Sibos 2011 - Financial services need the “right medicine”

Day three at Sibos and the advantage of opting for footwear other than high heels is becoming increasingly obvious. It’s quite a walk from the north building, where the large plenary sessions are held, down to the guts of the south building and the hubbub of the exhibition hall. That familiar word of ‘regulation’ was …

September 22, 2011 | bobsguide

Day three at Sibos and the advantage of opting for footwear other than high heels is becoming increasingly obvious. It’s quite a walk from the north building, where the large plenary sessions are held, down to the guts of the south building and the hubbub of the exhibition hall.

That familiar word of ‘regulation’ was again being thrown around during two of the morning sessions on Wednesday. In ‘Securities Regulation – turning threats into opportunities’, the panel discussed the key challenges brought on by the incoming deluge of regulatory compliance and whether growth could stem from any of these changes.

Mark Gem, member of the board at Clearstream International, said that it would require a change in outlook. “The cost of regulatory change needs to be seen as an investment. A budget for regulatory compliance needs to be integrated into the core business budget.” Previously, the main benefit for firms was seen in terms of compliance with the rules, but Mr Gem explained that this measure of achievement needs to be widened as the landscape changes.

He also highlighted how human nature is programmed to recognise risks only after an event, such as the great crash of 2008, has occurred. Much prudential regulation is reactive rather than anticipatory – “a cynic would say it is only aimed at preventing a past crisis”, he concluded.

Patrick Colle, general manager at BNP Paribas Securities Services, another panel member, warned that innovation can open up as many new risks as it does create business potential.

“Innovation is good but we need to recognise that it can also have a detrimental impact. The financial industry should look to the food or pharmaceutical industries for their lead. For example in medicine, new remedies are tested before they reach the market place – the right medicine needs to be used to treat the right disease.” Similarly in the financial industry, remedies are effective as long as they are used to fix the appropriate problem, he explained.

The second ‘Big Debate’, ‘Back to Business – Where’s the growth in 2012 and beyond?’ looked to the future of the financial services industry. Tim Keanney, vice-chairman and chief executive officer (CEO) of Asset Servicing, BNY Mellon, said the sector is entering a “new reality”.

He explained that investment in alternative asset classes and the amount of exchange traded funds will increase while business models at financial institutions will continue to shift in line with regulatory changes. “If well-intended regulation is to take effect, it needs to be scalable, efficient and transparent … and be presented as a benefit,” Mr Keanney continued.

John E Coverdale, group general manager, head of Global Transaction Banking, HSBC Holdings, talked of the swing in economic growth from developed markets to the so-called ‘emerging’ territories. He said that the traditional idea of west selling to east should be abandoned, particularly as these latter economies are growing three times as fast as their supposedly more ‘advanced’ counterparts. Territories such as Brazil, China and the Gulf should offer much wider and deeper investment opportunities in the future, he added.

As Mark Gem said in the first session, the shadow of the financial crisis still hangs heavy over the global financial landscape and is continuing to influence behaviours among financial institutions. Suzanne Hurt, vice-president of global banking and financial services at Bottomline Technologies, explained that the demands made of their solutions have changed since the impact of the credit and liquidity crisis. Customers now want a real-time view of a transaction cycle so both buyer and seller are aware of the cash location.

She said: “It’s often said that we’re able to track a Fedex package but not a payment. And this is due to the disparate systems many institutions use. Technological changes need to be made to resolve these issues but they will be more evolutionary than revolutionary because of the cost of replacing legacy systems.”

One of the final sessions of Wednesday, Negotiating the new derivatives landscape: Is this the end for OTC? saw the spectre of regulation brought up again. The panel agreed that the implementation of the likes of Basel III and Dodd-Frank was too speedy while the full extent of the consequences of the regulation was not properly considered. Guus Warringa, board member, chief counsel, APG Asset Management, said it took more than 300 years to change the stock exchanges but only two years have been given over to changing the largest market in the world. “Please, please don’t be hasty,” he urged regulators. “No one will invest in areas of debt or potential risk. The situation is a bit scary.”

Networking and events after the conference session are almost as important as the panel sessions themselves so mention should be made for the Gtnews Corporate Treasury Awards on the Tuesday evening. Winners included Omnicom Group for Treasury Technology Implementation Project of the Year while Belden took the Cash Management Project of the Year.

Click here for full details on the various winners at the event

By Jim Ottewill

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