David Blair
Managing Director
Twenty five years of management and treasury experience in global companies. David Blair was formerly Vice-President Treasury at Huawei where he drove a treasury transformation for this fast-growing Chinese infocomm equipment supplier. Before that Blair was Group Treasurer of Nokia, where he built one of the most respected treasury organisations in the world. He has previous experience with ABB, PriceWaterhouse and Cargill. Blair has extensive experience managing global and diverse treasury teams, as well as playing a leading role in e-commerce standard development and in professional associations. He has counselled corporations and banks as well as governments. He trains treasury teams around the world and serves as a preferred tutor to the EuroFinance treasury and risk management training curriculum.
Clients located all over the world rely on the advice and expertise of Acarate to help improve corporate treasury performance. Acarate offers consultancy on all aspects of treasury from policy and practice to cash, risk and liquidity, and technology management. The company also provides leadership and team coaching as well as treasury training to make your organisation stronger and better performance oriented.
Contact details:
- david.blair@acarate.com
- Website:www.acarate.com
This year’s EuroFinance international conference in Copenhagen kicked off in high style with a debate between Jose Barroso, EU President between 2004-2014, and Zany Minton-Beddoes, Editor, the Economist. It was impressive to watch these two intelligent and articulate people with very different viewpoints – Barroso relentlessly positive (while acknowledging the challenges) and Minton-Beddoes more sceptical.
Barroso made an interesting comment that: “Politics is making what is necessary possible.” Food for thought at a time when citizens have exceptionally low confidence in politicians. Reminds me of Friedman’s statement that “only a crisis makes the politically impossible become the politically inevitable.”
Barroso’s hard headed positivity seemed to set the tone for the conference. Despite many challenges (especially macro uncertainty and market volatility) and deep frustrations (in particular regulations and resource constraints), treasurers again and again shared how they are getting on with improving treasury with targeted and cost effective solutions to a broad range of challenges.
Hot topics
I expect that many readers could guess the key topics and challenges discussed, but the outlook on some of these seems to be shifting.
Regulation
One of the challenges most frequently cited was regulation – especially that treasurers simply do not have the time and resources to deal with it all. Yet, overall the tone was more about dealing with rather than lamenting regulation. Vendors explained how technology can help ease the burden with derivative reporting, for example. Clouds loom around Basel III extensions to intraday liquidity, but seem resolvable. Likewise it feels like all the fuss around LCR and NSFR will subside into elements in pricing discussions.
KYC
One regulation which was an enduring source of frustration was know your customer (KYC). I saw various spontaneous (and off topic) outbursts on KYC. This is clearly an area that needs rationalisation, and one where treasurers want help. Treasurers understand that the authorities want assurances that money is flowing legitimately, and are happy to do their part. What rankles is that each bank seems to be reinventing the wheel on KYC compliance, so that corporates have to meet KYC requirements in different forms and varying content for each of them and even for different parts of each bank. Banks say they don’t get clear guidelines from regulators. Regulators say they don’t want KYC debased to box ticking (which it is anyway). And so nothing gets resolved.
Notional pooling
Although the treasury press is still energetically mining the rich seam of the ‘death of notional pooling’ storyline, the clear consensus from both bankers and treasurers in Copenhagen was that notional pooling is here to stay. Pricing and terms and conditions may adjust (though nothing dramatic is expected), and different players may enter and exit the market, but notional pooling is too good a tool to loose. Good news for corporates – bad news for scare mongering consultants.
China
China is always a hot topic – all the more so this year after the highly publicised double whammy of currency volatility and stock market wobbles has been driving fears about the success of China’s transition from export and investment fuelled growth to consumption based moderation. Most speakers were quick to point out that the CNY “devaluation” and stock market “crash” were, firstly minor blips compared to routine western market volatility and secondly well within the government’s fiscal capacity to manage. Despite all the excitement, China has increased the cross border flexibility for corporate lending and kept in place the reforms from which treasurers have benefitted. There was some concern about the recent divergence of CNY and CNH, but this is mostly an accounting issue since CNH is ipso facto at parity with CNY on delivery.
SIBOS
SIBOS is always a great conference. The 2015 edition brought over 8,000 bankers, vendors, and regulators and 200 corporates to Singapore for four days of transaction banking mayhem. Of course there was a lot of corporate, banking, regulatory, and tech discussions. What stood out for me in this SIBOS was the tech focus that seemed pervasive and brought up a lot of questions for banking and for society at large.
I had the privilege of moderating a panel of experienced treasurers representing regional associations from Singapore, Hong Kong, and Malaysia. This was the first time SIBOS has had an all corporate panel – even though SIBOS has had a corporate forum for several years, they have tended to have more bank than corporate speakers. Corporates are already over 10% of SWIFT members, and represent a high potential revenue stream for SWIFT, so this is entirely propitious.
Appropriately for SIBOS, everyone agreed on the need for seamless multi-bank connectivity (which is the major part of corporate SWIFT usage at the moment). Interestingly, reasons differed. One treasurer from a retail company cited the need to connect to local banks for deep in country coverage. Another treasurer cited the need to diversify banks in light of recent examples of banks pulling out of countries and regions. Both concerns drive the need for multiple banks, and therefore for multi-bank connectivity.
Technology also came up as an area for improvement. Treasurers lamented that corporate banking lags far behind retail banking in user friendliness. American businessman, Jeffrey Immelt’s recent statement that “industry has yet to feel the benefit of internet the way consumers’ have” resonated with our panellists. This was especially felt because other streams at SIBOS were full of wonderful case studies of improved customer experience. Corporate banking awaits some spill over.
Fintech was all over SIBOS – impacting clearing, channels, trade, securities, compliance, and so on. Treasurers were excited about the prospect of fintech driving improvement in corporate customer experience, improving channels, and other peripheral activities. But they did not see fintech taking over banking per se – in other words banks will continue to be the store of value (bank accounts) and run core systems for transfer of value (clearing systems).
A recurring theme at Innotribe, SWIFT’s Fintech innovation initiative, was the move from enabling transactions (payments) to enabling commerce. It is a laudable idea. Yet, it is definitely not currently being felt over in the corporate forum. I suspect that the Innotribe crowd are thinking more about Amazon than Glencore or Lenovo when they talk about commerce.
Given the diversity of corporate commerce, enabling commerce will be a big job. It is not clear that banks are best equipped to do this, and even less that they can be cost effective. Most industries already have XML standards for the non-banking part of commercial processes, so perhaps banks should focus on easing the interface to existing commercial processes and platforms. This might include not losing customer reference data by ramping up ISO 20022, wider and more thorough support for remittance advices (remt.001 and industry versions), and faster and richer collection reporting.
This discussion reminds me of the decade old attempt to introduce e-invoices. Banks thought they could intermediate the delivery of e-invoices (and POs, DNs, etc.) between corporates. I tried to explain that corporates can send e-invoices between themselves using their own networks and standards (such as RosettaNet in the tech space) for free – why would they pay banking level fees for this? The whole thing quietly fizzled.
FAST payments
Whist the talk about the future of payments is extremely interesting, something that is with us right now and that was a hot topic is FAST(er) payments. Many countries have already implemented some kind of faster payments – including Singapore which implemented FAST last year – and most others are working on it. An early issue is what constitutes fast, immediate or instant” – most think same day is not good enough, but most existing fast payment systems cannot handle the 400ms required for public transport applications (imagine waiting 30 seconds to get through a turnstile).
There is also a schism between the RTGS crowd and those who prefer deferred net settlement. The latter creates credit risk for banks since they have to clear (credit customer accounts) before settling (receiving interbank money via central bank), however it is perhaps easier to implement and certainly less onerous for the central bank. It is good news that most fast payment systems are adopting ISO 20022 for clearing which will encourage banks to fully integrate XML in their systems and open up the value added that comes with richer data. The faster payment crowd are working together to ensure consistent ISO 20022 standards for the various flavours of faster payments.
Needless to say, faster payments also mean faster AML for banks. Real time system vendors will have a field day with this. And banks will have to beef up their processing of resulting exceptions.
Banks are working on how to deliver rich remittance advices between corporates (to aid receivables reconciliation). ISO 20022 now includes the needed standard (remt.001 et al), and the banks will handle delivery outside of the clearing systems. It’s very similar to the RosettaNet 3C6 programme we worked on a decade ago, except that remittance advices flow through banks rather than from corporate to corporate.
A closing thought
One benefit of attending SIBOS is that it gives corporates a chance to look under the hood of the banking system. A discussion on intraday liquidity did not throw up any alarms for corporates – it was mainly about banks having to report intraday liquidity under new Basel III rules. But there is (yet another) risk of unintended consequences – the morning liquidity buffers that banks typically hold to make sure payments go smoothly throughout the day may be interpreted by regulators as volatility requiring higher capital. So another rule intended to keep us safe may in fact create more systemic risk.
The views and opinions expressed in this article are those of the authors.
