From Asset Servicing Times:
Technological innovations meeting demands of regulation-driven change, which is impacting business models across the financial industry’s supply chain, was the focus of delegates at this year’s Swift International Banking Operations Seminar (Sibos) payments and settlement conference.
Legislation such as Dodd-Frank in the US and MIFiD and Emir in Europe are resulting in significant structural changes, particularly in the UK where ring-fencing of banks’ retail operations will cause a major upheaval – the combined impacts of new requirements will hit firms with a 25 per cent reduction in their return on equity by some estimates.
Meanwhile, the lobbying capacity of the financial industry is weaker than ever – UBS’ $2.3 billion loss on its Delta One desk was still in the headlines as the Sibos conference began on 19 September.
“UBS was just the most unfortunate timing. It is surprising that these things still happen. As a result, I don’t think there is as much power within the financial services industry to push back. Politicians have got the bit between their teeth and have put statutes on the books and now you had best comply. That is a big challenge,” said Arun Aggarwal, managing director, UK, Ireland and Nordics for Swift.
Technological developments rising up to meet the challenges of compliance are a notable trend this year, he adds, at a time when transparency and reporting requirements are anticipated to create massive data flows for firms. And this when many firms are still using fax machines.
“I still liken a large part of the financial industry to a cottage industry. It is high time we industrialised. In a sense, that is what Swift does. We did that for correspondent banking and we are doing it in large parts of the securities and funds industry, such as corporate actions. The amount of manual processing and paper around proxy voting and corporate actions is unacceptable. The industrialisation of financial services is a key theme that we are propagating,” Aggarwal said.
Traditionally transaction banking has been Sibos’ heartland, he notes, but a wider range of the stakeholder community from the securities and IT sectors is better represented these days, notably, chief information officers (CIO).
“We have never had that much of the CIO community coming here in the past. But there is a need and a demand out there. How do you handle [being inundated with data]? How do you analyse that data? How do you sift it? Some of that links back to regulation,” Aggarwal said.
It seems that the financial services industry has moved past denial and to acceptance on the regulatory front, and the remaining questions target the most cost effective and least disrup- tive manner with which to tackle compliance. Can the problem be outsourced?
“Whether you like [regulatory change] or not, you must comply in the most efficient manner pos- sible, while focusing on core business. It is a win-win-win, be it for the industry participants, vendors or industry bodies this is time for utilities to collaborate and help solve the industries problems,” Aggarwal added.