Financial Infrastructure: Bigger, Better and ... More Regulated

20 Sept 2011 

The threat - and also opportunities - of new regulations dominated the opening plenary at Sibos 2011. Not surprisingly, there were a swathe of opinions as to the best way forward, but most agree that standardisation and harmonisation is the task of the financial services industry.

The opening plenary of Sibos 2011 focused on the rising emerging market economies as a backdrop to the crises in the eurozone and US. Keynote speaker John Havens, president and chief operating officer (COO) of Citigroup, outlined his view of the major trends in global economics:

• Decoupling between emerging markets and developed markets.
• New wave of regulations: national and international.
• Changes in technology revolutionising consumer expectations.

Havens identified four consequences of these trends:

1. A shift in global transaction banking from trans-Atlantic to Asia.
2. The unintended consequences of regulations.
3. A shift in financial services economies, with effectively a new shadow banking system.
4. Recalibration of banking economics.

His prediction was that banks would adopt a universal banking model, one that he believed Citi was at the forefront of engineering.

Tim Lane, deputy governor of the Bank of Canada, spent most of his keynote speech addressing the issue of systemic risk in the global financial infrastructure. He stressed the importance of building a robust financial system, including payments and settlements, trading and collateral management.

He explained how Canada was evaluating whether or not to set up a Canadian central counterparty (CCP) for clearing and settlement, specifically the advantages of doing so such as making it more straightforward for authorities overseeing systemically important banks; better management prices; liquidity support provision, and to reduce the financial shocks from abroad. However, he also raised some concerns such as to whether it would be economically viable and, related to that, would it deliver what Canadian and global payers were looking for?

Again, similar to Havens, Lane showed some concern over the unintended consequences of new regulations, although he did stress that the Bank of Canada supported the G20 reforms, and saw them as crucial for the stability of the global system. Havens accentuated that the world needed an open, global, standardised financial ecosystem - something that was bigger and better than what is on offer today in order to resist the shocks.

Yawar Shah, chairman of the board, SWIFT, opened the plenary citing the statistics of Sibos 2011: the last time Sibos was in Canada 24 years ago, it attracted 1700 people. Today here are close to 7,000, representing over 170 countries. He was quick to point out that last year in Amsterdam, Sibos experienced a wave of optimism in terms of the global outlook, whereas this year uncertainty reigned the day.

Interestingly, Shah also stressed the importance of the emerging economies and said there was a paradigm shift in how banks and world economy carries itself today. He stated how important it was to “serve tomorrow’s customer base”, which may be why the next three Sibos’ are being held outside of Europe, SWIFT’s main user base: next year will be in Osaka, Japan, while 2013 will be held in Dubai and 2014 will be in Boston. This is a bold gamble by SWIFT to increase its numbers outside of its strong base.

Today, I will be participating in a panel ‘Shortcut to SEPA - The European Payments Council (EPC) Highlights Latest Developments in the Single Euro Payments Area’. Plus I will be conducting two more video interviews with Pierre Fersztand, global head of cash management, BNP Paribas, and Richard Dallas, transactional banking director, Lloyds Bank Corporate Markets.

Don’t forget that tonight we will be announcing the winners of the gtnews Global Corporate Treasury Awards.

First published on www.gtnews.com