Just in case you didn't see it, the Banker Magazine has an exclusive interview with Gottfried Leibbrandt, CEO of SWIFT, about what to expect at SIBOS 2012 and the company's position in a rapidly changing global landscape.
I'm reproducing it here and would recommend all of you to subscribe to The Banker, if you don't already, as I write a monthly column over there that is exceptional 😉
Q. With Sibos on the horizon what topics do you expect to dominate the conference?
A. One of the biggest topics of Sibos will, I think, still be recovering from the financial crisis and regaining confidence. Part of that will be the securities industry, where I think we are seeing profound changes – in particular a significant reduction in the activities of the front office, reduced proprietary and algorithmic trading, and less active trading in general. That will trickle down to the back office. The whole securities industry will be a topic of discussion in fact, including why volumes are down this much, and whether this is a result of a correction or whether they will bounce back.
Another important subject will be regulation and compliance. We will be discussing everything that is hitting the industry, from the Dodd–Frank Wall Street reform and Consumer Protection Act to the European Market Infrastructure Regulation. Now, four years after the crisis, we are starting to see real clarity about the details of incoming regulation on capital requirements, limits on activities, resolution schemes, trade reporting and a whole slew of changes, many of which hit the back office.
Compliance issues include Know Your Customer, sanctions and anti-money laundering rules. We have seen big headlines on this subject recently, and the whole industry is going through this, so it will be another big topic, looking at questions such as what can be done about it, what tools can be used to comply and how the costs of compliance can be lowered across the industry, because everybody sees them spiralling out of control.
Q. How will the location of Sibos 2012 – in Osaka, Japan – be reflected in the conference programme?
A. We have a Japan day on the Thursday, we have the CEOs of the big three Japanese banks [Bank of Tokyo-Mitsubishi UFJ, Mizuho and Sumitomo Mitsui Banking] speaking at either the opening plenary or the secondary plenary. We also have a large number of events concentrating on Asia, so in that sense we have tried to give more of a focus on Asia as a theme than we did in Toronto or Amsterdam.
Developments in Asia will be an important subject, reflecting the shift from west to east. The cliché is that there is no such thing as 'Asia', but there really is not: Japan still struggles with the crisis, China on the other hand is forging ahead, but for the first time there seems to be doubt about its boom. India is a different story again. Meanwhile, the Asean [Association of South-east Asian Nations] countries are trying to improve integration between markets and perhaps even implement a single currency. And then there is Australia and New Zealand, which are in a league of their own.
Q. Technology has been a bigger and bigger part of the Sibos agenda in recent years. Will that continue in 2012? Is it important to attendees and to Swift's continued growth?
A. Absolutely. Banking is to some extent an information business so it should not be surprising that technology is having a huge impact and that impact has been growing over time. We see e-banking increasing, we see mobile banking increasing and we see a change from customer-hosted e-banking to cloud-based services. There is a whole wave of technological change going through banking. There is also still a huge amount of automation of back-office processes – paper flows and faxes being converted to electronic flows, for example.
The other thing happening is the consolidation and professionalisation of market infrastructures. It will be interesting to see how Target2-Securities plays out: while it is expensive, it will force centralisation and hopefully the reduction of costs for CSDs [central securities depositories] and therefore ultimately the consumer.
Swift is not a bank – we are probably closest to a telecoms provider or technology company – so we are clearly well aware of both the opportunities and the threats of technology. Historically, we have been able to leverage technology… and have moved to new technologies as they have become available. One of my clear goals is to keep that pace up. On the other hand, one of the big lessons we have learned is to provide backward compatibility, so that when you introduce new technology, it minimises the impact on users. No one wants to go through mandatory migrations when all information technology expenditure is needed for regulatory compliance and commercial projects.
It is a difficult world we are entering into, because clearly sanctions are by nature divisive and our role is to serve the global community
Our mission, and the whole strategy we have at Swift, is two-fold: making sure we continue to deliver on our core business of payments and securities messaging – that the trains run on time if you will – and at the same time ensuring that our infrastructure stays relevant from a technology and commercial perspective, and that means innovation and putting new technologies in place.
Q. In recent years, Sibos has been attracting a broader and more senior range of participants from across the banking sector and covering a wider range of topics. How do you see that developing?
A. One of the debates we are having right now is where to take Sibos. We are very happy with the increased seniority of the attendees. In terms of broadening the audience, that is a more interesting debate. We have seen an increase in the number of corporates attending, but at the same time I do not think Sibos will be competing with the large corporate events, although we are discussing whether we should bring part of Sibos to those events.
We do have a corporate forum with good attendance, which is a reflection of the increased presence of corporates on the network. This is the one segment where we have seen year-on-year growth of 40%. As corporates join us, we see the amount of traffic steadily rise year on year as they bring more flows on to Swift.
We are having a similar debate on the securities industry: the CSDs and custodians have always come to Sibos, but the brokers and the investment managers have been more peripheral and have their own events. That said, both have attended more and more in recent years.
Q. One of Swift’s strengths has always been its global nature. In the current world, is that something you can maintain?
A. That is a very good question and one to debate at Sibos as well. As a result of European legislation, we disconnected 24 Iranian banks earlier this year. The US recently passed similar legislation mandating financial messaging networks to disconnect the Iranian banks on that list. For us this has been a watershed event because we have always maintained the position that we are like the internet – we connect everybody and we do not listen in on the conversation – and the banks have to make sure they comply with sanctions in terms of what they send over the network.
It is a difficult world we are entering into, because clearly sanctions are by nature divisive and our role is to serve the global community. And we are not alone – many of the global banks are facing the same issues.
If the sanctions were backed by the UN it would be simpler than if they are backed by Europe and the US but without, say, Russia and China.
Q. Could this result in a rival network? If so, how likely is that?
A. This is a possible outcome. China has done this for credit cards – it took its national scheme international. A state could do the same with payments and decide to connect to other states directly. That is a risk we see, and we really believe the creation of such a rival network would be a loss for the global banking community.
If the sanctions remain limited in scope, then the impact should be minimal. But if we become the tool of choice for imposing sanctions on a whole series of countries, then we really are on a road we think is not conducive to the global banking system.
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