Blockchain / Distributed Ledger Technology - DLT initiatives from an operations perspective -
ECB OMG Meeting 2019-09-04 André Kolb, Bernhard Brand | Commerzbank AG | Group Banking & Markets Operations
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 Distributed Ledger Technology / Blockchain Blockchain / DLT Basics
• Electronic Register – Electronic Records • Shared Ledger - decentralized Blockchain / • Data / Transactions are DLT - documented in chronological order - distributed across multiple sites Blockchain Types Principles
Public Private
• No central entity
• No verification by trustee Unpermissioned Permissioned
• Transparency and Availability Characteristics (real-time) for participants
Decentralized Database
• Immutable Data => Finality Validation, Encryption (Hash)
Fundamentals • Tokenizing of Assets Consensus (Proof of Work, Proof of Stake) • Automated execution of agreed conditions
• Potential for cost savings, increased efficiency Smart Contracts
DLT offers high potential for reducing established intermediaries and existing business models => Disruption
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 2 Distributed Ledger Technology / Blockchain DLT in Commerzbank Operations
Core Topics 2019 / 2020 Principles / Key Objectives • CASH ON LEDGER Commerzbank • Client-centric DLT Lab • CAPITAL MARKETS • Create added value for our customers • TRADE FINANCE • First mover • KYC / DIGITAL IDENTITY
Cooperation with DLT Lab • Close collaboration since June 2016 • Support of selected DLT Use Cases / Pilots including New Product Processes (NPP) Commerzbank Operations Our Motivation • Awareness of potential impacts on Operations (processes and services) Group Banking & Markets Operations • Pro-active participation and support • Enable future planning in Operations (resources, efforts, timelines, etc.)
• Learning organisation – Knowledge, Change, Transformation
Complementary • Member of German Bankers Association (BdB) – Working Group DLT • Member of EBF Blockchain Task Force
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 3 Distributed Ledger Technology / Blockchain Main Incubator - DLT Lab at a glance
Facts & Figures
2015 Use 2019 >80 Cases The main incubator - a 100 % subsidiary of analyzed Commerzbank - supports the bank in its Foundation, technological transformation via three routes: learning* phase Path to production 2016 • Community building ~ 10 regularly in scope
Developers/ • Ventures – strategic investment in tech startups >50 business analysts 12 • Prototyping – develop own prototypes on the basis of 12 technologies of the future Affiliates across segments/ Investment in global e.g. functions tech consortium Artificial 8 Intelligence Blockchain / DLT 2017 2018 Cloud Get real, Machine 4 POCs ready and Co-Heads Learning completed Big Data grow! 2 Robotics Open API
https://main-incubator.com/en/prototype/ Source Facts & Figures: Commerzbank DLT Lab | Frankfurt / August 2019
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 4 Distributed Ledger Technology / Blockchain Commerzbank DLT Lab - Road Map
Road Map for DLT Lab Focus areas of Commerzbank’s DLT Lab in 2019 Application area & maturity Examples Maturity of Use Cases CAPITAL MARKETS Securities issuance and trading, (post-) PoC Pilot Production trading processes, FX, syndicated loans Production 2019/ 2020 TRADE FINANCE Open account, bank payment obligations, digital letter of credit Pilot PoC Pilot Production 2018/ 2019
Proto- PAYMENTS Plain payments and delivery vs. payment, type e.g. by using e-money 2017/ PoC Pilot Production 2018 POC 2016/ 2017 Time KYC/ ID MANAGEMENT Self-sovereign digital ID management for private persons, corporate KYC today PoC Pilot Production
Source: Commerzbank DLT Lab | Frankfurt / August 2019
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 5 Distributed Ledger Technology / Blockchain Main Incubator - DLT Lab => Commerzbank Operations support
DLT Initiatives 2018 / 2019 Commerzbank Operations GS-BM Commerzbank DLT Lab / Operations Group Digital GS-BM Transformation & Strategy
• 8 Areas • 18 Use Cases
Operations Commerzbank Group Markets & Operations GS-BM Banking Operations (GS-BM)
• 4 Areas Commerzbank • 10 Use Cases Operations GS-BM
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 6 Distributed Ledger Technology / Blockchain Commerzbank DLT Lab – Selected Initiatives 1 / 3
CAPITAL MARKETS Details onDetails next slides
Euro Commercial Paper Euro Commercial Paper Euro Commercial Paper Euro Commercial Paper
MVP ISIN: DE000A1V4HP3 ISIN: FR0125350217 ISIN: XF0000C24384 APR 2017 SEP 2017 DEC 2018 JAN 2019
DLT platform provider DLT platform provider DLT platform provider DLT platform provider
Repurchase Agreement Secondary Trade USD EUR / PLN FX Forward
ISIN: DE000A1V4HP3 ISIN: DE000A1V4HP3 Deposit FEB 2019 Q1 2019 SEP 2018 MAY 2018
DLT platform provider DLT platform provider DLT platform provider DLT platform provider
Source: Commerzbank DLT Lab | Frankfurt / August 2019
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 7 Distributed Ledger Technology / Blockchain Commerzbank DLT Lab – Selected Initiatives 2 / 3
Euro Commercial Paper
SEP SEPDEC SEPJAN 2017 20172018 20172019 Parties & Roles Issuer
Investor
Dealer None
Platform
Implemen- On Ledger On Ledger On Ledger tation Security simulated, ISIN: UK law, ISIN: LUX law, ISIN: DE000A1V4HP3 FR0125350217 XF0000C24384
On Ledger Payments traditional traditional (E-Money by )
Source: Commerzbank DLT Lab | Frankfurt / August 2019
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 8 Distributed Ledger Technology / Blockchain Commerzbank DLT Lab – Selected Initiatives 3 / 3
Selected Press Releases (Extracts) Feb. 2019: EURO Commercial Paper on DLT
Dec. 2018: Euro Commercial Paper on DLT
Feb. 2019: Repo Transaction on DLT
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 9 Distributed Ledger Technology / Blockchain DLT Initiatives - Commerzbank Operations
Selected DLT Initiatives 2019 with support from Operations Units 01/2019: Euro Commercial Paper (ECP) – Pilot Trade Secs. Issuance (Lux. Law) – Distribution - Redemption of ECP Partners: Siemens, Continental
03/2019: Repo Pilot Trade (Secondary Market) Focus: Securities and Cash on ledger Partner: Deutsche Börse / Eurex
Ongoing: HQLA – Exchange for Collateral Exchange of Digital Collateral Record (tokenized Secs.) for High Quality Lquid Assets (HQLA) Partners: ING, CS, UBS, CIBC, Dt. Börse, Commerzbank
Ongoing: Digital Custody Solution (DCS) Internet of Things (IoT) – Asset tokenizing, Asset deposits 24/7 for Corporate Clients
Credit Agency Services (Coba Lux.) GS-BM driven Syndicated Loan Administration via DLT initiative Platform LenderComm (Finastra) – Tests planned
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 10 Distributed Ledger Technology / Blockchain DLT / Blockchain => Challenges - Opportunities
Legal certainty – pre-requisites (Commerzbank Operations view) Regulatory • Clear Guidance for DLT based applications – Level Playing Field – Sandbox Approach Legal • Modification of existing laws and regulations most likely (e.g. CSDR, SFTR) Tax • Harmonisation of EU jurisdictions and in a global context => competitive aspects • Regulatory Reporting, Tax Aspects
• DLT Scalability and Performance => Standardization, Taxonomy • Participants to agree on / determine a dedicated DLT Technology Technical • Interoperability Functional • Dual Infrastructure => e.g. existing traditional securities vs. DLT based securities Securities Value Chain: Pre-Trade – Trade – Post Trade => gradual approach on DLT?
• Security Aspects – Access to privat keys • Verification Services – e.g. specification of user rights (Read and Write) Processes › S • High Data Quality Blockchain / DLT requires harmonisation of data and processes
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 11 Distributed Ledger Technology / Blockchain DLT / Blockchain - Selected News / Insights
Objectives The Federal Government of Germany has set up a Blockchain Strategy to promote digital innovations and strengthen innovative technologies
Jan 2019 BaFin approval of Securities Token Offering in Germany for the first time Regulatory Developments Bitbond Bearer Bond: Issuance volume: 100 Mio. EUR, 10 years duration, FRN
DE Feb 2019 German Ministry of Finance (BMF): Online Consultation DLT / Blockchain
Mar 2019 German Ministry of Finance (BMF): Key note “electronic securities” Legal Framework for DE issuers, starting with debt instrument i.a. omission of physical documents (global certificates) foreseen
• Tailor made DLT Use Cases continued => Pilot Trades / Transactions Commerzbank DLT Lab • Several Corporate Clients approach Commerzbank asking for DLT/Blockchain- based solutions (e.g. Issuance of Securities)
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 12 DLT / Blockchain Outlook 2019 and beyond 1 / 2
How can we improve from an Operations perspective?
DLT / Blockchain Benefits
• Participation - collaboration - visibility Operations Process Expertise, Know-how Business Cases => Client Centric • Increase awareness of Employees for Digitization topics and potential changes
• Gateway to Digital Technologies - Commerzbank 4.0 Use Cases / Proof of Concepts • Touch Points with DLT Lab and leading CBK Units
• Lessons learned
Productive Environment • Cultural Change => Mind Set
Supporting Initiatives e.g. via BdB Working Group DLT
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 13 DLT / Blockchain Outlook 2019 and beyond 2 / 2
Stay connected – Engagement Group Banking & Markets Operations
Activities
• Monitor DLT Initiatives and developments
• Analyse potential areas of application
• Provide DLT Updates for Senior Mgmt. Staff Members Operations (GS-BM) • Continue DLT Community Meetings • DLT Information Sessions - Operations
Talents
External • DLT Events: e.g. “Between the Towers” Internal DLT Community GS-BM • DLT Lab Affiliates Calls • Digital Working Group (cross-segments)
• Networking - DLT Contacts • Alignment with other Digitization Topics
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 14 Distributed Ledger Technology / Blockchain
DLT in Commerzbank Operations
Thank you – Any questions?
Business Location: Bernhard Brand Commerzbank AG Neue Börsenstrasse 1 Key Area Trading 60487 Frankfurt/Main Cluster Post Trading www.commerzbank.de - Market Advocacy -
+49 69 136-2 24 06 Postal Address: [email protected] 60261 Frankfurt/Main
Commerzbank AG | Group Banking & Markets Operations | DLT / Blockchain | André Kolb, Bernhard Brand | 2019-09-04 15