The balance of power shifts to Asia

So, another SIBOS comes to a close and another year of financial markets ups and downs draws to an end. And what a year it has been.

In Vienna 2008, SIBOS was a shock zone. In Hong Kong 2009, it has been more of a worry zone. What I mean by that is that most of the dialogue here has been around regulation and the concerns about future regulation.

This kind of goes to the heart of SIBOS, which is where is the theme?

Each year the show has a theme and a heartbeat, sometimes not even the one that SWIFT expected. For example, last year the theme was shock as Lehmans, Washington Mutual, Merrill Lynch, HBOS and others disappeared each day. The year before the theme was corporates and what do they really want. This year, the theme has been more concerned with worry, and specifically the worries of the banking community around further regulatory pressures.

It is clear that the financial markets will be exposed to further regulation. The only question is: ‘how much?’

The answer to that is less clear right now, although talking with some delegates the view is that the future is brighter if you view regulation as an opportunity to create the future, and lobby the regulatory authorities to draft meaningful and appropriate regulations, rather than waiting for them to be released and thinking of them as a threat.

This means get involved and under the skin of regulatory drives, don’t ignore them.

I’m sure that next year’s SIBOS will delve down deeper into these areas but, this year, regulatory concerns were a core focus of the show.

What else is new?

OK, liquidity risk has been at the fore. Liquidity risk is unsurprisingly up there as a big issue because that’s what’s top of mind since and thanks to the collapse of Lehman Brothers last year.

Back office post-trade clearing and settlement has become 'sexy'.

Innovation has been a source of dialogue, although not as much as perhaps in previous years.

And new technologies have been a stimulant, particularly things like Twitter. For example, last year no-one had probably heard of Twitter at SIBOS and yet this year it’s been integral to the Show, as demonstrated by this panel on the exhibition floor hosted by SWIFT with Twitter streaming as part of the core presentation of the show (note Twitter stream at the bottom of this panel):

Meanwhile, the over-riding theme of this year's SIBOS has been Asia.  That’s not that unusual, as we are in Hong Kong and it is SIBOS Asia.

Lazaro Campos, CEO of SWIFT made it clear how important Asia has become when he outlined the final attendance numbers for SIBOS 2009. Apparently, there were 5,740 people attending this year of which 2,300 came from Asia which is a new record. 2,600 were from Europe, reflecting SWIFT’s strong European focus and domain, and the 840 remainder from the Americas, Africa and Middle East.

Certainly half the audience arriving from around Asia is a coup, but it also reflects a stronger drive from Asia to shape the future of banking.

For example, I had one conversation with the Chairman of a major European bank group who believes that the power base is shifting.

For the past century, the power base was firmly in the West and American banks led the way. For the next century, he believes that the power base has moved to the East and Chinese banks will lead the way.

Chinese banks have a new found confidence and, post the crisis, they have a new found capability.

Capital strength and liquidity are in abundance with the Chinese banks, unlike those in the West, but there is more to it than this. Specifically, China’s banks recognise the issues and opportunities in this crisis because they have been through it before.

A decade ago, Asia had its own financial crisis.

Back then, the West and the Americas in particular, took a view that Asia was a backwater with poor standards and knowledge.

The result is that the West had a bit of a superiority complex whilst the East had an inferiority issue.

This is what has turned around.

Today, the Eastern banks and China in particular recognise that they have the ability to dominate the next century of commerce.

This was the focus of the plenary panel on Tuesday and I agree with Dominic Barton of McKinsey who stated that "if you don't have footprint in Asia in the next few years, you will become irrelevant".

A few years ago, that statement would have been laughed at.  Today, we just nod in agreement.

Tomorrow's banks will therefore be exploding from an Asian base.

Be there or be irrelevant.

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