Sibos 2011: Sneak preview

Posted: 13 September 2011 | | No comments yet

What do regulation, transactional FX and Latin America have in common? They are all set to be hot topics at this year’s Sibos event, taking place in Toronto from 19th-23rd September. Rebecca Brace reports.

On the 19th September, the financial industry will converge upon Toronto for Sibos, the annual conference organised by SWIFT. This year’s five day event is taking place in Toronto’s Metro Convention Centre and at the time of writing SWIFT was expecting at least 7,000 delegates to attend.

This will be the first year that Sibos has come to Toronto, and there is a lot of excitement about the event among the Canadian financial community. As this year’s Sibos host, the cosmopolitan city has excellent credentials: as of March 2011, Toronto came in at an equal tenth position in the Global Financial Centres index and was ranked North America’s third financial centre after New York and Chicago.

Fifty five foreign banks are represented in Toronto, and five Canadian banks have chosen the country’s financial capital for their headquarters. The city, which has a population of around 2.5 million, prides itself on the calibre of its financial services professionals and recently established a Centre of Excellence in Financial Services Education, which aims to strengthen and increase the talent pool in the sector.

Formats and themes

In delivering information to delegates, the conference is due to employ a number of different formats. These will include plenary sessions, two big issue debates on the post crisis transaction infrastructure and future opportunities for growth, as well as conference streams covering payments, securities, technology and trade and supply chain. From 19th – 22nd September the standards forum will provide a number of sessions on ISO 20022 and other topics, while the forum for corporates on 20th – 21st September will cover a range of topics around the theme ‘Collaborating for success; harnessing end to end efficiency in cash and trade processing.’

A stream of Innotribe sessions will place a spotlight on innovation, covering topics like big data, social data and digital identity, while delving beyond the realm of technology with topics such as corporate culture, where investment money goes and new economies. Three ‘In conversation with…’ sessions will present one-to-one interviews with senior bank leaders, while Open Theatre sessions will be used to present case studies and papers on industry topics. Finally, the SWIFT Auditorium sessions will be used to provide information on SWIFT’s solutions, products and services.

This year, SWIFT has identified four major themes which the conference sessions will focus on:

  • Regulation re-visited.
  • Technology.
  • Changing landscape, new expectations.
  • Global and local perspectives.

These show an interesting evolution from last year’s nominated themes of regulation, rebuilding trust and recovery. Clearly regulation remains a major concern for the industry and as such remains at the top of the list. But whereas rebuilding trust and recovery had kept the focus of the 2010 conference on the financial crisis, albeit in the context of moving on from it, this year’s themes take a broader view of industry trends. Nevertheless, the 2011 conference will take place against the backdrop of the Eurozone crisis and recent US downgrade, which will inevitably receive plenty of airtime throughout the week.

“People are getting accustomed to the idea that conditions are going to be volatile for a while. The economic conditions will be a big topic at Toronto,” comments Malene McMahon, Senior Business Manager, SWIFT.

Emerging markets continue to grow in importance for the industry and Latin America is another topic which will be given a particular focus at this year’s conference. “We will have a day and a half focused on LatAm, with a close look at Brazil,” says McMahon. “After last year’s session on changes in LatAm – and the great LatAm cocktail party afterwards – we had a lot of requests for more on LatAm. This year we have placed a spotlight on the region and weaved a LatAm focus into a lot of the sessions that are taking place.”

Focus on regulation

The sole theme to be carried over from Sibos 2010, regulation is expected to have a major impact on this year’s conference and a number of regulatory initiatives will be heavily discussed.

Not least of these will be SEPA. “Even though the conference is taking place in Toronto, there will be a lot of European suppliers attending,” says Ruth Wandhöfer, EMEA Head of Regulatory & Market Strategy, Director Citi Global Transaction Services, Citi. “They are keen to discuss SEPA and there will be a number of sessions on this. Where do we stand on SEPA? Will certain banks outsource their payments processing? What will happen to the competitive environment? Or will we see the industry going back to domestic practices, whereby we use the same standards and syntax but have the same fragmentation as before?”

Basel III is another big topic on the regulatory front and there is likely to be plenty of discussion on the associated uncertainties. “The more we get into stock markets falling and confidence further plummeting, the real question is going to be whether all the Basel III requirements can realistically be met within deadline,” says Wandhöfer.

“We do already see key differences in the European proposed legislation that came out at the end of July. At the same time there is uncertainty over when Basel will apply in the US. Whilst the Dodd-Frank Act in the US covers the G20 recommendations around OTC derivatives clearing, which in itself shows differences compared to proposed EU rules in that space, there is still catching up to do on Basel. So the whole question of time and geography arbitrage, whether there will effectively be a level playing field, whether these measures that were taken in response to the crisis will actually be feasible when we look at what is currently happening in the market. Estimates from the Commission say banks in Europe will need to raise $600 billion or more to be compliant. How is that going to work when bank shares are currently down?”

Another key discussion where Basel III is concerned is the impact of the regulation on the area of trade finance. “Everyone in the industry agrees that trade finance has been unduly punished and we are hoping to see that being corrected from a high level perspective in November,” continues Wandhöfer. “We are hoping that on the off balance sheet regime and leverage ratios, the G20 will get together in November to look at this again.”

Meanwhile, Wandhöfer points out that Europe’s securities space is currently undergoing a raft of regulatory measures which aim to make the industry both more competitive and more harmonised. “Of course, that might have a few longer term impacts on how this industry is going to behave and Europe is likely to continue its transformation. As a service provider, it’s the usual argument of consistency: business models are entirely changed just by the mere fact of the ECB bringing in centralised securities settlement, you are changing the dynamics of the industry. And there will be additional legislation coming down at the end of the year to further enhance competition.”

Innovation, innovation, innovation Aside from the high level themes, Sibos is seen as a platform for new products to be aired. SWIFT will be showcasing a number of new and current initiatives, as McMahon explains: “One of the things we are excited about is that we are in partnership with DTCC to do a new FX repository. So that’s going to be something we’ll be talking about a lot at Sibos this year. Another thing I’m deeply involved in relating to the US market is the DTCC adoption of the new ISO 20022 corporate action messages, which have been piloted since April.

“Something else we are working on as part of our innovation area is called MyStandards, where we can capture market practices around the globe in one central place and allow our community to access them.”

Meanwhile, at the exhibition discussions around innovation are likely to include a focus on the concept of transactional FX, according to Joerg Pinkernell, Head of FI Product Management team at Barclays.

“We are seeing some very interesting times for transaction banking,” says Pinkernell. “Due to the impact of regulation and competition, pricing margins within the clearing business are under high pressure. Banks are looking to identify and explore new revenue opportunities. One such opportunity is transactional FX, whereby you convert an international payment from the original currency to the currency of a beneficiary in another country.

“For example, if people send euros from Euroland to the UK, in a lot of cases this payment would be converted into pounds by the beneficiary bank. The idea of transactional FX is to move this conversion one step higher up the payment value chain, so you can share the revenue out of this conversion with your FI client. That is something which is very high on the agenda on a number of financial institutions, in order to participate in the revenue their own transactions their own clients are generating. In a lot of cases their own clients do not necessarily know whether the beneficiary wants to receive it in euro or in local currency.”

The concept of transactional FX has begun to attract widespread attention in the past two to three years and has already led to development by most of the big service providers in the market. However, not all offerings are the same, as Pinkernell warns: “There are banks who have invested resources and money in this topic – and banks who simply say, ‘well we can convert payments from one currency to another, so let’s offer this.’ In principle, converting from one currency to another is something banks have been doing for 300 years but it is the analysis of the exception processing that makes all the difference. In order to do this analysis and process a high number of payments on an STP basis, you need sophisticated systems. In this regard, there are a handful of service providers who are very high in terms of sophisticated level.”

Pinkernell predicts that these sophisticated providers will be promoting transactional FX at Sibos and expects this to be a hot topic. He also expects that multi-currency nostro accounts will be attracting some interest: “FIs are looking to use a multi-currency account in a base currency (their home currency) to facilitate payments in exotic currencies against this account in order to save cost.” In addition, Pinkernell is backing intra-day liquidity as a topic of discussion at this year’s conference, with financial institutions look to understand how they can save money by means of more efficient settlement processes.

Virtual SIBOS

While they are likely to be prominent, SEPA, Basel III, emerging markets and transactional FX – not to mention the economic climate – are just a few of the topics, themes and products awaiting the delegates due to attend Sibos later this month.

Beyond these topics, SWIFT is taking technological innovation one step further this year and has set out to revamp the experience of conference attendees, in recognition of the proliferation of tablet computers and smartphones in the industry today. This year will see the launch of the Sibos app for iPhones and iPad, with versions also being developed for Android and BlackBerry. Downloadable from the Apple store, the app will provide delegates with the conference programme, session details, speaker information, locations and a map of the venue.

In addition, SWIFT is launching Sibos TV which will provide live streaming of interviews with executives attending or speaking at the conference. And Virtual Sibos, another new initiative, will allow attendees of the conference to access videos of the entire conference after the event, including demos and factsheets. “If two sessions are happening at the same time, you can go back into Virtual Sibos whenever you want to listen to the one you missed,” says McMahon. Virtual Sibos will be available for three months from the Monday following the event. This will come as welcome news for those delegates wondering just how to fit in the myriad discussions taking place throughout the week.

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