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October 20, 2011updated 04 Apr 2017 4:15pm

Sibos: Lovers and fighters

Passionate calls for unity across the banking industry echoed across the cavernous exhibition halls of the Toronto Convention Center

By James Ratcliff

Pictures from Sibos 2011

 

Sibos 2011 was an emotional affair. Passionate calls for unity across the banking industry echoed across the cavernous exhibition halls of the Toronto Convention Center. But this annual industry love-in also saw new battle lines being drawn, writes James Ratcliff.

 

Collabetition is a horrible word. In fact, it is not a word at all. But it is an idea the payments industry is increasingly subscribing to. There is a recognition that in order to compete, banks first need to collaborate in order to create an environment conducive to competition.

Perhaps the best place to take in the full Sibos panorama was, strangely, in the rather stuffy, overcrowded Community Room 4. This was where, on Wednesday afternoon, the ACI-sponsored Executive Payments Forum gathered to explore the key themes of the conference.

Over the course of an hour, the panel considered the main themes set out for Sibos 2011 under Chatham House Rules, and the key message was that banks need to collaborate on regulatory initiatives.

The frank discussions reflected many of the conversations taking place on the conference floor. The regulatory discussions revolved primarily around the unintended consequences in Basel III and SEPA. One particularly interesting issue raised was that of the future ownership of clearing houses.

"As a bank, you are using a particular clearing for the vast majority of your transactions, and there is a natural instinct to want to own a part of it – or want your central bank to part own it," said one of the panellists. "I think that will change when SEPA is properly implemented and there are higher volumes of domestic payments. At that stage we will have a number of competing providers, and banks, as buyers of clearing services, may be more relaxed about whether they want to own part of a clearing house – and that could open the door to non-traditional ownership models."

Such sentiments suggest that banks are preparing themselves for major change. But how that change is going to manifest itself depends on a wide range of factors.

 

Regulatory interaction

The previous day, in another airless side-room, Capgemini, RBS and EFMA launched the 2011 edition of their World Payments Report. Perhaps the most interesting aspect of the report was the Regulatory Heat Map (see diagram on opposite page).

It may seem obvious, but the report makes an essential point here: in order to respond effectively to the barrage of new regulations and industry initiatives they face, banks need to look very carefully at the interactions between them. Initiatives like Basel III, Dodd Frank, SEPA at Payment Services Directive should not be acted on in isolation.

Christophe Vergne, leader of the consultancy’s Cards & Payments Center of Excellence, said that work must be done to analyse the ways in which these initiatives impact one another.

"As far as we see, very little is being done to determine the cumulative effects of the various regulations and initiatives that are hitting the payments sector. Different national governments and banks are interpreting the initiatives differently, which means there is lack of clarity moving forward. I would be very surprised if one roadmap emerges," he said.

Pat Meredith, chair of the Canadian Task Force for the Payments System Review, said the industry is at the beginning of a decade of change.

These concerns have been echoed by others on the conference floor at SIBOS. Fundtech’s chief marketing officer George Ravich is concerned that the banking industry is not fully aware of the extent of change to come, arguing that "Basel III will change banking models for the worse".

He described the impact of the Dodd Frank Act and Basel III on payments as unnecessarily severe.

 

Practicalities

Back at the Executive Payments Forum, discussions moved on to the practicalities of working with regulators.

"Post-crisis, regulators are going back to protecting their national boundaries," said one panellist. "This means that working together cross border becomes a bigger challenge."

But another of the panellists argued transactional banks with strong global positions are perfectly placed to meet that challenge.

"Banks are well-positioned to help bring regulators together – encourage dialogue and bring lessons learned to regulators in the interest of the global industry," they said.

Whether you consider regulatory conversations a burden or a duty, the fact remains that they need to be addressed and new standards will have to be implemented.

"Picking up technical standards is vital," said one forum member. "They are pro-efficiency and pro-competition. Initiatives like SEPA are essential to creating a level playing field.

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