Sibos 2010 Day One - 'Banks and society are in this together'

26 October 2010

Last year Sibos began during a typhoon called Koppu. In 2008, the opening of the event coincided with the collapse of Lehman Brothers at what turned out to be the start of one of the worst financial crises to hit the markets since the Great Depression.

So far 2010 has been less tumultuous. The main concern was arriving in time for the morning sessions following Sunday’s opening events - arguably a less catastrophic obstacle to navigate than a natural disaster or the collapse of a major banking institution.

Mike Fish, chief information officer at SWIFT, led one of the early sessions on the first day which posed the question; ‘How much resilience is enough’?

Wolfgang Gaertner, chief information officer (CIO) of core banking at Deutsche Bank, Alan Goldstein, CIO and executive vice-president of asset management at BNY Mellon and Christine Larsen, chief operating officer and T&SS at JPMorgan Chase, made up the panel and suggested that resilience has become rapidly ingrained within the financial services industry following the great crash of 2008.

Panel members defined resilience as being able to maintain critical financial services round the clock and, if they fail, restoring these services as quickly as possible. In a positive note, the panel agreed that resilience is now at an appropriate level of attention but dialogue within the industry should be ongoing to ensure this awareness keeps up with innovation.

They agreed that awareness of the concept needs to endure to ensure any future banking crisis is anticipated. Alan Goldstein noted that while resilience is now at the centre of all banking behaviour, institutions need to remember the mantra - ‘hope for the best, plan for the worst’.

Elsewhere discussion also focussed on the need for banks to be aware of innovation and to collaborate on developing regulation. The first of the big issue debates held in the cavernous Plenary room saw a panel tackle regulation and what the future of the banking industry may resemble.

Panellists contemplated the shape new legislation after a period which Charles Goodhart from the London School of Economics, in reference to Goldman Sachs CEO Lloyd Blankfein, described as a “difficult time to be a banker, whether you’ve been doing God’s work or just behaving normally”.

Stephen Hestor, CEO of the Royal Bank of Scotland and Hans Van der Noorda, CEO of banking Benelux at ING, both suggested that firms working within the industry still need their wings to be clipped. The former stated that in an uncertain market environment banks need to identify what they are best at, then only work within this area. The latter reaffirmed this view, suggesting that banks need to strip their business back to its core. He urged firms to increase transparency surrounding processes and to realign business focus on particular customers to increase their firm’s credibility. Meanwhile, Hester described the financial crisis as one of “globalisation” and echoed the words of David Cameron, the UK’s prime minister, when he said that “banks and society have to reconnect with the idea that we are all in this together”.

The final session of my first day in Amsterdam was a conversation between Hester and chairman of the big debate, Martin Woolf, chief economics editor for the Financial Times.

During the interview, the RBS chief discussed the bank and it’s near collapse during the financial crisis. He talked candidly about the bank, its reliance on a state bail out and the criticism levied at bankers in the media and by the public for what is perceived by many to be an excessive bonus culture.

He said that the use of government money to prop up the bank means RBS is constantly in the public eye and the ensuing scrutiny is both a weakness and strength for the financial institution.

Hester also described the debate surrounding the culture of bonuses as a “no win” situation for the banking industry and explained that the excesses are not in line with reality. He added that criticism of the industry will slow as the gap between the reality and the “demonization” grows.

The RBS chief also addressed the regulatory debate surrounding government bail outs - whether banks deemed too big to fail should be allowed to collapse by the authorities.

He suggested that the size of institutions is not a threat to economic or market stability - “the principal transmission mechanism is confidence”. When an issue occurs and is followed by a parallel problem somewhere else within the markets, then this is what knocks confidence and can lead to volatility.

The banking head concluded the conversation by positively reinstating the importance of the industry. He described the banking sector as “mature” and emphasised its continued importance in ‘oiling’ the growth of the economy.

By Jim Ottewill

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