The Big Picture Three Years On, Can Collaboration Stop Another Financial Crisis?

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SEPTEMBER 2011 SEPTEMBER 2011

Risk: the big picture Three years on, can collaboration stop another financial crisis?

Beyond the Fringe The Standards Forum and Innotribe events are stepping out of the shadow of Sibos. Interview: State Street in the cloud CIO Chris Perretta outlines how State Street plans to transform itself with cloud computing. Let's work together Post-trade interoperability efforts in clearing and settlement are coming to a head. Join the social club Why social media is all the rage in financial services at the moment. Contents September 2011 In this issue

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4 news 27 Beyond the Fringe the Standards Forum and Innotribe strands of 8 news Analysis Swift’s annual Sibos gathering are starting to ■ Heather mcKenzie: cheque row highlights emerge from the shadow of the main conference banks’ rift with public and become year-round events in their own right. ■ banks could improve roe says Ibm 30 Roundtable: Moving beyond messages 12 By the numbers the ISO 20022 standard and XmL provide ■ Financial markets to spend $90 billion on It business benefits and opportunities beyond The best view ■ FSA pay rules will weaken UK banking sector mere standardisation according to a panel of With Wallstreet Cash Management you can sit back and see ■ iphone users most keen on mobile banking experienced practitioners brought together by ■ Hiring slowdown hits financial services in London Swift and Banking Technology. a real-time global view of all your cash positions. ■ Firms fail to focus on projects 34 Interview: Chris Perretta, state street 14 Cover Focus: Risk – the Big Picture State Street’s chief information officer explains three years after the collapse of Lehman brothers, why a wholesale adoption of cloud computing will what lessons have been learned and how has the lead to a transformation in the way the bank does relationship between risk and technology changed? business.

18 Let’s work together 36 Appointments efforts to create interoperability between clearing and settlement venues are coming to a head, 38 Products & services bringing change and opportunity. ■ Vendor announcements, enhancements and innovations 22 Hands up to join the social club Increasing use of social media by financial 42 Industry columns & comments institutions is changing the way that they interact with customers and organise themselves. 48 out of office WALLSTREET CASH MANAGEMENT The global cash management infrastructure WWW.WALLSTREETSYSTEMS.COM | INFO@ WALLSTREETSYSTEMS.COM www.bankingtech.com I 1 Contents September 2011 In this issue

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4 news 27 Beyond the Fringe the Standards Forum and Innotribe strands of 8 news Analysis Swift’s annual Sibos gathering are starting to ■ Heather mcKenzie: cheque row highlights emerge from the shadow of the main conference banks’ rift with public and become year-round events in their own right. ■ banks could improve roe says Ibm 30 Roundtable: Moving beyond messages 12 By the numbers the ISO 20022 standard and XmL provide ■ Financial markets to spend $90 billion on It business benefits and opportunities beyond ■ FSA pay rules will weaken UK banking sector mere standardisation according to a panel of ■ iphone users most keen on mobile banking experienced practitioners brought together by ■ Hiring slowdown hits financial services in London Swift and Banking Technology. ■ Firms fail to focus on projects 34 Interview: Chris Perretta, state street 14 Cover Focus: Risk – the Big Picture State Street’s chief information officer explains three years after the collapse of Lehman brothers, why a wholesale adoption of cloud computing will what lessons have been learned and how has the lead to a transformation in the way the bank does relationship between risk and technology changed? business.

www.bankingtech.com I 1 eDITORIAL COMMeNT September 2011

editor David Bannister +44 207 017 4019 [email protected] Ch-ch-ch-changes Deputy editor Neil Ainger Where shall we start? It’s three years since the collapse of Lehman +44 203 377 3498 Brothers changed the world … It’s 10 years since the terrorist [email protected] attack on the World Trade Center changed the world … or it’s 22 Publishing Director Brian Meggs years since the fall of the Berlin Wall changed the world. +44 207 017 5004 It’s only a few months since the phrase ‘Arab Spring’ began [email protected] falling from the lips of optimistic Westerners who saw in the desire for freedom of some oppressed citizens a validation of their own Regular Contributors David Adams, Sherree DeCovny, Alison Ebbage, Tom Groenfeldt, outlook and assumptions. It’ll certainly change the world though. Eugene Grygo, Heather McKenzie, Nicholas that’s the trouble with the world: it keeps changing, or letting itself be changed. Pratt, Kristina West especially lately – fifty years of relative stability and peace since 1945 and people start getting complacent, eh? Designer Kosh Naran One thing is certain: it’s all about to change again. Don’t ask me how – it doesn’t Press Releases Send relevant releases to really matter, so long as you are equipped to deal with change, which a surprising [email protected] number of people and institutions seem singularly ill-equipped to do. What does it mean to be equipped to deal with change, though? the only sensible Group Sales Manager Neil Hartley, answer I can think of is being able to change yourself: adapt and survive. I know, it’s +44 203 377 5385 [email protected] Darwinism, of a sort, but it does have the distinct advantage of being proven to work. Darwin’s theory is often summarised as the survival of the fittest, which some people Senior Sales executive Leon Thomson, object to on the grounds that it is not only the fittest that survive. be that as it may, it +44 203 377 3493 is certainly about survival of characteristics, and the elimination of those that have no [email protected] function. events Manager So, my question is this: are banks a distinct species that can adapt and survive, or is Gemma Healy, banking merely a societal characteristic that no longer has a function? BT +44 207 017 6752 [email protected] David Bannister, editor Marketing and Circulation Savinder Degun, +44 207 017 4750 [email protected] Its déjà vu all over again Subscriptions and Renewals Mike Ellicot +44 207 017 75392 With the plunging stock markets over the summer, the rising price Email: [email protected] of gold and many banks reporting losses and staff redundancies, I’ve had a strong sense of déjà vu all over again, as the famous For Reprints and Web Publishing Rights baseball coach Yogi Berra once said. What took me fully back to the please contact Leon Thomson on future was when France, Spain and other european countries extended +44 203 377 3493 or imposed short selling bans in August. Are we merely back to 2008 ©2011 Banking Technology again, I asked myself, with an impending credit crunch 2.0 looming on All rights reserved; no part of this publication may the horizon and the upcoming Sibos show in toronto, Canada, perhaps be reproduced, stored in a retrieval system, or replicating the panicky atmosphere of the Vienna show? transmitted in any form or by any means, electrical, For all our sakes let’s hope not. but with talk of a tobin tax being revived yet again as 1-2 Bolt Court mechanical, photocopying, recording, or otherwise Fleet Street without the prior written permission of the publisher. a possible way for states to pay off the sovereign debt that some of them inherited from London bailing out banks, and others ran up by being profligate, the signs don’t look good.p resident EC4A 3DQ Banking Technology is published 10 times a year Sarkozy of France and Germany’s Chancellor merkel did little to alleviate the panic when by Informa Business Information, a trading division they met in August and rejected the idea of eurobonds to help stabilise the eurozone debt of Informa UK Ltd, 1-2 Bolt Court, Fleet Street, London EC4A 3DQ, UK. crisis or of increasing the €440 billion rescue fund. much of the talk about the Single euro payments Area at Sibos 2011, therefore, may well be prefaced by the caveat if there is a Printer: Wyndeham Grange, Southwick, UK. euro. Other interesting news on the SepA-front concerns VocaLink’s decision not to focus on this for growth any more, but instead on immediate payments (see news page 4). I look Subscription enquiries: Customer Service Dept, forward to talking about this and many other developments at them etro Convention Centre Informa UK Ltd, Sheepen Place, Colchester, CO3 3LP. Tel: +44 (0)207 017 5532, Fax: +44 (0)20 in toronto on this month as part of the Daily News at Sibos team. 7017 7860, Email: [email protected] the silver lining if there is to be a second crunch is that this time most banks Annual Subscription: UK £655, Europe €815, US/ – except the so-called ‘zombie banks’ being artificially kept alive by governments – rest of world $1175. theoretically have more liquidity and should be better able to fight off the ill winds of Member of the Audit Bureau of Circulation a downturn. basel III will no doubt be one of the other topics discussed in toronto, Average net circulation for the period 1st July 2010 alongside mobile payments, the ascent of the east and so forth. I look forward to the to 30th June 2011 – 8,171 debates and hope that the event won’t involve too big a trip back to the future. On the tech front, a fond farewell to the departing chief executive of Apple, Steve Jobs, and thanks for all the gadgets. BT

Neil Ainger, deputy editor ISSN 0266-0865

www.bankingtech.com I 3 eDITORIAL COMMeNT September 2011

Neil Ainger, deputy editor ISSN 0266-0865

www.bankingtech.com I 3 September 2011 Go to www.bankingtech.com for the latest news and comment

EuroCCP starts to NEWS interoperate as MTFs open to competition

JPM gains speed uroCCp, the pan-european Low demand forces VocaLink to drop SEPA cash equities clearing house, and efficiency with Phased withdrawal leaves room for competitors but adds to Ehas signed up boA merrill pessimistic picture of industry adoption of SEPA mechanisms Lynch, Credit Suisse, morgan Stanley GPU deployment By David Bannister and Nomura on bats europe for its clearing services and Citigroup’s Global p morgan is reporting a 40 times transaction Services unit is putting its increase in the end-to-end speed ake up of SepA payments has “simply not happened at the rate anyone thought third party clearing business on UbS Jof its risk calculations thanks to it would”, prompting VocaLink, to announce that it will make a phased withdrawal mtF via the London-based subsidiary the installation of Graphics processing Tof its euro CSm and SepA value added services of the Depository trust & Clearing Unit systems from Nvidia. the vendor marion King, chief executive at VocaLink, said that the move is “a straightforward Corporation. is claiming the improvement after response to market demand” and rejected suggestions that the decision reflects badly both deals take advantage of the the equity derivatives group at the on the whole Single euro payment Area. “We’ve supported SepA for a number of years King: VocaLink dropped SEPA services because “there is no commercial case” fact that these trading venues have investment bank installed Nvidia tesla and are not saying for a moment that SepA won’t continue,” she said. opened themselves up to competition m2070 GpUs in its data centres. King said that VocaLink will continue to support existing customers and “manage a volumes remain stubbornly low – not least because cross-border payments represent and now support full interoperability as As part of the three-year plan transition to their choice of clearing and settlement mechanism”. She declined to say a relatively small volume of the overall european payments market – just 2.3%, required under eU regulations. launched last year, more than half how many customers are affected and added that the transition will “take as long as acccording to the boston Consulting Group. the new bats europe preferred of the equity derivative-focused risk the customers need”. the move will also be seem in many quarters as a setback for King’s ambitious Interoperable Clearing Service enables computations run by the bank have the move took many industry watchers by surprise, including Aite Group senior plans to make VocaLink a major force in the international market as it consolidates trading firms to elect a preferred CCp already been moved from running on analyst enrico Camerinelli. Writing on the Aite blog, he said: “banks and corporations futher over the next few years. SepA services had been part of this strategy, which will to clear their trades, as the four banks just CpU-based systems, to running on will continue to cut costs in an increasingly competitive transaction banking space, and now rest mainly on internationalising the work it has done in building the UK Faster have done with euroCCp. Under this hybrid GpU/CpU-based systems. As SepA promises efficiency gains and lower costs; moving away from that promise in this payments Service. service, if trading firms on both sides well as the speed improvement, Nvidia climate is imprudent. I do not see any immediate reason for VocaLink to have cut its this is clearly set out in a company statement that describes the creation of a Global of a trade have selected a preferred is claiming 80% savings for the bank SepA service, nor any corporate clients keen to dismiss SepA-related services. Indeed, transaction Services team “to deliver the innovations required by today’s evolving Central Counterparty then each side unit in comparison to the previous corporate treasurers welcome any form of cost savings and process improvement.” payments industry”. Led by marc terry, managing director of Global transaction will be cleared by the respective CCp standalone CpU-based operation, the move leaves room for other competitors such as equens, which is continuing to Services, the team will deliver a range of services to global customers and partners of choice, which means euroCCp will which is in-line with Jp morgan’s offer similar services to those VocaLink is dropping. based on its real-time payments expertise and presence in clearing and switching. be gaining quite a bit of volume from overall project targets. Figures produced by the european banking Association have painted a gloomy “We have conducted extensive international research into the payments needs of bats europe but less from the UbS Using GpUs as companion picture for SepA adoption rates, which the VocaLink move can only add to, despite our customers as well as the typical consumer which we will be sharing at this year’s multilateral trading Facility for the processors has accelerated application King's assurances that it is still a supporter of the SepA project. Sibos conference,” terry said. “Overall, there is a widespread desire to move towards foreseeable future. performance and efficiency, delivering It had been expected that with a clear end date for SepA adoption being forced on immediate payments. VocaLink is best placed to support this innovation and assist Firms trading on UbS mtF, the latest greener data centres which have higher the industry by the european Commission, there would be an upsurge in adoption, but our customers and partners in the delivery of next generation payments services.” BT fully interoperable execution venue in performance ratios for the same power europe, are able to choose euroCCp – a key consideration when electricity to clear their cash equities trades as is priced so high at the moment and ■ provide the essential credit controls unlikely scenario, mIrS would enable the DtCC subsidiary now interoperates carbon taxes are hitting the owners Swift to develop business continuity to prevent settlement banks going CHApS and other payments activity to with the incumbent CCp. but many of power hungry facilities. the faster overdrawn at the central bank. continue to settle in central bank money other clearing houses are scrambling speeds are beneficial competitively in service for RTGS systems According to Swift, mIrS will protect throughout the business day. We are for this same business simultaneously, that risk can be calculated in seconds market Infrastructure resiliency handle the business management of the against a large-scale failure, even in the pleased to be participating in the pilot.” so a tough battle for volume awaits – or minutes for clients, rather than Service is being developed by Swift service from a Crisis Command Centre extreme scenario of a catastrophic loss Commenting on the development, as indeed is the case for most venues hours, and in meeting the burgeoning Ato keep key functions at real time connected to Swift. the separate mIrS of all production sites, at an acceptable Alain raes, chief executive, emeA, Swift, now across europe post-miFID and demand for quicker regulatory risk Gross Settlement systems around the world generic payment settlement system will: cost. minimal impact will be felt on said: “mIrS will make a vital contribution Giovannini. more such interoperable reporting currently being placed upon operating in the event of a major outage. ■ establish accurate starting liquidity existing rtGS systems around the world, to the safety of critical payments market deals should be announced in the the industry. the mIrS service specifications have been positions at the time of failure, including it also maintains. infrastructures, and I believe we are coming months. the Nvidia tesla GpUs are agreed in collaboration with a number of the outstanding unprocessed payments explaining the bank of england’s perfectly positioned to help our customers “this represents huge progress ... deployed in multiple data centres and central banks and development is under held in Swift message queues rationale for working with Swift on the benefit from highly resilient business and we are hoping the success of these applications across the bank’s global way, says Swift, to keep the payments ■ maintain the account structure and development of mIrS, toby Davies, continuity services, at a reasonable cost, initiatives will encourage other trading offices via its Compute backbone operations of rtGS’ intact with a project enable transfers across the books of the head of the market services division at thanks to our existing footprint in the venues to follow suit in implementing infrastructure initiative. the integration end date of Q4 2013 envisaged. the bank central bank boe said: “With twin operational sites payments world. We are delighted to be interoperability,” said Diana Chan, chief of GpUs into the shared computational of england will participate in a mIrS pilot ■ Settle inter-bank payments and net our current operation of rtGS – the UK’s working with the bank of england to build executive of euroCCp. “If there is wider infrastructure has resulted in GpU to aid development and the organisation is settlements initiated by banks or ancillary interbank high value payment system a solution that caters for the interests of adoption of interoperability across more utilisation rates approaching 70%, hoping others will come on board later on. systems – is highly resilient, but we have been a whole community as we deliver on our trading venues, the european equities which means the bank’s systems are mIrS is a shared service that will ■ provide a user interface to give the looking for a strong and cost effective key strategic thrust to expand our services trading landscape will be transformed and being sweated more than they ever technically be operated and hosted rtGS operator and participating banks contingency solution in the improbable for rtGS systems by leveraging our core market participants will truly benefit from have before. BT by Swift, while the central banks will monitoring and control functionality event of catastrophic failure. In this competences.” BT greater competition and lower costs.” BT

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EuroCCP starts to interoperate as MTFs open to competition

uroCCp, the pan-european Low demand forces VocaLink to drop SEPA cash equities clearing house, Ehas signed up boA merrill Lynch, Credit Suisse, morgan Stanley and Nomura on bats europe for its clearing services and Citigroup’s Global transaction Services unit is putting its third party clearing business on UbS mtF via the London-based subsidiary of the Depository trust & Clearing Corporation. both deals take advantage of the King: VocaLink dropped SEPA services because “there is no commercial case” fact that these trading venues have opened themselves up to competition volumes remain stubbornly low – not least because cross-border payments represent and now support full interoperability as a relatively small volume of the overall european payments market – just 2.3%, required under eU regulations. acccording to the boston Consulting Group. the new bats europe preferred the move will also be seem in many quarters as a setback for King’s ambitious Interoperable Clearing Service enables plans to make VocaLink a major force in the international market as it consolidates trading firms to elect a preferred CCp futher over the next few years. SepA services had been part of this strategy, which will to clear their trades, as the four banks now rest mainly on internationalising the work it has done in building the UK Faster have done with euroCCp. Under this payments Service. service, if trading firms on both sides this is clearly set out in a company statement that describes the creation of a Global of a trade have selected a preferred transaction Services team “to deliver the innovations required by today’s evolving Central Counterparty then each side payments industry”. Led by marc terry, managing director of Global transaction will be cleared by the respective CCp Services, the team will deliver a range of services to global customers and partners of choice, which means euroCCp will based on its real-time payments expertise and presence in clearing and switching. be gaining quite a bit of volume from “We have conducted extensive international research into the payments needs of bats europe but less from the UbS our customers as well as the typical consumer which we will be sharing at this year’s multilateral trading Facility for the Sibos conference,” terry said. “Overall, there is a widespread desire to move towards foreseeable future. immediate payments. VocaLink is best placed to support this innovation and assist Firms trading on UbS mtF, the latest our customers and partners in the delivery of next generation payments services.” BT fully interoperable execution venue in europe, are able to choose euroCCp to clear their cash equities trades as ■ provide the essential credit controls unlikely scenario, mIrS would enable the DtCC subsidiary now interoperates to prevent settlement banks going CHApS and other payments activity to with the incumbent CCp. but many overdrawn at the central bank. continue to settle in central bank money other clearing houses are scrambling According to Swift, mIrS will protect throughout the business day. We are for this same business simultaneously, against a large-scale failure, even in the pleased to be participating in the pilot.” so a tough battle for volume awaits – extreme scenario of a catastrophic loss Commenting on the development, as indeed is the case for most venues of all production sites, at an acceptable Alain raes, chief executive, emeA, Swift, now across europe post-miFID and cost. minimal impact will be felt on said: “mIrS will make a vital contribution Giovannini. more such interoperable existing rtGS systems around the world, to the safety of critical payments market deals should be announced in the it also maintains. infrastructures, and I believe we are coming months. explaining the bank of england’s perfectly positioned to help our customers “this represents huge progress ... rationale for working with Swift on the benefit from highly resilient business and we are hoping the success of these development of mIrS, toby Davies, continuity services, at a reasonable cost, initiatives will encourage other trading head of the market services division at thanks to our existing footprint in the venues to follow suit in implementing boe said: “With twin operational sites payments world. We are delighted to be interoperability,” said Diana Chan, chief our current operation of rtGS – the UK’s working with the bank of england to build executive of euroCCp. “If there is wider interbank high value payment system a solution that caters for the interests of adoption of interoperability across more – is highly resilient, but we have been a whole community as we deliver on our trading venues, the european equities looking for a strong and cost effective key strategic thrust to expand our services trading landscape will be transformed and contingency solution in the improbable for rtGS systems by leveraging our core market participants will truly benefit from event of catastrophic failure. In this competences.” BT greater competition and lower costs.” BT

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Nationwide moves UK Payments Council reprieves cheques KBC centralises data centres in Hungary K retail banks have abandoned over the ppI mis-selling scandal was Energy efficiency gains come with consolidation into a single central location to single risk engine the idea of getting rid of cheques perhaps another contributing factor as ationwide building Society, Uby 2018 after coming under banks are keen not to be seen to be bC banking & Insurance, the belgian financial group one of the top three savings pressure from consumer champions, upsetting customers at the moment, whose operations include retail banking, private banking, Nproviders and mortgage lenders charities and government. the payments although this is outside the remit of Kinsurance, and the provision of services to both Smes in the UK with 15 million members Council announced the scrapping of the the payments Council, which only and major corporates, has consolidated its Central european It and more than £190 billion in assets, policy, which was adopted two years operates in the payments field and has infrastructure into two new data centres in Hungary. is installing the Fico blaze Advisor ago and was due to be reviewed in 2016, an independent chairman and directors KbC Global Services, the firm’s internal It organisation, business rules management system after sustained pressure from pensioner alongside its banking members. the worked in partnership with data centre supplier minkels and to provide a single risk engine for its groups, small business organisations and Council will also be busy enough over system integrator Simac to build the new centres. the initial operations. the treasury Select Committee, lead by the next two years introducing a new migration of It testing and acceptance systems started in June, part of the society’s Strategic risk chair Andrew tyrie mp, which reopened centralised account switching system and is expected to be completed by the middle of 2013. Infrastructure initiative, the solution will an investigation into the plan in the spring that will automatically re-route incoming KbC has a total of 23 existing data centres housed in 18 be used to automate all risk decisions following a deluge of public letters. and outgoing payments to new bank separate buildings in various countries throughout Central for mortgage lending and personal mark Hoban, Financial Secretary to accounts by 2013. europe. KbC’s objective in building the two new data centres loans by the end of the year, with the treasury, also attacked the policy in Cheques are in decline in the UK, with in Hungary is the energy-efficient consolidation of its Central a rollout to the rest of the society’s June saying there wasn’t a “credible and usage levels having fallen by 70% over european It infrastructure at a single location, including a portfolio to follow next year. coherent case” for abolishing cheques the last two decades and a further 40% fallback facility for redundancy purposes. the project is intended to enable without an alternative being fully tested. A decline being predicted. Nevertheless From a list of eight european firms, minkels was chosen KbC has highly ambitious objectives in terms of energy Nationwide to improve the consistency Council working group was established in 1.4 billion cheques were issued last year to supply the 460 custom-made data centre racks and 20 efficiency – the building was designed to achieve a power Usage and oversight of its risk decisioning, December 2010 to look at the feasibility of and certain sections of the community, energy-efficient minkels Cold Corridors and will become KbC’s effectiveness of 1.3 at full load, which is a requirement for the while reducing the complexity and cost perhaps using mobile p2p payments as particularly the elderly and small business preferred supplier throughout europe. “It was crucial to us that latest generation of data centres. “KbC is keen to minimise its of its current disparate It infrastructure. a possible replacement technology and people, are obviously keen to keep them. the supplier be capable of providing on-site services both in CO2 footprint,” martens said. “reduced energy consumption is the Strategic risk Infrastructure long-term this could still help to speed “We will use what we’ve learnt [from Hungary and in belgium,” said barry martens (pictured), expert an important issue to us, and a pUe of 1.3 is both a feasible initiative should also give Nationwide’s up the natural, now unforced, decline of talking to stakeholders] to keep improving systems engineer at KbC Global Services, who is responsible objective and extremely energy-efficient.” risk management group greater agility, cheques which are of course expensive existing systems, as well as introducing for the bank’s data centre infrastructure. System integrator In order to achieve this KbC has installed energy-efficient allowing it to respond to changes in for banks to process. innovation, so that customers benefit Simac was appointed for project management and design and minkels Cold Corridors, and technical systems chosen especially customer behaviour, markets and the payments Council explained that from 21st century ways to pay,” added construction of the structured data cabling. for their high energy efficiency. regulations more easily. Additional from now on, “cheques will continue North. “Innovation must be at the heart the data centres are on two separate sites in the budapest the housing of its Cisco switches was one of the greatest expected benefits include enhanced for as long as customers need them”. of what we do.” region. both have floor areas of 4 x 500 square metres, with the challenges, according to martens: “A lateral air outlet was data quality. richard North, chairman, said: “It’s in the Jonathan Williams, director of option of expansion by a further 6 x 500 square metres each. required, while particularly high standards were applicable with Fico’s blaze Advisor will provide an DNA of the Council to consult and listen strategic development at experian, said the power capacity initially available at each data centre is 4mW, regard to both cabling and energy efficiency in airflows. In this enterprise rule repository allowing rules to all those people who actually make that his company’s figures show that with the potential of increasing to 9mW. these are high-density regard, minkels’ engineers spent considerable time thinking to be deployed on different platforms payments and use cheques. Listening 64% of organisations already make less values which are intended to facilitate equipment such as blade along with us, before we ultimately opted for 64 custom-made across the society, including Java, to over 600 stakeholder groups, than 10% of their payments via cheques, server technology. Cisco switch racks.” BT Cobol and .Net. working with the banks and following while more than two thirds state that less “to serve our members with the most our appearance before the treasury than 10% of their customers use cheques competitive prices, our team needs to Select Committee, we have concluded to pay them. “many businesses we talk Algorithmics is latest analytics acquisition for IBM be able to adjust to the market faster,” we should reassure customers that the to plan to eradicate cheque usage within said Henry Jordan, head of retail credit cheque is staying.” the public outcry the next few years,” he said. BT n a $387 million deal, Ibm is to acquire standing and the ability to deliver more the need to have the right information at risk at Nationwide building Society. Canadian risk analytics specialist transparency to stakeholders,” said the right time is fundamental to developing “by using Fico blaze Advisor, we can IAlgorithmics as its latest move to rob Ashe, general manager, business and managing business strategies. the continuously update our policies and expand its business analytics capabilities analytics, Ibm. “Combining Algorithmics’ combination of Algorithmics’ thought offers, while keeping our risk at the Austrian trio consolidate Swift messaging in the financial services industry. expertise with Ibm’s deep analytics leadership, technology, content and appropriate level. Fico provided the trio of Austrian banks have laundering systems through mQ Series, Algorithmics’ risk analytics software portfolio will allow clients to take a more services and Ibm’s globally recognised most comprehensive, flexible and successfully consolidated their Stelink is being used to manage Swift FIN and services will be brought together holistic approach to managing risk and analytics business will help a broader cost-effective way for us to manage Adomestic and international Swift & rmA traffic for all branches. Users in with technologies that Ibm has acquired responding to economic change across group of clients improve their business decisions across our enterprise.” message traffic through their joint It dispersed locations are now connected from Openpages and other recent their enterprises.” performance based on a deeper According to mike Gordon, Fico’s provider, 3 banken. over a web-based thin client interface for investments in predictive analytics, to Ibm said that the agreement with understanding of risk.” vice president and managing director Oberbank, bKS bank and btV – bank für all Swift FIN & rmA activities. “provide clients with the broadest range Algorithmics “demonstrates that companies Some 900 Algorithmics employees for europe, the middle east and Africa, tirol und Vorarlberg – have been migrated “the migration from merva was of operations analytics solutions” the It are looking to integrate independent silos will join Ibm's Software Group, Nationwide is not the only financial from their legacy platform, known as merva, smooth” said Joost meuwissen of the giant claimed. to gain an enterprise-wide view of risks becoming part of its business Analytics institution investing in centralised to a new platform based on the Stelink systems engineering-group at 3 banken. the acquisition is part of Ibm's long for strategic planning, operations and new and Optimization practice, which has decision management systems to system from Swiss vendor Sterci. “Stelink is reliable, easy to manage and term strategy to support strong expected growth opportunities”. more than 8,000 consultants, including improve agility and stay ahead in a With headquarters in Linz, Innsbruck particularly easy to use for business growth in business analytics, an area of On the Algorithmics side, michael 200 mathematicians with more than highly competitive market. “many and Klagenfurt and 10 correspondent people. the very positive results of its business that is expected to reach Zerbs, president and chief operating 500 patents and a network of analytics forward-looking FIs are doing it,” banks, 3 banken now uses Stelink as a hub the proof of Concept and the Stelink $16 billion in revenue by 2015. officer, said:“It is increasingly important to solution centres, backed by an overall he said. “It is a big change from the for Swift messages that are exchanged thin Client presentation and evaluation “today's economic environment deliver integrated solutions that provide investment of more than $24 billion in past, when every channel, product with various external and internal bank were the competitive differentiators that demands that financial institutions an understanding of risk and enable acquisitions in the last five years. more and decision area formerly required a branches and entities. Interfaced with drove our selection of Sterci’s financial have more cash on hand, a better effective decision support while meeting than 350 clients, including 25 of the top different point system.” BT back-office applications and anti-money messaging platform.” BT understanding of their financial rapidly evolving regulatory requirements. 30 banks use Algorithmics’ software. BT

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UK Payments Council reprieves cheques KBC centralises data centres in Hungary Energy efficiency gains come with consolidation into a single central location

bC banking & Insurance, the belgian financial group whose operations include retail banking, private banking, Kinsurance, and the provision of services to both Smes and major corporates, has consolidated its Central european It infrastructure into two new data centres in Hungary. KbC Global Services, the firm’s internal It organisation, worked in partnership with data centre supplier minkels and system integrator Simac to build the new centres. the initial migration of It testing and acceptance systems started in June, and is expected to be completed by the middle of 2013. KbC has a total of 23 existing data centres housed in 18 separate buildings in various countries throughout Central europe. KbC’s objective in building the two new data centres in Hungary is the energy-efficient consolidation of its Central european It infrastructure at a single location, including a fallback facility for redundancy purposes. From a list of eight european firms, minkels was chosen KbC has highly ambitious objectives in terms of energy to supply the 460 custom-made data centre racks and 20 efficiency – the building was designed to achieve a power Usage energy-efficient minkels Cold Corridors and will become KbC’s effectiveness of 1.3 at full load, which is a requirement for the preferred supplier throughout europe. “It was crucial to us that latest generation of data centres. “KbC is keen to minimise its the supplier be capable of providing on-site services both in CO2 footprint,” martens said. “reduced energy consumption is Hungary and in belgium,” said barry martens (pictured), expert an important issue to us, and a pUe of 1.3 is both a feasible systems engineer at KbC Global Services, who is responsible objective and extremely energy-efficient.” for the bank’s data centre infrastructure. System integrator In order to achieve this KbC has installed energy-efficient Simac was appointed for project management and design and minkels Cold Corridors, and technical systems chosen especially construction of the structured data cabling. for their high energy efficiency. the data centres are on two separate sites in the budapest the housing of its Cisco switches was one of the greatest region. both have floor areas of 4 x 500 square metres, with the challenges, according to martens: “A lateral air outlet was option of expansion by a further 6 x 500 square metres each. required, while particularly high standards were applicable with the power capacity initially available at each data centre is 4mW, regard to both cabling and energy efficiency in airflows. In this with the potential of increasing to 9mW. these are high-density regard, minkels’ engineers spent considerable time thinking values which are intended to facilitate equipment such as blade along with us, before we ultimately opted for 64 custom-made server technology. Cisco switch racks.” BT Algorithmics is latest analytics acquisition for IBM

n a $387 million deal, Ibm is to acquire standing and the ability to deliver more the need to have the right information at Canadian risk analytics specialist transparency to stakeholders,” said the right time is fundamental to developing IAlgorithmics as its latest move to rob Ashe, general manager, business and managing business strategies. the expand its business analytics capabilities analytics, Ibm. “Combining Algorithmics’ combination of Algorithmics’ thought in the financial services industry. expertise with Ibm’s deep analytics leadership, technology, content and Algorithmics’ risk analytics software portfolio will allow clients to take a more services and Ibm’s globally recognised and services will be brought together holistic approach to managing risk and analytics business will help a broader with technologies that Ibm has acquired responding to economic change across group of clients improve their business from Openpages and other recent their enterprises.” performance based on a deeper investments in predictive analytics, to Ibm said that the agreement with understanding of risk.” “provide clients with the broadest range Algorithmics “demonstrates that companies Some 900 Algorithmics employees of operations analytics solutions” the It are looking to integrate independent silos will join Ibm's Software Group, giant claimed. to gain an enterprise-wide view of risks becoming part of its business Analytics the acquisition is part of Ibm's long for strategic planning, operations and new and Optimization practice, which has term strategy to support strong expected growth opportunities”. more than 8,000 consultants, including growth in business analytics, an area of On the Algorithmics side, michael 200 mathematicians with more than its business that is expected to reach Zerbs, president and chief operating 500 patents and a network of analytics $16 billion in revenue by 2015. officer, said:“It is increasingly important to solution centres, backed by an overall “today's economic environment deliver integrated solutions that provide investment of more than $24 billion in demands that financial institutions an understanding of risk and enable acquisitions in the last five years. more have more cash on hand, a better effective decision support while meeting than 350 clients, including 25 of the top understanding of their financial rapidly evolving regulatory requirements. 30 banks use Algorithmics’ software. BT

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Scotiabank is rolling out CGI’s Trade360 Software-as-a-Service considering its status as a banker for the UK Government solution to give it a single, integrated trade finance platform for its Banking Service and the continued growth of its UK client North and Latin American, Caribbean and Asian operations. The base and cash management operations. cloud-based SaaS offering replaces multiple legacy trade and supply chain applications at the bank and the contract runs for Yorkshire Building Society is installing the Q-Guard fraud detection seven years from this summer, with various break points thrown and prevention software suite from Quest on its mortgage processing in dependent upon performance. The intention is to improve operations. The pattern-spotting behavioural software can alert the the service to Scotiabank’s clients, providing greater visibility and Society to a broad range of risks, including over-valuations to covert transparency into their letters of credit, accounts, payments and so buy-to-lets, bad customer credit ratings and so forth. The automated forth, while simultaneously reducing the upfront cost of operation nature of the system should also help to improve efficiency and assist by no longer having to support multiple systems. integration at the newly enlarged firm, which took over the Norwich and Peterborough in the spring after earlier taking on the Barnsley and Canadian exchange operator TMX Group – still independent Chelsea building societies to become the second largest Society in the following failed acquisition attempt by the London Stock UK with 2.6 million members. Exchange earlier this year – is now on the acquisition trial itself having just brought Atrium Network for an undisclosed fee. The Bank of Fushun in China has deployed the FIS eCas2 TMX Atrium, as the new entity will be known, will operate as a core banking suite to support its expansion and strengthen unit of TMX Datalinx, the group’s information services division its customer service capabilities. The solution is helping to and spearhead a drive into the European and US connectivity bring new products to market more quickly and efficiently, and low latency data hosting and delivery environment for already enabling the commercial bank to launch new SMS the capital markets. The global connectivity footprint will also text and telephone banking services, with online services provide a new channel for order flow into the Toronto Stock also planned by year end. The FIS eCas2 core banking Exchange, TSX Venture Exchange and Montreal Exchange. software provides full processing support for the bank’s branch and non branch-based deposits, loans, payments Leumi Bank in Israel is introducing FircoSoft’s Firco Continuity and cards, treasury, intermediary, settlement and wealth watch list filtering solution on its Swift Alliance Access link to management activities. The solution is expected to help enhance its compliance with national and international regulations identify cross-selling opportunities across multiple lines of concerning anti-terrorist financing and anti-money laundering. business, assisting growth and aiding customer service. The software will screen all outgoing and incoming Swift payment messaging instructions against all appropriate sanction lists in real- wema Bank, a Nigerian commercial bank with more than 150 time. Any flagged transactions will automatically be stopped from branches, is installing the Finacle core banking system from proceeding, while the vendor claims its Firco Multi-Laws advanced Infosys, including consumer e-banking software and treasury business rules engine option will improve the bank’s data recognition solution modules, to improve productivity and customer experience and matching processes, reducing the false positive rate. across its online and branch-based operations. Wema will use the software to develop personalised customer offerings using Centrale Bank van Suriname, the central bank of the South the enhanced customer view provided, bundled products and an American nation, has gone live with the Olympic Banking enriched segment-specific portfolio. The solution’s scalability and System from Eri Bancaire in order to support the core business support for 24X7 multi-channel transactions were considerations in activities of its directorate of banking operations. The solution the contract award, as was the installation and ongoing support of is being deployed to handle payments operations, foreign local reseller Computer Warehouse Group Nigeria. exchange processing, accounting, the management and distribution of notes and coins and the management of the Santander UK is moving its call centres back to Britain country’s foreign currency and gold reserves. from India. The decision comes after the bank, which has acquired Abbey, the Alliance & Leicester and Bradford & JP Morgan Chase has chosen a web-enabled local regulatory Bingley in recent years to become a major UK player, has reporting solution from FRSGlobal for its operations in Hong Kong consistently topped the complaints league table in the and Singapore. The Wolters Kluwer Financial Services subsidiary country, proving the difficulty of integrating these different is supplying its subscription-only Regulatory Update Service to institutions together into a coherent retail bank. Santander ensure that reports, covering capital ratios/stress tests, money will take on 500 extra staff for the new call centres, adding to laundering and other essential requirements, are generated locally the 400 agents it employed last year in Liverpool, Leicester as required. The web service is being rolled out alongside a unified and Glasgow to handle the growth in its UK business. risk and analysis solution that monitors liquidity, and market and credit risk to ease JPM Chase’s operations oversight. Banca Popolare dell’Emilia Romagna, a Luxembourg private bank, has implemented the Thaler Wealth Management software Citi has become the first non-European member to join the from Callataÿ & Wouters to provide it with improved automation Bacs Payments Scheme in the UK, the owners of the direct for Swift messaging and enhanced Straight Through Processing debit and credit system in the UK. Part of the critical national capabilities for order management, cash transfers and corporate infrastructure, the bank-owned non-profit organisation actions. The vendor’s Swiss partner, TeamWork, is installing the handles more than 90% of salaries paid in the UK through its Callataÿ & Wouters system and its familiarly with the private bank’s VocaLink-operated systems. Citi is the sixteenth member of old solution (called Newbanking) was a key reason for the contract Bacs, joining leading banks and building societies in the UK award as it is expected to ease the migration process through the and Europe, and says its decision to join is a logical move use of its established data extraction tools. BT

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Payments ANALYSIS: BuSINeSS modeLS September 2011 September 2011

Cheque, mate? More bang for your buck Tom Groenfeldt Research from IBM shows that banks can boost Return on Equity by adopting new, simpler business models. What was seen as an attempt by UK banks to abolish cheques has highlighted the gulf between Banks could add two percentage points trading by new rules, said Ian bentinck, continue to be an issue. “It enables the industry and almost everyone else, reports Heather McKenzie. to their Return on equity by changing financial markets industry leader at Ibm. people, but the bigger problem is their business models, outsourcing “For the first time banks are saying they ownership,” said bentinck. “How do you the tension between the financial “Our decision shows that we are well placed some activities, partnering, or turning can’t afford silos in their organisations. persuade the commodities group to wait industry, regulators and politicians to respond to stakeholder needs and will to industry utilities rather than insisting Size and complexity work against profits, two years for an upgrade while others get was amply demonstrated in the not flinch from taking a difficult decision if on doing everything internally, says but size and complexity are a result of their systems done first?” recent farce played out in the UK as it is the right decision.” Conversely, a few IBm. legacy operations and the It landscape,” One way is to change the organisation’s the industry – through the Payments months ago the Council was arguing that “there’s a big gap between aspiration said bentinck. the combination of structure. “many clients have changed Council – attempted to phase out the the abolition of cheques was a difficult, but and valuation,” said Keith bear, director, of pressure on profits and the need to to a more horizontal structure because use of cheques. popular opposition to right decision. financial markets business development adapt to new regulations is leading to of a push from the top, and not just in the move, stoked by the mainstream the Council’s handling of the issue at Ibm. Some banks have roe in single transformational thinking. Although the investment banks but in commercial media, resulted in a flood of complaints has prompted the tSC to recommend digits, said bear, whilst 16+ was the norm nature of the transformation is still unclear, banks and private banking. You need a to the UK’s treasury Select Committee that the treasury makes provision in before the crisis. Now the norm is 9-12%, it will probably include more partnerships single view of products from the private inquiry into the move and a subsequent the forthcoming Financial Services bill while bankers say they want to achieve and outsourcing to turn fixed costs into bank to the investment bank. most of the rap on the knuckles from that body to the to bring the payments Council formally 12-16%. variable costs. big banks are changing their structure to payments Council. within the system of financial regulation. “that gap between valuation and break down their silos.” the tSC is appointed by the House Additionally it wants: aspiration can only be bridged by quite “Banks will have to focus As banks break down internal divisions, of Commons (the UK’s elected legislative ■ the Council to obtain a commitment radical change (it equates to hundreds they have the opportunity to make better body) to examine the expenditure, from the banks to give it advance sight of millions of dollars of operational on realising economies- use of client data. bear noted that one administration and policy of Hm treasury, of any material related to the future expense).” of-scale, and shedding a client, a large global bank, has a lot of data Hm revenue & Customs and associated and where innovation and new options availability of cheques that banks send to that would require far more aggressive about how its customers interact with the public bodies, including the bank of are required to ensure that they are put their customers; and innovative transformational partnering higher proportion of their bank, but they don’t use the information. england and the Financial Services in place”. A taskforce was launched in ■ all banks to write to their customers and outsourcing than banks have been non-core activities.” “If they recognised the value there, they Authority. the payments Council was December 2010 to explore mobile p2p stating that cheques will continue to be in willing to do in the past. “Our research could make client relationships stronger set up by the payments industry in 2007 payments as a possible alternative. use for the foreseeable future; looked at the cost of organisational bear and bentinck pointed to target and trigger more sales discussions by “to ensure that UK payment systems In the time that followed, the Council ■ the Council to consider reintroducing complexity and at our own experience in 2 Securities and a foreign exchange using predictive analytics,” he said. and services meet the needs of payment published numerous surveys highlighting the cheque guarantee card; and outsourcing across trading, back office, trade depository being developed by technology and integrated data sources service providers, users and the wider the decline in cheque use. For example, ■ changes to be made to the composition and other activities.” banks often have a DtCC and Swift as examples of industry could also improve anti-fraud measures economy”. in figures published on 9 September of the board of the payments Council to major gap between the systems they have platforms that will be used by multiple without simply adding headcount. but the tSC’s 24 August report, The 2010, the Council revealed that usage strengthen the representation of consumers. now that create a fixed cost, especially institutions. they also cited the alliance An Ibm study, Toward transparency Future of Cheques, casts doubts on had dropped by £21.5 billion, down 10% In combative mood, the chairman of the in the back office, and the systems they with broadridge that Ibm announced and sustainability – Building a new whether the Council does work to meet compared to the same period in 2009, Committee, Andrew tyrie, said: “Cheques need, especially in areas of reduced in April as another case of industry financial order, is based on a large survey the needs of users. In a statement the “as businesses and consumers switched have been saved, for the moment, but we volume. transformation. that announcement of financial executives around the world. tSC said: “the Committee welcomes the to faster and more convenient electronic need to remain vigilant. the incentives “this is causing many firms to look said: “the collaboration of broadridge It suggested that, “tomorrow’s winners belated decision of the Council to retain payments and cards”. every day of a for the industry to get rid of cheques at different approaches and make and Ibm will enable clients to focus are likely to be those that specialise and cheques, but warns the payments Council quarter last year, on average 290,000 have not gone away. Neither have we. major changes, including utilities and their resources on revenue-generating deliver a first-rate service, rather than to ensure that banks do not attempt to fewer cheques were written than the year that is why we are making far-reaching outsourcing moves. We are now working, activities to compete more effectively in trying to do everything themselves.” abandon cheques by stealth, nor deter before, it added. recommendations about the future of the for instance, with a tier 2 investment bank the marketplace, rather than supporting the industry is moving in that direction, customers from using cheques.” the but in July this year and prior to publication payments Council as well as to secure the which is looking to outsource its securities in-house transaction processing and the survey showed. 60% of financial Committee said it had received more than of the Committee’s report, the payments future of cheques.” back office. the cost of regulations technology infrastructures”. executives interviewed by Ibm favoured 1,200 letters and emails from members of Council abandoned its efforts to abolish tyrie pointed up that the Council has “no and the rOe are causing them to be “the partnership with broadridge is a outsourcing non-core activities, up from the public regarding the future of cheques, cheques. In its capitulation, the payments effective public accountability” in making concerned about the scalability of their good combination for business process just 30% in previous years. the report far more than the Committee typically Council said cheques would continue “for as decisions that are of “vital importance to systems, which are now almost entirely outsourcing and our own services and concluded that banks don’t have a lot of receives for an inquiry. long as customers need them”. millions of people”. Its decision to abolish internal. this [plan to outsource] is a technology,” said bear. “It shows how new choice. Although they cut staff and sold the result is that the tSC has stated Chairman of the Council, richard cheques was taken without assessing significant change we wouldn’t have seen alliances are being done. the back office off some business lines after the start of that the “industry-dominated” Council North, said: “It’s in the DNA of the the costs and benefits or providing any a few years ago.” is changing from in-house to outsourced.” the financial crisis, they still need to cut should “no longer have the unfettered payments Council to consult and listen indication of what alternatives to cheques Since 2008 when securitised products He estimates that one-third of Ibm’s costs by another 20%. power to decide the future of cheques, to all those people who actually make would be put in place. went through the floor, fixed income financial services business is outsourcing banks have already implemented the or other payment methods that directly payments and use cheques. Listening to the fracas indicates just how prepared operations at investment banks are in one form or another. most obvious cost-cutting measures, affect millions of people”. over 600 stakeholder groups, working with legislators and regulators are to take on looking weak, he added: “Large swings that transformation isn’t always said bear. “they will have to focus on the payments Council first announced the banks and following our appearance financial institutions. Under-use and the have major implications for large firms smooth; many providers have their own realising economies-of-scale, integrating its plans for cheques in December 2009, before the treasury Select Committee, high cost of processing have not proven with fixed costs.” issues about expensive and inflexible their It more closely with their business setting a target date of 31 October 2018 we have concluded we should reassure to be significantly robust arguments to Although banks have often talked of legacy systems, added bentinck. He strategies and shedding a higher to close UK central cheque clearing. It customers that the cheque is staying.” support the abolition of cheques. Given bringing technology costs under control, and bear expect to see continuing proportion of their non-core activities. justified its plans by pointing out that putting a brave face on the turnaround, the industry’s desire to see them phased this time they may really mean it. revenues consolidation among service companies the firms that compete most successfully cheque use was in long-term, terminal North added that the Council was “pleased” out, some more work remains to be are off, banks have seen a change in their with innovation coming from start-ups in this new environment will be those that decline. the Council said it would “seek to that the Committee’s report welcomed the done on alternatives and on presenting mix of business, new regulations are that are eventually acquired by major specialise and form partnerships with promote and explain existing alternatives; decision to retain central cheque clearing. arguments. BT putting pressure on profits, and in the US players. other organisations to supplement their banks are being pushed out of proprietary Internal power politics at banks will own areas of expertise.” BT

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ANALYSIS: BuSINeSS modeLS September 2011

More bang for your buck Tom Groenfeldt Research from IBM shows that banks can boost Return on Equity by adopting new, simpler business models. Banks could add two percentage points trading by new rules, said Ian bentinck, continue to be an issue. “It enables to their Return on equity by changing financial markets industry leader at Ibm. people, but the bigger problem is their business models, outsourcing “For the first time banks are saying they ownership,” said bentinck. “How do you some activities, partnering, or turning can’t afford silos in their organisations. persuade the commodities group to wait to industry utilities rather than insisting Size and complexity work against profits, two years for an upgrade while others get on doing everything internally, says but size and complexity are a result of their systems done first?” IBm. legacy operations and the It landscape,” One way is to change the organisation’s “there’s a big gap between aspiration said bentinck. the combination of structure. “many clients have changed and valuation,” said Keith bear, director, of pressure on profits and the need to to a more horizontal structure because financial markets business development adapt to new regulations is leading to of a push from the top, and not just in at Ibm. Some banks have roe in single transformational thinking. Although the investment banks but in commercial digits, said bear, whilst 16+ was the norm nature of the transformation is still unclear, banks and private banking. You need a before the crisis. Now the norm is 9-12%, it will probably include more partnerships single view of products from the private while bankers say they want to achieve and outsourcing to turn fixed costs into bank to the investment bank. most of the 12-16%. variable costs. big banks are changing their structure to “that gap between valuation and break down their silos.” aspiration can only be bridged by quite “Banks will have to focus As banks break down internal divisions, radical change (it equates to hundreds they have the opportunity to make better of millions of dollars of operational on realising economies- use of client data. bear noted that one expense).” of-scale, and shedding a client, a large global bank, has a lot of data that would require far more aggressive about how its customers interact with the and innovative transformational partnering higher proportion of their bank, but they don’t use the information. and outsourcing than banks have been non-core activities.” “If they recognised the value there, they willing to do in the past. “Our research could make client relationships stronger looked at the cost of organisational bear and bentinck pointed to target and trigger more sales discussions by complexity and at our own experience in 2 Securities and a foreign exchange using predictive analytics,” he said. outsourcing across trading, back office, trade depository being developed by technology and integrated data sources and other activities.” banks often have a DtCC and Swift as examples of industry could also improve anti-fraud measures major gap between the systems they have platforms that will be used by multiple without simply adding headcount. now that create a fixed cost, especially institutions. they also cited the alliance An Ibm study, Toward transparency in the back office, and the systems they with broadridge that Ibm announced and sustainability – Building a new need, especially in areas of reduced in April as another case of industry financial order, is based on a large survey volume. transformation. that announcement of financial executives around the world. “this is causing many firms to look said: “the collaboration of broadridge It suggested that, “tomorrow’s winners at different approaches and make and Ibm will enable clients to focus are likely to be those that specialise and major changes, including utilities and their resources on revenue-generating deliver a first-rate service, rather than outsourcing moves. We are now working, activities to compete more effectively in trying to do everything themselves.” for instance, with a tier 2 investment bank the marketplace, rather than supporting the industry is moving in that direction, which is looking to outsource its securities in-house transaction processing and the survey showed. 60% of financial back office. the cost of regulations technology infrastructures”. executives interviewed by Ibm favoured and the rOe are causing them to be “the partnership with broadridge is a outsourcing non-core activities, up from concerned about the scalability of their good combination for business process just 30% in previous years. the report systems, which are now almost entirely outsourcing and our own services and concluded that banks don’t have a lot of internal. this [plan to outsource] is a technology,” said bear. “It shows how new choice. Although they cut staff and sold significant change we wouldn’t have seen alliances are being done. the back office off some business lines after the start of a few years ago.” is changing from in-house to outsourced.” the financial crisis, they still need to cut Since 2008 when securitised products He estimates that one-third of Ibm’s costs by another 20%. went through the floor, fixed income financial services business is outsourcing banks have already implemented the operations at investment banks are in one form or another. most obvious cost-cutting measures, looking weak, he added: “Large swings that transformation isn’t always said bear. “they will have to focus on have major implications for large firms smooth; many providers have their own realising economies-of-scale, integrating with fixed costs.” issues about expensive and inflexible their It more closely with their business Although banks have often talked of legacy systems, added bentinck. He strategies and shedding a higher bringing technology costs under control, and bear expect to see continuing proportion of their non-core activities. this time they may really mean it. revenues consolidation among service companies the firms that compete most successfully are off, banks have seen a change in their with innovation coming from start-ups in this new environment will be those that mix of business, new regulations are that are eventually acquired by major specialise and form partnerships with putting pressure on profits, and in the US players. other organisations to supplement their banks are being pushed out of proprietary Internal power politics at banks will own areas of expertise.” BT

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iPhone users most keen on adoption of Slowdown in hiring BY THE NUMBERS mobile banking and payment services hits London’s ne in five (21%) adults in the UK would pay their bills through a mobile phone financial services FSA pay rules will Financial markets to spend $90bn on IT if they had the choice, while 25% would transfer funds using a mobile phone. pending on It in the world’s financial markets will reach almost $90 billion by O According to research carried out by YouGov for Intelligent environments, he London financial services weaken UK 2015, driven on by strong growth in Asia pacific, predicts research firm Ovum in men are more likely to access banking services through a mobile phone. Almost a sector saw a slowdown in hiring ity firms fear that the new Financial Sits latest report entitled Financial Markets Technology Spending Through 2015. quarter (24%) of males said they would be happy to pay their bills via a phone compared Tactivity between June and July, Services Authority remuneration In China, It spending will grow by a compound annual growth rate of 8.8% from to 18% of women. One in five men would also use a mobile phone to pay other people, with the number of new jobs available CCode will make it more difficult 2011 to 2015, says Ovum, while Hong Kong will grow by 8.1% and Singapore by such as family and friends, versus 14% of women. falling 10% month-on-month from to attract and retain talent in London 7.1%. the trend of continued growth in the Far east far outstrips the compound annual Against the backdrop of a ‘cash-strapped’ britain, people in the south of england are 5,544 down to 4,977 in July 11. according to a pA Consulting Group and growth rate predicted for the US and the UK & Ireland, which will only manage 6% and also keener to use a mobile phone to bank should they have the option. In particular, According to the latest morgan City Hr Association survey carried out 5.8% respectively. 42% would check their account balance, 25% would pay bills and 30% transfer funds. mcKinley employment monitor, the year- among senior executives at 50 UK and the hedge funds sector is the other major driver for the growth in It spending with 11.1% James richards, director of mobile at Intelligent environments, said: “Smartphones on-year figure was even worse, with an international banks. being predicted by Ovum as the compound annual growth rate until 2015 – the strongest are increasingly becoming the norm in the UK and the recent Ofcom report shows 18% decrease in vacancies from 6,048 more than half (52%) of respondents performance by any single segment of the capital markets arena. In terms of functional how obsessed brits are with these new ‘must-haves’. Consumer demand for real-time to 4,977. feel the Code will make it harder to verticals, Ovum is predicting that risk management and reporting systems will be to the access and information is going beyond just social networking and is now expected in the number of professionals new to attract talent into London and 58% say fore as the need for greater transparency and compliance with regulations such asb asel III all walks of life, including financial services. As consumers grow to be more comfortable the jobs market in July dropped sharply it will make it easier to attract talent away spurs investment – no surprise there then. with mobile and purse-strings tighten due to harsher economic conditions, it is no by 44% down from 15,671 in June 11 from London and as a result 82% of Commenting on the report, Daniel mayo, Ovum’s financial markets technology surprise that financial management has moved up britons’ agendas and the number to 8,770. there was also a decrease decision makers at banking institutions analyst, said that the key trend of the rise of the Asia pacific market was “mainly due to looking to access banking services via a mobile phone is on the rise.” compared to the number of job seekers at are predicting that the Code will risk global companies shifting their decision-making power from New York and London to the research goes a step further in breaking down smartphone habits by operating the same time the previous year, falling by weakening UK competitiveness. these cities such as beijing, because of their growing economic influence”. system and provides an update on what smartphones say about their owners. 14% from 10,170 in July 10. findings support the FSA’s own prediction meanwhile, global spending on It in the hedge funds sector will grow at a CAGr of “the decline in financial services job in its cost-benefit analysis for the Code 11.1% from 2011 to 2015. this is the strongest growth of all the lines of business and iPhone profile: the ‘adventurous’ smartphone user opportunities in July 11 is unsurprising that it “could also adversely affect UK is being driven by a resurgence in the hedge funds market as investors seeking high ■ the heaviest and most ‘addicted’ smartphone users with 43% spending more than given recent economic issues: there is competitiveness, as firms subject to this returns forgive (or forget) the woes of 2008/09. two hours a day on their phones versus 33% of Android and 31% of blackberry owners. currently significant turmoil in financial requirement may find it more difficult to mayo said: “the hedge funds market was badly affected by the financial crash, with ■ most likely to jump on their phones once they wake up (23%) and before they go to markets; banks are reducing headcounts; compete for talent on a global basis”. investors staying away due to its disastrous performance. As a result, investment in It bed (26%) compared to other smartphone users. Also, favourites to regularly use their Q2 results were on the whole below fell significantly in 2008 and 2009. However, investors seeking the high returns it can smartphone while on the loo (35%). expectations, plus the summer holiday “Banks are changing once again provide have come back, and It investment is slowly growing as a result. ■ eager to access banking services via their phones: 69% would check their balance, 46% period typically sees a slowdown in pay structures for senior by 2012, we expect the market to reach pre-recession levels.” would pay their bills and 62% don’t mind transferring funds, all through their mobiles. recruitment activity. In addition, we are According to mayo, much of the investment in all regions and lines of business will be ■ Still debt-laden: 17% admit that their main bank account is always overdrawn, only just beyond the mid-point of the bankers and expect to made in risk management systems, as well as reporting systems that allow financial markets compared to an average 11% of all britons. year with several months of H2 still to go increase base salaries to re- companies to provide greater transparency and comply with new regulations. BT and a real lack of clarity on how the rest balance the rewards.” BlackBerry profile: the ‘sensible’ smartphone user of the year will play out. these current ■ Not ‘obsessed’: many (38%) spend less than an hour on their phones in a day issues have come together at this point in the survey also demonstrates that ■ Still more prudent with their cash compared to other smartphone users: only 14% time to create a ‘perfect storm’ in the City firms are taking the Code seriously and FS firms fail to focus on projects say they are always overdrawn, compared with Android (17%) and Apple (17%), and hiring market, which is to some extent most institutions confirm that they have ew financial services companies have formal, rigorous and tested project now more blackberry users (55%) never go into the red than a few months ago (49%). reflected across global financial centres already implemented changes to comply management processes in place to meet their goals consistently, according to ■ Least inclined to want to receive special banking offers via their phone: 4% compared around the world. with the new requirements. While most Fnew Oracle-sponsored research by the economist Intelligence Unit. to 12% of Android users and 17% of iphone users. “Despite turbulence in the financial bankers will see little change in the way the report, Proactive response: How mature financial services firms deal with services sector, hiring has not completely they are paid it is clear that the Code is troubled projects, explores how firms identify and deal with at-risk projects and which Android profile: the ‘unpredictable’ smartphone user ground to a halt,” said Andrew evans, changing the way senior bankers are paid. strategies help them to achieve greater project success. Key findings include: ■ Spend less time on their phone during the morning : 14% versus 15% of blackberry chief operations officer,m organ mcKinley “the objective of the Code is to ■ A surprising 35% of project sponsors in financial services either wait until a project users and 22% of iphone users. Financial Services. “We are still seeing sustain market confidence and promote is in serious trouble before getting involved, or never get involved at all. ■ but most likely to jump on their phone straight after leaving work, comparing Android financial institutions focused on securing financial stability. to be fit for the future ■ Nearly half (47%) of surveyed firms do not respond to troubled projects until (30%), iphone (26%) and blackberry (22%) users. top talent in certain areas of the market. and meet the needs of the regulations, they have officially missed their time and budget targets. A further 15% of financial ■ more likely to be “always overdrawn” than a few months ago: 17% in July versus However, talent retention and internal banks are changing pay structures for the services firms have no formal process to address project failure at all. 14% in march. career development have now risen up the most senior bankers and many expect ■ Unrealistic goals are the most common cause of unsuccessful projects in financial ■ Keen on ‘wave and pay’ purchasing: 27% would swipe their phone across a payment agenda for many Hr and line managers to increase base salaries to re-balance services firms, according to the survey. Others include poor alignment between reader to pay for goods compared to an average 13% of all britons. under pressure to reduce overheads while the total reward package as a result of project and organisational goals, and a lack of necessary human resources. driving business performance.” bonus deferrals and issuance of stock,” ■ Smaller firms tend to have the most rigour in their project management process. richards added: “this research shows that although the iphone is the bastion of apps, the average salary for those securing says Stephen brooks, specialist in people Companies with less than $500 million in annual revenue respond to signs of trouble organisations must cater to Android and blackberry users too. by recognising how new roles in July fell slightly by 2% to £50,591 management at pA Consulting Group. earlier than their larger peers. consumers use their smartphones, there is huge potential for businesses in all sectors, from the average pay of professionals who “However, there is also a clear expectation ■ Financial services companies with rigorous project management practices are less whether retailers or banks, to tailor their mobile offerings to provide real value add and took up new roles in June. the time taken to that the Code will make it more difficult to burdened by regulatory demands. these organisations more often deliver projects on drive brand loyalty. the key is to focus on mobile applications and services that bring fill new roles has risen by 10 days to 57 days attract and retain talent.” BT time and on budget. BT convenience and simplicity to consumers’ lives.” BT in July 2011. BT

12 I www.bankingtech.com www.bankingtech.com I 13 Go to www.bankingtech.com for the latest news and comment iPhone users most keen on adoption of Slowdown in hiring mobile banking and payment services hits London’s ne in five (21%) adults in the UK would pay their bills through a mobile phone financial services if they had the choice, while 25% would transfer funds using a mobile phone. O According to research carried out by YouGov for Intelligent environments, he London financial services men are more likely to access banking services through a mobile phone. Almost a sector saw a slowdown in hiring quarter (24%) of males said they would be happy to pay their bills via a phone compared Tactivity between June and July, to 18% of women. One in five men would also use a mobile phone to pay other people, with the number of new jobs available such as family and friends, versus 14% of women. falling 10% month-on-month from Against the backdrop of a ‘cash-strapped’ britain, people in the south of england are 5,544 down to 4,977 in July 11. also keener to use a mobile phone to bank should they have the option. In particular, According to the latest morgan 42% would check their account balance, 25% would pay bills and 30% transfer funds. mcKinley employment monitor, the year- James richards, director of mobile at Intelligent environments, said: “Smartphones on-year figure was even worse, with an are increasingly becoming the norm in the UK and the recent Ofcom report shows 18% decrease in vacancies from 6,048 how obsessed brits are with these new ‘must-haves’. Consumer demand for real-time to 4,977. access and information is going beyond just social networking and is now expected in the number of professionals new to all walks of life, including financial services. As consumers grow to be more comfortable the jobs market in July dropped sharply with mobile and purse-strings tighten due to harsher economic conditions, it is no by 44% down from 15,671 in June 11 surprise that financial management has moved up britons’ agendas and the number to 8,770. there was also a decrease looking to access banking services via a mobile phone is on the rise.” compared to the number of job seekers at the research goes a step further in breaking down smartphone habits by operating the same time the previous year, falling by system and provides an update on what smartphones say about their owners. 14% from 10,170 in July 10. “the decline in financial services job iPhone profile: the ‘adventurous’ smartphone user opportunities in July 11 is unsurprising ■ the heaviest and most ‘addicted’ smartphone users with 43% spending more than given recent economic issues: there is two hours a day on their phones versus 33% of Android and 31% of blackberry owners. currently significant turmoil in financial ■ most likely to jump on their phones once they wake up (23%) and before they go to markets; banks are reducing headcounts; bed (26%) compared to other smartphone users. Also, favourites to regularly use their Q2 results were on the whole below smartphone while on the loo (35%). expectations, plus the summer holiday ■ eager to access banking services via their phones: 69% would check their balance, 46% period typically sees a slowdown in would pay their bills and 62% don’t mind transferring funds, all through their mobiles. recruitment activity. In addition, we are ■ Still debt-laden: 17% admit that their main bank account is always overdrawn, only just beyond the mid-point of the compared to an average 11% of all britons. year with several months of H2 still to go and a real lack of clarity on how the rest BlackBerry profile: the ‘sensible’ smartphone user of the year will play out. these current ■ Not ‘obsessed’: many (38%) spend less than an hour on their phones in a day issues have come together at this point in ■ Still more prudent with their cash compared to other smartphone users: only 14% time to create a ‘perfect storm’ in the City say they are always overdrawn, compared with Android (17%) and Apple (17%), and hiring market, which is to some extent now more blackberry users (55%) never go into the red than a few months ago (49%). reflected across global financial centres ■ Least inclined to want to receive special banking offers via their phone: 4% compared around the world. to 12% of Android users and 17% of iphone users. “Despite turbulence in the financial services sector, hiring has not completely Android profile: the ‘unpredictable’ smartphone user ground to a halt,” said Andrew evans, ■ Spend less time on their phone during the morning : 14% versus 15% of blackberry chief operations officer,m organ mcKinley users and 22% of iphone users. Financial Services. “We are still seeing ■ but most likely to jump on their phone straight after leaving work, comparing Android financial institutions focused on securing (30%), iphone (26%) and blackberry (22%) users. top talent in certain areas of the market. ■ more likely to be “always overdrawn” than a few months ago: 17% in July versus However, talent retention and internal 14% in march. career development have now risen up the ■ Keen on ‘wave and pay’ purchasing: 27% would swipe their phone across a payment agenda for many Hr and line managers reader to pay for goods compared to an average 13% of all britons. under pressure to reduce overheads while driving business performance.” richards added: “this research shows that although the iphone is the bastion of apps, the average salary for those securing organisations must cater to Android and blackberry users too. by recognising how new roles in July fell slightly by 2% to £50,591 consumers use their smartphones, there is huge potential for businesses in all sectors, from the average pay of professionals who whether retailers or banks, to tailor their mobile offerings to provide real value add and took up new roles in June. the time taken to drive brand loyalty. the key is to focus on mobile applications and services that bring fill new roles has risen by 10 days to 57 days convenience and simplicity to consumers’ lives.” BT in July 2011. BT

www.bankingtech.com I 13 Cover story: systemiC risk September 2011

prevent systemic risk and return a level of confidence the problems are not all down to senior management to markets. though, concedes Quigley. Unfortunately, the regulatory-led stress tests failed risk managers may be experts in mathematics to achieve any credibility with the market. this is not but too many are poor at communicating and this is surprising given that the Committee of european where stress tests should be employed to better effect. banking Supervisors’ europe-wide stress tests in 2010 “I believe stress tests should not be used as models gave all Irish banks a pass only to see them apply for but as a process for guiding senior management. risk a multi-billion bail-out just months later. So it was with managers should use the combined results of stress understandable interest that an audience of Irish risk tests to create a plausible set of events that can tell a managers gathered at a professional risk managers’ story to management.” International Association meeting in Dublin earlier this year to hear the thoughts of paul Quigley, former the regulators chief executive of the Institute of bankers Ireland, and It is not just the banks and their corporate clients esrtwhile general manager for risk measurement and that have spent heavily on risk technology following architecture at Allied Irish bank, a role that saw him the crisis. regulators have also invested large sums take responsibility for developing the bank’s stress on revamping their systems. In Ireland the Central tests back in 2005. bank has implemented an Information management According to Quigley, one of the biggest & technology Directorate to address enterprise problems regarding stress tests is that they have architecture, It solution delivery, project management been consistently misunderstood or even ignored and customer engagement, which includes a new at a senior management level. “When I was at AIb focus on modelling methodology. we ran an enterprise-wide stress test in 2005 that A central feature of the Directorate is the suggested the bank could lose €2.5 billion under development of a new risk framework, the prudential certain scenarios,” says Quigley. “When these results risk and Impact System (prism) which the Central were shown to senior management, they said that bank hopes to launch before the year-end. According won’t happen because the model is wrong or the data to the Central bank, prism will “enhance the bank’s is wrong and to come back when the data has been ability to deliver judgement-based, outcome-focused fixed.” regulation” and “enable supervisors and management In the crucial period between 2007 and 2009 there to see the risks posed by institutions in any sector at were also problems in the way stress tests were any point”. conducted, says Quigley, with too much emphasis on statistical analysis and not enough on sound judgment. “models aren’t there to provide answers, “When I was at AIB we ran an enterprise- Nicholas Pratt charts the major they are there to sharpen questions. You have to wide stress test in 2005 that suggested the Risk: the big developments in risk management since overlay sound judgment on the results and apply a common sense test because it is better to be roughly bank could lose €2.5 billion under certain the 2008 crisis and examines how the right rather than precisely wrong.” relationship between risk and technology Data is of course very important and this is where scenarios” Picture has changed. technology can play a role in creating better quality Paul Quigley databases. “there is a need to maintain the data so that you can see if behaviour is changing and to in the wake of the financial crisis, every man and risk had not been eliminated of course and it is test our assumptions and back-test for reliability,” the Irish Central bank is less forthcoming about his dog appear to have taken their turn to deliver unlikely that even the most confident of traders really says Quigley. the Institute for International Finance, the technical details of the system and its cost, a well-aimed kick at technology. the crisis was believed this. but it could be argued that the rapid an association of 38 global banks, has stated that although it has said that prism will be broadly based not, after all, the result of a foolhardy pursuit of profit development of risk technology did lead banks to the reason some banks fared better than others on the Arrow II system, the risk assessment framework and a failure to understand that housing markets assume more certainty in the prediction of market in the crisis was because they had the data and developed by the UK’s Financial Services Authority in could go down as well as up. Nor was it the fault of behaviour than was wise. Nassim Nicholas taleb, the indicators that allowed them to act quickly to 2006. this itself is now being replaced with a proactive senior management that ignored the warnings of risk economist and author of The Black Swan, certainly changing events. Intervention Framework, as the FCA replaces the FSA. managers about the dangerous concentration of risks. thought this. In the wake of the financial crisis taleb this logic has to be applied to stress tests, says meanwhile the FSA is actually selling off some of its And nor was it a system of overly complex debt-based told a bbC television audience that the crisis has been Quigley. “If you run a scenario that would put you out technology, after announcing the sale of its Approved derivatives deliberately designed to bamboozle gullible caused by a reliance on “bogus measures” like Value at of business, you also have to know how far away from reporting mechanism to the London Stock exchange purchasers. No it was technology’s fault for being so risk, mean variance and portfolio at risk. “the banks that point you are. What assumptions would drive you for £15 million. advanced that everyone thought that financial risk was want us to take action based on our understanding of to the abyss?” this does create challenges though, the transaction reporting service has been used all under control. the world. “I do the opposite,” he said. I wake every accepts Quigley. For example, using profit and loss to collect trading data from FSA-regulated firms such A series of films by british documentarian Adam morning knowing that I do not know what is going on as the only measure of risk may be totally flawed but as counterparty details and times of execution which Curtis, called All Watched Over by Machines of and that is the way we have to operate. We have to be how do you deal with concentration risk when the are then fed into the FSA’s early warning system for Loving Grace, made the claim that computers have more robust towards human error.” main area of concentration, say Irish banks lending potential insider trading. According to the FSA the third- distorted our view of the world rather than liberating to the construction sector, is the area that makes party vendor market is now sufficiently competitive in us from our physical and intellectual limitations. Curtis the risk managers the bank the most money? How do you persuade its provision of transaction reporting services that firms illustrated his point by referencing the rise of electronic Human error has been in plentiful supply in the area the bank to stop activity in its most commercially should be able to fulfil their reporting requirements trading and the use of complex, algorithmically-driven of stress tests. Since the crisis, the whole issue of lucrative sector? “Someone has to say enough is without the need for Arm. modelling. traders mistakenly began to believe that the stress testing has come under serious examination – enough,” says Quigley. “this should be the job of the the use of the private sector to carry out regulatory advancement in risk technology had created a way of not just the tests run by banks for their own internal risk manager, however it became evident during the tasks is something that is likely to increase as regulators trading that eliminated risk, argued Curtis. use but also those imposed by regulators in order to crisis that risk managers were rarely listened to. attempt to introduce more sophisticated and risk- >

14 I www.bankingtech.com www.bankingtech.com I 15 prevent systemic risk and return a level of confidence the problems are not all down to senior management to markets. though, concedes Quigley. Unfortunately, the regulatory-led stress tests failed risk managers may be experts in mathematics to achieve any credibility with the market. this is not but too many are poor at communicating and this is surprising given that the Committee of european where stress tests should be employed to better effect. banking Supervisors’ europe-wide stress tests in 2010 “I believe stress tests should not be used as models gave all Irish banks a pass only to see them apply for but as a process for guiding senior management. risk a multi-billion bail-out just months later. So it was with managers should use the combined results of stress understandable interest that an audience of Irish risk tests to create a plausible set of events that can tell a managers gathered at a professional risk managers’ story to management.” International Association meeting in Dublin earlier this year to hear the thoughts of paul Quigley, former the regulators chief executive of the Institute of bankers Ireland, and It is not just the banks and their corporate clients esrtwhile general manager for risk measurement and that have spent heavily on risk technology following architecture at Allied Irish bank, a role that saw him the crisis. regulators have also invested large sums take responsibility for developing the bank’s stress on revamping their systems. In Ireland the Central tests back in 2005. bank has implemented an Information management According to Quigley, one of the biggest & technology Directorate to address enterprise problems regarding stress tests is that they have architecture, It solution delivery, project management been consistently misunderstood or even ignored and customer engagement, which includes a new at a senior management level. “When I was at AIb focus on modelling methodology. we ran an enterprise-wide stress test in 2005 that A central feature of the Directorate is the suggested the bank could lose €2.5 billion under development of a new risk framework, the prudential certain scenarios,” says Quigley. “When these results risk and Impact System (prism) which the Central were shown to senior management, they said that bank hopes to launch before the year-end. According won’t happen because the model is wrong or the data to the Central bank, prism will “enhance the bank’s is wrong and to come back when the data has been ability to deliver judgement-based, outcome-focused fixed.” regulation” and “enable supervisors and management In the crucial period between 2007 and 2009 there to see the risks posed by institutions in any sector at were also problems in the way stress tests were any point”. conducted, says Quigley, with too much emphasis on statistical analysis and not enough on sound judgment. “models aren’t there to provide answers, “When I was at AIB we ran an enterprise- they are there to sharpen questions. You have to overlay sound judgment on the results and apply a wide stress test in 2005 that suggested the common sense test because it is better to be roughly bank could lose €2.5 billion under certain right rather than precisely wrong.” Data is of course very important and this is where scenarios” technology can play a role in creating better quality Paul Quigley databases. “there is a need to maintain the data so that you can see if behaviour is changing and to test our assumptions and back-test for reliability,” the Irish Central bank is less forthcoming about says Quigley. the Institute for International Finance, the technical details of the system and its cost, an association of 38 global banks, has stated that although it has said that prism will be broadly based the reason some banks fared better than others on the Arrow II system, the risk assessment framework in the crisis was because they had the data and developed by the UK’s Financial Services Authority in the indicators that allowed them to act quickly to 2006. this itself is now being replaced with a proactive changing events. Intervention Framework, as the FCA replaces the FSA. this logic has to be applied to stress tests, says meanwhile the FSA is actually selling off some of its Quigley. “If you run a scenario that would put you out technology, after announcing the sale of its Approved of business, you also have to know how far away from reporting mechanism to the London Stock exchange that point you are. What assumptions would drive you for £15 million. to the abyss?” this does create challenges though, the transaction reporting service has been used accepts Quigley. For example, using profit and loss to collect trading data from FSA-regulated firms such as the only measure of risk may be totally flawed but as counterparty details and times of execution which how do you deal with concentration risk when the are then fed into the FSA’s early warning system for main area of concentration, say Irish banks lending potential insider trading. According to the FSA the third- to the construction sector, is the area that makes party vendor market is now sufficiently competitive in the bank the most money? How do you persuade its provision of transaction reporting services that firms the bank to stop activity in its most commercially should be able to fulfil their reporting requirements lucrative sector? “Someone has to say enough is without the need for Arm. enough,” says Quigley. “this should be the job of the the use of the private sector to carry out regulatory risk manager, however it became evident during the tasks is something that is likely to increase as regulators crisis that risk managers were rarely listened to. attempt to introduce more sophisticated and risk- >

www.bankingtech.com I 15 Cover story: systemiC risk September 2011

based reporting mechanisms, all of which will require no longer a conversation that takes place between strategic function with a senior management focus is a decade or more ago remains in place with some substantial investment in technology. Nowhere is this quantitative analysts but is involving other business helped by the recent revelation that the bank’s chief risk patches and extensions added over the years. more apparent than in the macro-prudential ambitions divisions and senior management as banks realise officer bruce thompson was its highest paid executive “So many banks have not taken advantage of of the european Central bank and the US treasury. how the same data can be used for multiple purposes in 2010, taking home $11.4 million. thompson has the massive transformation in technology or the both organisations have announced plans to – collateral management, compliance, trade order since been promoted to the role of chief financial advancements in processing that continue to occur,” monitor and manage systemic risk by developing management. “As market data vendors we have to officer and been replaced by terry Laughlin as chief says rowe. parallel processing has been especially trade repositories that are able to monitor all securities consider how the data is packaged for other roles and risk officer. influential in calculating counterparty risk, enabling transactions. the european Systemic risk board is the make it easier for consumption.” And while a shuffle of senior management has been multiple simulations to be run in real-time rather than eCb’s proposed ‘dashboard’ to monitor risks, while helpful, technology has also proved crucial in meeting on an end-of-day basis. the US treasury has established the Office of Financial the banks clients’ risk requirements, says Francyn Stuckey, head rowe points out, however, that there are multiple research to oversee much the same thing. While banks may still be prone to internal politics of strategic solutions delivery, emeA for boA merrill ways to implement parallel processing. Some are the OFr’s first step has been to call on the industry when it comes to their own risk systems, they have Lynch’s Global treasury Solutions team. For example, quick and easy but these inevitably lead to processing to develop a single and standard Legal entity Identity realised the commercial benefit of supplying risk- XmL has been especially useful in meeting clients’ bottlenecks. “If you don’t reorganise your calculations, framework so that every counterparty in a securities based services to their own clients, especially in the demand for richer risk data. “Whereas previously risk redesign the systems and change the whole workflow, transaction can be indelibly tagged. After a tender corporate banking space. According to Yuri polyakov, reporting was largely based on balance sheets and you fail to gain the full benefit of the new technology. process, the US-based Depositary trust and Clearing head of risk solutions at Lloyds bank Corporate credit risk, it is now about including other risks like there will be some increase in efficiency, but the Corporation and financial messaging co-operative markets, prior to 2008 many corporates were yet to sovereign defaults and operational risk. It is a more marginal benefit of additional hardware begins to Swift were jointly chosen to run the project. the DtCC be convinced about the use of derivatives for hedging sophisticated process that involves looking at greater decline as trade and processing demands continue to will be responsible for the data collection, validation, purposes. but that has all changed in the wake of the exposures. It is not just about profit and dividends but grow,” says rowe. reconciliation and enrichment while Swift will be in Lehmans default. And now banks have to provide a lot capital rations and risk dividends.” even installing a vendor system is not an easy charge of allocating and distributing the LeIs. more in risk management services. task – the tender process can be long and by the Aside from the sheer scale of the project (some 2.5 Another post-Lehmans change has been the move time the new system has replaced the old one, new million entities could conceivably require an LeI), and away from Value at risk as the dominant risk measure. requirements have emerged. Consequently many the political opposition to the project (taleb has likened perhaps ironically, given the thoughts of paul Quigley, “XML caters for an increased level banks have fallen into a cycle of installing a system the OFr to “an omniscient Soviet-style central risk banks are now employing more scenario-based of information and data within based almost completely on the ability to meet their manager”), there are numerous commercial issues that simulations and stress tests within their market risk current needs. then they have to embellish it with a could arise around the technology work involved. tools. to complement Var-based tools, Lloyds has reporting. But the data also needs series of add-ons and extras over the following years developed a tool called the economic environment to be accessible. It needs to be until it becomes so tangled and top-heavy that another the vendors Generator which employs thousands of scenarios for replacement project is required. “banks need systems market data vendors are unlikely to underestimate interest rates, FX levels, commodity prices and other highly categorised and labelled with a modular and open architecture where new the impact of the OFr. According to tim Lind, global market indicators. “We don’t try to predict the future, so that it can be pulled out as applications can be added efficiently and integrated head of strategy and business development, enterprise we just show the scenarios,” says polyakov. “We can fully with pre-existing functionalities,” says rowe. content at thomson reuters, the LeI initiative will take a portfolio and run it through the scenarios and needed.” Competition has forced significant advancements commoditise much of the market data industry by show the clients the various market risks they are Francyn Stukey, BoAML in the vendor market. Ironically, there are many making data a utility, but having common identifiers exposed to and assess whether they are comfortable second tier institutions that have been able to take and standard symbols will be good for the industry. with that level of exposure.” advantage of these advancements by relying on “It will create the ability to synchronise databases Another change has been the level of risk related “XmL caters for an increased level of information vendor solutions, says rowe. “they can control them and to link risk information in a way that has not been communication between the bank and its corporate and data within reporting. but the data also needs centrally and have a better handle on their exposures. possible.” clients, says polyakov. “It is multi-faceted now. It to be accessible. It needs to be highly categorised Other banks are too big or too complex to do this. For market data vendors it will also create new used to be primarily between risk professionals on and labelled so that it can be pulled out as needed,” Instead they end up with systems that have been opportunities, says Lind. “We are basically mapping our side and the treasurers on their side but now it says Stuckey. this is where technology like Web 2.0 cobbled together over many years and they never get the financial genome. Understanding the complexity involves senior management on both sides.” Lloyds has been effective. “previously databases were hard- the funding to overhaul it all.” of global corporate structures and the hierarchy of bank has developed an e-platform, Arena, that can coded but new technology such as active servers the crisis has helped banks to recognise the benefit connections between entities, along with securities be accessed by clients at various levels of seniority, combined with Web 2.0 makes it easier to extract data of a long-term approach to risk, however the financial issued and related will be the kind of value added from a junior treasurer to a financial director. “there and makes it more accessible and dynamic.” there consequences of the crisis has made it difficult to content that thomson reuters will link to LeI. It will has been so much change from senior management in is more to do though, says Stuckey. banks still have devote the time or the resources needed. there was a enable firms to take a broader perspective on risk their attitude towards risk management in the last three legacy issues and treasurers need to enhance their feeling that once people had met the challenge of the management terms, particularly in assessing the years. there is a realisation of the role that risk plays modelling capabilities, despite the fact that many immediate mess, they could then turn their attention creditworthiness of an entity and creates an indelible in setting the financial strategy – this means constant treasury management systems do not provide top to dealing with the long-term issues but, three years link between the valuations process and other communication with risk managers and a critical need quality risk modules. on, this has been slow to happen – something that is information such as news, corporate actions, supply for a strategy that is adaptable enough to take account a source of frustration for many vendors. chain risk and even regulatory sanctions.” of daily risk factors,” says polyakov. the technology rowe recounts that on one occasion negotiations Lind believes the events of 2008 will be studied there is a similar attitude at bank of America merrill but while the banks continue to market the for a new counterparty risk system were virtually done for decades to come. And while these events Lynch. “providing strong risk frameworks is what our enhancements in their own risk platforms, not everyone when the crisis struck with a vengeance in September uncovered many risks that were improperly addressed corporate clients rightfully expect,” says Kevin Smith is so convinced about the apparent progress. “I continue 2008. rather than proceed with the same or greater (from contagion to liquidity to leverage to complex who leads the business controls team at boA merrill’s to be disappointed by the banking industry’s level of urgency, however, the institution had lost so much instruments), the core issue for Lind is the transparency Corporate banking Operations and technology areas. insight into their risk management requirements,” says money that all elective projects were put on hold. that is now required in the valuations process. “Firms “Clients are also looking for banks that have a strong David rowe, a former risk manager at bank of America For the risk technology industry, this should be must be able to explain the model and triangulate risk platform of their own and risk specialists who and then executive vice president at SunGard before a cautionary tale to go along with the belief that market inputs to demonstrate fair value to auditors, understand the complexities of their own business. It setting up his own risk advisory firm. rowe accepts common-sense and judgement is more important regulators, and clients.” is hard to be a credible consultant at something you that banks have made significant progress since the than a multi-million dollar market risk model. Financial the presentation of market data and risk data are not an expert on.” boA merrill’s credibility as an days of basel I but he is concerned that a lot more crises may well give with one hand but they may well has also become an important issue, says Lind. It is organisation that is treating risk management as a has not been done and that what was implemented take with the other. BT

16 I www.bankingtech.com www.bankingtech.com I 17 strategic function with a senior management focus is a decade or more ago remains in place with some helped by the recent revelation that the bank’s chief risk patches and extensions added over the years. officer bruce thompson was its highest paid executive “So many banks have not taken advantage of in 2010, taking home $11.4 million. thompson has the massive transformation in technology or the since been promoted to the role of chief financial advancements in processing that continue to occur,” officer and been replaced by terry Laughlin as chief says rowe. parallel processing has been especially risk officer. influential in calculating counterparty risk, enabling And while a shuffle of senior management has been multiple simulations to be run in real-time rather than helpful, technology has also proved crucial in meeting on an end-of-day basis. clients’ risk requirements, says Francyn Stuckey, head rowe points out, however, that there are multiple of strategic solutions delivery, emeA for boA merrill ways to implement parallel processing. Some are Lynch’s Global treasury Solutions team. For example, quick and easy but these inevitably lead to processing XmL has been especially useful in meeting clients’ bottlenecks. “If you don’t reorganise your calculations, demand for richer risk data. “Whereas previously risk redesign the systems and change the whole workflow, reporting was largely based on balance sheets and you fail to gain the full benefit of the new technology. credit risk, it is now about including other risks like there will be some increase in efficiency, but the sovereign defaults and operational risk. It is a more marginal benefit of additional hardware begins to sophisticated process that involves looking at greater decline as trade and processing demands continue to exposures. It is not just about profit and dividends but grow,” says rowe. capital rations and risk dividends.” even installing a vendor system is not an easy task – the tender process can be long and by the time the new system has replaced the old one, new requirements have emerged. Consequently many “XML caters for an increased level banks have fallen into a cycle of installing a system of information and data within based almost completely on the ability to meet their current needs. then they have to embellish it with a reporting. But the data also needs series of add-ons and extras over the following years to be accessible. It needs to be until it becomes so tangled and top-heavy that another replacement project is required. “banks need systems highly categorised and labelled with a modular and open architecture where new so that it can be pulled out as applications can be added efficiently and integrated fully with pre-existing functionalities,” says rowe. needed.” Competition has forced significant advancements Francyn Stukey, BoAML in the vendor market. Ironically, there are many second tier institutions that have been able to take advantage of these advancements by relying on “XmL caters for an increased level of information vendor solutions, says rowe. “they can control them and data within reporting. but the data also needs centrally and have a better handle on their exposures. to be accessible. It needs to be highly categorised Other banks are too big or too complex to do this. and labelled so that it can be pulled out as needed,” Instead they end up with systems that have been says Stuckey. this is where technology like Web 2.0 cobbled together over many years and they never get has been effective. “previously databases were hard- the funding to overhaul it all.” coded but new technology such as active servers the crisis has helped banks to recognise the benefit combined with Web 2.0 makes it easier to extract data of a long-term approach to risk, however the financial and makes it more accessible and dynamic.” there consequences of the crisis has made it difficult to is more to do though, says Stuckey. banks still have devote the time or the resources needed. there was a legacy issues and treasurers need to enhance their feeling that once people had met the challenge of the modelling capabilities, despite the fact that many immediate mess, they could then turn their attention treasury management systems do not provide top to dealing with the long-term issues but, three years quality risk modules. on, this has been slow to happen – something that is a source of frustration for many vendors. the technology rowe recounts that on one occasion negotiations but while the banks continue to market the for a new counterparty risk system were virtually done enhancements in their own risk platforms, not everyone when the crisis struck with a vengeance in September is so convinced about the apparent progress. “I continue 2008. rather than proceed with the same or greater to be disappointed by the banking industry’s level of urgency, however, the institution had lost so much insight into their risk management requirements,” says money that all elective projects were put on hold. David rowe, a former risk manager at bank of America For the risk technology industry, this should be and then executive vice president at SunGard before a cautionary tale to go along with the belief that setting up his own risk advisory firm. rowe accepts common-sense and judgement is more important that banks have made significant progress since the than a multi-million dollar market risk model. Financial days of basel I but he is concerned that a lot more crises may well give with one hand but they may well has not been done and that what was implemented take with the other. BT

www.bankingtech.com I 17 POST-TRADE INTEROPERABILITY September 2011

“the preferred interoperability model is actually In OtC derivatives clearing, trade repositories and quite smart,” says Diana Chan, chief executive regulators will also have to be connected with the of euroCCp. “bAtS has found a way to introduce market participants in the trade lifecycle. this should choice to its trading firms without the incumbent CCp be straightforward as long as the repositories are interoperating with everybody else.” global by asset class and regulators can retrieve the bank of America merrill Lynch, Credit Suisse, information they need from them in a format that is morgan Stanley and Nomura have selected euroCCp quickly and easily usable. to clear trades executed on bAtS. If one of the four there is some discussion about using FpmL banks executes a trade with as the standard for data a firm that has selected transmission, but there will SIX x-clear or LCH, then be challenges associated euroCCp will clear one side with that choice. FpmL and the other CCp will clear “This cannot be done manually describes some trade types, the other side. but if only one in a way that is scalable and but it does not cover some firm has selected euroCCp of the exotic ones. moreover, and the other firm has not avoids operational risks,” there is no standard for made a selection, then the “Everything should be broker statements, which are default clearer is emC F. important for interoperability. “this condition is not automated.” “Smaller stakeholders ideal, but it’s a very good are not so familiar with start,” says Chan. “the FpmL,” says Veronique introduction of preferred Diana Chan, EuroCCP malbos, solution manager at interoperability starts a misys. “they don’t have the new chapter in clearing in framework in place to push europe, and eventually it will information in real time. they lead to more efficient and safer markets.” are still dealing with flat files, Ftp transfers, emails and Although interoperability generally reduces risk, excel spreadsheets to reconcile their positions.” there are some exposures associated with managing the methodology that is used to clear cash equities collateral across participating CCps. Interoperable can be made to apply to OtC derivatives, but certain CCps have to exchange collateral in case the other differences would need to be taken into consideration. CCp cannot meet its obligations. the CCp that expects In cash equities, a trade settles in three days and shares to be delivered would have to purchase those all the exposure is gone. In derivatives, the tenure shares at the prevailing market price to deliver to its of the contracts are far longer so the level of margin Let’s work members if the interoperating CCp fails to make the requirement is much higher. In addition, the amount delivery. this could represent a loss for the CCp if it of money that interoperating CCps would have to had to pay more for the shares than the price at which exchange with each other to collateralise the exposure the trade was executed and which it had guaranteed to in OtC derivatives could be very large. together “there might not be much demand for the CCps in its own members. the collateral given by the defaulted Efforts to create interoperability between clearing and CCp needs to be sufficient to cover such an adverse derivatives to interoperate, not because the risk cannot market price movement. be managed, but because the level of extra margin settlement venues are coming to a head. Sherree DeCovny the CCp that expects to receive money from shares needed for inter-CCp risk management could make it looks at what changes and opportunities this will bring. delivered needs to have collected sufficient collateral more expensive than the market participants having from a defaulted CCp. Its risk is that when it sells the to use multiple CCps,” says euroCCp’s Chan. “but shares at the prevailing market price, it gets less than that is a commercial demand issue, not necessarily a Post-trade interoperability increases efficiency, their positions in the same stock. It reduces liquidity what it had guaranteed to its own members. technical or a risk barrier.” reduces costs and risk, promotes competition risk because the margin requirement is based on the essentially, the collateral giver and receiver are In settlements and asset servicing, interoperability and presents new business opportunities. net position. In addition, trading firms only need to exposed to the legal risk of being able to use the allows collateral to be managed more effectively and european central counterparties and central securities contribute to the clearing fund of one CCp. A clearing collateral they received and retrieving the collateral settlement liquidity to be shared across different depositories in the cash equities markets have been fund is a loss sharing mechanism that can be leveraged they gave to the defaulted party. to this end, legal systems to achieve economies of scale independent moving in that direction. And as new regulations come if the CCp has collected insufficient collateral from a arrangements need to be robust to ensure that all the of geography. It enables CSDs, International CSDs, into effect post-crash requiring standardised OtC defaulted member. rights to collateral are enforceable in the case of the global custodians and sub-custodians to access derivatives to be centrally cleared, participants in that trading firms want to concentrate clearing with bankruptcy of an interoperating CCp. remote markets. Some interoperability models market may borrow some of their methodologies. their CCp of choice, but the two counterparties to “this cannot be done manually in a way that is are already in place, such as the bridge between In the equities markets, the same stock can be a trade may want to select different CCps. to make scalable and avoids operational risks,” says Chan. euroclear and Clearstream. In addition, the ISO 15022 traded on multiple venues, each using a different CCp. this possible, bAtS europe recently introduced the “everything should be automated.” communications protocol has helped to overcome the Currently, however, traders can open a position on preferred Interoperable Clearing Service. european It is possible to extend post-trade interoperability to need to standardise the operational components of one exchange or trading venue, close it on another multilateral Clearing Facility, the incumbent CCp for other asset classes including OtC derivatives. In cash settlement platforms. resulting in a flat position, yet still have to pay margin bAtS, does not want to interoperate with other CCps equities clearing, several parties need to be connected According to mark Gem, head of business to two CCps. Not only is this expensive, but it is also because it does not want to share the flow. However, including the trade execution platforms, CCps, trading management at Clearstream, interoperability reconciles risky because there are so many moving parts. bAtS has given its trade feed to three interoperable firms, clearing participants, CSDs and agent banks that what used to be a big issue in the industry: weighing the Interoperability reduces operational risk because CCps – euroCCp, SIX x-clear and LCH – so trading act as intermediaries. these data flows work well enough merits of centralised vs. distributed settlement models. trading firms can work with fewer CCps and net firms can select which one they prefer to use. now, and they are not a major source of cost or problems. A big monolithic system is efficient because everybody >

18 I www.bankingtech.com www.bankingtech.com I 19 “the preferred interoperability model is actually In OtC derivatives clearing, trade repositories and quite smart,” says Diana Chan, chief executive regulators will also have to be connected with the of euroCCp. “bAtS has found a way to introduce market participants in the trade lifecycle. this should choice to its trading firms without the incumbent CCp be straightforward as long as the repositories are interoperating with everybody else.” global by asset class and regulators can retrieve the bank of America merrill Lynch, Credit Suisse, information they need from them in a format that is morgan Stanley and Nomura have selected euroCCp quickly and easily usable. to clear trades executed on bAtS. If one of the four there is some discussion about using FpmL banks executes a trade with as the standard for data a firm that has selected transmission, but there will SIX x-clear or LCH, then be challenges associated euroCCp will clear one side with that choice. FpmL and the other CCp will clear “This cannot be done manually describes some trade types, the other side. but if only one in a way that is scalable and but it does not cover some firm has selected euroCCp of the exotic ones. moreover, and the other firm has not avoids operational risks,” there is no standard for made a selection, then the “Everything should be broker statements, which are default clearer is emC F. important for interoperability. “this condition is not automated.” “Smaller stakeholders ideal, but it’s a very good are not so familiar with start,” says Chan. “the FpmL,” says Veronique introduction of preferred Diana Chan, EuroCCP malbos, solution manager at interoperability starts a misys. “they don’t have the new chapter in clearing in framework in place to push europe, and eventually it will information in real time. they lead to more efficient and safer markets.” are still dealing with flat files, Ftp transfers, emails and Although interoperability generally reduces risk, excel spreadsheets to reconcile their positions.” there are some exposures associated with managing the methodology that is used to clear cash equities collateral across participating CCps. Interoperable can be made to apply to OtC derivatives, but certain CCps have to exchange collateral in case the other differences would need to be taken into consideration. CCp cannot meet its obligations. the CCp that expects In cash equities, a trade settles in three days and shares to be delivered would have to purchase those all the exposure is gone. In derivatives, the tenure shares at the prevailing market price to deliver to its of the contracts are far longer so the level of margin members if the interoperating CCp fails to make the requirement is much higher. In addition, the amount delivery. this could represent a loss for the CCp if it of money that interoperating CCps would have to had to pay more for the shares than the price at which exchange with each other to collateralise the exposure the trade was executed and which it had guaranteed to in OtC derivatives could be very large. its own members. the collateral given by the defaulted “there might not be much demand for the CCps in CCp needs to be sufficient to cover such an adverse derivatives to interoperate, not because the risk cannot market price movement. be managed, but because the level of extra margin the CCp that expects to receive money from shares needed for inter-CCp risk management could make it delivered needs to have collected sufficient collateral more expensive than the market participants having from a defaulted CCp. Its risk is that when it sells the to use multiple CCps,” says euroCCp’s Chan. “but shares at the prevailing market price, it gets less than that is a commercial demand issue, not necessarily a what it had guaranteed to its own members. technical or a risk barrier.” essentially, the collateral giver and receiver are In settlements and asset servicing, interoperability exposed to the legal risk of being able to use the allows collateral to be managed more effectively and collateral they received and retrieving the collateral settlement liquidity to be shared across different they gave to the defaulted party. to this end, legal systems to achieve economies of scale independent arrangements need to be robust to ensure that all the of geography. It enables CSDs, International CSDs, rights to collateral are enforceable in the case of the global custodians and sub-custodians to access bankruptcy of an interoperating CCp. remote markets. Some interoperability models “this cannot be done manually in a way that is are already in place, such as the bridge between scalable and avoids operational risks,” says Chan. euroclear and Clearstream. In addition, the ISO 15022 “everything should be automated.” communications protocol has helped to overcome the It is possible to extend post-trade interoperability to need to standardise the operational components of other asset classes including OtC derivatives. In cash settlement platforms. equities clearing, several parties need to be connected According to mark Gem, head of business including the trade execution platforms, CCps, trading management at Clearstream, interoperability reconciles firms, clearing participants, CSDs and agent banks that what used to be a big issue in the industry: weighing the act as intermediaries. these data flows work well enough merits of centralised vs. distributed settlement models. now, and they are not a major source of cost or problems. A big monolithic system is efficient because everybody >

www.bankingtech.com I 19 POST-TRADEXXXXXXX: INTEROPERABILITY XXXXXXXXXXXX JULY/AUGUStSeptember 2011

“No one has the full set of solutions to offer a T2S solution to the market, but all of the components to form that solution exist across the market.” Mark Gem, Clearstream participates, but the bureaucracy could undermine a single point of access for processing all european innovation and price competition. A distributed system and international securities in its environment or in spreads scale across different environments and t2S. A technical solution will be leveraged to combine infrastructures, but there are concerns about horizontal centralised processing with the remote processing and vertical integration inhibiting competition. that happens today at the agent bank, local CSD or Interoperability will become the norm after local stock exchange. meanwhile, the workflow will September 2014, when target2-Securities is rolled out be shared between the central and local processing as a common platform for CSDs. t2S will combine many points. settlement systems into one technical architecture, “the gap that we have to fill is that local leg, which allowing them to interoperate without having to we will do in partnership with banks and CSDs locally,” consolidate. In effect, all the CSDs will outsource their says Clearstream’s Gem. “We will build on our existing settlements processing to one platform. agent bank network connections and our investments the way asset and issuer services and tax in Linkup markets to find solutions to that problem that and corporate actions processing is delivered to will go beyond simply a sequential reprocessing of customers may change. Currently, european assets messages.” are distributed across several local service providers. today, for example, a local stock exchange generates Value chain partners that operate independently today a Swift message to notify the banking community of will need to share processing functions as well as a corporate action. Clearstream generates a Swift information on events and positions, and this will have message for each of its holders, and then its customers an impact onworkflows. will proceed to do the same thing, resulting in several Until now, interoperability in settlements has thousand messages. the reverse happens when the been seen as a protectionist game: larger systems investors decide how to respond to the corporate action. wanted to interoperate with smaller systems so they Clearstream eventually summarises the responses could capture liquidity. With t2S on the horizon, the into one message, sends it to its local agent, who then settlement layer has moved beyond that. players in this transmits it to the issuer agent. space recognise there is no real value to monopolising In the future, those processing steps will be settlement liquidity, and they need to find other ways collapsed so there is no sequential reprocessing. of being relevant to their customers. this will involve implementing workflow technology, “t2S is a game changer because with change cleansing and scrubbing techniques, communication comes opportunities,” says euroCCp’s Chan. “those protocols and connectivity strategies for data sharing. who are far-sighted, who are visionaries, will be able One of Clearstream’s competitors, bNp paribas to construct new services for a new post-t2S world.” Securities Services, has a different gap to fill. It has a She suggests that businesses can offer a single best-in-class local agent network across europe, but it gateway to access multiple markets on t2S. they needs to build out a central hub for processing it. can structure themselves to manage firms’ collateral “No one has the full set of solutions to offer a t2S across all the CSDs that use t2S. Alternatively, they solution to the market, but all of the components to can offer asset and corporate action servicing for form that solution exist across the market,” says Gem. multiple markets. “Interoperating together through workflow and data Clearstream, for example, currently operates two sharing technologies on the back of a different kind settlement platforms for the international and the of business partnership – something deeper than a German markets. In the future, the company will act as pure principal-agent relationship – will be necessary to a pan-european securities services provider, offering accomplish the goal.” BT

www.bankingtech.com I 21 POST-TRADEXXXXXXX: INTEROPERABILITY XXXXXXXXXXXX JULY/AUGUStSeptember 2011

www.bankingtech.com I 21 Social Media September 2011

you may have been asked to join an investment banking freelancers and other business people to expand their social network such as Seb’s the benche or etoro, the network of contacts and meet potential new partners, social trading network that claims 1.5 million users across customers and suppliers. 130 countries, whose platforms can be used as you look According to benjamí puigdevall, managing director of at individual traders’ performance and swap information e-la Caixa, they see it – and indeed all social media – as a about the financial markets. the former has recently way to bind existing customers together and attract new launched iphone and Android apps so benche users can ones. “It’s far from being a fad,” he says, when questioned now access the online platform more easily while on the about the technology’s importance. “We believe social move, demonstrating the amplifying affect that the mobile media are firmly establishing themselves as a new channel is having on already channel through which to deliver fast growing social networks in value to customers. It’s permanently financial services. “Social media is rapidly available too with the widespread Stocktwits.com is another becoming the medium of adoption of smartphones that is crowd-sourced business happening.” tools such as twitter, platform emerging in the interface and engagement Flickr and Youtube – where the bank securities space and Saxo for the second decade of has already had two million visits – bank has also long been are used to propagate La Caixa’s established in this investment the 21st century. It is a presence on external social media banking and trading field. It tectonic shift rippling across that is widely used by the general topped Greenlight’s trading public, while a corporate blog is also 2011 report earlier this year, the planet with incredible deployed as part of its strategy. which profiles natural and paid- force and potential” Shaygan Kheradpir, barclays’ for search behaviour in the UK, Shaygan Kheradpir, Barclays chief operating officer forr etail and looking at 447,000 searches for business banking, believes that online trading-related platforms “social media is rapidly becoming Hands up to join the social club and services on Google. Saxo bank came out as the the medium of interface and engagement for the second most followed financial trading brand in social media as decade of the 21st century. It is a tectonic shift rippling Humans have always been social creatures and now we’ve got Facebook, Twitter, YouTube, LinkedIn, part of this research, at least in the UK, with a collective across the planet with incredible force and potential,” he Google+ and other social networking tools the way that financial institutions do business, organise of 18,000 people. says. themselves, talk to their customers and vice versa is set to change, writes Neil Ainger Different parts of the financial services sector are being “barclays will be leading the wave, with its strategic targeted with this new technology. Wonga, for instance, policy to create a multichannel ‘Digital beachhead’ for Has your bank asked to be friends recently? Perhaps considerable opportunities here for the brave. uses social media and networking effectively to fuel its customers globally; delivering products and services you’re being followed by a financial institution or the rise of social media has been pronounced over growth in the controversial pay-day loans sector in the they want, injecting Social-Local-mobile (SoLomo) have been invited to contribute towards developing the last couple of years – you’ll see it at the annual Sibos UK and retail banks, such as bbVA and ING Direct in the capabilities, and engaging customers in co-production. its products, as is the case with First direct’s recent show organised by Swift, for instance, where a large US and Canada, which had a Youtube channel way back the aim is to make customers’ lives much easier and labs portal launch which seeks to harness the power community will no doubt be following the #sibos hashtag in 2007, use it very successfully to grow and promote more secure,” he adds. Some steps towards this aim of crowd sourcing. maybe you’ve asked to take out a and a somewhat less interactive ‘Virtual Sibos’ is on offer. their businesses and to offer innovative products for have already been made by the bank with its barclaycard loan on a peer-to-peer lending website such as Zopa, this allows delegates to ‘attend’ an interactive version niche markets or for testing prior to wider dissemination. Freedom offering (which is similar to Amex’s more or been invited to look at communal trading research in of the event online, starting on 26 September, the week ASb bank in New Zealand has its own virtual banking extensive rewards idea) delivering an app that enables online forums run by banks? after the show ends (see panel, page 27). A Sibos 2011 branch on Facebook. customers to find participating retailers for rewards, with perhaps you’ve been asked to participate in tradeShift, app is also available on the iphone, ipad and on Android there is even a Facebook payments Inc subsidiary special bonuses available in the eStore. Additionally, a web-based invoicing platform that seeks to use social smartphones providing an interactive mobile guide to the now, set up this year to handle the Facebook Credits the bank has other social media elements to encourage networking in a similar way to p2p lenders, providing a event and live interviews and links. “During the Innotribe@ programme says the company although the scope is dialogue with – and between – small business owners forum where people can exchange invoices for free – not Sibos programme in toronto our discussions will take it there to develop it into a rival point-of-Sale payments under its ‘take One Small Step’ competition, which is run necessarily good news for traditional commercial banks. for granted that social media platforms are a reality and business should the firm wish to do so. Americane xpress through the commercial banking arm. If you’ve had one or more of these experiences – seek to engage those following this stream accordingly,” has already started to use this new service, partnering “Internally, we are also rolling out a Facebook-like some directly offered by financial institutions, others adds matteo rizzi, innovation manager at Swift. with mark Zuckerberg’s outfit to push coupons. the tool for our employees to share and exchange work and by potential rivals – then you are not alone. this year “the financial sector is using social media relatively Amex ‘Link, Like, Love’ application gives cardholders’ customer service ideas and an internal twitter-like tool is > social media and networking technology seems to have effectively today,” rizzi says. “With a few exceptions, deals, discounts and experiences with scheme members found its feet, gaining ever more adherents as Facebook adoption started in defensive mode. Subsequently, social such as Virgin America, Fox and Whole Foods, based approaches the billion users mark, Google+ was unveiled media has been gradually adopted in specific areas such upon their and their friends’ Facebook likes. Valuable as a potentially credible rival, and banks and financial as customer support and cloud-based collaboration. A information is of course shared in return. According to services companies around the world have sought to major shift happened when widely-used Crm solutions Diarmuid mallon, senior product marketing manager at harness the power of these new collective tools to catch (like Salesforce) and business intelligence tools (like Sybase365, this type of merchant-based activity has up with other industries. Social media are not necessarily Hyperion) embedded social platforms within their existing the potential to turn customers from consumers of your just being deployed for marketing purposes either. the applications. more sophisticated social tools – such as brand into champions of it. He is particularly keen on the phenomenon of increasing uptake reflects the growing sentiment analysis software that can be applied to social FourSquare site and its use of the amplifying affect of power of social media and of more targeted specialist networks – are coming to market now as well.” mobiles, believing that FIs could learn from it. social networks to transform the financial services It’s not just retail banks leading the charge either, as is more traditionally, La Caixa bank in Spain is seeking industry across its retail, commercial and investment commonly assumed, although they have typically been to support its commercial banking activities with This word cloud shows the most popular words being used on social media in regard to the banking sectors. pilot programmes are now being ahead of other FS segments in adopting social tools. As its Caixaempressa Online Community. this bank- Sibos 2011 show as of 25 August 2011. It is being updated daily on www.cognitoforsibos. turned into full scale rollouts. there are threats, but also a professional working within the financial services sector administered social network is designed to help Smes, com in the lead-up to and during the show. Source: Cognito Analytics

22 I www.bankingtech.com www.bankingtech.com I 23 you may have been asked to join an investment banking freelancers and other business people to expand their social network such as Seb’s the benche or etoro, the network of contacts and meet potential new partners, social trading network that claims 1.5 million users across customers and suppliers. 130 countries, whose platforms can be used as you look According to benjamí puigdevall, managing director of at individual traders’ performance and swap information e-la Caixa, they see it – and indeed all social media – as a about the financial markets. the former has recently way to bind existing customers together and attract new launched iphone and Android apps so benche users can ones. “It’s far from being a fad,” he says, when questioned now access the online platform more easily while on the about the technology’s importance. “We believe social move, demonstrating the amplifying affect that the mobile media are firmly establishing themselves as a new channel is having on already channel through which to deliver fast growing social networks in value to customers. It’s permanently financial services. “Social media is rapidly available too with the widespread Stocktwits.com is another becoming the medium of adoption of smartphones that is crowd-sourced business happening.” tools such as twitter, platform emerging in the interface and engagement Flickr and Youtube – where the bank securities space and Saxo for the second decade of has already had two million visits – bank has also long been are used to propagate La Caixa’s established in this investment the 21st century. It is a presence on external social media banking and trading field. It tectonic shift rippling across that is widely used by the general topped Greenlight’s trading public, while a corporate blog is also 2011 report earlier this year, the planet with incredible deployed as part of its strategy. which profiles natural and paid- force and potential” Shaygan Kheradpir, barclays’ for search behaviour in the UK, Shaygan Kheradpir, Barclays chief operating officer forr etail and looking at 447,000 searches for business banking, believes that online trading-related platforms “social media is rapidly becoming and services on Google. Saxo bank came out as the the medium of interface and engagement for the second most followed financial trading brand in social media as decade of the 21st century. It is a tectonic shift rippling part of this research, at least in the UK, with a collective across the planet with incredible force and potential,” he of 18,000 people. says. Different parts of the financial services sector are being “barclays will be leading the wave, with its strategic targeted with this new technology. Wonga, for instance, policy to create a multichannel ‘Digital beachhead’ for uses social media and networking effectively to fuel its customers globally; delivering products and services growth in the controversial pay-day loans sector in the they want, injecting Social-Local-mobile (SoLomo) UK and retail banks, such as bbVA and ING Direct in the capabilities, and engaging customers in co-production. US and Canada, which had a Youtube channel way back the aim is to make customers’ lives much easier and in 2007, use it very successfully to grow and promote more secure,” he adds. Some steps towards this aim their businesses and to offer innovative products for have already been made by the bank with its barclaycard niche markets or for testing prior to wider dissemination. Freedom offering (which is similar to Amex’s more ASb bank in New Zealand has its own virtual banking extensive rewards idea) delivering an app that enables branch on Facebook. customers to find participating retailers for rewards, with there is even a Facebook payments Inc subsidiary special bonuses available in the eStore. Additionally, now, set up this year to handle the Facebook Credits the bank has other social media elements to encourage programme says the company although the scope is dialogue with – and between – small business owners there to develop it into a rival point-of-Sale payments under its ‘take One Small Step’ competition, which is run business should the firm wish to do so. Americane xpress through the commercial banking arm. has already started to use this new service, partnering “Internally, we are also rolling out a Facebook-like with mark Zuckerberg’s outfit to push coupons. the tool for our employees to share and exchange work and Amex ‘Link, Like, Love’ application gives cardholders’ customer service ideas and an internal twitter-like tool is > deals, discounts and experiences with scheme members such as Virgin America, Fox and Whole Foods, based upon their and their friends’ Facebook likes. Valuable information is of course shared in return. According to Diarmuid mallon, senior product marketing manager at Sybase365, this type of merchant-based activity has the potential to turn customers from consumers of your brand into champions of it. He is particularly keen on the FourSquare site and its use of the amplifying affect of mobiles, believing that FIs could learn from it. more traditionally, La Caixa bank in Spain is seeking to support its commercial banking activities with This word cloud shows the most popular words being used on social media in regard to the its Caixaempressa Online Community. this bank- Sibos 2011 show as of 25 August 2011. It is being updated daily on www.cognitoforsibos. administered social network is designed to help Smes, com in the lead-up to and during the show. Source: Cognito Analytics

www.bankingtech.com I 23 Social Media September 2011 planned,” says Kheradpir, who goes on to urge people to “stay tuned as the barclays Digital beachhead project continues to build momentum”. First Direct, HSbC’s phone and internet banking-only unit in the UK, has some more concrete social media offerings. It would like you, for instance, to help develop its products in future via its new online Labs portal, which is updated with content every month allowing users to critique potential new products and services via a comment forum that links back to the development teams. the initial plans to be discussed on the portal, following its launch in August, were a website redesign, a consultation on the use of Qr codes and an early version of a mortgage comparison smartphone app. According to paul Say, First Direct’s head of marketing, the bank among some banks. but the better firms should not worry “is constantly looking at new ways of communicating about rising to meet this challenge, and instead focus on with customers and the public and the Lab is a natural what they can learn from such organisations about how progression of this. We want people to inform our offering to use social media effectively. and in so doing help us to serve them better. this is about changing the way people interact with banks by giving Relax, respect privacy & ensure security them a stake.” Social media isn’t just a marketing tool. It should be seen First Direct has a history of innovation in the UK, of as a channel in its own right or at least as an amplifier course, being the first specialist online and phone retail or a way to deliver an integrated multichannel offering bank in the country. the Lab initiative follows on from from a single financial institution. It can link up varying its earlier ‘Little black book’ customer social network existing routes to market, add new ones and provide where people can share positive experiences about forums and customer and business intelligence feedback anything other than banking and its online talking point as long as businesses thoroughly plan how to implement forum, where a dedicated team responds to good or bad and run the various external tools or internally developed customer service comments and queries. A social media networks at their disposal. “many are afraid of making a newsroom has also been established and the bank has mistake and ruining the reputation of a brand but I would presences on Youtube, twitter and Facebook. Its ‘Live’ argue this means you don’t use social media to its full project also aggregated what people were saying about potential,” comments First Direct’s Say. “things are being the bank in the virtual world to assist these initiatives. said about your brand whether you like it or not, so it’s mark mullen, the bank’s new chief executive, has only better to be in a position to influence it.” recently taken his position (see appointments, page 40) As Nicola millard, a futurologist at british telecom’s after leaving the bank two years ago to become regional UK r&D centre in Suffolk, puts it, social media is not head of marketing for HSbC middle east, but he has a broadcast media; it’s about dialogue. “banks need to background in social media and is a firm believer in its understand you cannot control the dancefloor,” she said, uses. mullen introduced the Little black book and talking “but you can go and dance”. point networks to First Direct during his first stint at the the trick is not to be perceived as being too invasive bank and reckons that it is ahead of other UK rivals of privacy or too corporate to be in targeted customers because it does not have a branch network, so has already ‘friends’ networks. As Chris Cathart, account director at had to develop non-physical expertise in using the phone, Lbi’s bigmouthmedia, which works with rbS and Lloyds online and virtual channels to engage and win customers. banking Group in this space, explains: “FS companies “I think we’re slowly seeing FIs start to use social should learn to engage in conversations their consumers media and networking, but I wouldn’t say everyone is are already having in the social sphere; they shouldn’t using it as effectively as they might at the moment,” says be trying to stifle them or hide away. You will garner mullen, when discussing how quickly the technology respect if you show engagement and, if required, admit is being adopted. “I’ve found that, especially in the UK mistakes – this is how you get users onside.” this is not (versus the US or Australia) we’re a bit behind the times. a consideration for more specialist social networks like In my opinion this is largely due to the nature of the sector etoro for instance, but for ‘consumer’ social media like here and the speed with which regulators catch on to this twitter it should be considered the right approach. new approach to banking.” Security concerns are another potential problem for regulation is potentially a key factor in this discussion some with worries about data breaches and fraud to the as its heavy presence in financial services has fore, but again, if you put a proper policy in place, along undoubtedly restrained its development in comparison with adequate secure identity, anti-malware and virus to the telco and communications industries where the solutions, you should be OK. No anti-fraud measures technology was originally developed and where oversight are ever inviolable but as long as they are as secure as is less omnipresent. the fact that Zopa, prosper and possible and backed by good procedures if breaches do other p2p social lenders aren’t covered by the same occur then no more can be asked. Having said that, a stringent loan obligations and rules as traditional banks is little customer education might be in order for consumer- possibly why they’ve gone further than some established based social channels following the recent case of Ian players in utilising social media. It is also possibly a cause Wood, a Newcastle man who was jailed for 15 months for concern and could spark fears of disintermediation in the UK in August after stealing more than £35,000 >

www.bankingtech.com I 25 Social Media September 2011 planned,” says Kheradpir, who goes on to urge people to “stay tuned as the barclays Digital beachhead project continues to build momentum”. First Direct, HSbC’s phone and internet banking-only unit in the UK, has some more concrete social media offerings. It would like you, for instance, to help develop its products in future via its new online Labs portal, which is updated with content every month allowing users to critique potential new products and services via a comment forum that links back to the development teams. the initial plans to be discussed on the portal, following its launch in August, were a website redesign, a consultation on the use of Qr codes and an early version of a mortgage comparison smartphone app. According to paul Say, First Direct’s head of marketing, the bank among some banks. but the better firms should not worry “is constantly looking at new ways of communicating about rising to meet this challenge, and instead focus on with customers and the public and the Lab is a natural what they can learn from such organisations about how progression of this. We want people to inform our offering to use social media effectively. and in so doing help us to serve them better. this is about changing the way people interact with banks by giving Relax, respect privacy & ensure security them a stake.” Social media isn’t just a marketing tool. It should be seen First Direct has a history of innovation in the UK, of as a channel in its own right or at least as an amplifier course, being the first specialist online and phone retail or a way to deliver an integrated multichannel offering bank in the country. the Lab initiative follows on from from a single financial institution. It can link up varying its earlier ‘Little black book’ customer social network existing routes to market, add new ones and provide where people can share positive experiences about forums and customer and business intelligence feedback anything other than banking and its online talking point as long as businesses thoroughly plan how to implement forum, where a dedicated team responds to good or bad and run the various external tools or internally developed customer service comments and queries. A social media networks at their disposal. “many are afraid of making a newsroom has also been established and the bank has mistake and ruining the reputation of a brand but I would presences on Youtube, twitter and Facebook. Its ‘Live’ argue this means you don’t use social media to its full project also aggregated what people were saying about potential,” comments First Direct’s Say. “things are being the bank in the virtual world to assist these initiatives. said about your brand whether you like it or not, so it’s mark mullen, the bank’s new chief executive, has only better to be in a position to influence it.” recently taken his position (see appointments, page 40) As Nicola millard, a futurologist at british telecom’s after leaving the bank two years ago to become regional UK r&D centre in Suffolk, puts it, social media is not head of marketing for HSbC middle east, but he has a broadcast media; it’s about dialogue. “banks need to background in social media and is a firm believer in its understand you cannot control the dancefloor,” she said, uses. mullen introduced the Little black book and talking “but you can go and dance”. point networks to First Direct during his first stint at the the trick is not to be perceived as being too invasive bank and reckons that it is ahead of other UK rivals of privacy or too corporate to be in targeted customers because it does not have a branch network, so has already ‘friends’ networks. As Chris Cathart, account director at had to develop non-physical expertise in using the phone, Lbi’s bigmouthmedia, which works with rbS and Lloyds online and virtual channels to engage and win customers. banking Group in this space, explains: “FS companies “I think we’re slowly seeing FIs start to use social should learn to engage in conversations their consumers media and networking, but I wouldn’t say everyone is are already having in the social sphere; they shouldn’t using it as effectively as they might at the moment,” says be trying to stifle them or hide away. You will garner mullen, when discussing how quickly the technology respect if you show engagement and, if required, admit is being adopted. “I’ve found that, especially in the UK mistakes – this is how you get users onside.” this is not (versus the US or Australia) we’re a bit behind the times. a consideration for more specialist social networks like In my opinion this is largely due to the nature of the sector etoro for instance, but for ‘consumer’ social media like here and the speed with which regulators catch on to this twitter it should be considered the right approach. new approach to banking.” Security concerns are another potential problem for regulation is potentially a key factor in this discussion some with worries about data breaches and fraud to the as its heavy presence in financial services has fore, but again, if you put a proper policy in place, along undoubtedly restrained its development in comparison with adequate secure identity, anti-malware and virus to the telco and communications industries where the solutions, you should be OK. No anti-fraud measures technology was originally developed and where oversight are ever inviolable but as long as they are as secure as is less omnipresent. the fact that Zopa, prosper and possible and backed by good procedures if breaches do other p2p social lenders aren’t covered by the same occur then no more can be asked. Having said that, a stringent loan obligations and rules as traditional banks is little customer education might be in order for consumer- possibly why they’ve gone further than some established based social channels following the recent case of Ian players in utilising social media. It is also possibly a cause Wood, a Newcastle man who was jailed for 15 months for concern and could spark fears of disintermediation in the UK in August after stealing more than £35,000 >

www.bankingtech.com I 25 Social Media SIBOS 2011 September 2011 September 2011

over two years. He spent up to 18 hours online a day explaining its purpose, Susan rivers, vice president working out passwords from personal information posted of corporate communications at bNY mellon, said: on social networking sites by acquaintances. the mantra “We hope the white paper will offer valuable insights not to share personal data online can never be repeated for FS companies that want to use social media enough it seems. to enhance their business competitiveness, while adhering to industry compliance norms and ethical Beyond Bits: a social media framework for all? standards.” the power of social media is perhaps best illustrated by According to a recent survey of its membership, Juliette Kennel the fact that a number of institutions have taken the time to the Financial Services roundtable found that 65% of the Fringe get together to develop a social media framework, sensing the large FS firms it counts as part of the organisation future opportunities. bits, the technology-arm of the US employ at least one twitter account and 44% already The Standards Forum and Innotribe strands bank-backed Financial Services roundtable organisation professionally maintain a Facebook page. these which has 100 members that provide products to North numbers have already climbed this year and are further of Swift’s annual Sibos gathering are starting American consumers, including bank of America, bNY illustrative of the faith that is being put in consumer- to emerge from the shadow of the main mellon, Jp morgan Chase & Co, masterCard, tD bank focused social networks. the evident growth in conference and become year-round events in and the NasdaqOmX Group, released the Social Media specialist FS social communities in the investment and their own right, says David Bannister Risks and Mitigation paper this summer. commercial banking areas is also encouraging. the recognising that the social media world spans the legal, fact that morgan Stanley expansion Capital has just Back in 2005, when Swift’s annual Sibos show customer service and marketing, It, communications and pumped £7 million in Series C funding into Socialware, was held in Copenhagen, a series of sessions Hr functions, the paper covers compliance, information a vendor that makes social business management held alongside the main conference programme retention, hiring risks and security concerns ranging from solutions, perhaps also proves the attractiveness of focussed on the standards development work reputational threats to phishing and social engineering this area right now. the vendor’s Voice, Compass and carried out by the Brussels-based consortium. scams. Compiled by a panel of tech, comms and security Insight software, which respectively seek to deliver Called the Standards Forum, it attracted a small but executives drawn from bits’ membership, which includes engagement, compliance and intelligence information keen following, and was notable for attempting to break affiliates like microsoft, paypal and the American and to clients so they can better manage their activities in out of the normal conference round of presentations Canadian bankers’ Associations, the Social Media Risks this space – one of many such solutions available – and panels: all sorts of external participants, including and Mitigation paper can be downloaded via www.bits. will hopefully find many users in the financial services journalists like myself, were roped into experimental org and is intended to help guide banks as they build industry as the sector steps up its involvement in this sessions intended to create debate and dialogue. the out their presence on consumer-focused platforms like unfolding revolution. BT idea of adding some controversy was – perhaps still is – Facebook, twitter and so forth. It might not be so useful seen as rather daring in the traditionally staid Swift world. for more specialist FS-focused social networks therefore, ■ For all the latest news, video, in-depth features and Since then, the Standards Forum has grown to the although there should still be some useful lessons in it vox pops from Sibos 2011 be sure to visit our sister site point where it is now a prominent part of the overall and the US-centric advice should be applicable in some at www.dailynewssibos.com and you can follow us on event, and while it is still looking at new formats and other countries. twitter using @bankingtechno new ways of presenting its messages, it has probably been overtaken in terms of off-the-wall presentational Virtual Sibos and getting social in Toronto styles by the more recent Innotribe strand. Innotribe is intended as a sort of test-bed incubator Swift, the organiser of Sibos 2011, which iPad and on Android smartphones providing According to Matteo Rizzi, innovation for new ideas, allowing people to share and think takes place at the Toronto Metro Convention a more immediate mobile guide to the show manager at Swift, social media is now so collaboratively. Over the past year, the Innotribe Centre this month, plans to use a variety of and live interviews and links. In addition, ticker much a part of their mindset that internally community has firmly embraced social media, social media to actively engage the more displays onsite in Toronto will share tweets they are now using Yammer, the private particularly twitter, which has certainly made it seem than 7,000 show attendees and exhibitors from #sibos (as well as #standardsforum and enterprise social network and similar social to be the most vocal of the Sibos sub-communities. that are expected – not to mention the wider #innotiribe) and they promise that www. collaboration tools such as Mindtagger.com to more importantly, it has also meant that Innotribe, “[We are] moving away from the FS community that will be in attendance, sibos.com will feature feedback prominently. try and embed the technology’s collaborative like the Standards Forum before it, is no longer including the IMF and World Bank. There is In the heart of the conference floor at ethos even more deeply in the organisation. confined to the duration of the Sibos event during a production and delivery of standards to the already the swiftcommunity.net collaborative Sibos, in the Innotribe space, a Social Data The latter enterprise search tag solution can week in the autumn. implementation of standards,” ” and Collaboration keynote presentation on help to find competent and appropriately Standards Forum events have now been held at platform but this year a ‘Virtual Sibos’ is also Juliette Kennel, Swift on offer. Monday 19 September, 1230-1400, may skilled people in large multi-national bodies other times of the year in the US, London and Japan, Accessible from the week after the also be of interest as this will look at LinkedIn, to undertake tasks or to join industry-wide while Innotribe held its first non-Sibos event earlier this gathering finishes until the end of the year, Twitter, Quora, Chatter and many other social working groups – ideal for an organisation year in mumbai. this is echoed by Juliette Kennel, who took over as the website includes a virtual exhibition data and collaboration platforms. The impact such as Swift. this escape from the confines of the Sibos calendar head of standards at Swift earlier this year following hall, with exhibitor demonstrations and of these and other tools on the banking The www.cognitoforsibos.com site could also be said to have led to events such as the the retirement of Jamie Shay. “We are looking at ways product materials; a plenary room, to see business will be considered by a panel that from Cognito Analytics may also be of interest Swift London business Forum last may, which was of doing things differently,” she says. “It is not about and hear keynote speeches and flagship includes the vice president of social business as this free-to-use site will pull in all the feeds very successful and described (positively) by many making more messages.” panel discussions; a main hall, to go back at Wells Fargo, Darius Miranda; Pol Navarro, surrounding the show that Cognito Analytics’ participants as a “mini-Sibos”. In her view, standards are an enabler of innovation, and see conference sessions by day or topic; head of direct channels and innovation at pre-configured database can find. According both of the Swift people behind these streams not a straightjacket, and defining what can be done and a resource centre, for press releases, Banco Sabadell; and Howard Lindzon, chief to Tom Coombes, chief executive of Cognito, also talk extensively about this expansion in terms of collaboratively is part of that. case studies and other materials. It will link executive of Stocktwits, among others. Topics “the aim is to use the analytical tools that the frequency and in terms of the scope of their ambitions. peric points to the mumbai event organised under into the swiftcommunity.net platform and will range over the opportunities for talent firm has got to provide an easily accessible Kosta peric, head of innovation at Swift, has been the Innotribe banner during the summer, focussed on is part of Swift’s plans to encourage greater discovery and development, for building or platform that aggregates and analyses all of closely involved in the development over the past few mobile payments for the unbanked, as an example. debate, involvement and feedback from its protecting firm’s reputations and influence the relevant information around the Sibos years of the Innotribe strand, and says it is not simply “In that case the innovation is more on the how membership and from other Sibos attendees. online, and how to manage the inevitable event, just from monitored social media data.” about trawling around hoping to light on a bright new rather than the what,” he says. “the question we are A more interactive and social Sibos 2011 compliance and regulatory issues that social This can then be turned into word clouds, pie idea – it is about finding what the industry can do asking the banks is are we going to do all over again mobile app is also available on the iPhone, media create in the financial world. charts or other forms of analytical material. collaboratively and what will remain in the competitive like we did back in the early 1990s when everyone space. developed their own home banking systems – and >

26 I www.bankingtech.com www.bankingtech.com I 27 SIBOS 2011 September 2011

Beyond the Fringe Juliette Kennel The Standards Forum and Innotribe strands of Swift’s annual Sibos gathering are starting to emerge from the shadow of the main conference and become year-round events in their own right, says David Bannister

Back in 2005, when Swift’s annual Sibos show was held in Copenhagen, a series of sessions held alongside the main conference programme focussed on the standards development work carried out by the Brussels-based consortium. Called the Standards Forum, it attracted a small but keen following, and was notable for attempting to break out of the normal conference round of presentations and panels: all sorts of external participants, including journalists like myself, were roped into experimental sessions intended to create debate and dialogue. the idea of adding some controversy was – perhaps still is – seen as rather daring in the traditionally staid Swift world. Since then, the Standards Forum has grown to the point where it is now a prominent part of the overall event, and while it is still looking at new formats and new ways of presenting its messages, it has probably been overtaken in terms of off-the-wall presentational styles by the more recent Innotribe strand. Innotribe is intended as a sort of test-bed incubator for new ideas, allowing people to share and think collaboratively. Over the past year, the Innotribe community has firmly embraced social media, particularly twitter, which has certainly made it seem to be the most vocal of the Sibos sub-communities. more importantly, it has also meant that Innotribe, “[We are] moving away from the like the Standards Forum before it, is no longer confined to the duration of the Sibos event during a production and delivery of standards to the week in the autumn. implementation of standards,” ” Standards Forum events have now been held at other times of the year in the US, London and Japan, Juliette Kennel, Swift while Innotribe held its first non-Sibos event earlier this year in mumbai. this is echoed by Juliette Kennel, who took over as this escape from the confines of the Sibos calendar head of standards at Swift earlier this year following could also be said to have led to events such as the the retirement of Jamie Shay. “We are looking at ways Swift London business Forum last may, which was of doing things differently,” she says. “It is not about very successful and described (positively) by many making more messages.” participants as a “mini-Sibos”. In her view, standards are an enabler of innovation, both of the Swift people behind these streams not a straightjacket, and defining what can be done also talk extensively about this expansion in terms of collaboratively is part of that. frequency and in terms of the scope of their ambitions. peric points to the mumbai event organised under Kosta peric, head of innovation at Swift, has been the Innotribe banner during the summer, focussed on closely involved in the development over the past few mobile payments for the unbanked, as an example. years of the Innotribe strand, and says it is not simply “In that case the innovation is more on the how about trawling around hoping to light on a bright new rather than the what,” he says. “the question we are idea – it is about finding what the industry can do asking the banks is are we going to do all over again collaboratively and what will remain in the competitive like we did back in the early 1990s when everyone space. developed their own home banking systems – and >

www.bankingtech.com I 27 SIBOS 2011 September 2011

technology subjects and three more soft, almost on people’s minds and try to build on that to have social, subjects. On technology, the first is digital some common projects going forward.” Standards Forum at Sibos 2011 programme identity. I was recently touring California where many the last subject is the future of money itself. “Is there All sessions take place at the Standards Forum (stand J127). things are happening on that front and I think digital still a role for banks? With new payment schemes and identity is going to be the hot topic for Innotribe, like peer-to-peer and mobile wallets and things like that, Monday 19 September cloud was last year.” where is this all going?” asks peric. “With Facebook 12:30 Opening of the Standards Forum In fact cloud is a hot topic at Sibos this year, but having its own currency, Facebook Credits, the in the main sessions, which he says demonstrates question we will put on the table is: what is the banks 12:45 Food for Thought - What makes a good standard and why should you care? the idea. “You see the logic – Innotribe acts as a traditional infrastructural role going to become in these hatching ground for ideas that eventually get into the contexts? And, by induction, what is the role of Swift?” 14:00 Education session – The ISO 20022 cooking class mainstream while we focus on new things,” he says. this is a more formalised approach to Innotribe than 14:15 Education session – An ISO 20022 refresher “Digital identity is a really big subject for banks its previous speciality of having competitive drawing on from the purely technological angle of getting walls. “It is quite structured because Innotribe is really 15:00 Education session – The ISO 20022 Business Model customers on board and having some sort of growing,” agrees peric, “but we will keep on having identity,” he says, adding that it then takes the Innotribe as a very informal event on the ground. It is 16:00 The Canadian standards landscape subject on to the business opportunities for banks, still going to be facilitated collaborative workshops 17:00 Meet the Implementer – DTCC’s ISO 20022 CA implementation which is linked to the second subject for Innotribe – very much in the Innotribe tradition. Actually we will Kosta Peric social media. do more, because on thursday we will do what we are “You can almost say that if the banks become calling a festival which will be a big facilitated event more digital in the future that instead of being safe- to put all of these ideas together for the videos for the Tuesday 20 September keepers of money they could become safe keepers closing plenary.” 09:00 Standards and Innovation, a(n un)likely pair? of sums of social data that have value,” he says. “As As the audience has evolved from the enthusiasts an example, with ebay when you buy and sell things, at the beginning, to those who are more curious, it is 10:00 Leveraging ISO 20022 as a business standard you slowly and gradually build up a reputation. now attracting people who are specifically interested 11:00 Education session – MT Energized! eventually that reputation ends up being quite in the topics. “It is evolving positively. my only fear valuable for people because, if you have a good is it becomes too formalised because the true value 11:45 Education session – Delivering tailored solutions for MIs reputation, people will want to buy and sell to you. of Innotribe is keeping a low-key interactive and fun You have the same on Facebook, you have the same event. that is our challenge,” he says. “It is a noisy 12:30 Food for Thought – How open are open standards? on LinkedIn, and you have the same on twitter. the bunch, but it is quite representative of the new way 14:00 Collaboration in technology (BIAN) question then is, if value becomes more general than of doing work. It is constant and we keep in touch pure money, what is the banks’ role with respect to throughout the year: I am more and more amazed by 16:15 Let’s get practical – CGI on the mainline that?” the power of twitter to build communities.” the third subject is big Data. “that has to do the Standards Forum is further down that path of with analytics and follows on from an early idea that developing a more mixed audience, and it is a central Wednesday 21 September we had at Innotribe about mash ups,” says peric. part of Kennel’s plans to keep that happening. Although “big Data is really about applying the enormous she had moved away from the standards side of Swift 09:00 Let’s get practical – Market Practice compliance, what does it take? computing power that we have today to process for a few years before returning as head, she was multiple sources of data. banks could quite usefully actually involved in the creation of that first Standards 10:00 MyStandards – pilot feedback & networking time put that to their advantage in terms of profiling and Forum event back in 2005. 11:30 Citi XBRL pilot doing all sorts of business analysis of customer As it is her first Standards Forum as the head of “Our job in the Innotribe context is not to sell flows and corporate flows. there is quite a potential standards, the question of her plans for the future 12:30 Food for Thought – Are messages the only answer? value-added to be had there for the banks.” beyond Sibos 2011 arise. these come down to a small Swift but to have educated discussions.” 14:00 Let’s get practical – SWIFT TCO solutions On a more nebulous plane, in line with its thinking- number of clearly defined goals, some of which will be Kosta Peric, Swift out-of-the-box mandate, it will also be considering aired for the first time at the show. 15:15 ISO 20022 and High Value Payments: the time is now! a range of blue Sky topics. “Last year we had an First up is creating centres of standards expertise, in fact still do today at great cost and for very little experiment to talk about some of softer, more futuristic particularly in Asia pacific, where there is a great deal 16:15 How the SDK changed my life: testimonials competitive advantage? Is there is something we can such as the Long Now, which was quite a big success of education to be done, and an enthusiastic audience 17:00 Meet the Implementer – Standards Developer Kit implementation do collaboratively that would be more cost-effective?” and generated a lot of follow-up on the internet if Swift’s first forays into the region are any indicator. both peric and Kennel are quick to point out that afterwards,” he says. “this year will have more of this this is mirrored by another thread, which is “to move they are looking to the banks to make the running kind of subject and have we three on the table: the to more of a consultative role, starting with moving on this, not Swift, which they see more as a central first is New economies: what happens with traditional away from production and delivery of standards to the Thursday 22 September enabler or facilitator. capitalism in the interconnected economy of today? implementation of standards,” she says. 09:30 Education session – The ISO 20022 cooking class “I’m not saying that Swift should be doing the Is there some fundamental rethinking of value? How It will also involve a move into products, including definitions,” says peric. “We could, but it would be a can we account for intangible assets? Is there more myStandards, a web-based collaboration tool for the 09:45 Breaking down silos question for the membership. I am saying it is worth collaboration to be had in the banking industry from management of standards and market practices. this asking the question. Our job in the Innotribe context the perspective of funding new initiatives?” has been in development with pilot customers for some 10:45 T2S case study: SWIFT Standards gets closer to its customers is not to sell Swift but to have educated discussions.” the second is slightly more tangible, asking, where time and will be available generally early next year. 11:45 Education session – How to get your new and improved messages faster? this background of changing and expanding does investment money come from? “this will bring but peric’s “noisy bunch” won’t be having it all roles will be reflected in the Standards Forum and together many heads of innovation from industry – my their own way on the wackiness front: as part of its 12:30 Food for Thought – Vets vs. rookies: not your standard face-off Innotribe strands at Sibos in toronto. peers –and we will ask them to tell us where they put education stream, it features the ISO 20022 Cooking 14:00 LEI in practice “this year at Sibos we are going to be even their money: in what domains? What subjects? What Class in a couple of early afternoon slots. Apparently bigger,” says peric. “We will focus on three are their interests? this will give us a sense of what’s aubergines are involved. BT 15:00 Closing of the Standards Forum

28 I www.bankingtech.com www.bankingtech.com I 29 on people’s minds and try to build on that to have some common projects going forward.” Standards Forum at Sibos 2011 programme the last subject is the future of money itself. “Is there All sessions take place at the Standards Forum (stand J127). still a role for banks? With new payment schemes and peer-to-peer and mobile wallets and things like that, Monday 19 September where is this all going?” asks peric. “With Facebook 12:30 Opening of the Standards Forum having its own currency, Facebook Credits, the question we will put on the table is: what is the banks 12:45 Food for Thought - What makes a good standard and why should you care? traditional infrastructural role going to become in these contexts? And, by induction, what is the role of Swift?” 14:00 Education session – The ISO 20022 cooking class this is a more formalised approach to Innotribe than 14:15 Education session – An ISO 20022 refresher its previous speciality of having competitive drawing on walls. “It is quite structured because Innotribe is really 15:00 Education session – The ISO 20022 Business Model growing,” agrees peric, “but we will keep on having Innotribe as a very informal event on the ground. It is 16:00 The Canadian standards landscape still going to be facilitated collaborative workshops 17:00 Meet the Implementer – DTCC’s ISO 20022 CA implementation very much in the Innotribe tradition. Actually we will do more, because on thursday we will do what we are calling a festival which will be a big facilitated event to put all of these ideas together for the videos for the Tuesday 20 September closing plenary.” 09:00 Standards and Innovation, a(n un)likely pair? As the audience has evolved from the enthusiasts at the beginning, to those who are more curious, it is 10:00 Leveraging ISO 20022 as a business standard now attracting people who are specifically interested 11:00 Education session – MT Energized! in the topics. “It is evolving positively. my only fear is it becomes too formalised because the true value 11:45 Education session – Delivering tailored solutions for MIs of Innotribe is keeping a low-key interactive and fun event. that is our challenge,” he says. “It is a noisy 12:30 Food for Thought – How open are open standards? bunch, but it is quite representative of the new way 14:00 Collaboration in technology (BIAN) of doing work. It is constant and we keep in touch throughout the year: I am more and more amazed by 16:15 Let’s get practical – CGI on the mainline the power of twitter to build communities.” the Standards Forum is further down that path of developing a more mixed audience, and it is a central Wednesday 21 September part of Kennel’s plans to keep that happening. Although she had moved away from the standards side of Swift 09:00 Let’s get practical – Market Practice compliance, what does it take? for a few years before returning as head, she was actually involved in the creation of that first Standards 10:00 MyStandards – pilot feedback & networking time Forum event back in 2005. 11:30 Citi XBRL pilot As it is her first Standards Forum as the head of standards, the question of her plans for the future 12:30 Food for Thought – Are messages the only answer? beyond Sibos 2011 arise. these come down to a small 14:00 Let’s get practical – SWIFT TCO solutions number of clearly defined goals, some of which will be aired for the first time at the show. 15:15 ISO 20022 and High Value Payments: the time is now! First up is creating centres of standards expertise, particularly in Asia pacific, where there is a great deal 16:15 How the SDK changed my life: testimonials of education to be done, and an enthusiastic audience 17:00 Meet the Implementer – Standards Developer Kit implementation if Swift’s first forays into the region are any indicator. this is mirrored by another thread, which is “to move to more of a consultative role, starting with moving away from production and delivery of standards to the Thursday 22 September implementation of standards,” she says. 09:30 Education session – The ISO 20022 cooking class It will also involve a move into products, including myStandards, a web-based collaboration tool for the 09:45 Breaking down silos management of standards and market practices. this has been in development with pilot customers for some 10:45 T2S case study: SWIFT Standards gets closer to its customers time and will be available generally early next year. 11:45 Education session – How to get your new and improved messages faster? but peric’s “noisy bunch” won’t be having it all their own way on the wackiness front: as part of its 12:30 Food for Thought – Vets vs. rookies: not your standard face-off education stream, it features the ISO 20022 Cooking 14:00 LEI in practice Class in a couple of early afternoon slots. Apparently aubergines are involved. BT 15:00 Closing of the Standards Forum

www.bankingtech.com I 29 ROuNdTAble: ISO 20022 September 2011

In association with

Moving on from messaging Photos: Tom Groenfeldt

For a while, the debate around the ISO 20022 standard was focused on whether or not there was a business case for its adoption. That stage has passed, and when PARTICIPANTS Banking Technology and SWIFT brought together a number of practitioners, it quickly became apparent that there are many benefits on all sides – and one or two challenges …

Sumit Jamuar, Managing The simplest reason for adopting a This was echoed by Alex Wong, Director and Global standard is to provide clarity, and at base Treasury Specialist, Global Treasury Head Of Sales And the ISO 20022 standard does this, but the Solutions, Bank of America Merrill Lynch. Global Clients, Financial way that it has been created around a “I’m inclined to agree, particularly for Institutions, Lloyds Bank data dictionary means that this is the least client integration,” he said. Commercial of its capabilities. Sumit Jamuar, Managing Director The purpose of the debate was to and Global Head Of Sales And Global Stephen Lindsay, Head explore the other benefits that accrue Clients, Financial Institutions, Lloyds format they can use in interbank clearing of Automation, SWIFT from standards adoption, such as Bank Commercial, also agreed: “We systems. Standards ease of communication with clients, moved to ISO 20022 because of SEPA, “That is a recognition of the richness flexibility in integration and the freeing of but once you start using the format you of the format,” said Sutton. “Would we resource to concentrate on competitive realise this has a lot of value in terms of have still adopted it? Absolutely: It is not Mark Sutton, Director developments. interoperability,” he said. “It is beneficial just about SEPA, it is about the solution it and Senior Payments “A useful analogy for standards is a to have a programme such as SEPA to provides to the complexity of the existing & Integration Services language: it is essential for the purposes of make you adopt standards, but as people systems. Banks are changing because Consultant for Treasury communications that we have a common become more used to it they recognise corporates are telling them they have to: & Trade Solutions at Citi language and common standards, the richness and the value of that in a we are in a competitive space if we don’t Global Transaction Services and the more terse and focused the world where we need more information support something another bank will.” language and the standards, the more for things like sanctions. You can use the That said, “it is not ISO 20022 that accurate the communication,” said Bob standards to capture that data, but there they’re interested in, it is the fact that it is Ton Versteeg, Senior Blair, Executive Director at JP Morgan has to be some business driver: that a great enabler in terms of the business Product Manager, Market Chase. “ISO 20022 is the next iteration of could be the introduction of SEPA, as it processes that allows them to build Infrastructures, Rabobank language or standards by which we can was for us.” efficiency, improve monitoring, and communicate across banks, and users It’s not about standards, it’s about improve visibility,” said Sutton. “There and payment systems, and SWIFT.” business, was a phrase that several is a mind-set change, within even the Alex Wong, Treasury The language point is agreed by all, panellists used, and one of the most is critical to the overall success or failure stage because until you get mandatory Treasury community, where Treasury no Specialist, Global Treasury but it immediately raises the point of interesting outcomes has been the extent of a project.” migration, SEPA volumes won’t come longer sees itself as a cost centre: it sees Solutions, Bank of America compatibility. to which the adoption of standards has led He added that XML is important to through,” said Sutton. “Corporate people itself as a profit centre and to do that Merrill Lynch “Bob’s point about language is good, to collaboration between banks, and their that flexibility in dealing with clients. are looking at SEPA; they are looking at you need to have that instant access to but if you consider the English language, corporate customers for mutual benefit. “Corporates may not have been able the bigger picture. We, the banks, have an information. I think the business process Bob Blair, Executive Director we have the American interpretation “Really the drive behind this new to identify XML as part of their exact opportunity to help corporates simplify is the right way to position this. It is more at JP Morgan Chase and if you go to Newcastle you have language or standard was to try and requirements, but, in articulating their standards because the competitive space than just a format. The concept is an (participated by telephone) something different; that adds a layer of take collaboration to the next level, to challenges and needs, we would likely has moved: it’s not the same area as it was enabler to becoming more operationally complexity,” says Mark Sutton, Director help people become more efficient, to identify XML as part of an appropriate and formats are no longer competitive. and financially efficient.” and Senior Payments & Integration standardise and to simplify what is being and flexible solution,” he said. This is where we can help make a “The dictionary that defines the Services Consultant for Treasury & Trade done, typically in the corporate to bank “This is very important: XML is more difference. It’s a win-win for corporates common banking concepts does not Solutions at Citi Global Transaction space,” said Sutton. “The key challenge than just a file format – it is a way of and banks because it is much easier to depend on XML messaging,” said Services. that the corporate community has, and building a more efficient, low-cost, cash integrate.” Stephen Lindsay, Head of Automation, The essential role of communications that feeds through to the banks and the management environment,” said Sutton. In some ways XML has gone from SWIFT Standards. “It is even more with customers was highlighted by all clearing systems, is that each bank has “This is what we are starting to see, being a catalyst for standardisation to flexible and can be used in a variety of the panellists, with the added driver its own interpretation of a particular and we are seeing significant interest: being a driver “because people want to technical integration contexts where of migration to new systems for the standard – their own language if you will: Citi has 59 clients live, processing get on the train”, said one panellist. “They XML is not in the picture. For example, introduction of the Single Euro Payment there are nuances that create a layer of transactions across 78 countries. This want to make that generational jump the content is already being used in the Area. complexity, and therefore a layer of cost, is more than just SEPA – obviously the and by buying into XML they have the Banking Industry Architecture Network Ton Versteeg, Senior Product Manager, in terms of the business process.” drivers and dynamics are different but potential to do that.” (BIAN) initiative to describe standardised Wong agreed: “It also reduces the the global interest is considerable – we software services.” CHAIRMAN Market Infrastructures, Rabobank, said Under the SEPA banner, the banks that the biggest driver for the bank, need for you to make wholesale changes processed last month our five millionth lobbied the European Payments Council Internally too, the adoption of ISO David Bannister, editor, in terms of providing communication to your back-end systems because it XML-initiated transaction.” to support XML as the underlying format 20022 is coming to be seen as a benefit. Banking Technology from bank-to-infrastructure and bank- simplifies the integration. Agility is key It is not just the banks that are for SEPA and to get XML on the map and “Banks generally have a large number to-corporate, was to persuade corporate to this approach – the ability to react and seeing this. “We are starting to see big it has reaped rewards. Other clearing of systems supporting different needs. clients to use ISO 2022 rather than make changes to fixed projects without numbers of customers using XML – and systems – in Japan and Indonesia, for Internally, I think, people are starting domestic or proprietary standards. requiring full-scale change management not necessarily through SEPA at this instance – are all looking at ISO XML as a to recognise the richness of the format >

30 I www.bankingtech.com www.bankingtech.com I 31 Moving on from messaging Photos: Tom Groenfeldt

format they can use in interbank clearing systems. “That is a recognition of the richness of the format,” said Sutton. “Would we have still adopted it? Absolutely: It is not just about SEPA, it is about the solution it provides to the complexity of the existing systems. Banks are changing because corporates are telling them they have to: we are in a competitive space if we don’t support something another bank will.” That said, “it is not ISO 20022 that they’re interested in, it is the fact that it is a great enabler in terms of the business processes that allows them to build efficiency, improve monitoring, and improve visibility,” said Sutton. “There is a mind-set change, within even the is critical to the overall success or failure stage because until you get mandatory Treasury community, where Treasury no of a project.” migration, SEPA volumes won’t come longer sees itself as a cost centre: it sees He added that XML is important to through,” said Sutton. “Corporate people itself as a profit centre and to do that that flexibility in dealing with clients. are looking at SEPA; they are looking at you need to have that instant access to “Corporates may not have been able the bigger picture. We, the banks, have an information. I think the business process to identify XML as part of their exact opportunity to help corporates simplify is the right way to position this. It is more requirements, but, in articulating their standards because the competitive space than just a format. The concept is an challenges and needs, we would likely has moved: it’s not the same area as it was enabler to becoming more operationally identify XML as part of an appropriate and formats are no longer competitive. and financially efficient.” and flexible solution,” he said. This is where we can help make a “The dictionary that defines the “This is very important: XML is more difference. It’s a win-win for corporates common banking concepts does not than just a file format – it is a way of and banks because it is much easier to depend on XML messaging,” said building a more efficient, low-cost, cash integrate.” Stephen Lindsay, Head of Automation, management environment,” said Sutton. In some ways XML has gone from SWIFT Standards. “It is even more “This is what we are starting to see, being a catalyst for standardisation to flexible and can be used in a variety of and we are seeing significant interest: being a driver “because people want to technical integration contexts where Citi has 59 clients live, processing get on the train”, said one panellist. “They XML is not in the picture. For example, transactions across 78 countries. This want to make that generational jump the content is already being used in the is more than just SEPA – obviously the and by buying into XML they have the Banking Industry Architecture Network drivers and dynamics are different but potential to do that.” (BIAN) initiative to describe standardised the global interest is considerable – we Under the SEPA banner, the banks software services.” processed last month our five millionth lobbied the European Payments Council Internally too, the adoption of ISO XML-initiated transaction.” to support XML as the underlying format 20022 is coming to be seen as a benefit. It is not just the banks that are for SEPA and to get XML on the map and “Banks generally have a large number seeing this. “We are starting to see big it has reaped rewards. Other clearing of systems supporting different needs. numbers of customers using XML – and systems – in Japan and Indonesia, for Internally, I think, people are starting not necessarily through SEPA at this instance – are all looking at ISO XML as a to recognise the richness of the format >

www.bankingtech.com I 31 ROuNdTAble: ISO 20022 September 2011

In association with

Moving on from messaging Photos: Tom Groenfeldt

and the consistency across different In all, the conclusion is that the speed applications through the data dictionary of adoption of ISO 20022 is accelerating, which people are now looking at in a and as this happens the benefits become different light – realising that maybe clearer to a wider community of potential this is not just about cash management users, creating a snowball effect that will and improving the customer-to-bank go on to accelerate it even further. relationship: internally we can get benefits “I think we are in a good place if you through adoption and we can see benefits think about it,” said Sutton. “We are in because we can be more consistent and good shape with the work of the CGI pass more data through the system in a which was formed in October 2009. It structured way,” said Sutton. has taken the best part of a year to look Adoption on a wider scale naturally It may be a price worth paying, at the messages and also to look at the takes time. “The biggest element of suggests Blair. “It does translate into local country rules. This is looking at, over change will be human behaviour,” said cost but it also translates into capability and above the core payment information Jamuar. “It takes some time for the if you look at a payment infrastructure like bank account details, what you need broader institution to get used to the like BACS. It could not operate without in each market to be able to process the change: there is education to be done, and the use of standards – as we scale up the payments and then to agree where the that change takes time. You don’t have to industry, if you will, and adopt standards, information goes in the XML message. go back too far to see that the internet was we gain a greater capacity as well as a That takes quite a bit of time. In Japan, you only used in a couple of universities, yet that even further, and possibly even into greater efficiency. The efficiencies accrue need to specify an account type and there now when you travel it is unacceptable not the corporate back office. “What can make or break this not only to the end-users but also to the are penalties for getting it wrong and these to have broadband access. There is also a This, again, is something banks are proposition comes out of pricing and that’s banks themselves and their ability to are all examples of country rules.” generational change about people getting looking at: how they add more value where we gain a competitive space,” said readily absorb additional data.” “A further example of how the used to things and their expectations in given that the competitive space has Jamuar. “Faster payments, for instance, is The benefits will largely outweigh the standard is advancing will be seen in the the way they do things.” changed and the format is no longer one of the biggest changes that happened cost, argued Sutton: “There is a cost, but forthcoming MyStandards initiative from “Simply building stickiness around considered part of the competitive space. in the UK industry: as prices have gone it is more about simplification through SWIFT – to be previewed at Sibos – which how you connect to me is not acceptable Banks need to look at the value-added down, clients are willing to do more standardisation. You become more will allow market practices like CGI to in the modern world,” was how one solutions they can build on the back of transactions. This is a question I really do efficient and that is very important. Banks be captured formally and published in a panellist summed up the intensity of that, everyone agreed. worry about: we have seen some great are constantly looking at taking a layer of way that implementers find intuitive and competition in today’s environment. Blair for instance, said that one products come out but the adoption has cost out of the equation.” convenient,” said Lindsay. BT Against this is the level of collaboration competitive field would be STP rates and been slowed down because of the pricing.” that has been shown through forums how they can be improved, along with All agree that rising costs associated like the ISO 20022 Common Global services and information content that will underlying format, the connectivity with rising data volumes are a worry. The ISO 20022 CGI working group Implementation Group (see panel). be shared and relative efficiencies and and the security around that, while “Something we are conscious of is The ISO 20022 Common Global Implementation (CGI) working group was formed The fact that there are 942 data elements the avoidance of repair fees. “All of those the competitive space is clearly price, data costs: these files are considerably with the primary objective of defining one common global implementation standard in a corporate-to-bank payment message quality-of-life issues,” he said. coverage, service, value-added solutions larger than text files and we have seen for ISO 20022 messages in the Corporate-to-Bank space. has a lot to do with market practice in Wong said that addressing customer and the enrichment, as Alex has quite customers wince when they consider the In the process it has become a key element in defining what the banks can do in different regions that the standard needs demand and recognising their needs is rightly described it.” data costs,” said one. creating a collaborative basis on which they can build competitive services. to be able to incorporate, and so efforts crucial. “Their pain points are around To an extent, this is not a new situation: That is built into the structure, said “The CGI working group is very much an inclusive club: we want more banks, more like CGI are designed to normalise those reconciliation: that is where we see most banks have long been operating in a Sutton. “The costs of processing the corporates, more vendors to join,” says Mark Sutton, director and senior payments & market practices, to establish a common client demand at the moment,” he said. market where a lot of their offerings messages through SWIFT are going to be integration services consultant for Treasury & Trade Solutions at Citi Global Transaction shared use by which the standards can be “There’s been a focus on STP for are plain vanilla and they have needed higher. You have the whole data structure Services. “SWIFT has done a fantastic job in terms of broadening the appeal to a large applied across markets to affect settlement some time and much progress has been to be creative to be competitive. One of XML, which logically increases the size number of banks, so we have increased representation from the Japanese community, and facilitate greater efficiencies on the made on this front. The challenge now panellist said that this was exactly the of a message – there are 942 fields in for instance, and from Korea, where we now have membership. This is good because part of their users. is to increase the efficiency through case in the use of the older MT standards the core payment message, though you people are working together to share the knowledge and to get more people on “There is a very synergistic effect the reconciliation process. This can be in correspondent banking: everyone don’t have to use them all. And that is board. There are more people feeling that this is absolutely the de facto standard, and between the standards themselves and achieved by the enrichment of data flows was using the same thing, but “they compounded by the harmonisation efforts those corporates who were perhaps more unsure will see local banks adopting the the circumstances they exist in,” said Blair. back to the corporate.” are all very different banks and have where to get the harmonised template standards. And that in turn will make life easier for the banks, because we can start The XML messages are functionally “We look to measure this in terms of differentiation both within the channel you need to take on board the different decommissioning some of the systems that are no longer going to be relevant because rich and there is an opportunity to Straight Through Reconciliation (STR) – and their use of SWIFT message, but also data elements each bank requires. Yes, the customers are saying they just want a particular standard.” have some competitive space in the flip-side of STP …” outside the channel in terms of things like there are benefits for corporates, but the According to Sutton: “More and more people are now participating – this is very collaborative messages where banks “Back in June 2003 when the banks all currency processing and other factors downside is that if they’re using SWIFT as much collaboration at its best: the more people participate the better it is. It is very can provide additional services and got together, we worked on a slide that that distinguish between their banking a transmission vehicle then there will be much neutral in terms of the way we do things. And we also have the momentum of additional richness back to a client in defined what the competitive aspects systems”. an increase in the cost. But to offset that people like SAP looking to adopt the standards, and it won’t be long before Oracle terms of statement reporting or intraday were and what was collaborative, so The single biggest fly in the ointment cost they have a scalable, resilient, global, and Microsoft start doing the same: SunGard and Wallstreet are already engaged, reporting. There are opportunities for that we could articulate that back out also stems from the capability to provide multibank solution: it is a question of and more and more vendors are recognising this connectivity. I think there is a good the banks not only to deliver the vanilla to the community,” said Sutton. “The enriched data, and that is the cost of looking at what you actually want in terms industry success story here about a standard that is going to be adopted – and that’s proposition, but to look at ways of taking collaborative space is around the moving it around. of how you engage with your bank.” the measure of success.”

32 I www.bankingtech.com www.bankingtech.com I 33 Moving on from messaging Photos: Tom Groenfeldt

In all, the conclusion is that the speed of adoption of ISO 20022 is accelerating, and as this happens the benefits become clearer to a wider community of potential users, creating a snowball effect that will go on to accelerate it even further. “I think we are in a good place if you think about it,” said Sutton. “We are in good shape with the work of the CGI which was formed in October 2009. It has taken the best part of a year to look It may be a price worth paying, at the messages and also to look at the suggests Blair. “It does translate into local country rules. This is looking at, over cost but it also translates into capability and above the core payment information if you look at a payment infrastructure like bank account details, what you need like BACS. It could not operate without in each market to be able to process the the use of standards – as we scale up the payments and then to agree where the industry, if you will, and adopt standards, information goes in the XML message. we gain a greater capacity as well as a That takes quite a bit of time. In Japan, you greater efficiency. The efficiencies accrue need to specify an account type and there “What can make or break this not only to the end-users but also to the are penalties for getting it wrong and these proposition comes out of pricing and that’s banks themselves and their ability to are all examples of country rules.” where we gain a competitive space,” said readily absorb additional data.” “A further example of how the Jamuar. “Faster payments, for instance, is The benefits will largely outweigh the standard is advancing will be seen in the one of the biggest changes that happened cost, argued Sutton: “There is a cost, but forthcoming MyStandards initiative from in the UK industry: as prices have gone it is more about simplification through SWIFT – to be previewed at Sibos – which down, clients are willing to do more standardisation. You become more will allow market practices like CGI to transactions. This is a question I really do efficient and that is very important. Banks be captured formally and published in a worry about: we have seen some great are constantly looking at taking a layer of way that implementers find intuitive and products come out but the adoption has cost out of the equation.” convenient,” said Lindsay. BT been slowed down because of the pricing.” All agree that rising costs associated with rising data volumes are a worry. The ISO 20022 CGI working group “Something we are conscious of is The ISO 20022 Common Global Implementation (CGI) working group was formed data costs: these files are considerably with the primary objective of defining one common global implementation standard larger than text files and we have seen for ISO 20022 messages in the Corporate-to-Bank space. customers wince when they consider the In the process it has become a key element in defining what the banks can do in data costs,” said one. creating a collaborative basis on which they can build competitive services. That is built into the structure, said “The CGI working group is very much an inclusive club: we want more banks, more Sutton. “The costs of processing the corporates, more vendors to join,” says Mark Sutton, director and senior payments & messages through SWIFT are going to be integration services consultant for Treasury & Trade Solutions at Citi Global Transaction higher. You have the whole data structure Services. “SWIFT has done a fantastic job in terms of broadening the appeal to a large of XML, which logically increases the size number of banks, so we have increased representation from the Japanese community, of a message – there are 942 fields in for instance, and from Korea, where we now have membership. This is good because the core payment message, though you people are working together to share the knowledge and to get more people on don’t have to use them all. And that is board. There are more people feeling that this is absolutely the de facto standard, and compounded by the harmonisation efforts those corporates who were perhaps more unsure will see local banks adopting the where to get the harmonised template standards. And that in turn will make life easier for the banks, because we can start you need to take on board the different decommissioning some of the systems that are no longer going to be relevant because data elements each bank requires. Yes, the customers are saying they just want a particular standard.” there are benefits for corporates, but the According to Sutton: “More and more people are now participating – this is very downside is that if they’re using SWIFT as much collaboration at its best: the more people participate the better it is. It is very a transmission vehicle then there will be much neutral in terms of the way we do things. And we also have the momentum of an increase in the cost. But to offset that people like SAP looking to adopt the standards, and it won’t be long before Oracle cost they have a scalable, resilient, global, and Microsoft start doing the same: SunGard and Wallstreet are already engaged, multibank solution: it is a question of and more and more vendors are recognising this connectivity. I think there is a good looking at what you actually want in terms industry success story here about a standard that is going to be adopted – and that’s of how you engage with your bank.” the measure of success.”

www.bankingtech.com I 33 INTERVIEW: CHRIS PERRETTA SEPTEMBER 2011

“The way we are approaching it is to not only use cloud Curricululum Vitae computing to run the infrastructure: we are going to create frameworks so that programmers share and exploit the Chris Perretta, cloud and can deliver a lot faster. We really do think that we State Street can reduce the amount of work that a typical programmer has to do to deliver a business function. At the end of the 2007 – Present chief information offi cer, State Street Bank day, our cloud implementation allows us to spend less on 2002-2007 chief information offi cer at GE Commercial Finance running the infrastructure and more on development.” 2000-2007 chief technology offi cer at GE Capital This goes back to the business, not the IT need, he 1990-2001 chief information offi cer at GE Retail Financial Services says: “You have to decide what matters to your customers and we want our employees to work on what matters.” Education Taking that as a goal made it easier to create a ■ Harvard MIT Health Sciences and Technology business argument and bridge the IT/business divide. “If ■ Syracuse University you talk about IT architecture, it’s really hard to fund it: ■ The Johns Hopkins University number one, it’s a religious war, number two, it’s always below deck,” he says. “We’ve used the LEAN work in our business operations to really identify key areas that will in this space, I expect someone will ask if they can run drive performance in the business and tied them back to their application on our cloud. And that will be interesting architectural questions or areas. That way we were able because it is not the business we have been in – we deliver to put a commercial case to our management that says if data to the customer, traditionally. But if I have a cloud we can address these issues we can get these bene ts. with a security framework around it and present you with Without that we would never have got the money to do it.” a large data store and tools to access it, then that’s new.” Having done that, the implementation phase is That immediately raises the issue of security, which underway – alongside a more familiar story, which comes up in any discussion of cloud computing in nancial is that the rm is laying off more than 500 IT staff and services. Perretta thinks that the technical arguments are transferring another 300-plus to IBM. in favour of the cloud approach: “We believe the cloud “The work is phased in very detailed projects: we are is more secure than our existing environment – it is more running about 180 individual projects over the next three secure, it is more resilient and it’s more scalable. It handles years, about 60 of them are in train right now and they disasters better, and I can run on multiple data centres.” all have commercial results attached,” says Perretta, There are other more pressing issues that adoption of adding that the customer-facing systems are at the cloud computing both raises, and, potentially, answers. start of the project rather than being the last to migrate. “Frankly when you look at everything that is pressing “Typically people use cloud initially for HR systems or on us, security is a big one, but there are also things like CRM: we are using it in our customer facing systems supporting a mobile workforce. Cloud lets you virtualise – our internal systems will probably be the last to your desktop and that’s useful because I can’t even tell Above switchover. That is the scale of the opportunity we see.” you where my end-users are or the device they are going One of the major opportunities that the bank sees is in to be using. I have to be agnostic about the end device,” the providing data enhancement services to its customers, he says. “There is a bunch of imperatives hitting us and which Perretta believes will become increasingly we wanted one architecture to be able to handle it all.” important as increased computing power meets huge That said, there are new issues that the move raises, cloud data sets in data analytics systems and services. particularly in ensuring quality control in production. “We “A lot of the work is on the data front, on heavy duty are a factory, so we are de ning a new operating model State Street’s chief information offi cer Chris Perretta has spearheaded a move into cloud data systems and data analytics,” he says. “We will also to run production that is different to the old one, and it’s continue to build out our derivatives applications, which a lot less expensive. We sat down with our auditors and computing at the bank. He spoke to David Bannister about his rationale and ambitions. were developed quite recently and are ‘cloud ready’. And said, ‘we are going to design this new operating model – Since the fi nancial crisis, there has been a discernible computing you can deliver a lot more to the business – then there is a lot of work underpinning the frameworks. what other control objectives do we need to add?’. It is recovery of control over systems spending and if you extrapolate 20 years you’re going to have in nite We are building tools that assess software’s ability to not just saying that we can provision an operating system development by the business side from the IT computing power.” run in the cloud, and looking across our inventory to for someone: we had to build the integration between department, which has often had things too much its Central to the project is having the support of the board. see how much work we have to do. Rationalising the existing technologies, so we have actually separated the own way. “We have been spending about a year with the board. At existing inventory is probably the hardest part.” process and the processing from the data. You need a But when an organisation embarks on a large-scale the end of the day there is a real strategic challenge that Further out, he sees wide-ranging and unpredictable whole new generation of control systems: the scale and migration to a totally new architecture, it is crucial to IT is facing: the use of technology – the actual hardware changes in the way the rm interacts with customers. “I complexity of these things is beyond the capability of strike a balance between the two sides. That’s what and software – is growing faster than revenue, and in an think, frankly, that not only technology will change, but human beings just to understand the moving parts. It’s like Chris Perretta, chief information of cer at State Street, environment where your budgets have tended to be at the way customers consume our applications will also a modern aeroplane that can’t y without the computer – is seeking to achieve in a three-year migration to a new over the last couple of years, that just steals away from change,” he says. “We need to put in place new models we have to have much more automation to address this.” cloud-based framework. product development. Instead of doing the product you to provide them with the data analytics that they will Despite this, Perretta is a vocal evangelist for the cloud “There is a convergence: the line between what we had to buy more storage, for instance.” need in the way they want.” approach, and even more so of the way in which State used to call technology and the business almost doesn’t He sums it up thus: “My CFO says, ‘you spend too That could be just the beginning: he also sees a time Street plans to harness it. make sense anymore – the technology is the physical much money’, my CEO says, ‘are we spending the right when the boundaries between the bank’s systems and “Building frameworks that are standard across the manifestation of the product we make. It is pretty amount of money?’ Everybody else just says, “go faster’.” the customer’s systems become blurred. platforms are amazingly powerful because you really well embedded, and I see new computing paradigms His view is that the cloud can answer all those “We are building more powerful data analytics right focus on the business functions,” he says. “You can increasing the technology content of nancial services questions, but the Holy Grail is that it will free developers now that allow people to augment our reference data be productive very quickly. We are essentially building exponentially,” he says. “Look at low latency trading and to create new applications that add value and service the with their data, without touching our reference data,” he intelligence into our processes. When I look at it that way, you can see that what is exciting now is that through rm’s customers, rather than just keep the lights on. says. “Within six months of us launching new products I know we are doing the right thing.” BT

34 I www.bankingtech.com www.bankingtech.com I 35 “The way we are approaching it is to not only use cloud Curricululum Vitae computing to run the infrastructure: we are going to create frameworks so that programmers share and exploit the Chris Perretta, cloud and can deliver a lot faster. We really do think that we State Street can reduce the amount of work that a typical programmer has to do to deliver a business function. At the end of the 2007 – Present chief information offi cer, State Street Bank day, our cloud implementation allows us to spend less on 2002-2007 chief information offi cer at GE Commercial Finance running the infrastructure and more on development.” 2000-2007 chief technology offi cer at GE Capital This goes back to the business, not the IT need, he 1990-2001 chief information offi cer at GE Retail Financial Services says: “You have to decide what matters to your customers and we want our employees to work on what matters.” Education Taking that as a goal made it easier to create a ■ Harvard MIT Health Sciences and Technology business argument and bridge the IT/business divide. “If ■ Syracuse University you talk about IT architecture, it’s really hard to fund it: ■ The Johns Hopkins University number one, it’s a religious war, number two, it’s always below deck,” he says. “We’ve used the LEAN work in our business operations to really identify key areas that will in this space, I expect someone will ask if they can run drive performance in the business and tied them back to their application on our cloud. And that will be interesting architectural questions or areas. That way we were able because it is not the business we have been in – we deliver to put a commercial case to our management that says if data to the customer, traditionally. But if I have a cloud we can address these issues we can get these bene ts. with a security framework around it and present you with Without that we would never have got the money to do it.” a large data store and tools to access it, then that’s new.” Having done that, the implementation phase is That immediately raises the issue of security, which underway – alongside a more familiar story, which comes up in any discussion of cloud computing in nancial is that the rm is laying off more than 500 IT staff and services. Perretta thinks that the technical arguments are transferring another 300-plus to IBM. in favour of the cloud approach: “We believe the cloud “The work is phased in very detailed projects: we are is more secure than our existing environment – it is more running about 180 individual projects over the next three secure, it is more resilient and it’s more scalable. It handles years, about 60 of them are in train right now and they disasters better, and I can run on multiple data centres.” all have commercial results attached,” says Perretta, There are other more pressing issues that adoption of adding that the customer-facing systems are at the cloud computing both raises, and, potentially, answers. start of the project rather than being the last to migrate. “Frankly when you look at everything that is pressing “Typically people use cloud initially for HR systems or on us, security is a big one, but there are also things like CRM: we are using it in our customer facing systems supporting a mobile workforce. Cloud lets you virtualise – our internal systems will probably be the last to your desktop and that’s useful because I can’t even tell Above switchover. That is the scale of the opportunity we see.” you where my end-users are or the device they are going One of the major opportunities that the bank sees is in to be using. I have to be agnostic about the end device,” providing data enhancement services to its customers, he says. “There is a bunch of imperatives hitting us and which Perretta believes will become increasingly we wanted one architecture to be able to handle it all.” important as increased computing power meets huge That said, there are new issues that the move raises, data sets in data analytics systems and services. particularly in ensuring quality control in production. “We “A lot of the work is on the data front, on heavy duty are a factory, so we are de ning a new operating model data systems and data analytics,” he says. “We will also to run production that is different to the old one, and it’s continue to build out our derivatives applications, which a lot less expensive. We sat down with our auditors and were developed quite recently and are ‘cloud ready’. And said, ‘we are going to design this new operating model – then there is a lot of work underpinning the frameworks. what other control objectives do we need to add?’. It is We are building tools that assess software’s ability to not just saying that we can provision an operating system run in the cloud, and looking across our inventory to for someone: we had to build the integration between see how much work we have to do. Rationalising the existing technologies, so we have actually separated the existing inventory is probably the hardest part.” process and the processing from the data. You need a Further out, he sees wide-ranging and unpredictable whole new generation of control systems: the scale and changes in the way the rm interacts with customers. “I complexity of these things is beyond the capability of think, frankly, that not only technology will change, but human beings just to understand the moving parts. It’s like the way customers consume our applications will also a modern aeroplane that can’t y without the computer – change,” he says. “We need to put in place new models we have to have much more automation to address this.” to provide them with the data analytics that they will Despite this, Perretta is a vocal evangelist for the cloud need in the way they want.” approach, and even more so of the way in which State That could be just the beginning: he also sees a time Street plans to harness it. when the boundaries between the bank’s systems and “Building frameworks that are standard across the the customer’s systems become blurred. platforms are amazingly powerful because you really “We are building more powerful data analytics right focus on the business functions,” he says. “You can now that allow people to augment our reference data be productive very quickly. We are essentially building with their data, without touching our reference data,” he intelligence into our processes. When I look at it that way, says. “Within six months of us launching new products I know we are doing the right thing.” BT

www.bankingtech.com I 35 PeoPle September 2011

consultancy at Accenture where he spent Street Corporation, is appointing enda events Appointments ten years working with tier one clients McMahon as head of compliance for defining various technology, process and EMEA and Niall o’leary as head of 19-23 september operations strategies, particularly in the product engineering for Europe, Middle sibos 2011, toronto derivatives area. East and Africa. Both joined SSGA as a After a recovering some of its pizzazz at result of its acquisition of Bank of Ireland Amsterdam in 2010, the mother of all Specialist broker technology and advisory Asset Management earlier this year. financial sector conferences and exhibitions firm ITG is overhauling its leadership team McMahon was formerly global head moves further away from tradition with a The Depository Trust & Clearing Corporation has named Adam Wysota as its new chief with the appointment of David Stevens of compliance at BIAM and is an ex- move outside the US for the North America technology officer, replacing Lea Moskowitz, who retires in September after 34 years with DTCC. He as head of US and Latin America, while financial regulator with the Securities & leg of its perpetual world tour. will be responsible for the strategic direction and oversight of DTCC’s critical IT infrastructure and for Jamie Selway has been named head of Exchanges Department of the Central www.swift.com driving its risk-mitigation initiative. His role will also cover the review and approval of new technology liquidity management, which includes Bank of Ireland, where he led the upgrades, as well as the maintenance of systems. the firm’s Posit crossing network and investment intermediaries’ inspection 28-30 september Wysota joins from Barclays Capital where he was previously a managing director in Prime Services its smart routing and algorithmic trading team. He trained as an accountant with eFmA 2011 Cards and payments, paris IT overseeing applications and infrastructure in support of the firm’s equities, prime brokerage, fixed units. He’ll also lead ITG’s derivatives Eagle Star Life Assurance and will report Now in its ninth year, this event attracts income and investment management areas. Futures clearance technology also fell under Wysota’s business advisory service and joins from to Michael Fay, SSGA’s global chief over 40 leading industry speakers and remit at BarCap. Prior that that, he spent nearly two years as a senior vice president at Lehman Archipelago where he was formerly chief compliance officer. Also based in Dublin around 350 senior executives from Brothers, overseeing many of the firm’s operations applications and technologies and leading the economist. is O’Leary who was formerly responsible throughout the world. effort to increase its capacity for heavy trading volumes. He started his career at Morgan Stanley Stevens will be based in New York for the cash, fixed income and property www.efma.com/cards Institutional Securities working in the Enterprise Infrastructure Group, before rising to become overseeing the Americas but interestingly investment functions at BIAM. In his new executive director in charge of technology strategy, architecture, engineering and operations for data management and quality will retain oversight of the Asia Pacific role at SSGA, he will report to Mike Arone, 11-13 oCTobeR assurance. Wysota will report to Robert Garrison the newly appointed chief information officer at DTCC. region he used to run, presenting quite global head of product engineering at the bAI Retail Delivery 2011, Chicago “Adam has been a leader in developing innovative technology solutions for fast-paced, global financial services institutions,” a geographical challenge to the six-year firm. In 2010 BAI Retail Delivery was revamped, said Garrison, when discussing his appointment. “DTCC’s technology infrastructure protects the certainty of our post-trade veteran of Investment Technology Group reorganised and revitalised, and is now on processing capacity and the resiliency of all data transmission and telecommunications for the financial firms we serve. His wealth who was also previously in charge of ITG’s The Cheque and Credit Clearing its way back to being the retail banking of knowledge and experience in this area is a real asset.” European operations. Stevens joined Company has appointed les Thwaites event of the year. ITG from JP Morgan where he managed as its new chairman. He will replace Willie www.bai.org European research sales, after starting his Nicoll, who has retired after six years in ClS Group has appointed Sankar Aiyar to Strimer, so has the requisite experience roles at investment banks, supporting career at Goldman Sachs. the role, and will no doubt be tasked with 13-14 oCtober as the first chief technology officer at for the top job. The new arrangement, fixed income, equities and derivatives managing decline although, interestingly, 39th eFmA Congress, paris the foreign exchange settlement bank. however, whereby Kindler will take on businesses, at Barclays Capital, Credit ICAP, the interdealer broker, has raided he won’t be overseeing the end of The European Financial Marketing Reporting to chief executive Alan Bozian, the responsibility for clearing relationship Suisse First Boston, Merrill Lynch and Deutsche Bank for its new group chief cheques after the UK industry cancelled Association’s annual Congress will explore he joins from Citigroup where he was a management and new business Lehman Brothers. operating officer. Mark Price joins in its intention to do away with cheques by different approaches to multi-channel managing director, responsible for aligning development, means that Wieland will October after spending 13 years at 2018 in the face of consumer and political management. It will feature case studies technology priorities and strategy for the be free to concentrate on improving risk First Direct, the UK Deutsche Bank, where he was most opposition. from senior executives of new European institutional business in Latin America. management and compliance activities, a phone and internet bank, recently COO for global credit and Thwaites has worked for the Co- banks, such as Metrobank, Zuno Bank and During his 13 years at Citigroup, he key post-crash requirement that is likely has appointed its former emerging market debt. Prior to that, operative Bank since 1972, where he had Alior Bank,. held a number of other roles, including to take up a lot of time, and on day-to- head of marketing as chief Price worked at Merrill Lynch as product involvement in all elements of cheque www.efma.com head of equities technology in Tokyo, day operations. Wieland and Kindler, executive. Mark Mullen controller for credit derivatives and started processing and the management of the global head of equities, programme who spent many years at Clearstream introduced a number of social media out as a senior auditor at Ernst and Young operation. C&CCC is a non-profit making 18-19 oCtober trading technology and risk, plus global before joining LinkUp Markets, a JV of initiatives at First Direct in his first stint in London. He will be in charge of ICAP’s industry body, which has managed business & operational excellence in head of payments and wholesale cards ten CSDs that aims to improve cross- at the HSBC subsidiary running up until IT estate and oversee its risk, staffing and the cheque clearing system across payments, London technology in New York. Aiyar began border post-trade processing efficiency 2009, including the Talking Point open compliance functions as well. the UK since 1996 and also processes From the organisers of the International his career at Burroughs in Belgium and and transparency, will both jointly focus forum where good or bad customer bankers’ drafts, postal orders, warrants Payments Summit, This two day conference then joined American Express in Mexico on expanding international business and opinions could be aired, the Little Black DealHub, a provider of financial markets and travellers’ cheques, alongside euro examines the issues around achieving before moving to Swiss Bank Corporation executing the interoperability agreement Book customer network and links to software, has added Chris leaver to its cheques and US dollar cheques. operational efficiency in payments. as executive director for FX settlements concluded in May of this year. Facebook, Twitter and YouTube. management team as chief operating www.informaglobalevents.com and payments technology, giving him Mullen moved to in Dubai two years officer. Previously global head of As part of a drive to establish itself in extensive experience across the industry. lCH.Clearnet has appointed Tom ago to become regional head of marketing marketing and business execution at Europe through its new London offices 10 NoVeMbeR Zschach as group chief information for HSBC Middle East, but returns to First Thomson Reuters, Leaver has 17 years Clairmail Mobile Solutions has hired banking Technology Awards 2011, SIX Securities Services has appointed officer, in which role his primary Direct on this month to take up his new of experience in the financial markets, industry veteran Philip Harrison as london Urs Wieland as chief responsibilities, with no major projects role as head of the unit. He replaces Matt and was responsible for taking the Eikon managing director for Europe. Harrison has The premier event recognising excellence in executive of SIX x-clear planned, will be to oversee the existing Colebrook, who is moving on to become trading platform to market at his old job. previously worked at Advanced Payment the use of IT in financial services. Winners Ltd, succeeding Marco technology infrastructure and ensure group head of contact centres at HSBC, a Intended as a rival to the Bloomberg Solutions, Western Union Bank, Visa will be announced on the night. Strimer, who has headed the resilience of the company’s clearing new position at the parent bank. terminal, Eikon never quite lived up to International, Brokat, ACI and Accenture, www.bankingtech.com/awards the clearer for six years. solutions. Zschach has more than 21 expectations against a well-established and has more than 25 years’ experience In addition, Tomas Kindler, former years of tech experience within the Financial services consultants Capco rival. In his new role, Leaver will oversee in retail banking technologies and the 5-9 DeCember managing director of LinkUp Markets, investment banking environment and has promoted Andrew Tarver to UK finance, sales and the marketing payment card industry in EMEA. He will riskminds, Geneva has joined the SIX x-clear arm as the joins from Bank of America Merrill Lynch, chief executive from their UK capital functions at DealHub, and seek to identify be responsible for business development The organisers hope to beat the turnout of new head of clearing relations. Wieland where he was previously a managing markets team. He replaces Ismail Amla development opportunities. and setting out the regional strategy as more than 600 chief risk officers, senior risk has been with SIX Securities Services director and co-head of global rates and who will now head up the firm’s North the US-based mobile payments and practitioners, academics & advisors who since 1996, as head of operational risk currencies technology infrastructure. Prior American practice. Tarver joined in State Street Global Advisors, the banking processor attempts to break into made last year the largest risk conference. management and deputy chief executive to that, he held several senior technology 2010 after leaving the capital markets investment management arm of State the European market. BT www.informaglobalevents.com

36 I www.bankingtech.com www.bankingtech.com I 37 consultancy at Accenture where he spent Street Corporation, is appointing enda events ten years working with tier one clients McMahon as head of compliance for defining various technology, process and EMEA and Niall o’leary as head of 19-23 september operations strategies, particularly in the product engineering for Europe, Middle sibos 2011, toronto derivatives area. East and Africa. Both joined SSGA as a After a recovering some of its pizzazz at result of its acquisition of Bank of Ireland Amsterdam in 2010, the mother of all Specialist broker technology and advisory Asset Management earlier this year. financial sector conferences and exhibitions firm ITG is overhauling its leadership team McMahon was formerly global head moves further away from tradition with a with the appointment of David Stevens of compliance at BIAM and is an ex- move outside the US for the North America as head of US and Latin America, while financial regulator with the Securities & leg of its perpetual world tour. Jamie Selway has been named head of Exchanges Department of the Central www.swift.com liquidity management, which includes Bank of Ireland, where he led the the firm’s Posit crossing network and investment intermediaries’ inspection 28-30 september its smart routing and algorithmic trading team. He trained as an accountant with eFmA 2011 Cards and payments, paris units. He’ll also lead ITG’s derivatives Eagle Star Life Assurance and will report Now in its ninth year, this event attracts business advisory service and joins from to Michael Fay, SSGA’s global chief over 40 leading industry speakers and Archipelago where he was formerly chief compliance officer. Also based in Dublin around 350 senior executives from economist. is O’Leary who was formerly responsible throughout the world. Stevens will be based in New York for the cash, fixed income and property www.efma.com/cards overseeing the Americas but interestingly investment functions at BIAM. In his new will retain oversight of the Asia Pacific role at SSGA, he will report to Mike Arone, 11-13 oCTobeR region he used to run, presenting quite global head of product engineering at the bAI Retail Delivery 2011, Chicago a geographical challenge to the six-year firm. In 2010 BAI Retail Delivery was revamped, veteran of Investment Technology Group reorganised and revitalised, and is now on who was also previously in charge of ITG’s The Cheque and Credit Clearing its way back to being the retail banking European operations. Stevens joined Company has appointed les Thwaites event of the year. ITG from JP Morgan where he managed as its new chairman. He will replace Willie www.bai.org European research sales, after starting his Nicoll, who has retired after six years in career at Goldman Sachs. the role, and will no doubt be tasked with 13-14 oCtober managing decline although, interestingly, 39th eFmA Congress, paris ICAP, the interdealer broker, has raided he won’t be overseeing the end of The European Financial Marketing Deutsche Bank for its new group chief cheques after the UK industry cancelled Association’s annual Congress will explore operating officer. Mark Price joins in its intention to do away with cheques by different approaches to multi-channel October after spending 13 years at 2018 in the face of consumer and political management. It will feature case studies Deutsche Bank, where he was most opposition. from senior executives of new European recently COO for global credit and Thwaites has worked for the Co- banks, such as Metrobank, Zuno Bank and emerging market debt. Prior to that, operative Bank since 1972, where he had Alior Bank,. Price worked at Merrill Lynch as product involvement in all elements of cheque www.efma.com controller for credit derivatives and started processing and the management of the out as a senior auditor at Ernst and Young operation. C&CCC is a non-profit making 18-19 oCtober in London. He will be in charge of ICAP’s industry body, which has managed business & operational excellence in IT estate and oversee its risk, staffing and the cheque clearing system across payments, London compliance functions as well. the UK since 1996 and also processes From the organisers of the International bankers’ drafts, postal orders, warrants Payments Summit, This two day conference DealHub, a provider of financial markets and travellers’ cheques, alongside euro examines the issues around achieving software, has added Chris leaver to its cheques and US dollar cheques. operational efficiency in payments. management team as chief operating www.informaglobalevents.com officer. Previously global head of As part of a drive to establish itself in marketing and business execution at Europe through its new London offices 10 NoVeMbeR Thomson Reuters, Leaver has 17 years Clairmail Mobile Solutions has hired banking Technology Awards 2011, of experience in the financial markets, industry veteran Philip Harrison as london and was responsible for taking the Eikon managing director for Europe. Harrison has The premier event recognising excellence in trading platform to market at his old job. previously worked at Advanced Payment the use of IT in financial services. Winners Intended as a rival to the Bloomberg Solutions, Western Union Bank, Visa will be announced on the night. terminal, Eikon never quite lived up to International, Brokat, ACI and Accenture, www.bankingtech.com/awards expectations against a well-established and has more than 25 years’ experience rival. In his new role, Leaver will oversee in retail banking technologies and the 5-9 DeCember finance, sales and the marketing payment card industry in EMEA. He will riskminds, Geneva functions at DealHub, and seek to identify be responsible for business development The organisers hope to beat the turnout of development opportunities. and setting out the regional strategy as more than 600 chief risk officers, senior risk the US-based mobile payments and practitioners, academics & advisors who State Street Global Advisors, the banking processor attempts to break into made last year the largest risk conference. investment management arm of State the European market. BT www.informaglobalevents.com

www.bankingtech.com I 37 September 2011 Go to www.bankingtech.com for the latest news and comment

ProductS and ServiceS Bolero completes trade finance pilot Polaris puts new Vendor announcements, enhancements and innovations using first electronic Bill of Lading processing solution olero has completed a live trade finance pilot with five partners that involved the issuance of an electronic bill of Lading, which is a shipping contract for the on the grid Bcarriage of goods. the vendor says this is the first time an electronic boL has open protocol HP’s autonomy deal tops growing raft ever been issued and that it will help to improve Straight through processing and aid efficiency as the process has been incorporated into its wider trade finance Software- he new Ft Grid from polaris for managing of M&A activity in financial services as-a-Service offering, which was developed in conjunction with Swift and a broad Software Lab has the capacity ith a $10 billion price-tag, Hp’s acquisition UK software specialist Autonomy spectrum of industry stakeholders. Such cooperation is vital if a fully integrated, global Tto handle 100 million customers hedge fund risks was by far the largest deal in a raft of merger and acquisition activity over the electronic trade finance channel is ever to be instigated. and is open to global retail, wholesale homson reuters and Albourne Wpast few months. mining company bHp billiton was the beneficiary of the trade with South Korea’s tae or investment banks and other partners have released a new Other deals among financial services and financial technology companies include Kyung. as the applicant. the issuing bank was Korea exchange bank, with rbS acting financial institutions on a pay-per-use Tprotocol to standardise how Ge Capital’s acquisition of Credit Agricole’s leasing and factoring UK business for as the advising and negotiating bank. K Line was the shipping company involved. basis, says the India-based vendor. hedge funds collect, store and share an undisclosed fee, HSbC selling its US credit card business to Capital One for $2.6 Unlike other electronic presentation initiatives, this pilot was not simply restricted the new cloud-based platform risk information. the Open protocol billion as it extricates itself from its disastrous Household deal from 2003, following on to pre-checking of scanned electronic documents, say the participants, or to direct has what is described as industry- enabling risk Aggregation (Opera) from the sale of 195 branches in New York state to First Niagara bank, and temenos examination of documents electronically by the advising bank. the programme has standard hardware and middleware, aims to bring more transparency to the disposing of the investment management portfolio of Odyssey. proved the ability to drive the presentation end-to-end through to being promptly virtualised technology, a relational sector and alleviate regulatory fears temenos only recently brought Odessey and the rationale behind the disposal honoured and paid by the issuing bank. database management system and about the level of risk in the shadow of part of the business is that the core banking specialist wants to focus solely on the common legal infrastructure for bolero’s SaaS offering is the vendor’s rulebook, network connectivity components. banking arena. Odyssey’s more profitable wealth management business. Odyssey Im has been sold which was developed after a feasibility study into the legal issues related to electronic Identrust and Ibm have partnered Developed by 16 firms, including for an unnamed fee to tradar, a global technology solution provider that specialises in bills of Lading and the broader use of electronic commerce in cross-border trading. to provide servers, infrastructure, the two principals and a collection investment management. the unit made $180,000 last year in pre-tax profits. the successful study was undertaken by Allen & Overy and richards butler, two security and future scalability. An all- of investors, prime brokers, fund Commenting on the disposal, max Chuard, director of m&A at temenos, said: international law firms based in London whose legal work was incorporated into the day everyday help desk and support administrators and hedge funds, the “Odyssey Im was a largely independent and sub-scale unit within the Group. We procedures used for the test. function is also part of the package. Open protocol is intended to help viewed the business as non-core to the overall temenos operations and believe that “We are very excited about the success of the live pilot this summer, which three options are available, catering investors aggregate and integrate it was a better fit with its new owner. this sale will free up management time to focus demonstrates both the reality as well as the substantial opportunities associated with for different segments of the financial their exposures and cut the number on our core banking market and its impact on temenos’ income statement in 2011 is straight through document presentation,” said Arthur Vonchek, chief executive of services sector: of investor-specific risk formats that immaterial.” bolero. “this initiative has demonstrated the practicality of an end-to-end electronic ■ Ft Grid 7010 Core banking is the hedgies have to manage, which is the CA acquisition, formerly known as eurofactor (UK) and worth the equivalent bill of Lading. the willingness to support this initiative shown by key trade partners lowest cost variant and is aimed at itself another cause of concern for of £3 billion in finance to UK firms last year, will build on Ge Capital’s burgeoning such as K Line is testimony to the fact that this is increasingly seen as the way forward delivering core banking functionality, international regulators post-crash. UK commercial and corporate lending, in-line with the company’s strategic focus in international trade.” BT including pre-paid card solutions Adoption of the protocol has been on providing more financial solutions to britain’s Small-to-medium sized enterprise and mobile banking, to retail banks. designed with no commercial agenda, community. Developing countries such as India, and is open to all at no commercial Ge Capital brought rbS’ accounts receivable finance businesses in France and Lombard risk adds to collateral system bangladesh, Vietnam and in Africa, cost. Germany last year as part of its efforts to become a major european player in this where banks are most likely to need Henry Knapman, a managing field. the UK business is expected to double on the back of this deal to acquire Credit ombard risk management has ■ master Netting at fund level: allowing this processing assistance, are the director at UbS, who was seconded Agricole’s leasing and factoring business, which considering Ge Capital alone lent more released a version of its Colline consolidation at fund manager level of prime target markets. to the Financial Services Authority than £4 billion last year in volume terms to UK Smes, establishes the newly enlarged Lcollateral management solution individual fund margin calls – for greater ■ Ft Grid 8010 Capital markets is the in 2009/2010 as a senior advisor entity as a considerable force. Ge Capital lent more than €250 million to european Smes with a combination of enhanced and new efficiency, transparency across funds, wealth management, mutual funds, on hedge fund policy, welcomed each day last year and provides finance to more than 350,000 european companies in features. enhanced client reporting and control. brokerage services and risk & treasury the launch, commenting that “this 2010. the extra UK capacity will see it grow even more. Colline is a web-based solution for ■ Convenience margining: allowing users applications cloud-based module. initiative could not be more timely. “this is a great opportunity to do more for our customers by combining two excellent end-to-end, cross-product collateral to net margin calls across different asset polaris expects customers to be from As the industry prepares to respond businesses with strong risk management expertise and customer relationships,” said management. It provides a consolidated classes, reducing the number of margin maturing markets in the european to the present european Securities John Jenkins, chief executive of Ge Capital in the UK. “I am looking forward to meeting solution for multiple global entities, cross- calls issued, providing a consistent and Union but it is of course open to and markets Authority consultation with our new customers and continuing to build on Ge Capital’s presence in the product margining, Central Counterparty efficient workflow mechanism for clients others. exercise, let us hope that investors, market.” Clearing and mIS reporting. and delivering a transparent risk overview. ■ Ft Grid 9010 Corporate banking funds, and trade organisations can all In other news, cash management vendor talaris has fully acquired Lutzwolf Systems, Joanne Coe, director of product ■ Settlement risk management: is the liquidity, payments, collections rally around this thoughtful solution.” a provider of connectivity solutions based in Frankfurt, Germany, with which it already consulting for Colline at Lombard risk, collateralising settlement risk by retaining and customer on-boarding option, to coincide with the New York City had a partnership agreement. said: “the enhanced and new functionality the exposure on matured trades until the aimed primarily at developed markets launch, Andrew baker, chief executive the two companies have jointly developed CashInsight Assure in the past, an would enable users to assess the final fee to provide a true view of exposure such as the US, Canada and Australia. of the Alternative Investment enhanced automated teller system aimed at retail banks, and plan to work together business impact of market issues – such ■ enhanced rule-based approval processes: “With the launch of the Ft Grid management Association, observed more closely following the takeover. the complementary North American and european as the downgrading of the US credit rating adding additional levels of authorisation to we are firmly establishing ourselves that: “AImA supports any efforts to geographic strengths and market presences of talaris and Lutzwolf were key deciding by S&p recently – by enabling them to collateral bookings meeting certain criteria. as a complete financial technology improve the harmonisation of risk factors in the deal. Lutzwolf will continue to operate as an independent software house quickly access recalculated information ■ A new, single-screen workflow: for company,” said Arun Jain, chairman reporting to investors. Open protocol for the foreseeable future, said talaris. indicating potential collateral deficits and processing bulk collateral and transfer and chief executive of polaris. “We enabling risk Aggregation was born “We are delighted to be extending our partnership with Lutzwolf,” said tim robinson, funding requirements.” bookings have branded this offering as ‘grid’ out of dialogue between a range of chief executive of talaris, when discussing the takeover. “the company is a leader the new version includes: ■ enhanced exposure management: to match with our vision of making market practitioners and we support in the field of advanced connectivity solutions and significantly enhances our ability ■ Scenario analysis: the ability to forecast enabling users to create bespoke banking services available as this open, voluntary and inclusive to deliver bespoke software solutions. the acquisition will allow us to capitalise on the impact on collateral liquidity arising workflow views that reflect their individual ubiquitously as electricity is available approach.” BT opportunities in the rapidly growing teller automation market.” BT from credit rating up/downgrades. business requirements. BT over a power grid today.” BT

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Bolero completes trade finance pilot Polaris puts new using first electronic Bill of Lading processing solution olero has completed a live trade finance pilot with five partners that involved the issuance of an electronic bill of Lading, which is a shipping contract for the on the grid Bcarriage of goods. the vendor says this is the first time an electronic boL has ever been issued and that it will help to improve Straight through processing and aid efficiency as the process has been incorporated into its wider trade finance Software- he new Ft Grid from polaris as-a-Service offering, which was developed in conjunction with Swift and a broad Software Lab has the capacity spectrum of industry stakeholders. Such cooperation is vital if a fully integrated, global Tto handle 100 million customers electronic trade finance channel is ever to be instigated. and is open to global retail, wholesale mining company bHp billiton was the beneficiary of the trade with South Korea’s tae or investment banks and other Kyung. as the applicant. the issuing bank was Korea exchange bank, with rbS acting financial institutions on a pay-per-use as the advising and negotiating bank. K Line was the shipping company involved. basis, says the India-based vendor. Unlike other electronic presentation initiatives, this pilot was not simply restricted the new cloud-based platform to pre-checking of scanned electronic documents, say the participants, or to direct has what is described as industry- examination of documents electronically by the advising bank. the programme has standard hardware and middleware, proved the ability to drive the presentation end-to-end through to being promptly virtualised technology, a relational honoured and paid by the issuing bank. database management system and the common legal infrastructure for bolero’s SaaS offering is the vendor’s rulebook, network connectivity components. which was developed after a feasibility study into the legal issues related to electronic Identrust and Ibm have partnered bills of Lading and the broader use of electronic commerce in cross-border trading. to provide servers, infrastructure, the successful study was undertaken by Allen & Overy and richards butler, two security and future scalability. An all- international law firms based in London whose legal work was incorporated into the day everyday help desk and support procedures used for the test. function is also part of the package. “We are very excited about the success of the live pilot this summer, which three options are available, catering demonstrates both the reality as well as the substantial opportunities associated with for different segments of the financial straight through document presentation,” said Arthur Vonchek, chief executive of services sector: bolero. “this initiative has demonstrated the practicality of an end-to-end electronic ■ Ft Grid 7010 Core banking is the bill of Lading. the willingness to support this initiative shown by key trade partners lowest cost variant and is aimed at such as K Line is testimony to the fact that this is increasingly seen as the way forward delivering core banking functionality, in international trade.” BT including pre-paid card solutions and mobile banking, to retail banks. Developing countries such as India, Lombard risk adds to collateral system bangladesh, Vietnam and in Africa, where banks are most likely to need ombard risk management has ■ master Netting at fund level: allowing this processing assistance, are the released a version of its Colline consolidation at fund manager level of prime target markets. Lcollateral management solution individual fund margin calls – for greater ■ Ft Grid 8010 Capital markets is the with a combination of enhanced and new efficiency, transparency across funds, wealth management, mutual funds, features. enhanced client reporting and control. brokerage services and risk & treasury Colline is a web-based solution for ■ Convenience margining: allowing users applications cloud-based module. end-to-end, cross-product collateral to net margin calls across different asset polaris expects customers to be from management. It provides a consolidated classes, reducing the number of margin maturing markets in the european solution for multiple global entities, cross- calls issued, providing a consistent and Union but it is of course open to product margining, Central Counterparty efficient workflow mechanism for clients others. Clearing and mIS reporting. and delivering a transparent risk overview. ■ Ft Grid 9010 Corporate banking Joanne Coe, director of product ■ Settlement risk management: is the liquidity, payments, collections consulting for Colline at Lombard risk, collateralising settlement risk by retaining and customer on-boarding option, said: “the enhanced and new functionality the exposure on matured trades until the aimed primarily at developed markets would enable users to assess the final fee to provide a true view of exposure such as the US, Canada and Australia. business impact of market issues – such ■ enhanced rule-based approval processes: “With the launch of the Ft Grid as the downgrading of the US credit rating adding additional levels of authorisation to we are firmly establishing ourselves by S&p recently – by enabling them to collateral bookings meeting certain criteria. as a complete financial technology quickly access recalculated information ■ A new, single-screen workflow: for company,” said Arun Jain, chairman indicating potential collateral deficits and processing bulk collateral and transfer and chief executive of polaris. “We funding requirements.” bookings have branded this offering as ‘grid’ the new version includes: ■ enhanced exposure management: to match with our vision of making ■ Scenario analysis: the ability to forecast enabling users to create bespoke banking services available as the impact on collateral liquidity arising workflow views that reflect their individual ubiquitously as electricity is available from credit rating up/downgrades. business requirements. BT over a power grid today.” BT

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Gresham Computing has signed a deal with GigaSpaces system that acquires, authenticates, switches, and authorises Technologies to use its virtualised and scalable eXtreme Application multi-currency financial transactions across multiple channels. Platform as the infrastructure layer to support its transaction and Prosa is now using it to support 1.2 billion transactions per year cash management solutions. XAP is an end-to-end platform that and 37,000 ATMs across the region, and there is ‘headspace’ for brings together an in-memory data grid, application processing further volume growth says the firm. New features can more easily International Payments: and messaging services, delivering an engine that can manage be added in the future, claims the vendor, thanks to the scripting terabytes of data with low latency performance and higher functionality, which enables users to build and manage their own control. The ability to continuously scale on demand for its clients’ business rules. overshadowed by SEPA transaction businesses, which can fluctuate from one to 100 million transactions per day, was the key attraction for Gresham, alongside Banking software specialist Avaloq has acquired a majority In Europe, everyone is talking about SEPA right now. But what does the strong service level agreements and GigaSpaces’ client list which stake in B-Source, a Swiss business process outsourcer. standardisation of European payment transactions through SEPA mean for the includes Morgan Stanley and NYSE. BSI, part of the Generali Group and original founders of non-SEPA cross-border payments of the banks? The number of transactions, which B-Source, will remain a minority shareholder and be an Fidessa has integrated FinCad’s derivatives pricing important customer of B-Source. The pair see this move as a is low to begin with, will further decline. Banks will have to consider whether it is library and analytics, commonly used by buy-side market logical extension of an existing cooperation between them. still worthwhile to process their cross-border transactions themselves. participants, into its sell-side trading platforms. The As a result of the acquisition, the Avaloq offering will extend partnership is intended to give sell-side firms’ access to beyond banking technology and consultancy services to Michael Steinbach Upon introduction of the SEPA Credit Transfer (SCT) potentially further declining numbers of cross-border ‘industry-standard’ options pricing and associated risk include data centre services, application management CEO on January 28, 2008, all cross-border Euro payments transactions. analytics to enhance their benchmarking and multi-asset services, and the ability to outsource banks’ entire back- Equens SE were switched to SEPA in the Euro zone. This already trading capabilities for global futures and US equity options. office and IT operations. led to a reduction in the number of cross-border In its Global Payments Report 2010, Boston Consulting FinCad has more than 4,000 clients in 80 countries so is payment transactions which, compared to the number Group assumes that payment transaction models will widely used across the sector. SunGard has completed the acquisition of Finace, a provider of of domestic transactions, was already low to begin in future have to be both cost-ef cient and exible. Fidessa is expecting the link-up to enable broker-dealers securities lending and collateral management software, from Swisscom with. In November 2009, cross-border SEPA direct We share this view, because a marked shift has taken to better manage their derivative positions in all markets IT Services. The Finace offering will complement SunGard’s existing debit transactions (SDD) were introduced. place here in the past few years: while in the past it thanks to FinCad’s comprehensive coverage and extensive portfolio of securities finance solutions, including Apex, Astec, Global was mostly standard solutions that were being sold, documentation. One and Loanet. It also has strengths in private bank lending that will According to the Global Payments Report 2010 of and rarely a customised solution, the opposite is true enhance SunGard’s offerings to European regional and private banks. Boston Consulting Group, the share of cross-border today. That’s why systems are needed that allow for Connectivity provider, Exponential-e, is to provide fast low-latency Finace will become part of SunGard’s capital markets business, where payments in Europe amounted to 2.3 per cent last year, a exible con guration of the functions on which the access to the BME’s two data centre hubs in London, which enable it will operate within the securities finance business unit. Finace’s including SEPA payments. This number will decline services are based in order to address the individual UK-based firms to more easily and effectively trade on the Spanish management team will continue in their current roles. further, if non-European companies open a Euro requirements of clients – particularly those concerning stock exchange. By moving its offering into the BME’s data account in the European branches of their banks and cross-border payments. centres the vendor is increasing the options available to its existing The Finance Trading Laboratory at the Chinese University of make their European payments via SEPA. However, the community of users, while the Spanish exchange increases its Hong Kong has enlisted OneMarketData, a specialist in tick xed costs of the banks do not decline to the same Various options for outsourcing chances of attracting liquidity. The BME, via its IT subsidiary Visual data management and analytics, to provide access to real- degree as the number of cross-border payments. non-SEPA cross-border payment Trader, maintains the two access points in London because of the time historical market data and analysis through its OneTick transactions UK capital city’s concentration of international market participants solution for teaching and research. Launched in November Own cross-border payment system There are various outsourcing options. Outsourcing and the data centres deliver a one-way latency of 14 milliseconds last year, the Lab is equipped with Bloomberg and Thomson not very proﬁ table is currently offered by nancial institutions and by between London and Madrid. Reuters terminals and supported by real-time data feeds Despite stagnating volumes, banks still have to operate independent payment processors. from the world’s major stock exchanges. Offering hands-on a non-SEPA cross-border payment system in addition Level Four Software is updating its BridgeTest product training in a simulated real-time market situation, the Lab to the SEPA payment system. The xed costs for this A neutral, so-called “White Label Service Provider” like to enable the owners of Automated Teller Machines in plays an important role in the finance training of MBA, MSc system remain the same due to existing infrastructures Equens has the advantage that only the processing of the US to conduct testing procedures for voice activated and executive education programmes. and statutory requirements, among others due to the payment transactions is taken over while the margins functionality, which will become mandatory from 15 Financial Action Task Force on Money Laundering from treasury remain with the outsourcing bank. Savings March next year under the American Disability Act giving Xtrakter, a provider of capital market data, trade matching and (FATF) or the Of ce of Foreign Assets Control in personnel costs also play a role when outsourcing visually-impaired people full access to ATM services. The regulatory reporting, is now reporting derivative transaction data (OFAC). The introduction of the Foreign Account Tax payment transactions, of course. Depending on the vendor has already updated its Regression Test Manager for clients to the UK’s Financial Services Authority using a newly Compliance Act (FATCA), planned for the beginning volume, a neutral service provider can take over the module and been demonstrating some new voice testing implemented industry format – the Alternative Instrument Identifier. of 2014, will further increase the demands on banks – back-of ce employees – because if the volume is high, capabilities. The US Department of Justice issued a final In compliance with MiFID, the use of Aii for transaction reporting with negative effects on the cost-income ratio for this the competence of the outsourcing bank’s employees ruling on new accessibility standards under the Americans across Europe for derivatives admitted for trading on regulated business segment. Currently, banks are considering is still needed, especially for non-STP transactions that with Disabilities Act in late July. The move imposes new markets will become compulsory for reporting to the FSA from whether to continue processing their non-SEPA need to be corrected manually. standards around ATM accessibility, including requirements 13 November 2011. Currently, Trax enables its users to report cross-border transactions themselves or whether to on voice guidance, height and reach, layout and touch of the derivatives transactions using Aii to the regulators in France and outsource them to an external service provider. In addition to SEPA, therefore, there is another big keypad, screen visibility and Braille instructions. Banks and the Netherlands. issue for European banks. And when, if not during ATM owner operators across America face a considerable Outsourcing can give banks more security. On the Sibos in Toronto, would you get a chance to talk about logistical upgrade challenge ahead of the March deadline. The DTCC has launched its Loan/SERV Cash on Transfer one hand, they avoid the high xed costs for the something other than SEPA: about non-SEPA cross- service, which coupled with Markit’s loan settlement maintenance and development of a cross-border border payment transactions. Promoción y Operación, a Mexico-based international card platform, gives the global syndicated loan market its first payment transaction system, while on the other hand and payments processor to 90 banks across Latin America, has delivery-versus-payment platform for secondary loan increasing their exibility through extended services upgraded its transaction switching, processing and settlement trading, and advance in reducing settlement risk in the and a xed accounting model that is based on the engine by installing ACI Worldwide’s BASE24-eps solution. A loan market. Cash on Transfer links the buyer, seller, agent number of transactions. Furthermore, this accounting customer for 25 years, Prosa previously used ACI’s standard bank, trade processing platform and counterparty accounts, model allows them to protect themselves against Base24 software but decided to upgrade to the newer system after allowing for cash and legal ownership of the asset to move a competitive review. BASE24-eps is an integrated processing simultaneously on the agreed trade settlement date. BT

40 I www.bankingtech.com www.bankingtech.com I 41 PRODUCT AND SERVICES Go to www.bankingtech.com for the latest news and comment September 2011

www.bankingtech.com I 41 INdUSTry ColUMN INdUSTry ColUMN SEPTEMBER 2011 SEPTEMBER 2011

European corporate The delay to the FSA’s Nathalie Aubry-Stacey, Victoria Barnard, governance framework International Capital Market Association Mortgage Market Review Building Societies Association

The European Union’s green paper stage policy document which is seeking for a sector or company. The Financial Services Authority’s room for lenders to take a flexible and and it is fearful of overly bureaucratic on corporate governance in financial to bring together policy at the EU level Council members believe that there long-running Mortgage Market innovative approach to meets the needs processes. institutions and remuneration policies, to “ensure that the interest of consumers is a need for an effective corporate review consultation process officially of these consumers, especially first time Better supervision and robust and swift adopted in June this year, is intended and other stakeholders are better taken governance framework based on commenced in october 2009 with the buyers, young people or the recently enforcement is the best way to deal with as a response to the great crash of 2008 into account, businesses are managed in the premise of ‘comply or explain’. publication of the initial discussion separated. Society has changed and a irresponsible lending. The FSA has already and aims to strengthen the board of a more sustainable way and bankruptcy Institutional investors have been criticised paper. Since then we have seen three certain amount of flexibility is required in moved to a more intrusive supervisory directors, pay and oversight procedures risks are reduced in the longer term”. for not exercising their responsibilities as consultations and one policy statement, our procedures. regime and therefore it should wait and and the way that shareholders engage The Asset Management and Investors shareholders and failing to hold boards along with tremendous debate and Arguably, the risk averse approach that assess the impacts of this and then target with management. Crucially, it also Council of IMCA responded to the Green to account. Regulators are calling upon comment within the industry on the relative the FSA is keen to see is already occurring rule changes where issues persist. seeks to explain how to introduce the Paper with a letter and consultations them to be more proactive in engaging merits (or otherwise) of the proposals. The anyway due to market pressures. Some In regard to irresponsible borrowing, ‘comply or explain’ approach which and are focusing on two main aspects with the management of companies and so-called ‘affordability’ rules, covering lenders are nervous about lending to any arguably for many consumers the current now underpins the EU’s framework of the changes – namely, shareholder AMIC has recognised this. Members pre-emptive consumer protection ideas consumer who doesn’t fit nicely into the economic climate may last in the memory covering corporate governance. engagement and remuneration policy. believe that it is good practice to be that would outlaw 125% mortgages for super prime, low Loan To Value category, for some time, with consumers perhaps Measures to strengthen control and risk AMIC believes that the continued transparent (and publish voting records instance, or excessive multiples of salary for instance, for fear of future regulatory being more cautious in the future when it management in banks and other financial evolution of corporate governance for instance) and to ensure that clients to loan ratios in the future has been change resulting in this lending being comes to obtaining credit. Furthermore the institutions, clarify directors’ liabilities and practices across Europe, informed by the are made aware of certain issues to be particularly hotly debated as getting this viewed as irresponsible. This segment of introduction of the Money Advice Service to increase shareholder engagement were consultations done at EU and Member voted on. However, while being engaged right is crucial in enabling first time buyers the market has tailed off significantly since may help provide better educational the cornerstone of Michel Barnier, the EU State level, present a strong argument for is part of the commitment when taking to get into the housing market safely. the financial crisis automatically. The FSA information to consumers in the future, Commissioner for the internal market and the use of best practice guidance rather a stake in a company, it is important to The FSA had originally planned has been at pains to point out to lenders helping them avoid making irresponsible services, Green Paper which is entitled than law, which once set is much more emphasise that asset managers are not to publish near final proposals and a that they should not pre-empt the final borrowing decisions. Although the caveat Corporate Governance in FIs but making difficult to revise. Business practices the ultimate owners of the assets. Any detailed indicative impact assessment rules, but with the focus on irresponsible has to be added that the effectiveness of them work on a day-to-day basis will be are not static and a flexible framework policy trying to regulate the agents as a and cost benefit analysis for the MMR this lending, can we really blame lenders for a body with the word advice in its name, the challenge. enables adaptation as circumstances proxy for encouraging desired behaviour summer, but this has now been delayed taking a more cautious approach during that does not actually give advice, remains The paper also has broader reflections dictate. AMIC has publicly supported the by principals may be counterproductive, until sometime in the autumn and no final these uncertain times? to be seen. on corporate governance in listed UK Financial Reporting Council ‘comply as agents have a fiduciary role and can rules will be published until 2012 at the The key question is how do we Also worth considering is the impact companies generally and on the issue or explain’ approach. only act on behalf of their clients as earliest now. At the BSA we believe this move forward? The FSA’s detailed cost of the proposed Directive from the of Corporate Social Responsibility, The approach allows for sufficient contractually agreed. If principals decline is a positive move, however, because it benefit analysis, which will be published European Commission that has the which is of course now mentioned in flexibility to accommodate different to empower agents, or go further and gives the industry and the regulator time alongside the near final proposals in potential to conflict with and override the many annual reports. The wide-ranging investment strategies, approaches and positively instruct them not to act, agents to get this policy right. We hope that the the autumn should take account of the MMR proposals. It is not sensible for the governance reform plan is part of the models while providing asset owners with have no authority to follow regulators’ delay will result in a constructive and wide cumulative impact of all the proposals, industry, nor consumers, to move towards European Commission’s roadmap to relevant information on the investment instructions to do otherwise. ranging debate about how best to fulfil the including in the wider economic context, a new regulatory regime at national level, meet the commitments made at various manager’s approach to engagement Finally, the industry represented by objectives of the MMR. not just in relation to the mortgage market. only to have to then unpick it all a year later G20 meetings post-crash to strengthen to make an informed decision when AMIC has, as mentioned previously, a The aims of the MMR are well trailed: to This will provide the basis for the technical to comply with new European legislation. transparency, responsibility and capital appointing a manager. AMIC also notes fiduciary duty towards its clients. The have a mortgage market that is sustainable analysis. However, we would agree with Whether the delay to the MMR means requirements and the time for delivery that the success of the ‘comply or explain’ way asset managers are compensated for all participants and to have a flexible Lord Turner, chairman of the FSA, that we will indeed see a shift in policy direction has now come. It must, however, be approach is based on good quality, therefore is aligned with clients’ interests market that works better for consumers. the debate needs to be much wider and and substantial changes to the proposals, appropriate and practicable. detailed explanations. and their longer-term horizons: asset We would add another objective, however, attempt to reach a social consensus. remains to be seen. However, if the The EC mentions that the financial Council members feel that paramount management is multi-year business which is to have a market that promotes As Lord Turner recognises, this cannot debate finds that changes are required, crisis has revealed noticeable weaknesses in these considerations should be a rather than a transactional business innovation and meets the demands of be resolved “on the basis of technical then we should be optimistic that the FSA in the corporate governance of FIs and focus on the efficiency of the board, and and remuneration arrangements already changing consumer behaviour. Perhaps analysis alone”. will take note. After all, does it really want suggests that timely and effective checks ensuring that the appropriate mix of skills reflect this, with variable pay being based that is what the FSA’s objectives also The MMR debate also needs to to regulate a lifeless mortgage market and balances in the governance systems and knowledge are present. Indeed the on a multi-year performance, typically seek to achieve, but I think we need to be focus on whether rule changes to the anymore than we want to operate in one? would have helped mitigate some of the primary responsibility of a board is to over two to three years. clearer and spell this aim out from the very detailed conduct of business rules are risks after the fall of Lehman Brothers. increase shareholder value. AMIC argues beginning. really necessary. In the UK there has The Green Paper explains clearly that that both external and internal evaluations The Building Societies Association’s not been widespread irresponsible the Commission supports the view that of a board will be useful in this context. concern is over whether the FSA’s lending, although we accept there was previously shareholders did not exercise Secondly, AMIC members do not proposals meet the core objectives in a some at the margins before the crash. enough control over risk-taking in the believe that there is excessive short- practicable way and we believe it’s this Nor was there widespread irresponsible financial institutions they owned and it termism in capital markets. Within the question which needs to be at the centre borrowing, though again perhaps at the seeks to remedy this. investment management industry there of the debate. The BSA has argued that margins there was in the past. The current European corporate governance is a spectrum of different investment some of the responsible lending proposals economic circumstances can leave some at the moment is a mix of existing strategies, with different horizons, as went too far and shifted responsibility consumers overstretched, but would rules mainly relating to mergers and dictated by client demand. Even investors away from the consumer onto the lender. lending them £20,000 less three years ago acquisitions and shareholders rights, with a relatively constant holding will, Furthermore, the prescriptive approach really have made a difference if they could alongside recommendations on the buy and sell at the margin for a number Nathalie Aubry-Stacey is secretary of to affordability assessments could leave still have borrowed it via a second charge inclusion of independent directors and of reasons, including changes to client the Asset Management and Investors some customers unable to access finance or on unsecured credit? The market itself Victoria Barnard is the Mortgage directors’ activities and remuneration mandates, fund flows, rebalancing of an Council at the International Capital at all, despite being an acceptable credit has learnt many lessons but wishes to Policy Advisor at the Building Societies policies. The Green Paper is an early index or revised views on the prospects Market Association. risk in all other respects. This leaves little retain some flexibility to help consumers Association

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The delay to the FSA’s Victoria Barnard, Mortgage Market Review Building Societies Association

The Financial Services Authority’s room for lenders to take a flexible and and it is fearful of overly bureaucratic long-running Mortgage Market innovative approach to meets the needs processes. review consultation process officially of these consumers, especially first time Better supervision and robust and swift commenced in october 2009 with the buyers, young people or the recently enforcement is the best way to deal with publication of the initial discussion separated. Society has changed and a irresponsible lending. The FSA has already paper. Since then we have seen three certain amount of flexibility is required in moved to a more intrusive supervisory consultations and one policy statement, our procedures. regime and therefore it should wait and along with tremendous debate and Arguably, the risk averse approach that assess the impacts of this and then target comment within the industry on the relative the FSA is keen to see is already occurring rule changes where issues persist. merits (or otherwise) of the proposals. The anyway due to market pressures. Some In regard to irresponsible borrowing, so-called ‘affordability’ rules, covering lenders are nervous about lending to any arguably for many consumers the current pre-emptive consumer protection ideas consumer who doesn’t fit nicely into the economic climate may last in the memory that would outlaw 125% mortgages for super prime, low Loan To Value category, for some time, with consumers perhaps instance, or excessive multiples of salary for instance, for fear of future regulatory being more cautious in the future when it to loan ratios in the future has been change resulting in this lending being comes to obtaining credit. Furthermore the particularly hotly debated as getting this viewed as irresponsible. This segment of introduction of the Money Advice Service right is crucial in enabling first time buyers the market has tailed off significantly since may help provide better educational to get into the housing market safely. the financial crisis automatically. The FSA information to consumers in the future, The FSA had originally planned has been at pains to point out to lenders helping them avoid making irresponsible to publish near final proposals and a that they should not pre-empt the final borrowing decisions. Although the caveat detailed indicative impact assessment rules, but with the focus on irresponsible has to be added that the effectiveness of and cost benefit analysis for the MMR this lending, can we really blame lenders for a body with the word advice in its name, summer, but this has now been delayed taking a more cautious approach during that does not actually give advice, remains until sometime in the autumn and no final these uncertain times? to be seen. rules will be published until 2012 at the The key question is how do we Also worth considering is the impact earliest now. At the BSA we believe this move forward? The FSA’s detailed cost of the proposed Directive from the is a positive move, however, because it benefit analysis, which will be published European Commission that has the gives the industry and the regulator time alongside the near final proposals in potential to conflict with and override the to get this policy right. We hope that the the autumn should take account of the MMR proposals. It is not sensible for the delay will result in a constructive and wide cumulative impact of all the proposals, industry, nor consumers, to move towards ranging debate about how best to fulfil the including in the wider economic context, a new regulatory regime at national level, objectives of the MMR. not just in relation to the mortgage market. only to have to then unpick it all a year later The aims of the MMR are well trailed: to This will provide the basis for the technical to comply with new European legislation. have a mortgage market that is sustainable analysis. However, we would agree with Whether the delay to the MMR means for all participants and to have a flexible Lord Turner, chairman of the FSA, that we will indeed see a shift in policy direction market that works better for consumers. the debate needs to be much wider and and substantial changes to the proposals, We would add another objective, however, attempt to reach a social consensus. remains to be seen. However, if the which is to have a market that promotes As Lord Turner recognises, this cannot debate finds that changes are required, innovation and meets the demands of be resolved “on the basis of technical then we should be optimistic that the FSA changing consumer behaviour. Perhaps analysis alone”. will take note. After all, does it really want that is what the FSA’s objectives also The MMR debate also needs to to regulate a lifeless mortgage market seek to achieve, but I think we need to be focus on whether rule changes to the anymore than we want to operate in one? clearer and spell this aim out from the very detailed conduct of business rules are beginning. really necessary. In the UK there has The Building Societies Association’s not been widespread irresponsible concern is over whether the FSA’s lending, although we accept there was proposals meet the core objectives in a some at the margins before the crash. practicable way and we believe it’s this Nor was there widespread irresponsible question which needs to be at the centre borrowing, though again perhaps at the of the debate. The BSA has argued that margins there was in the past. The current some of the responsible lending proposals economic circumstances can leave some went too far and shifted responsibility consumers overstretched, but would away from the consumer onto the lender. lending them £20,000 less three years ago Furthermore, the prescriptive approach really have made a difference if they could to affordability assessments could leave still have borrowed it via a second charge some customers unable to access finance or on unsecured credit? The market itself Victoria Barnard is the Mortgage at all, despite being an acceptable credit has learnt many lessons but wishes to Policy Advisor at the Building Societies risk in all other respects. This leaves little retain some flexibility to help consumers Association

www.bankingtech.com I 43 In Partnership with: INdUSTry ColUMN SEPTEMBER 2011

Regulatory reform: CRD4 Angela Knight, & Recovery and Resolution Plans British Bankers’ Association

It’s almost become a banking industry However, there should still be a detailed impact the amount they lend, what the customer mantra that our three priorities are analysis as changes to these proposals are ultimately wants is to be able to take restoring financial stability, securing made by the European Parliament and the banking for granted. Customers want economic recovery and ensuring Council over the coming year. The real effect of to know that they are getting a good regulatory reform is fit for purpose. All CRD4, particularly on the supply of credit into deal and that their money is safe. This is three are tall orders by themselves, but the UK economy and elsewhere, should be where RRPs come in. As an industry we you cannot have one without the others. established. are trying to stop them being referred to The aim of policymakers is to bring ■ International Alignment: as “living wills” – for one thing it is in bad about economic recovery while restoring implementation needs to take place taste, and for another it goes only a little financial stability and also carrying out on a level playing field and be operated way to explaining what these are, or the an ambitious programme of regulatory consistently internationally. The G20 protection they afford. reform which has minimal or no impact on decisions recognised the importance of the first two. the major countries acting together. The recovery and resolution Chief among the present regulatory EU, as part of the global economy, must Recovery and Resolution Plans are a reforms is the use of ever more closely not proceed alone but consider what central part of the robust and effective defined capital standards, to ensure is happening in other areas such as the reform programme being undertaken to banks always have enough money at US and the Far East. Basel III addresses contribute to financial stability. The aim their disposal to assure the markets not only capital standards but also bank is to ensure that any financial institution they can weather any economic storms. liquidity. Our initial discussions with the can be allowed to fail without imposing And if these for any reason fail, then the US authorities leave us less than hopeful the cost on its customers or the taxpayer, Recovery and Resolution Plans (RRPs) that they will implement the globally- while ensuring that its economically will be in place to ensure an orderly agreed liquidity standards in full. The important functions continue. In other failure which does not affect customers or previous global capital standards – Basel words, RRPs should be able to provide Are you ready to walk the indeed taxpayers. II – were never fully implemented in the the reassurances that customers need. First and foremost, I’d like to look at the USA, and many observers fear a repeat. If their bank finds itself facing funding capital requirements. The global authority ■ Timetable: considerable care difficulties, for instance, they will know red carpet with leading here is of course the Basel Committee needs to be taken about the timetable as that their accounts are safe even if the for Banking Supervision, which has set changes cannot be introduced overnight. bank ultimately fails. The Banking Act the coming set of capital adequacy rules The BBA looks forward to working with of 2009 set in motion the process in the professionals in the financial known as Basel III. In the European Union, the European Parliament and Council to UK for creating these plans – as with so these regulatory standards will actually finalise the legislative proposals in order much regulation, the UK is well ahead of technology industry? pass into law via a set of amendments that our members have sufficient time to the international reform programme – and to the Capital Requirements Directive. implement the changes. aspects of the RRP mechanism were used This is the fourth set of amendments to ■ More haste/less speed: the in the resolution of Bradford & Bingley and this directive, so the package is known observation and parallel running periods the Dunfermline Building Society. Similar as CRD 4. must be fully utilised before long-lasting efforts now need to be made worldwide. So far, so good. CRD 4 broadly reflects and wide-reaching operational issues are But such plans are inevitably complex, the Basel decisions which we welcome settled. We support the Commission’s so it is crucial that they are supported as essential for creating a more stable decision to introduce the liquidity by the right regulation. The next step international banking system. However, coverage ratio as a reporting standard to for the BBA will be to review the FSA’s the big unanswered question – quite apart allow the industry time to work with the recent updated RRP proposals closely to from the issue of concentrating regulatory Basel Committee and to identify which ensure they would be effective in future power at the European level or otherwise assets should qualify for the buffer. In – and, as always, that they align with Book your table today to secure your place at – is how these CRD4 changes will impact particular, we believe good quality retail international regulatory reforms. This will the supply of credit into the economy. mortgage backed securities – and yes, be crucial as the international dimension This is complex legislation and we urge these still exist – should stand alongside is increasingly important in all these post- the industry’s premier networking event! national authorities to continue to look at covered bonds. crash regulatory reforms. the impact, get the detail right and then What happens next is that the implement a timetable, in partnership with European Parliament and Council will now Contact: the other major global financial centres. consider the Commission’s proposals on The industry believes ‘maximum the prudential requirements for credit Leon Thomson on +44 (0)20 3377 3493 or [email protected] harmonisation’ of prudential requirements institutions and investment firms. is the right way forward but that individual But to the customer all of this seems countries must be free to make their own quite technical, and certainly some way For further information and to see who’s on the winners shortlist, decisions where necessary. We believe away from their everyday experience at visit www.awards.bankingtech.com the essential next steps are: the bank counter. Although it is becoming ■ Impact analysis: the European Commission more widely recognised that banks are Angela Knight is the chief executive of has published its impact assessment. safer if they hold more capital against the British Bankers’ Association. Sponsored by: Follow us on Twitter: www.twitter.com/bankingtechno Join us on LinkedIn: Go to www.bankingtech.com www.bankingtech.com I 45 and click on the button on our home page INdUSTry ColUMN SEPTEMBER 2011

Regulatory reform: CRD4 Angela Knight, & Recovery and Resolution Plans British Bankers’ Association

It’s almost become a banking industry However, there should still be a detailed impact the amount they lend, what the customer mantra that our three priorities are analysis as changes to these proposals are ultimately wants is to be able to take restoring financial stability, securing made by the European Parliament and the banking for granted. Customers want economic recovery and ensuring Council over the coming year. The real effect of to know that they are getting a good regulatory reform is fit for purpose. All CRD4, particularly on the supply of credit into deal and that their money is safe. This is three are tall orders by themselves, but the UK economy and elsewhere, should be where RRPs come in. As an industry we you cannot have one without the others. established. are trying to stop them being referred to The aim of policymakers is to bring ■ International Alignment: as “living wills” – for one thing it is in bad about economic recovery while restoring implementation needs to take place taste, and for another it goes only a little financial stability and also carrying out on a level playing field and be operated way to explaining what these are, or the an ambitious programme of regulatory consistently internationally. The G20 protection they afford. reform which has minimal or no impact on decisions recognised the importance of the first two. the major countries acting together. The recovery and resolution Chief among the present regulatory EU, as part of the global economy, must Recovery and Resolution Plans are a reforms is the use of ever more closely not proceed alone but consider what central part of the robust and effective defined capital standards, to ensure is happening in other areas such as the reform programme being undertaken to banks always have enough money at US and the Far East. Basel III addresses contribute to financial stability. The aim their disposal to assure the markets not only capital standards but also bank is to ensure that any financial institution they can weather any economic storms. liquidity. Our initial discussions with the can be allowed to fail without imposing And if these for any reason fail, then the US authorities leave us less than hopeful the cost on its customers or the taxpayer, Recovery and Resolution Plans (RRPs) that they will implement the globally- while ensuring that its economically will be in place to ensure an orderly agreed liquidity standards in full. The important functions continue. In other failure which does not affect customers or previous global capital standards – Basel words, RRPs should be able to provide indeed taxpayers. II – were never fully implemented in the the reassurances that customers need. First and foremost, I’d like to look at the USA, and many observers fear a repeat. If their bank finds itself facing funding capital requirements. The global authority ■ Timetable: considerable care difficulties, for instance, they will know here is of course the Basel Committee needs to be taken about the timetable as that their accounts are safe even if the for Banking Supervision, which has set changes cannot be introduced overnight. bank ultimately fails. The Banking Act the coming set of capital adequacy rules The BBA looks forward to working with of 2009 set in motion the process in the known as Basel III. In the European Union, the European Parliament and Council to UK for creating these plans – as with so these regulatory standards will actually finalise the legislative proposals in order much regulation, the UK is well ahead of pass into law via a set of amendments that our members have sufficient time to the international reform programme – and to the Capital Requirements Directive. implement the changes. aspects of the RRP mechanism were used This is the fourth set of amendments to ■ More haste/less speed: the in the resolution of Bradford & Bingley and this directive, so the package is known observation and parallel running periods the Dunfermline Building Society. Similar as CRD 4. must be fully utilised before long-lasting efforts now need to be made worldwide. So far, so good. CRD 4 broadly reflects and wide-reaching operational issues are But such plans are inevitably complex, the Basel decisions which we welcome settled. We support the Commission’s so it is crucial that they are supported as essential for creating a more stable decision to introduce the liquidity by the right regulation. The next step international banking system. However, coverage ratio as a reporting standard to for the BBA will be to review the FSA’s the big unanswered question – quite apart allow the industry time to work with the recent updated RRP proposals closely to from the issue of concentrating regulatory Basel Committee and to identify which ensure they would be effective in future power at the European level or otherwise assets should qualify for the buffer. In – and, as always, that they align with – is how these CRD4 changes will impact particular, we believe good quality retail international regulatory reforms. This will the supply of credit into the economy. mortgage backed securities – and yes, be crucial as the international dimension This is complex legislation and we urge these still exist – should stand alongside is increasingly important in all these post- national authorities to continue to look at covered bonds. crash regulatory reforms. the impact, get the detail right and then What happens next is that the implement a timetable, in partnership with European Parliament and Council will now the other major global financial centres. consider the Commission’s proposals on The industry believes ‘maximum the prudential requirements for credit harmonisation’ of prudential requirements institutions and investment firms. is the right way forward but that individual But to the customer all of this seems countries must be free to make their own quite technical, and certainly some way decisions where necessary. We believe away from their everyday experience at the essential next steps are: the bank counter. Although it is becoming ■ Impact analysis: the European Commission more widely recognised that banks are Angela Knight is the chief executive of has published its impact assessment. safer if they hold more capital against the British Bankers’ Association.

www.bankingtech.com I 45 contActs: neil hartley on +44 (0) 203 377 5385 or leon thomson on +44 (0) 203 377 3493 or Directory of service email: [email protected] email: [email protected]

Accuity smArtstreAm technoloGies

Accuity is the world’s leading provider of international payment routing data and AML screening software smartstream technologies delivers operational advantage to clients through enterprise-wide, real-time enabling banks and corporations to maximise payment efficiency and ensure AML compliance. Transaction Lifecycle Management (TLM®) solutions that automate, track and control financial transactions SmartStream Technologies Our Payment solutions help maximise rates of payment STP and with our recent acquisition of CBNet, and processes within and beyond the enterprise. St Helen’s we are now the only company to source all payment data, including SSI’s, SWIFT/BICs and National Bank Built on SmartStream’s TLM Enterprise Control Architecture, TLM solutions provide greater transaction 1 Undershaft Accuity Codes directly from the authoritative sources. visibility to create exceptions-based operations capable of automating complex and high volume transaction London 1 Quality Court Our compliance suite includes the world’s first compliance filtering engine, introduced in 1994, as well flows. Operational risk and cost is reduced, while customer service levels are improved. EC3A 8EE Chancery Lane as a range of caution lists and screening solutions that provide a prime defence against participation in illicit SmartStream is owned by Dubai International Financial Centre (DIFC) and has global operations United Kingdom London WC2A 1HR financial activities, such as money laundering. supporting over 1,000 clients, including more than 75 of the world’s top 100 banks. Tel: +44 (0)20 7898 0600 United Kingdom Our strategic services Group provides deployment, consulting, training and integration services. We are Email: marketing@ Tel: +44 20 7014 3480 experts in reducing False Positive rates and helping improve rates of Payment STP. smartstream-stp.com Fax: +44 20 7061 6478 Web: www.smartstream-stp.com [email protected] visit www.Accuitysolutions.com/bankingtech to sign up for a free trial of any of our industry-leading AccuitySolutions.com/bankingtech solutions. sunGArD

About sunGard cleAr2PAy With annual revenue of $5 billion, SunGard is a global leader in software and processing solutions for financial Email: [email protected] services, higher education and the public sector. Visit SunGard at www.sungard.com Tel: +44 (0)208 081 2779 clear2Pay is a payments modernisation company that actively supports global financial institutions to meet Fax: +44 (0)208 081 2001 their payments unification goals through its pure SOA Open Payment Framework (OPF). The company Adaptiv Clear2Pay NV SA facilitates financial organisations in their provision of payments services across the entire value and process SunGard’s Adaptiv provides enterprise-wide credit and market risk management and operations solutions for Schaliënhoevedreef 20A chain: Card, ACH, Branch, Bulk, High Care and International Payments. Clear2Pay also offers solutions and financial services institutions. Adaptiv assists institutions of varying size and complexity to deploy technology 2800 Mechelen, Belgium services such as e-Banking, the Open Test Platform, ChargeBack, Consultancy and Training. Clients include to meet both internal and regulatory requirements for risk management and operational control. Adaptiv helps Tel: +32 15 79 52 00 financial institutions such as ING, Banco Santander, Crédit Agricole, VISA, MasterCard, BNP Paribas, The financial services institutions from the banking, hedge fund, asset management, insurance and corporate Fax: +32 15 79 52 01 Federal Reserve, NETS (Denmark), The People Bank of China (PBOC), Rabobank, The Co-operative Financial sectors with its deep understanding of risk management and operational processes. www.sungard.com/ Jean de Crane, GM EMEA Services and Commonwealth Bank. Clear2Pay operates out of 14 countries and employs over 650 staff. In adaptiv. Email: [email protected] 2011 the company won the XCelent Customer Base 2010 award. www.clear2pay.com For more information, please visit www.clear2pay.com. front Arena A trading solution serving a range of financial institutions, SunGard’s Front Arena solution provides straight- through processing by integrating sales and distribution functions, trading capabilities and risk management. Institutional asset managers and brokers, traders, and market makers use Front Arena to trade equities, fixed- income, interest rate derivatives, and credit. For more information, visit www.sungard.com/frontarena fiDessA GrouP securities finance Exceptional trading, investment and information solutions for the world’s financial community. Around the world, $11 trillion in securities financing is managed on SunGard’s proven solutions for 85% of the world’s premier financial institutions trust Fidessa to provide them with their multi-asset international and U.S. domestic securities lending and repo for over 250 clients. Through our Loanet, Global trading and investment infrastructure, their market data and analysis, and their decision making and workflow One, Martini and Astec Analytics products and services, we provide comprehensive business solutions and Fidessa technology. $10 trillion worth of transactions flow across our global connectivity network each year. We information with worldwide reach for equities or fixed income securities financing Contact: securitiesfinance@ One Old Jewry offer unique access to the world’s largest and most valuable trading community of buy-side and sell-side sungard.com London professionals, from global institutions and investment banks to boutique brokers and niche hedge funds. EC2R 8DN A global business with scale, resilience and expertise, we’ve delivered around 30% compound growth call a sunGard expert today: 0044 (0)208 081 2779 Tel:+44 (0)20 7105 1000 since our stock market listing in 1997 and we’re recognised as the thought leader in our space. We set the Fax:+44 (0)20 7105 1001 benchmark with our unrivalled set of mission-critical products and services and, uniquely, serve both the buy- Email: [email protected] side and sell-side communities. Ongoing investment in our leading-edge solutions ensures Fidessa remains tieto Web: www.fidessa.com the industry’s number one choice.

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www.bankingtech.com www.bankingtech.com contActs: neil hartley on +44 (0) 203 377 5385 or leon thomson on +44 (0) 203 377 3493 or email: [email protected] email: [email protected] smArtstreAm technoloGies smartstream technologies delivers operational advantage to clients through enterprise-wide, real-time Transaction Lifecycle Management (TLM®) solutions that automate, track and control financial transactions SmartStream Technologies and processes within and beyond the enterprise. St Helen’s Built on SmartStream’s TLM Enterprise Control Architecture, TLM solutions provide greater transaction 1 Undershaft visibility to create exceptions-based operations capable of automating complex and high volume transaction London flows. Operational risk and cost is reduced, while customer service levels are improved. EC3A 8EE SmartStream is owned by Dubai International Financial Centre (DIFC) and has global operations United Kingdom supporting over 1,000 clients, including more than 75 of the world’s top 100 banks. Tel: +44 (0)20 7898 0600 Email: marketing@ smartstream-stp.com Web: www.smartstream-stp.com sunGArD

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About tata consultancy services Tata Consultancy Services is an IT services, business solutions and outsourcing organisation with over 143,000 IT consultants located across the world delivering real results to global businesses through its unique Global Network Delivery ModelTM.

www.bankingtech.com SEPTEMBER 2011 From the Archive OUT OF OFFICE 10 Years ago World Trade Centre destroyed in terrorist The gift of the gab attack. The Irish economy may be on its last legs and its banks on their knees, but the sense of humour and way with words that the Irish people are renowned for can still be found. Now resident in Ireland, our regular contributor Nicholas Pratt discovered a 15 good example when he was researching the cover story for this issue. What have Years we learned about risk management since ago the collapse of Lehman Brothers three years ago this Sibos? was the essential thrust of his RBS spearheads multibank EDI venture early researches. for cross-border corporate payments When he put this to one experienced and well- … vendors aim for enterprise risk known member of the risk management world management … Y2K solutions begin to over in Dublin, his man thought for a moment – no doubt pausing for a re ective sip come to market … non-banks cut swathe of his Guinness or whiskey – and replied: “Hindsight is the foresight of the gobshite.” through traditional bank territories … Despite the obvious qualities of the remark– succinctness, truth, etc – it was ruled Easdaq set to open … that we couldn’t put it on the cover, or have it as the headline for the piece. Boo. BT Pass the sick bag Another regular contributor, Tom Groenfeldt, called from the US to draw our attention to this fi ne example of overwrought prose: “Viewed from above the clouds, the prevailing regulatory currents 20 are dispensing a cold draught of transparency while also attempting to minimise risk precipitation in a globally coordinated fashion. But Years how should banks, market participants and fi nancial infrastructures ago respond to the change in climate?” Swift chief in shock resignation … Taurus Why won’t we let him write like that? Tom asks. Because the cold draught of settlement system delays … French banks reality is that we pay him by the word. falter on interbank payment cooperation By the way, the quote comes from the preview edition of Swift’s Sibos Issues … Unix offers banks plug & play IT systems publication, but we can’t tell you whereabouts in the publication because we’re still … Russia plans card network … too scared to open it, lest there is more of the same. BT More of the same The editorial policy of Banking Technology – if “policy” is a valid description of the half-formed ramblings and arbitrary, on-the- y, decisions of our leaders – is to be supportive of the fringe elements of the Sibos and their attempts to break free from the sti ing dead hand of the Swift Thought Police. But sometimes you have to take a stand. 25 Elsewhere in this issue it is noted that “members of the Innotribe community have Years embraced social media, particularly Twitter …” and so they have, Gawd Help Us. In the spirit of being positive, let us say that the use of the #innotribe hashtag ago has been a very interesting experiment from which we can draw a number of conclusions. Most importantly, Twitter needs to introduce some sort of automatic UK Financial Services “slow to organise self upper limit on the number of times that something with a hashtag can be retweeted, policing” as Big Bang looms … trades to as some humans are too blinded by the shininess of new things to re ect that if be recorded to stop abuse … Tech impact there is a hashtag for a topic of interest to a group of nite size, the chances are that on correspondent banks discussed as most of that group are already following it. You don’t need to retweet it – particularly Sibos opens in Nice … Post Offi ce to offer if it is a link to a guide on best practice for using Twitter. BT banking services …

48 I www.bankingtech.com