Tuesday, 30 September 2014

Sibos: day one round-up

Sibos 2014 kicked off in Boston with the focus inevitably on regulation, standards and the build-up to the much anticipated plenary which revealed Swift's pricing strategy.

Over 7000 delegates converged on the Boston Convention and Exhibition Centre for the start of Sibos 2014. Most of the old favourites, standards, regulation and technology returned to the agenda, but the appetite for discussing the issues surrounding these topics does not appear to have abated, evidenced by the packed conference rooms.

Here are the highlights from some of the main streams:

Getting Started: The headline news from the opening plenary was Swift's announcement from chairman Yawar Shah that it had reached its price cut objective ahead of the 2015 timeframe, and that it would allow free usage of its Know Your Customer (KYC) utility for participating banks in 2015. This news was sandwiched between two speeches, one from James Forese, co-president at Citibank, who talked at length about the need for banks to not isolate themselves and 'keep the trend of globalisation alive', and a talk from Swift CEO, Gottfried Leibbrandt, who discussed disruption in the market, with a particular nod towards Bitcoin and how it would fit in with the existing financial ecosystem. Leibbrandt also alluded to the fact that research showed there were 40,000 potential correspondent banking relationships between the 200 countries using the Swift network, but only a quarter of these were actually active. Swift, he added, hoped to be able to increase that number and grow its network. 

Coming together: The Market Infrastructure Forum began with a discussion focused around greater collaboration in both the securities and payments space, led by Christine Cumming, COO at the Federal Reserve Bank. Industry utilities came under the microscope, and whilst Andrew Gray from DTCC emphasised that utilities were not necessarily fool-proof or easy to implement, he used the example of the legal entity identifier (LEI) project to demonstrate the advantages that industry collaboration can have for market infrastructures (MIs). DTCC has worked with Swift on the LEI project, and Gray said that other MIs were leveraging the joint LEI solution, such as Luxembourg, and stressed that there needed to be a firmer mandate from the regulator so that more MIs adopt the LEI. Cumming concluded that there was a need from both regulators and authorities to be more open minded about utility-type models, especially concerning KYC, to allow common standards to be established.   

Virtual Reality: Innotribe has grown to become one of Sibos' most popular tracks, and the first day saw a range of sessions tackling virtual currencies (the day was rounded off with a feature length film on Bitcoin). How Bitcoin might come to be regulated drew some interesting debate, with a general disagreement about how to approach tackling virtual currencies from a KYC perspective (half the audience believed that it should be approached from a 'traditional' banking point of view, whilst the other half felt it should not be treated like other currencies). The fact that only three per cent of Bitcoin trading volumes occur inside the US led to a consensus that whatever the best approach, finding a ubiquitous model for regulating virtual currencies would be a challenge, and requires a unified approach.

The Growing Importance of Data Scientists: The role of data importance was key in the Technology Forum, with the recurring theme that it is not enough just to have the data (and in many cases banks already have a lot of in-depth customer data accumulated over time), but to know how to apply and analyse it. 'Data Scientists' are what the banks will be looking more and more to hire, and these will not come cheap, observed Peter Cowhey, dean at the University of California San Diego. His co-panellist, Chris Perretta, EVP and CIO of State Street, commented that when it comes to data, banks have a lot to learn from manufacturing. 'Similar to a sheet of steel joined to another in the manufacturing process, without too much handling, carefully pieced together and producing an end product, this is how data should come together in a bank,' he observed. 'It is like an assembly line, with data augmented along the way, covering the end-to-end process.'

Another issue mooted was the threat of the likes of Amazon and PayPal to the banking sector (nothing new here). Perretta pondered whether banks should find new areas of business to expand in so that 'we become the predators rather than the victims'.

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