Industry SectorsFinancial ServicesSibos 2014 Preview: From Regulation to Russia

Sibos 2014 Preview: From Regulation to Russia

As SWIFT returns to Boston for its annual Sibos trade show, commencing 29 September and 7,000 finance delegates from around the world wing their way to the historic city there has been much talk about the new regulatory environment revolutionising business and banking. Since Boston last hosted in 2007, Lehman Brothers is no more and the financial world has been transformed.

Barclays’ senior transaction bankers highlighted post-crash regulation as one of their expected themes for Sibos 2014 at a recent London press conference, alongside partnership and innovation; topics that Royal Bank of Scotland (RBS) agreed with at its own pre-show warm-up. For SWIFT’s head of Americas, Chris Church, compliance and tech will be to the fore, but treasury attendees cannot ignore developments in Russia and the digital agenda as mobile, online and cyber-security provision rise up the agenda.

A raft of regulations such as the Basel III capital adequacy regime, Dodd-Frank in the US and European Market Infrastructure Regulation (EMIR), are now moving to implementation stage and are expected to dominate discussions at
Sibos 2014

Technological disruption will also be discussed at the Innotribe stream, and a new Investment Forum will reflect Boston’s status as one of the world’s leading wealth and investment centres. The rise of alternative investment strategies for corporate treasurers is likely to be a key theme here, as well as in treasurers’ own Corporate Forum at Sibos 2014.

SWIFT’s head of corporate and supply chain markets, Andre Casterman, will speak at the corporate forum aimed at treasurers. He expects “the growing digitisation of trade flows in the corporate-to-corporate and corporate-to-bank segments to be key themes at Sibos,” he told gtnews.

“Increased usage of multi-banking cloud treasury and trade solutions will also be a hot topic,” he added, citing sessions with Jörgen Holmgren, director of finance at Volvo and other corporates in the forum as learning experiences.

The geo-political situation in Russia is likely to thrust politics into the trade show, amid talk about how best to implement sanctions if you’re a western bank or corporate, without getting hit by fines. The notion of
Russia being ejected from SWIFT
, however, as mooted by some in the aftermath of the present Ukraine crisis seems a little far-fetched.

Russia, a Delicate Issue

At Barclays’ pre-Sibos press conference, held at the bank’s London Canary Wharf HQ on 4 September, David Scola, the new head of banks at the corporate banking arm, said it was necessary to follow sanctions through the international network. This presents no easy task in today’s interconnected world – not just in direct relationships with targeted individuals or institutions in Russia but worldwide. “It’s a learning experience,” he said, without wanting to go into detail on whether the Russian bear will growl at Sibos.

Sven Bossu, head of Sibos and chief organiser of the trade show at SWIFT, admitted that “geo-political challenges”- code for Russian sanctions – will be a hot topic at the show, alongside compliance, but was more excited about “Bill Gates being our closing plenary speaker” and the expected focus on technological innovation.

Sanctions screening, anti-money laundering (AML) and know your customer (KYC) compliance will be much discussed this year at Sibos, as SWIFT’s recent attempt to move into processing compliance traffic for corporates, banks and others on a shared service basis gathers pace. SWIFT is trying to offer economies-of-scale savings to its banking members, as it does in payments and securities traffic, but whether it or a rival becomes the desired KYC utility remains to be seen. Corporate end users will be keen to know what platform their KYC compliance traffic is flowing across, and can be expected to question the organisers and their banking partners intently on this issue in Boston.

SWIFT’s Church agrees that regulation will dominate many Sibos discussions, particularly in the areas of KYC, AML and other financial crime initiatives. “But other topics such as cyber security, crypto-currencies [like Bitcoin], big data, mobile and digital banking trends will top the digital agenda as well.”

At Barclays’ pre-show London press conference, the interaction between regulation and technology was evident – and a more comfortable talking point than Russia – for Scola’s colleague Dan Roberts, The trade and working capital head at the corporate bank highlighted how the UK’s Faster Payments Service (FPS) came about as the exemplar of this regulation and technology nexus.

UK regulators wanted to see the end of the old three-day clearing cycle for payments, which was the genesis of VocaLink’s FPS real-time same day payments infrastructure. This regulatory demand led to technological innovation and the FPS is now the basis for retail, corporate treasury data rich services, and mobile innovations like the pay-m mobile payments infrastructure in the UK. Partnership, innovation and regulation are often all linked as the FPS’ development illustrates.

“Barclays’ own mobile Pingit service rests on the real-time FPS back-end infrastructure for low-value payments,” said Roberts. The service was of course launched ahead of time before other UK banks moved en masse to the shared UK pay-m platform, reflecting just how vital Barclays thought it was to develop a mobile banking, payment, authorisation and service channel without waiting for others.

Another key theme that Sibos will explore as part of the Innotribe innovation stream is the threat of disintermediation that banks face from new payment services providers (PSPs), PayPal and other newcomers. For corporate treasurers, however, these newcomers present an opportunity to explore alternative payment processing partners and/or drive down the price for such services. Many of the newcomers can be found in the Innotribe conference stream.

Changing Regulations and Technology on Sibos

The Market Infrastructure (MI) Forum at Sibos 2014 will doubtless touch on other instances of real-time payments systems around the world, such as in Singapore, but the main regulatory focus will be on changing global securities and collateral infrastructures. In the wake of the US Dodd-Frank and EU EMIR stipulations, which demand increased transparency, centralised clearing and reporting, the changed securities environment will be a hot topic in Boston.

New collateral requirements, intra-day liquidity under Basel III, the role of central securities depositories (CSDs) and others in the financial chain will feature. The pending higher cost of capital for banks is also set to be high on the agenda, with the impact on corporate treasury customers likely to be spelt out in plain English as part of the Corporate and the Compliance Forum. Smaller firms can expect to find it harder still to access bank funding, turning instead to the capital markets, crowdfunding or other sources developed since the 2008 crash.

“I now have to worry about capital costs under the liquidity coverage ratio (LCR) in Basel III. This was never previously a concern,” said Michael Mueller, Barclays’ head of cash management, corporate banking at the London event. “Simply put I have to put a lot of that money into a central bank now as a liquidity buffer, which means I cannot use it for refinancing, or on the other side of the balance sheet.” It also means that in a low interest rate environment banks will be picky as never before about what capital they hold, on what terms, for whom and when.

Gates Closes the Show

To round off Sibos 2014, attendees get to see Bill Gates give the closing plenary guest speech and will be interested to hear what he says about innovation, regulation and partnership, in the light of his own experiences as Microsoft’s founder. The firm famously suffered numerous anti-trust suits and Gates is often seen as an ‘oldster’ by the hip young start-up technology innovators to be found in the Innotribe.

As with the banks and big corporates, however, Gates might just justifiably argue that Microsoft provided the money and platform for much of the tech innovation that has come through since the 1980s, and some newcomers rely on platforms provided by the firm he founded. It must be admitted too that Gates himself stood on the shoulders of giants as any newcomer does. Much of Microsoft’s front-end and OS work was built on previous achievements by Xerox and others, but he contributed to today’s evolving technological scene, alongside academics such as Sir Tim Berners-Lee, inventor of the worldwide web.

It is more likely that Gates will simply stick to the advertised script, focusing on his philanthropic efforts with the Bill & Melinda Gates Foundation and its admirable work to improve the financial, educational, health and general situation of the poor in the developing world.

The Foundation will no doubt tap Sibos 2014 delegates for assistance towards its work to help the poor access financial services, but hopefully Gates won’t stick too tightly to the script as it would be riveting to hear his technology and disintermediation viewpoints. Let’s hope the slideshow doesn’t crash and no animated paperclips pop up!

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