Corporate Finance

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Sibos Reflections Gold at the End of the Rainbow? Helen Sanders reports from this year's conference in Sibos for the cover story of the October 2009 issue of TMI. From the corporate treasurer's point of view, Sibos is often viewed as somewhat of a 'single issue' event; namely the issue of SWIFT Corporate Access. The events of the past year, however, have lent a new interest to developments raised at Sibos. Consequently, the article looks in particular at how the increased cost pressure and growing regulatory burden has affected banks of all sizes and in what ways this put a new emphasis on themes such as collaboration.

The success of SWIFTNet as the definitive interbank communication channel is a good example of how co-operation can and has worked, and leads to contemplation that SWIFT (itself owned as a co-operative by the banking community) may be able to play a larger role in facilitating greater collaboration. Certainly, there is now recognition amongst banks that barriers to communication will compromise their competitive position.

Also included in this month's cover story are three Quick Q&A sessions regarding the evolution of SWIFT within the corporate community and the importance of the Corporate Forum as part of Sibos. TMI gets the views of Elie Lasker (Head of Corporate Market at SWIFT), Bob Blair (Head of Channel Management, Asia, at J.P. Morgan Treasury Services), and Neal Livingston (Managing Director of Transaction Banking at Standard Chartered Bank).

The article is the first in a series of three TMI articles discussing issues raised at Sibos. The other articles will appear in future issues of TMI.

Sibos Reflections

by Helen Sanders, Editor

Gold at the end of the rainbow?

The last two Sibos conferences have suffered turmoil of different sorts: 2008 saw the collapse of Lehman Brothers on day one, this year saw a typhoon. Somehow, despite climactic events of all sorts, the event seems to go on regardless. This year, like most international conferences, Sibos saw lower numbers of delegates than usual, but the sessions were of a consistently high quality with good interaction amongst participants in panel discussions. Indeed, although Sibos is largely a ‘single issue’ event from a corporate treasurer’s point of view, namely exploring SWIFT Corporate Access, there were some excellent panel discussions which addressed issues of more generic appeal. Consequently, we will be sharing comprehensive content from the event, together with presentations from the BNP Paribas’ Cash Management University, in the next two editions of TMI.

Last year, with everyone distracted by rapidly unfolding market events, the messages and key themes of Sibos were rather swamped. This year, just as the rainbow that appeared as the typhoon passed was particularly striking, there seemed to be a universal perception that the financial crisis is also coming to an end. As David Blair, now VP Treasury at Huawei warned, however, “Recovery will not be V-shaped” and companies will still be under pressure to cut costs as well as grow revenues.

Collaboration and compliance

It has been widely believed that the banking market would need to, and be forced to go through radical reform to avoid a repeat of the crisis. While these discussions are still ongoing, the impression at Sibos was that little has changed in reality, except that the regulatory burden continues to grow. This in itself is important. A few years ago at Sibos, I remember a panel discussion in which one participant (from  a very large bank) suggested that to mitigate the ever-increasing cost of compliance, collaboration between banks would reduce the overall cost burden without compromising each bank’s differentiation. At the time, this suggestion was received mutely by some and negatively by others, who responded rather archly that this was simply a cost of doing business and would prove a catalyst for the survival of some banks and not others. Today, the situation is very different. Every bank has more cost pressure than at any time. Increasingly, banks of all sizes have recognised that while there are some investments that are critical to maintaining a bank’s competitive position and delivering value to customers, there are others, such as the cost of compliance and establishing infrastructure in new regions, that are currently replicated by every bank, adding no competitive advantage or benefit to customers. Given the choice between the two, clearly a bank will invest in value-added services that generate revenue, so it makes sense to collaborate more closely.

This year there seemed to be a universal perception that the financial crisis is also coming to an end.

Collaboration doesn’t come easily to competing organisations, but SWIFT is an example of how co-operation can and has worked. With the success of SWIFTNet as the definitive interbank communication channel, it makes sense for SWIFT as an organisation which is owned as a co-operative by the banking community, to play a larger role in facilitating greater collaboration.

The growing emphasis on collaboration can only be beneficial to the huge number of corporates which work with more than one bank for a variety of reasons. Whether cash management will become easier, from the ability to establish liquidity structures across banks more easily, remains to be seen; however, the prospect of greater co-operation and commitment to common standards for corporate-to-bank communication is very encouraging. For example, we are now increasingly seeing a common commitment to standardisation initiatives such as ISO 20022. Lack of critical mass and insufficient support from market players has hindered previous attempts at standardisation, but there is now recognition amongst banks that barriers to communication will compromise their competitive position. This applies not only to the format of financial messaging, but also to the channel through which messages are passed. Banks have given their support to SWIFT Corporate Access at different times and with various levels of enthusiasm, but those that were the least in favour now seem to be lending their active support to SWIFT.

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