process- The panel discussed the vol- response, banks and other pro- ing work. Given the complexity ume and complexity of regula- viders are expanding their foot- of the system, it’s clear that no tion as a driver for collaboration, print, but they’re also seeking one participant can solve this.” and then Watson raised regula- deeper and more comprehen- tory arbitrage. Maurice Cleave, sive partnerships.” Risk has be- Barcode lesson global head of cash management, come more pervasive, Watson Bruder cited the precedent of Barclays Corporate, said: “May- continued, while technology is the universal product code (bar- be it would be a good idea for the creating powerful new capabili- code). Government stepped in regulators to get together and say, ties for providers and corporates. early and large retailers adopt- this is structurally how we think Against such a background, what ed barcodes, thereby creating the banks should fit, and there- is the case for collaboration? critical mass. Widespread adop- fore, this is the way we should “In order to really leverage the tion led to substantial cost reduc- prescribe across the globe.” Then technology dollar, both for cor- tion and also created an industry Prasad pointed out that working porates and for banks, it would around inventory. From barcodes, together can itself amount to co- “Collaboration can lead to innovation.” be very helpful to think about the discussion moved naturally operation. Prasad said: “I would David Watson, head of client access products, Deutsche Bank how we can move to a com- to technology and security. Da- suggest that listening, talking, mon way of doing things. Inter- vid Watson, head of client access just the dialogue between the par- operability is important, as are products, Deutsche Bank, said: ties can help to move us forward.”

10 Sibos Issues sibos.com Forum for corporates Helping corporates manage a multi-bank world MT 798 trade envelope extends traditional trade financing messaging to the corporate-to-bank space

ollowing a panel earlier in the said. “We are following best prac- “The benefit to us of week on removing risk from tice logic,” he added. “We do not Fopen account transactions, define the instruments, but rath- the MT 798 is that an auditorium session on Wednes- er use ICC-approved instruments day shifted the focus to streamlin- that are in the public domain. We we no longer have to ing transactions based on letters of are also working with partners to log in to six different credit (LCs) and guarantees provide the software, with some Andre Casterman, head of focusing on bank needs and oth- processing platforms.” trade and supply chain, SWIFT ers on corporate requirements.” Ali Masari, treasury & e-banking group leader, said that over the decade since Saudi Aramco SWIFT first set out to engage Soothing pain points with corporate requirements, the Ali Masari, treasury & e-banking emphasis had increasingly moved group leader, Saudi Aramco, ex- to supporting a multi-bank envi- plained the lead up to the compa- ronment. “About two years ago, ny’s imminent implementation of we began looking at addition- the MT 798 trade envelope. “We al flows, such as trade finance identified a number of pain points for corporates,” he said. SWIFT with our existing LC processes,” he has since extended its coverage said. Aramco received LCs from to corporate-to-bank message ex- six advising banks via their por- changes. “We now have end-to- tals. This required manual verifica- end standards for letters of cred- tion and manual input of data into it and guarantees for customers the back-end system. “The benefit wanting to enable these flows in to us of the MT 798 is that we no a multi-bank environment,” he longer have to log in to six different commented. The introduction platforms and can streamline our of the MT 798 trade envelope in business processes,” he said. April last year, has been particu- Jacob Katsman, CEO, Global- larly well received with 22 banks Trade Corporation, a SWIFT part- having adopted it since then. ner said a particular challenge for Casterman stressed that the corporates is in integrating the MT messaging environment for trade 798 into their internal workflow – an finance was significantly more area where software partners could complex than simply instruct- help. “The value proposition of one ing payments. “The lifecycle of single channel for cash manage- an LC is four months, during ment, foreign exchange and trade is which the transaction is live,” he overwhelming,” he concluded. ICC approval key to BPO take off To gain market traction BPO will need the support of the International Chamber of Commerce

nce we have ICC of the market now accounts for ly? Banks might say I’m replicat- approval, and we 80%. Yet it is largely limited to ing the bank function but adviso- “Ocan get first-mov- transactions between headquar- ry fees are peanuts in any case,” ers involved, BPO will really take ters and subsidiaries of the same he said. off,” said John Ahearn, global company. Hence, there is sig- Subramaniam’s message was head of trade at Citi. “But you nificant potential in the region- that corporates were looking for won’t get market uptake until the al market for an alternative. Jose “a way out of the conflict between rules are in place and everyone Carlos Guedes, head of corporate buyers and sellers” – but not nec- knows what happens when some- finance and cash management at essarily looking to banks to re- thing goes wrong.” Vale, noted Chinese customers solve the conflict. “We can some- Without such approval there represent 30% of the Brazilian times do it ourselves,” he said. is a risk that SWIFT’s bank pay- miner’s revenues. Using LCs, it The panel’s bankers in turn ac- ment obligation (BPO) will lose takes 10 days to send documents knowledged that the old trade fi- its way between traditional Let- from Brazil to China. BPO would nance model had to change. “The ters of Credit (LCs) and open ac- not only make the process more LC doesn’t offer a great value count trading, warned Michael efficient but “as long as it means proposition for our clients,” said Kang, senior manager at Korea lower charges for our customers, Ahearn. “People used LCs be- Exchange Bank. they’ll be interested,” he said. cause there was a mystery in the Speaking at a session on next- The panel’s two corporate rep- transaction. Now it’s a demystified generation trade and finance on resentatives – Guedes and GS process because companies know Wednesday, Kang said BPO could Subramaniam, senior vice pres- more about their counterparties.” absorb demand for LCs that re- ident at Indian conglomerate mained strong despite the growth Reliance – acknowledged BPO of open account trading. “In Asia benefits in principle. But Sub- “In Asia LCs are LCs are still common,” he said. ramaniam made a case for par- still common.” He pointed out that in Asia tial bank disintermediation. “We Michael Kang, senior manager, Korea the open account trading that get LCs from all over the world Exchange Bank 10 years ago accounted for 30% so why can’t I get advice direct-

sibos.com Sibos Issues 11 “Once we get the ‘go’ decision, all everyone wants to know is ‘when?’”

Citi’s direct custody and clearing: how to say “go” in 60 markets.

Windows of opportunity can open and close quickly. The minute you decide on a new market or strategy, the clock starts ticking. By working with Citi, things can happen faster. What you get is a partner with the largest proprietary network, proven solutions, unrivalled local market expertise and scalable infrastructure. Find Panama, opened July 2011 out how our complete custody and clearing solutions can give you a competitive edge at sibos.citi.com.

Please visit us at Sibos, Direct Custody and Clearing Booth #F114. >> Global Payments Trade Services White Label and Outsource Solutions

© 2011 Citibank, N.A. All rights reserved. Citi and Arc Design and Citi Never Sleeps are registered service marks of Citigroup Inc. SWIFT auditorium More than just an end date SEPA’s end date entails a whole range of intermediate dates and obligations

he SWIFT auditorium session ing that he was speaking mainly to smaller, a wholesale position where you want to play ‘SEPA end date – countdown to perhaps undecided, banks, Pomes said: “It the scale game?” asked Chilosi. “SWIFT Tcompliance’ opened with the mes- is very important to map the profile of the can help,” he added. sage: “SEPA is coming, and SWIFT can institution to the timeline of the regulation help.” In the countdown – based upon the and the related obligations. We can help in current draft of the end-date regulation – assessing and asking the right questions.” there were two dates to focus on, explained What’s on Marc Pomes, senior manager, payments Heat mapping SEPA Thursday 22 September markets, EMEA, SWIFT. The likely date Thierry Chilosi, head of banking initia- for voting on the regulation would be mid- tives, EMEA, SWIFT, began his presen- (SWIFT auditorium unless otherwise stated) November 2011; the end date itself would tation by reminding delegates that SWIFT 09:00-09:45 be Q1 2014, probably February. “Some- would shortly be publishing two white pa- SSI challenges & solutions thing important to bear in mind is that pers on SEPA. He pointed out that SWIFT 10:00-10:45 very often we associate the SEPA migra- “It is very important could be of considerable help in aid- Increase the resilience of market tion with clearing systems, but it may ap- to map the profile of ing banks define a comprehensive migra- infrastructures, achieved through a new ply as well in the bank-to-bank space on a tion roadmap in line with the latest SEPA SWIFT offering bilateral basis,” said Pomes. the institution to the roadmap; impact-assess and prioritise mi- 11:00-11:45 He moved on to the critical questions gration scenarios, establishing a ‘heat map’ High-end interfaces – AMH banks should ask themselves. “We have a timeline of the regulation for the institution; and implement fit-for- tendency to focus on the end date, but there purpose messaging channels. 13:00-13:45 is a series of related obligations also com- and the related Chilosi discussed the need for a pre-SEPA Outsourced messaging services for high-end ing out,” said Pomes. Banks will face ob- obligations.” strategic decision-making process. “Before customers ligations if they are payment services pro- you take infrastructure decisions, what are 14:00-14:45 Marc Pomes, senior manager, viders in one or more EU member states; payments markets, EMEA, SWIFT the key elements of your current business, A bird’s eye view: SWIFT solutions if they participate in a credit transfer (CT) where do you want to grow your business, supporting CCP clearing & or direct debit (DD) domestic scheme in featuring interchange-fee compensation; if do you want to focus on acquisition of pay- collateralisation models euro; if they are enrolled in a DD scheme they process in domestic formats. Stress- ments and outsource clearing, or are you in Enabling P2P payments Watch this space infrastructure across the globe Dynamic correspondent banking reports will support SWIFTRemit provides a solution to the cumbersome decision makers

process of recreating new bilateral arrangements for etting a clear view of risk and effi- tutions’ SWIFT transaction data for ‘slic- every new remittance corridor ciency across correspondent bank- ing and dicing’ to produce self-defined Ging relationships has never been reports. The service is widely used – by he number and aggregate value of The session provided insight not only more important – and this is the first area some 160 institutions currently – to mine low-value, cross-border person-to- into the product itself, but also the experi- to benefit from an extension to SWIFT’s the business intelligence from their trans- Tperson payments has grown substan- ence of Citi, a user of SWIFTRemit, and of Watch portfolio of business intelligence. actions. But the data does require analysis. tially over the past decade to cater large- MoneyGram, which has just joined SWIFT Watch Insight, to be launched by the “With Watch Insight, users will get busi- ly for the needs of migrant and expatriate as a money transfer operator (MTO). end of Q2 2012, will provide business- ness-ready, actionable data” emphasises workers. The market is now estimated to ready, pre-defined views of transaction Bart Claeys, product manager, Business be worth USD 440 billion per annum. Scale and scope data with correspondents, which can be Intelligence, SWIFT. A key feature is mar- A session on Wednesday morning, ‘Har- One of the main difficulties for intermediar- used by a bank’s business decision mak- ket share data in a range of views – for ex- nessing the potential of person-to-person ies in the remittance business is its ‘corridor’ ers without further analysis. “Watch In- ample, by business, geography and curren- payments with SWIFTRemit’, offered an nature. For money to flow between individ- sight is a monthly pulse report of transac- cy and includes peer comparisons. insight into the opportunities and challenges uals in two specific countries, relationships of bank involvement in this growing market. must be established to allow both for the processing of the transfer between financial “With Watch Insight, “SWIFTRemit provides institutions and for the ultimate pay-out to users will get business- an alternative both to the the beneficiary. The less standardised these arrangements are, the less scalable the ser- ready, actionable data.” correspondent banking model vice is, since each new bilateral arrange- Bart Claeys, product manager, and the money transfer ment for a new corridor must be construct- Business Intelligence, SWIFT ed from scratch. SWIFTRemit is designed operator (MTO) model.” to address this problem. Catherine Banneux, senior market manager, SWIFT “A number of the banks that were already tion data that will enable decision makers in this business were looking for a frame- to drill down on their portfolio in a consol- work that could be used to facilitate such ex- idated view or by geographic footprint to “To some degree, the remittances busi- pansion, says Banneux. In addition, existing analyse their performance” explains Astrid ness might not appear to be core for many payment messages such as the MT 103 did Thorsen, market manager, Correspondent of the people attending Sibos as it is re- not cater for the information that needs to Banking at SWIFT. tail,” says Catherine Banneux, senior mar- be conveyed in a remittance. “SWIFTRe- Users will have a dashboard to select ket manager, SWIFT. “One purpose of mit provides an alternative both to the cor- and drill into the data. The reports will holding the session is in fact to underline respondent banking model and the MTO use standard business terminology, mak- the great opportunity that the remittance model,” she adds. ing them easily accessible outside the usu- Watch Insight will prove a useful addition market offers in different roles, not only as “With Release 2 of SWIFTRemit, we are al SWIFT environment. Four pre-defined for larger institutions enabling their busi- a direct participant, but also, for example, adding a number of functionalities to the reporting options are planned: cash man- ness decision makers to get full value from as a settlement service provider.” existing workflow,” says Banneux. Nota- agement and payments; trade finance; a SWIFT transaction data. The service will SWIFTRemit is an ISO 20022-compli- ble additions include exceptions handling functional report designed for network also give smaller institutions access to their ant solution that allows banks to handle and beneficiary creditor details. One inno- management departments which will allow transaction data at a lower cost of owner- large volumes of remittances in a consistent vative aspect of Release 2 that will be pilot- them to analyse their relationships accord- ship. Additional analyst resources are not manner and at a competitive cost. It brings ed in Q4 is the launch of a real-time service ing to revenues, counterparty exposures, required and the reports may also be pur- together a bilateral contract template, mar- aimed primarily at mobile cash-to-cash pay- level of reciprocity and so on; and an effi- chased separately. Watch Insight versions ket practice rulebook, directory with refer- ments popular in a number of markets such ciency and quality report, aimed at opera- tailored for the securities industry and for ence data and ISO 20022 XML standards as the Philippines. If successful the new ser- tions managers. corporate users are planned, and mobile with the FileAct Messaging service. vice will go live in the first half of 2102. The existing Watch service delivers insti- applications are also under development.

sibos.com Sibos Issues 13 SWIFT auditorium Countdown to LEIs Legal Entity Identifiers will be simple, publicly available and here soon

packed SWIFT auditorium demon- SWIFT is to be the registration author- Daniel Maury, managing director, enter- strated the high level of interest in ity, while DTCC will operate the core util- prise data client management, UBS pre- A understanding the practical impli- ity. (Avox, a DTCC company, has a dec- sented a user view. “We think the approach cations of the upcoming Legal Entity Iden- ade of experience in managing securities has a lot of strengths,” he said. Maury saw tifiers (LEIs) standard. industry data.) Ken Price, CEO, Avox, ex- opportunities to benefit in the areas of re- Paul Janssens, LEI programme director, porting, (such as client revenue and fund- SWIFT, explained that the standard in de- ing concentration reports) on-boarding cli- velopment – ISO 17442 – would be simple. “This offers an ents and improving efficiency. “This offers It will provide for a 20-character alphanu- an opportunity to progress to a new way of meric LEI code, which will be highly scal- opportunity to progress managing data,” he suggested. In terms of able and neutral. “It won’t be possible to to a new way of getting ready, he advised firms to review identify the institution simply from its LEI. how many identifiers they were holding Identification is through the attributes,” managing data.” per client as well as the number of systems he explained. LEI data would be public- Daniel Maury, managing director, enterprise holding data. They should also make sure ly available and accessible in one database. data client management, UBS LEIs were a Board-level discussion. In a Janssens also made clear that BIC codes very fast-moving landscape early thinking (ISO 9362) would continue independent- the Financial Stability Board and G20 and plained some of the challenges with build- was “essential” he said. “Without it you ly. “There will not be a one-to-one rela- many other regulators and supervisors, ex- ing the database. “Timeliness will be our will end up in a web of cross-referencing.” tionship between BICs and LEIs,” he said. plained Thomas Price, managing director, biggest challenge,” he said. Self-certifica- LEIs were a first step towards managing The LEI requirement originated from Securities Industry and Financial Markets tion would be part of the process and of- systemic risk. In itself the LEI does not de- the US Office of Financial Research, estab- Association (SIFMA). SIFMA is part of a fered practical benefits. Members of the liver that, but if you get that right, you can lished under the Dodd-Frank Act. The de- coalition of industry participants and trade Association of National Numbering Asso- start to close the loop, the panel agreed. cision to introduce LEIs to assist with mon- associations that coordinated the request for ciations (ANNA) would also play a role as The standard is expected to be finalised by itoring systemic risk also had the support of proposal process for an LEI system this year. LEI agents. April 2012 at latest.

SWIFT auditorium Tailoring solutions to your Copy that challenges FINInform provides a simple and versatile message copy service Banco do Brasil reduces risk and costs with SWIFT

Consulting Services INInform is a value-added feature of FIN that automatically duplicates hen the largest bank in Latin of the project had been “invaluable”. Fand forwards message types to one America needed to link its four Pat Antonacci, principal consultant at or more selected destinations. Copies are Wworld hubs and ensure effective- SWIFT Consulting Services, said custom- generated automatically according to pre- ness and resilience of its systems, it turned ers had engaged his team for a variety of defined service parameters. In a dedicat- to SWIFT Consulting Services. reasons. “We provide unique solutions to ed auditorium session on Wednesday, Su- Gilberto Pacheco, director of interna- business intelligence and technical chal- san Rogers, messaging product manager, tional products and head of SWIFT opera- lenges,” he said. SWIFT, described it as “a simple copy tions at the international business division Some companies were looking to capi- mechanism that is applicable to a number of Banco do Brasil said SWIFT Consult- talise on their existing SWIFT infrastruc- of different business areas.” ing Services was the only rational choice ture or efficiently manage their SWIFT The genesis of the service was in a spe- when choosing partners to help the bank operations. Antonacci said SWIFT Con- cific customer request, said Rogers. “One design and implement its disaster recovery sulting Services provided valuable mar- customer wanted us to copy all of their plan and provide best practice for its mes- ket insight for their customers and helped MT 950s to be sent to their head office saging infrastructure. them implement best practice. The team for risk management purposes,” she ex- “We have found “We needed to decrease technical risk could also help organisations maximise plained. “We soon realised that there were what we think is a while also increasing business resiliency,” their straight-through processing (STP) more applications for the service outside Pacheco said. “We also needed better ca- and back-office processing costs, or imple- of the intra-institution space, including, very creative use for pabilities over the entire environment.” ment industry initiatives. for example, cash management and cen- He said SWIFT Consulting Services be- The SWIFT Consulting Services team tral bank requirements for balance of pay- FINInform in the trade gan with an infrastructure assessment au- has completed more than 450 projects for ments reporting and AML compliance. services environment.” dit and capacity analysis of the present sys- 350-plus clients in over 75 countries. The Copies of messages can be sent to up to Theodore Rothschild, executive director, global market tem, before benchmarking and analysing 35-member team also provided access to three destinations or to one of a set of des- infrastructures, J.P. Morgan the messaging landscape of the bank. SWIFT’s 2,000-plus specialists. tinations based on criteria within specific Speaking yesterday at Sibos, Mudi- message fields. Rogers said the service was “We needed to tha Weedagama, VP of payment systems simple, flexible and reliable. It can be de- perspective. After exploring a range of op- at BNP Paribas, said he had contracted livered within a week through completing tions, the bank concluded that FINInform decrease technical risk SWIFT Consulting Services for multiple a simple electronic subscription form with would allow Northern Trust to meet the projects, including helping him rational- no internal development required from customer’s request without having to un- while also increasing ise his message routing and leveraging his the customer. Different triggering pat- dertake substantial development work. We business resiliency.” SWIFT infrastructure under very short terns and copy modes are available and, as have also used it for copies of payment Gilberto Pacheco, director of international products and time constraints. a FIN service it benefits from the security messages from our sub-custodians. head of SWIFT operations, Banco do Brasil One of Weedagama’s critical challeng- and reliability of the FIN platform. Theodore Rothschild, executive director, es was to align management processes and Two existing bank customers outlined global market infrastructures, J.P. Morgan build efficiencies across his network, while their experiences with FINInform. Dan- was particularly enthusiastic about FINIn- also increasing volumes of messages over nette Fleming, vice president operations & form, though somewhat cryptic for reasons “We were very impressed with the help the infrastructure from 40,000 to 100,000 technology, senior consultant, The North- of competitive advantage about the exact SWIFT Consulting Services provided us,” messages a day. ern Trust Company described her bank’s nature of the service the bank was offering. said Pacheco. “They provided an inde- “We were delighted with the team’s ex- engagement with the service, which began “We have found what we think is a very cre- pendent and neutral analysis with a team pertise,” said Weedagama. “They un- with a request from a client to send copies ative use for FINInform in the trade ser- which was incredibly knowledgeable. The derstand your business and can provide of settlement instructions received from vices environment,” he said. It has also fact SWIFT was able to offer local support comprehensive suggestions based on best investment managers. Neither confirma- proved very easy to implement. “Our cli- has been very helpful.” practice. It was an easy decision to go with tion nor reconciliation messages were con- ents love the ‘set it and forget it’ aspect,” Pacheco believed the tangible outcomes SWIFT Consulting Services.” sidered appropriate from a content or time said Rothschild.

14 Sibos Issues sibos.com SWIFT data SWIFT traffic highlights InterAct traffic data is up 9.3% year to date

n Tuesday, 20 September, Inter- umes (+102%). The biggest growth con- Figure 2: SWIFT InterAct traffic (Total) Figure 4: SWIFT InterAct traffic (Americas)

Act traffic reached 1.7 million mes- tributor (44% of the total growth) is FX Total SWIFT Messages growth Americas region Messages growth All business areas 1,822,798 +9.3% All business areas 219,281 +2.9% sages (See figure 1). This brings the traffic. A total of 83% of the InterAct traf- Securities MI 1,002,560 +5.8% Securities MI 94,773 -16.8% O FX 667,194 +11.3% FX 120,993 +24.9% daily average volume for September to 1.8 fic is generated in EMEA, which is also the Banking MI 101,168 +9.0% Banking MI 20 +71.0% Funds 46,654 +102.8% Funds 1,722 +160.6% million messages, representing a growth of region with the strongest growth (+10.8%) RMA 2,300 -4.1% RMA 348 -9.1% Other 2,923 +6.3% Other 1,425 +11.5%

+8.5% versus September 2010. No peak days have been recorded re- Monthly evolution all business areas (average daily tra c volumes). Monthly evolution all business areas (average daily tra c volumes). The year-to-date average daily volume cently in the InterAct market. The last 2.1 0.28

2.0 also stands at 1.8 million messages, which peak day was recorded on 10 May 2010 0.26 represents an increase of 9.3% over the with 2.4 million messages. The best day of 1.9 0.24 same period in 2010. Funds experienced 2011 was recorded last month, on Thurs- 1.8 0.22 1.7 the strongest growth doubling their vol- day 18 August (2.2 million messages). illions of messages illions of messages M M 0.20 1.6

1.5 0.18 -10 -11 -10 Figure 1 -11 y-10 y-11 y-10 y-11 Jul-10 Jul-11 Jul-10 Jul-11 Jan-10 Jan-11 Jan-10 Jan-11 Sep-10 Sep-11 Mar Mar Nov-10 Sep-10 Sep-11 Mar Mar Ma Ma Nov-10 Ma Ma SWIFT InterAct daily trac evolution

2.5

Figure 3: SWIFT InterAct traffic (EMEA) Figure 5: SWIFT InterAct traffic (Asia Pacific) 2.0 EMEA region Messages growth Asia Paci c Region Messages growth All business areas 1,504,940 +10.8% All business areas 98,577 +2.0% Securities MI 903,453 +9.1% Securities MI 4,334 -27.7% FX 458,825 +10.1% FX 87,375 +1.6% Banking MI 96,572 +7.1% Banking MI 4,576 +76.4% 1.5 Funds 43,352 +107.1% Funds 1,580 +11.5% RMA 1,257 -9.6% RMA 695 +11.4% Other 1,481 +4.9% Other 16 -73.1%

Monthly evolution all business areas (average daily tra c volumes). Monthly evolution all business areas (average daily tra c volumes). 1.0 1.8 0.12

1.7

illions of Messages 0.11

M 1.6

0.5 1.5 0.10

1.4 illions of messages illions of messages M M 0.09 1.3 0.0 Best day of 2011: 2.2 million messages g g g g g g g g g p p p p p p p p p 1.2 0.08 ug ug ug ug ug ug ug ug ug ug ug ug ug ug ug ug ug ug ug ug ug ug Au Au Au Au Au Au Au Au Au -10 -11 -10 -11 1-Se 2-Se 3-Se 4-Se 5-Se 6-Se 7-Se 8-Se 9-Se 1- 2- 3- 4- 5- 6- 7- 8- 9- y-10 y-11 y-10 y-11 10-Sep 11-Sep 12-Sep 13-Sep 14-Sep 15-Sep 16-Sep 17-Sep 18-Sep 19-Sep 20-Sep 10-A 11-A 12-A 13-A 14-A 15-A 16-A 17-A 18-A 19-A 20-A 21-A 22-A 23-A 24-A 25-A 26-A 27-A 28-A 29-A 30-A 31-A Jul-10 Jul-11 Jul-10 Jul-11 Jan-10 Jan-11 Jan-10 Jan-11 Sep-10 Sep-11 Sep-10 Sep-11 Mar Mar Mar Mar Nov-10 Nov-10 Ma Ma Ma Ma

SWIFT AUDITORIUM SWIFT’s delivery promise on PMI Peace of mind is part of the package, and so is on-time, on-budget delivery

ednesday morning’s session ‘SWIFT Services for Payment WMarket Infrastructures (PMI): delivering value and peace of mind’, provided not just valuable detail on SWIFT’s services, but also the reassur- ance of practical experience. Ali Nahle, information technology di- rector, Banque du Liban, gave a fasci- nating account of his bank’s work with SWIFT to implement a national pay- ment system for the Lebanon; the pro- ject is ongoing. Asked in the Q&A what single factor he considered most important in the part- nership with SWIFT, Nahle spoke of SWIFT’s readiness to take its share of responsibility for the project. “You are with us throughout,” said Nahle. The session was opened by Stephane Ernst, global market manager, HVPMI, and RTGSs are increasing globally. SWIFT services in action SWIFT, who set the scene with a review As this suggested, one key challenge in It was time for Nahle to give his account “We are building a of key trends impacting market infra- a PMI implementation is its complexity. of SWIFT’s services in action. “Our vision system for the future, structures worldwide. Ernst said: “The Ernst said, “The activities are complex, is to reform and transform all our applica- environment is not static; it is changing. from design to operation; in dimensions tions, all our services and all our systems.” in multi-currency.” Those changes are triggered by macro including infrastructure and legal, for ex- Nahle described Banque du Liban’s strat- Ali Nahle, information technology director, events such as economic change, pay- ample; there is also complexity in terms egy, and the scope of the project, in detail, Banque du Liban ment landscape and technology change, of the range of market participants who saying: “We are building a system for the and the coming of new instruments.” are affected by the project.” SWIFT’s future, in multi-currency.” Lebanon uses ment, to ensure community readiness, and Driving factors for the modernisation comprehensive solution, said Ernst, was USD, euro and the Lebanese lira in parallel. ongoing project management and support. of payment systems included regulatory based on a five-pillared approach, cov- Claudia Cassinari, head of Payments “We want to deliver peace of mind,” said pressure, risk mitigation, cost optimisa- ering integration, security, messaging, Markets Infrastructures, EMEA, SWIFT Cassinari. SWIFT is committed to deliv- tion and, crucially, the need for business standards as well as the services, from then described SWIFT’s services; these er projects, “on time, on budget, right first interoperability as links between FMIs inception to implementation and beyond. included training and participant deploy- time,” she said.

sibos.com Sibos Issues 15 MORE THAN A PARTNERSHIP: A GENUINE TEAM SECURITIES SERVICES

In a complex and constantly-changing financial environment, we are committed to accompanying our clients’ growth with securities services which meet their needs. Side by side, day by day, we build more than a partnership: a genuine team.

FF_SIBOS ISSUES_272X67_KAYAK_SGSS.indd 1 26/08/11 15:24 TIME OFF SITE Thursday 22 September 2011 www.sibos.com

Week, which runs until 24 Septem- Closing Party ber, and has created a special menu . of dishes paired with beers. Have a Thursday 22 September look at their website www.thedako- MTCC North Building Hall B (next to the main plenary)

Programme tatavern.com for more details. 7.30pm - midnight Taste of Canada food stations & coast to coast celebration midnight till 2am Dance club Canada Eating out Dress code: casual Serra Important Information 378 Bloor Street West Access to the event is restricted to full Sibos participants and their spouses who have paid the Accompanying Person fee as well as conference Day Passes for Thursday (only). Toronto M5S 1X2 Other Sibos visitors who wish to attend can buy a ticket for Tel: 416-922-6999 CAD 200.00 + HST (13%) at the main registration area. Excellent food, reasonable pric- Please remember that there will no access to the event without es and friendly service make this a valid Sibos Italian restaurant a definite din- badge. ner choice. Chinatown and Did you know…? Delicious appetisers like warm Kensington Market The land on which Toronto was goat cheese with grilled eggplant, Chinatown was previously a Jew- built was bought from the Missis- portabello mushrooms, roasted CSR & your promotional material ish district. In the 1960s an in- sauga First Nation band for a few red peppers and organic greens Exhibitors and delegates are reminded that any remaining promotional merchandise can be taken crease in Chinese immigration saw hundred pounds sterling, 24 ket- will tempt your taste buds. to the drop-off area at the Sibos Exhibition Office in the Show Management Offices on Level 800, an expansion in Chinese business- tles, 24 hats, 2,000 gun flints, all Choose from a variety of pas- south building. Drop off times 15:00-17:30 Thursday 22 September and 10:00 to midday Friday 23 September. es in this area. It now hosts one of the hand mirrors they could carry tas and pizzas or from the main All items will be distributed to a local charity, Touchstone Youth Centre, an emergency shelter for the largest communities of Chi- and 100 gallons of rum! menu for a meat or fish dish, in- 16-24 year-old homeless youths. Please note that items donated should be suitable for children nese people in Canada. Extending cluding roasted New Zealand rack and teenagers. the length of Spadina Avenue and Nightlife of lamb crusted with honey mus- along Dundas Street West, there Smokeless Joe’s tard, served with truffled mashed starters such as Laotian spring rolls such as Scallops Benny, which is are shops and restaurants reflect- 125 St John Street potatoes, sautéed asparagus and served with spicy peanut sauce, poached quail egg, potato toast, ing the different Asian cultures, Toronto M5E 1B5 grilled zucchini and red peppers in sweet potato fries with chipotle prosciutto and lobster froth. including Chinese, Thai and Viet- Tel: 416-728-4503 a rosemary jus. The fish of the day mayonnaise and three bean nachos The main course selection offers namese. Try the Sky Dragon, one With the longest beer menu in To- is served with shrimp, sea scallops with all the usual embellishments. you pan roast Atlantic salmon with of the best dim sum restaurants in ronto, more than 250 different and a vegetable risotto in a lemon For a main course, decide be- caramelised king oyster mushroom Chinatown. brands are on offer, including some herb-infused butter sauce. tween a house burger, chicken and mussel foam and creamed Adjacent to Chinatown is hard-to-find English and Belgian Try secret recipe honey crème curry roti, black bean quesadilla leeks, or fresh buttered pasta with Kensington Market, a labyrinth varieties. The pub is tiny and in a brulee for dessert, or a selection plate or a sundried tomato lamb field tomato and sweet herbs from of stalls selling fresh fruits and basement – it does get very busy, so of different ice creams and sor- burger, to name but a few! the Tundra’s rooftop garden. vegetables and dry goods. There you might want to escape outside bet for those with less room at the Desserts are an ever-changing dai- If you still have room for des- are also vintage clothing stores, onto the patio for fresh air, as there end of their meal. ly selection, so you will need to ask sert, try the Lanny’s chocolate some of the best in Toronto, and are no tables, just a long row of seats the waiting staff for your choices. moon pie with minted ice cream several cafés for that vital caffeine at the bar. Food is simple but excel- The Rivoli and chocolate pearls. boost to keep you going! Eateries lent ‘pub grub’ is available. 332-334 Queen Street West Tundra abound and you will be exposed Toronto M5V 2A2 Hilton Toronto Sibos schedule of to all different types of music on Dakota Tavern Tel: 416-596-1908 145 Richmond Street West transportation your journey through the area. 249 Ossington Avenue With a pool table upstairs and a Toronto M5H 2L2 Friday 23 September The last Sunday of every sum- Toronto M6J 3A1 back room hosting live stand-up Tel: 416-860-6800 07:00-11:00 mer month sees ‘Pedestrian Sun- Tel: 416-850-4579 comics, music and poetry read- The design of this restaurant is Shuttle bus service from official Sibos hotels to days’ close the streets to vehicles Famous for being a live music ven- ings, a lively and engaging atmos- reminiscent of a Canadian land- Toronto Pearson airport, departures every hour. 12:00-14:00 and giant games boards come out ue, this bar feels like an old saloon phere is guaranteed. scape, with internally lit columns Shuttle bus service from Convention Centre alongside art exhibitions and oth- that has been around for years. The The menu is an eclectic mix of emulating giant redwoods. (MTCC) to Toronto Pearson airport, departures er street entertainment. bar is taking part in Toronto Beer many different influences, with The starter menu has dishes every hour.

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16 Sibos Issues sibos.com