Banks

on SWIFT

THE VALUE OF SWIFT FOr bAnkS

ISSUE 4 Q3 2011

Contents
Editorial Common solutions to common problems
page 1

Editorial

Common solutions to common problems

Across a range of diverse business challenges, SWIFT is working with banks to identify areas of collaboration that meet end-clients needs more cost-effectively.

Interview renminbi internationalisation brings offshore opportunities

Thomas Poon, head of business planning and strategy at HSBC, believes the pace of RMB business in Hong Kong and further afield is set to accelerate rapidly.
page 2

Perspectives Aligning financial services with the real economy

SWIFT actively engaged with key industry issues at the 12th Asian Banker Summit.
page 3

Value business Intelligence to improve decision-making

SWIFT enhances its Watch products to meet evolving business needs.
page 4

Solutions Promoting integrated solutions for remittances

SWIFT Workers Remittances Day in Dubai confirmed strong industry interest in standardisation and interoperability.
page 5

Value SWIFT Sanctions Screening service to debut in early 2012

Centralised screening will provide a costeffective approach to sanctions compliance.
page 6

News Data management issues delay liquidity risk progress

A new SWIFT white paper confirms that collaborative solutions are needed to resolve data problems and enable compliance with new liquidity management regulations.
page 7

Interview bPO: Mitigating risks in international trade

Banks on SWIFT spoke to Sharyn Trainor, Director, Global Financial Supply Chain Product Management, Deutsche Bank about the banks approach to the opportunities that TSU and BPO present.
page 8

he growing importance of Asias economic superpowers is perhaps most evident in the widespread use of Chinas renminbi (RMB) as a currency for settlement of international trade. In a short period, use of RMB has accelerated from a strictly controlled pilot to a global phenomenon. In this issue, Thomas Poon, head of business planning and strategy at HSBC, asserts that all banks involved in international trade will be impacted sooner or later. The underlying message is that banks should consider their strategies now. Poon also suggests a role for SWIFT in enhancing RMB currency flows through increased automation. To this end, in September we will deliver a white paper in conjunction with Bank of China, Citi, Deutsche Bank, HSBC, ICBC and Standard Chartered. Interested parties should also attend the Sibos session, Payments to China: Internationalisation of the RMB and the Rules of the Road for Cross-border Settlement. One illuminating source of data on RMB trade flows is SWIFTs Watch product range which has been extended to further leverage SWIFT message traffic data (page 4). These services provide new insights into banks correspondent banking activities based on granular analysis of transaction volumes and currency flows. Further, SWIFTs Business Intelligence tool can be used to support strategic and product level decision-making as well as identifying risks and operational efficiencies. New challenges for banks often demand new solutions. An example highlighted when SWIFT brought Innotribe to Mumbai in early June is the National Payments Corporation of India, which has launched a pilot mobile payments system the Interbank Mobile Payments Service through which its member banks can provide banking services to Indias many millions of mobile phone users. Cooperation on this scale is rare but shows the value to customers of banks working together to build a common platform. For those keen to learn, the Sibos session, Mobile payments Is it too late for banks?, should prove informative. The increasing importance of person-to-person payments was also confirmed at SWIFTs Workers Remittances Business Day in Dubai. Interoperability is an imperative and a number of banks made the case for replacing bilateral arrangements with use of SWIFTRemit SWIFTs solution for workers remittances; we have already experienced an increase in bank certification to participate in the scheme. Collaboration is also on the agenda in the liquidity risk management space. The latest SWIFT survey on liquidity management has found that data management issues are hampering the development of effective strategies and respondents called for collaborative solutions such as industry best practice for intraday cash reporting and common reporting standards and liquidity monitoring and control standards for use across high-value payments systems. The challenges are explored further in our new white paper Managing liquidity risk: Collaborative solutions to improve position management and analytics - and at Sibos, in Liquidity Risk Have we learned lessons from the last crisis? Common solutions to common problems may just catch on.

Wim Raymaekers, head of banking market, SWIFT

Interview

Renminbi internationalisation brings offshore opportunities

Thomas Poon, head of business planning and strategy at HSBC, believes the pace of RMB business in Hong Kong and further afield is set to accelerate rapidly.
ccording to recent figures from the Hong kong Monetary Authority (HkMA), total Chinese currency deposits in Hong kong were rMb 510 billion (USD 79 billion) at the end of April, representing a fivefold increase in under a year. The increase in deposits reflects a significant increase in corporate activity, which accounted for two-thirds of total deposits. Thomas Poon, head of business planning and strategy at HSbC in Hong kong, sees significant room for growth in rMb business globally. In due course, I think most banks involved in global trade, both Chinese and non-Chinese, are going to feel the impact of rMb internationalisation on their own business, he says. At the moment, Poon suggests, Chinese banks are still living within their traditional comfort zone. The rMb is mainly traded onshore within China; it is still a closed market to a large extent. Exchange rates and interest rates are regulated, he says. rMb internationalisation will result in
Thomas Poon, HSBC

an increasing number of cross-border trades being done in rMb and, as a result, a lot of what might have been considered captive onshore business will now be open for banks offshore to enter. The reason we at HSbC are so excited about this opportunity is that a lot of things that we as foreign banks cannot do in China can now be done offshore using the offshore rMb market, says Poon. In aggregate terms, foreign banks altogether account for less that 2% of market share within the domestic Chinese banking sector. Thats as much as the foreign banks could get their hands on domestically. Internationalisation will, for example, allow activities such as rMb hedging to be done by banks like HSbC in Hong kong or other parts of the world. We see tremendous opportunities for foreign banks. This will obviously impact Chinese banks as well. They have to rethink their overall business model and strategy to sustain market share. Timeframe How rapidly does Poon see rMb internationalisation developing? He suggests that after an initially slow start, business opportunities are accelerating rapidly. Although the concept was launched in July

2009, it didnt really take off then because of the restrictions under which it operated, says Poon. Over the past eight or nine months, however, since the Peoples bank of China (PbOC) introduced a number of relaxations in the regulations, there has been considerable movement. now 7.5% of Chinas global trade is denominated in rMb, says Poon. In Hong kong, we have also seen a significant increase in rMb deposits as well as in rMb business and revenue flow. While Hong kong is leading the way, Poon sees other financial centres, such as Singapore and London, beginning to wake up to the opportunities. banks in Hong kong are the first to realise the potential of offshore rMb business, because Hong kong has always been very close to China, but other markets and banks will come to realise the business opportunities that are unfolding, says Poon. Enhancing currency flows Poon sees an important role for SWIFT in facilitating an efficient rMb market over the longer term. We would look to SWIFT to enhance rMb currency flow and automation opportunities, he says. In the near term, I understand SWIFT has formed a number of small working groups to explore the operational requirements for rMb flows. HSbC for its part has established a dedicated team in Hong kong to promote, coordinate and facilitate the development of all rMb-related service developments and product suites. We have to take a longer term view, says Poon. There is a balance to be struck between short-term cannibalisation of existing business and the longer term strategic goal of generating a sizeable future revenue stream. Its also important that ownership of this process should be vested in a business and product group within the bank. Its not just one persons mission. l

Internationalisation will, for example, allow activities such as RMB hedging to be done by banks like HSBC in Hong Kong or other parts of the world. We see tremendous opportunities for foreign banks.
Thomas Poon, HSBC

Banks on SWIFT

Visit swift.com/banks for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/banks or email us at swiftforbanks@swift.com

Perspectives

Aligning financial services with the real economy

SWIFT actively engaged with key industry issues at the 12th Asian Banker Summit.
he Asian banker Summit 2011 took place in Hong kong on 6-8 April attracting over 800 senior bankers, regulators and service providers and featuring prestigious speakers such as norman Chan, chief executive of the Hong kong Monetary Authority (HkMA), He Guangbei, chairman, Hong kong Association of banks, Muthukrishnan ramaswami, president of Singapore Exchange and Jos Mara roldn, director general for banking regulation, banco de Espaa and chair of the Standards Implementation Group of the basel Committee. representing SWIFT on several panels were Gottfried Leibbrandt, head of marketing; Patrick de Courcy, head of markets; Wim raymaekers, head of banking market; Alex Lee, director, payments markets, Asia Pacific; Adam Wilson, director, securities markets, Asia Pacific; and Matteo rizzi, innovation leader. Leibbrandt looked at how the banking community has evolved to accept corporates connecting directly to SWIFT. Our customers are no longer competing on the infrastructure to deliver services, but on the value-added services that they can deliver over a common platform, such as lending and cash

profit, customers, regulators and the industry coming together in the transaction banking space to deliver innovative, next generation services to new customers coming into the system. Mobile banking In a session entitled, How are mobile challenges changing how we do business? Alex Lee, together with Suresh Sethi, group president, transaction banking group, YES bank, and Chakrapani Gk, director emerging markets, nokia Financial Services, looked at the entrance of non-banking financial and telecommunications companies and their impact on trade banking. Panellists discussed the offerings by MnOs and how interconnectivity could leave the banks out of the picture. Is there a space for cooperation between the two industries? asked Lee. In an ideal model of cooperation, panellists agreed, stakeholders could leverage existing processes and industry bodies, but the unanswered question remained: who can take the lead and bring everyone to the table? Intraday liquidity Wim raymaekers represented SWIFT in a session on Prioritising bank liquidity The crucial role of transaction banking departments in measuring and monitoring intraday liquidity risk. The main points raised during the panel session showed that the issue of intraday liquidity is definitely on the agenda of banks as it has been put forward by basel III and more recently by the HkMA, said raymaekers. Panellists randy White, corporate treasurer for Asia, JP Morgan, Martin Maurer, secretary general, Association of Foreign banks in Switzerland, and Mark Taylor, strategic accounts director, SmartStream Asia Pacific agreed that transactions departments could play an important role in collecting better information (from internal systems, branches, correspondent banks and settlement systems) and build a data warehouse for liquidity analytics and decision reporting. This was a great opportunity for us to demonstrate the value of our FIninform copy services, Watch Analyser and integration consulting services as these can help with intraday messaging, said raymaekers. l

Our customers are no longer competing on the infrastructure to deliver services, but on the value-added services that they can deliver over a common platform.
Gottfried Leibbrandt, SWIFT

management, he told participants. Today, more than 700 major corporations have signed up directly to SWIFT to connect to the many banks around the globe with which they work. John Wong, managing director, head, transaction banking, Global Wholesale bank, Maybank, agreed. Every CFO, every corporate, is different and we as individual institutions need to focus on meeting their very specific needs, he said. no single solution, proprietary or otherwise, can cater on a mass scale to these customers needs and for this reason the industry needs to agree where it can on common solutions to be able to focus on delivering our own value-add. He told the audience that local banks in Asia are waking up to transaction banking. Its a line of business, its not the back office, he explained. Wong shared experiences with banks wanting to have correspondent relationships, but fighting over whose proprietary system to use to deliver to the customer. now that they use SWIFT, these discussions become moot, he said. If our clients look at a single channel only, they are limited across the entire liquidity chain, noted Faisal Ameen, managing director, global transaction services, Asia Pacific, bank of America Merrill Lynch. He pointed to the example of Vietnam, which represents tremendous opportunity as only 27% of the population of 87 million have a bank account. The growth potential is exciting for the banking industry, given the Vietnamese governments responsiveness and commitment to building out the countrys infrastructure, as the industry can only be as successful as the infrastructure available. Patrick de Courcy pointed to the creation of the national Payments Council of India (nPCI) as a great example of collaborative innovation by the industry. nPCI is a perfect example of

Banks on SWIFT

Visit swift.com/banks for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/banks or email us at swiftforbanks@swift.com

Business Intelligence to improve decision-making

SWIFT Watch products meet evolving business needs.
usiness Intelligence is becoming increasingly important to banks as they look for insights into customer, market and correspondent network behaviour and seek to improve profitability and market share. SWIFTs Watch products provide that intelligence by offering access to a wealth of information from messages sent over the SWIFT network. The Watch portfolio was extended in December 2010 with Value Analyser, which enables customers to understand the value of their transactional activity and analyse currency flows. Together with Traffic Analyser, it provides business insights into correspondent banking activities, including payments and cash management, trade finance and network management. The combination enables customers to take strategic and operational decisions based on data on messages exchanged by volume and value, at group or institution level, for a region or a specific corridor. SWIFTs business Intelligence can be leveraged to define strategies to grow and maintain market share, enhance product portfolios and develop and monitor your footprint, identify exposure, manage risk, and improve efficiency. Alongside the Analysers, Watch also provides reports. SWIFT is revamping these reports to provide insights into specific business domains; in particular, correspondent banking. To shape these new dynamic reports, SWIFT is undertaking a consultation exercise, among Watch and non-Watch users, to identify requirements for functionality (market comparison, filters for drilldown, report frequency and delivery methods), content (message types to include, correspondents to cover), and smart visualisation. If you are interested in participating in this consultation, please contact Watch@swift.com. In addition, SWIFT offers business Intelligence Services to provide reports and customised views for specific businesses needs and insights beyond the standard Analysers and report data such as peer benchmarking or macro-economic comparisons of GDP or international trade. A session at Sibos, Define the future of your correspondent banking business with SWIFT business Intelligence will take place on Wednesday 21 September from 10:00-10:45 in the SWIFT auditorium. Do not hesitate to contact us if you would like to meet us at Sibos to learn more about our evolving Watch product portfolio. l

Value

Example 1
Market share based on currency usage per value/volume Market share in MT 103 outbound France
60%

50%

40%
Market share

30%

20%

10%

0% Euro Us Dollar Pound Sterling Volume outbond Swiss Franc Swedish Krona Yen

Value outbond

Example 2
Reciprocity gap in volume and value Top 5 USD counterparties MT103 % Reciprocity gap by volume / amount
% Reciprocity gap (amount)

IN
100,0

50,0

0,0

-50,0

-100,0

OUT

Bank 1

Bank 2

Bank 3

Bank 4

Bank 5

Example 3
Trade evolution (inflows/outflows with Africa)

United States United Kingdom

Austria

Bangladesh Bahrain

UAE

Belgium

Spain

Africa

China

Saudi Arabia

France

Portugal Netherlands Japan Ireland

India

Banks on SWIFT

Visit swift.com/banks for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/banks or email us at swiftforbanks@swift.com

Solutions

Promoting integrated solutions for remittances

SWIFT Workers Remittances Day in Dubai confirmed strong industry interest in standardisation and interoperability.

WIFT held its Workers remittances business Day in Dubai on 19 April 2011. Over 65 people from 35 financial institutions and software companies from the remittance industry gathered for the event which was hosted at the Jumeirah Emirates Towers Hotel. The event was attended by participants from 15 different Middle East and South Asian countries. The fact that 65 people attended the event shows the role that SWIFT can play to help its customers grow their business and foster dialogue, noted khaled Moharem, account manager, SWIFT Dubai office. In the remittance market, the Middle East South Asia corridor is one of the busiest in the world in terms of number of transactions.

Activity is on the rise again after a slowdown due to the economic crisis. The World bank has forecasted that in 2011 remittances into South Asia will amount to USD 83 billion, some 5% up from 2010. The day began with presentations by some of the major regional players: Al rajhi (Saudi Arabia), ICICI (India), Eastnets (UAE), Habib bank (Pakistan), Citi bank and Al Fardan Exchange (UAE). They shared their views on market trends in both South Asia and the Middle East, explained the biggest challenges for them and their customers and set out where the business opportunities lie. One of the main messages from the morning session was that person-to-person remittances is the fastest growing segment in the payment market a trend set continue with the increasing number of Asian migrants who live and work in the Middle East, especially in the Gulf countries.

In the afternoon, SWIFT facilitated roundtable sessions organised by senders (mainly Middle East) and receivers (mainly South Asia) to explain their specific requirements and start a dialogue with their counterparties. both senders and receivers agreed that interoperability is key as traffic increases and more and more financial institutions enter the remittance market. The lack of interoperability is seen as a major issue as it prevents financial institutions (FIs) from scaling up their business. Hence the interest of most FIs in SWIFTremit, SWIFTs solution for workers remittances. The growing involvement of financial institutions in remittances calls for higher standardisation of inter-bank processes which is the core business of SWIFT, said nicolas Willard, head of remittances, EMEA, SWIFT. Picking up on this, Cesar Santos, Jr, senior vice president and group head, Global Filipino banking Group, Philippine national bank argued that, We need to be on SWIFTremit sooner rather than later At this point in time, the current bilateral arrangements are working fine but as the normal cycle of technology updates happen across most institutions, these bilateral arrangements will be challenged by the elegance of having only one messaging standard across all partners. The SWIFT solution will allow us to reach a large number of FIs with a common way of working and set a path for a standardised approach which results in efficiency, risk mitigation and speed, commented Osama H. Al rahma, director, Al Fardan Exchange. l

The SWIFT solution will allow us to reach a large number of FIs with a common way of working and set a path for a standardised approach which results in efficiency, risk mitigation and speed.
Osama H. Al Rahma, Al Fardan Exchange

T
5

Sibos 2011 in Toronto 19-23 September

(risk) management and the rapidly evolving regulatory environment of sanctions and AML, harness business intelligence to support better decision making about the future of your correspondent banking business, leverage the opportunities and manage the challenges of the Single European Payments Area, and analyse and use big data to make correlations and even predict trends.

here is a comprehensive line-up of sessions for banks at Sibos in Toronto. Check out www.sibos.com for more details of sessions on how to: exploit new developments such as mobile technology and the internationalisation of the RMB, address the changing face of trade and finance with the next generation of rules and tools, discover collaborative initiatives to support compliance on liquidity

Banks on SWIFT

Visit swift.com/banks for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/banks or email us at swiftforbanks@swift.com

Value

SWIFT Sanctions Screening service to debut in early 2012

Centralised screening will provide a cost-effective approach to sanctions compliance.

Sanctions and AML at Sibos 2011

implement foreign policy and fight financial crime and terrorist groups. keeping up-to-date and compliant with ever-changing sanctions lists and requirements represents a common challenge to the banking industry. The burden is particularly great for small to midsize banks, which often lack internal sanctions compliance resources. Enter SWIFTs new centralised Sanctions Screening service a unique, cost-effective solution in this area of growing concern and workload. Currently under development with FircoSoft and scheduled to go live in early 2012, Sanctions Screening over SWIFT will combine FircoSofts market-leading filtering application and list update service with the security and resilience of SWIFT. If you work at a smaller financial institution, Sanctions Screening will help you comply with evolving sanctions regulations. And, you dont have to worry about a costly and complex set-up and implementation process or expensive systems maintenance the service is zero

conomic sanctions are an instrument of choice for governments looking to

footprint and essentially subscribe and comply. Development of SWIFTs Sanctions Screening service is well under way, with pilot testing scheduled to start in October. Groups from the Uk, Italy, the netherlands and Finland took part in a recent workshop to validate the service description, including functionality, roles and responsibilities and the legal framework. How SWIFT Sanctions Screening works As a user of the new Sanctions Screening service, you will be able to request that selected SWIFT FIn messages be routed to the centralised screening application, where they will be filtered in real time, and checked against your selected sanctions lists. If there is no match to the sanctions list, the message will be delivered as usual. If there is a match, you will be asked to instruct SWIFT whether to release, abort or flag the message via an alert management system. Its that simple. A win-win for the industry As a result of recent regulatory evolutions, institutions are increasingly focusing on the financial crime controls applied by their correspondents. The new service is designed to increase compliance in the community

anctions and anti-money laundering will once again be in the spotlight at Sibos with the conference session, Sanctions & AML complying with requirements without breaking the bank. Make plans to join this session for a discussion of recent regulatory developments, the benefits and challenges of industry collaboration, tools, sharing of practices and common standards to meet the increasing expectations of regulators. The session takes place on Monday, 19 September from 16:00 17.00 to Conference Room 3.

For more information on this topic, please contact: brigitte.dewilde@swift.com. as a whole, explains brigitte De Wilde, head of AML & sanctions initiatives at SWIFT. Global banks are also interested in how the service could help their correspondents perform their own transaction screening and compliance activities, she says. SWIFT Sanctions Screening is an easy and costeffective solution that they might want to encourage their correspondents to subscribe to. Providing the international banking community with a secure, standardised service that supports sanctions compliance is another way SWIFT is fulfilling its mission of delivering standardised approaches that help our customers increase their efficiency and reduce costs and operational risk. Although global clearing organisations are less likely to use the new SWIFT service, they will still benefit from it indirectly by getting assurance that their correspondents are screening transactions before sending them. l

SWIFT Sanctions Screening is an easy and cost-effective solution that [global banks] might want to encourage their correspondents to subscribe to.
Brigitte De Wilde, SWIFT

Banks on SWIFT

Visit swift.com/banks for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/banks or email us at swiftforbanks@swift.com

News

Data management issues delay liquidity risk progress

A new SWIFT white paper confirms that collaborative solutions are needed to resolve data problems and enable compliance with new liquidity management regulations.
inancial institutions continue to struggle with the implementation of effective liquidity risk management strategies, according to a survey of industry experts. The key to overcoming these challenges is developing collaborative solutions to data management issues, according to a new SWIFT white paper entitled Managing liquidity risk: Collaborative solutions to improve position management and analytics that analyses the surveys findings. A previous SWIFT whitepaper and survey in 2010 concluded that effective liquidity risk management requires a top-down and bottomup approach. Strategy, principles and objectives must be set at management and board level, while the liquidity dashboard and analytics must be obtained at the operational level. However, the 2011survey found that data management challenges holding up progress in addressing liquidity risk issues have not yet been solved. Managing liquidity risk is a complex process that involves having the right monitoring and controls in place, as well as quantitative measures and reporting, says Catherine

banneux, senior market manager, SWIFT, but until the right data is readily available at the right time, progress will be difficult. At SWIFT, we can help our customers by leading and supporting collaborative efforts within the industry, namely by driving standardisation. Six key data challenges SWIFTs survey of 40 cash, liquidity and liquidity risk managers at financial institutions around the world identified six key areas in which data management needs to improve, to create: a view on intraday cash position across currencies (93%); ready-made liquidity risk analytics and business intelligence (91%); advanced interactive cash and collateral management functionalities within payments infrastructures (89%); an ability to build predictive positions (88%); an intraday view of unencumbered collateral positions including margin calls (88%); an ability to manage and report liquidity positions at a firm-wide level (82%).

Delivering real savings While regulation is a leading driver for improved management of liquidity risk, the business case to invest in real-time liquidity management goes beyond regulatory compliance and risk mitigation. Getting it right can save banks a lot of money, too. Lack of intraday data can lead to late identification of gaps between forecast and real inflows, outflows and positions, resulting in substantial financial costs due to over-collateralisation, intraday credit line costs, higher funding costs, overdraft charges and higher liquidity buffers. Collaborative efforts to develop industry standards an area of leadership and expertise for SWIFT could deliver real savings for the industry. Five top priorities The good news is that survey respondents also identified five top-priority collaborative developments that will address these challenges, some of which could be implemented in a relatively short timeframe. They are: industry best practice for intraday cash reporting; common reporting standards and liquidity monitoring and control standards for use across high-value payments systems; a standard margin call solution to support the implementation of intraday feeds in liquidity management applications; industry best practice for collateral reporting for liquidity management purposes; a central payment tracker/adviser platform providing transactional status. SWIFT is ideally positioned to help customers address these challenges. The business and regulatory pressure for financial institutions to improve their liquidity risk management cant be ignored, says Luc Meurant, head of banking, supply chain and corporate markets at SWIFT. The industry has to find solutions to the data management challenges. In addition to internal integration projects, the answer lies in collaboration. Industry-level initiatives to address these issues have already started. SWIFT stands ready to support our customers in these efforts. l Email: Catherine.Banneux@swift.com for a free copy of the white paper.

Liquidity management at Sibos 2011

E
7

xplore the topic of liquidity risk further at Sibos by attending the session: Liquidity Risk Have we learned lessons from the last crisis? Tuesday 20 September 16:00-17:00 Conference room 1

The business and regulatory pressure for financial institutions to improve their liquidity risk management cannot be ignored SWIFT stands ready to support our customers in these efforts.
Luc Meurant, SWIFT

Banks on SWIFT

Visit swift.com/banks for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/banks or email us at swiftforbanks@swift.com

Interview

BPO: Mitigating risks in international trade

Banks on SWIFT spoke to Sharyn Trainor, Director, Global Financial Supply Chain Product Management, Deutsche Bank about the banks approach to the opportunities that TSU and BPO present.
How has Deutsche Banks approach to TSU and BPO commercialisation evolved? Deutsche bank was involved in discussions around the Trade Services Utility (TSU) from the start. With the first release of the TSU our involvement deepened. However, it was with the additional functionality of the bank payment obligation (bPO) that we became actively engaged in exploring the commercial opportunities of the solution. We have a large community of importers and exporters among our client base, both in Europe and worldwide. Working capital is a huge strategic priority for them. With the shift to open account trading, clients are coming to us and looking for solutions to the challenges of risk mitigation and supply chain financing and we want to move with them. To accommodate the heightened interest of our clients in financial supply chain solutions, we are investing in our supply chain offering to maintain a leading position in this space. While the ideal situation for a bank is to have both sides of the transaction i.e. the importer and exporter as customers, there is a challenge for any one bank to cover every clients credit needs in every geography. In the
BPO is an optional component of a transaction in SWIFTs Trade Services Utility (TSU) which places a legal obligation on the issuing bank to pay the recipient bank subject to the matching of compliant data in the TSU. The BPO delivers all the benefits of a letter of credit, without the drawbacks of manual processing. For more information, please contact your account manager or visit www.swift.com

traditional paper-based trade business, where banks already actively collaborate as a matter of course, there are standard messages. TSU has the potential to create a similar environment in the open account space. We see the TSU as an opportunity to allow us to collaborate in the open account space with other banks in a standard, regulated fashion. How are you going about engaging your corporate customers in promoting new collaborative trade services? Understanding client needs and proactively working together to identify and provide the best solution is at the heart of all we do. Many aspects of the financial supply chain require a partnership approach between counterparties. We are constantly engaging with our corporate clients as we work together to develop tailored solutions. We also felt it was critical to expand the bank-to-bank discussions around TSU to actively include more input and feedback from corporates. In addition to our own client discussions, as part of the European user group, the German banks organised a corporate workshop to actively engage corporates. In addition, we are working with banks on a partnership or collaborative basis to identify joint business opportunities to provide greater value to our respective clients. What feedback have you had from corporates so far? There has been lots of interest from corporates in innovative open account and financing capabilities. Many are actively looking for alternative ways to access liquidity and build greater automation and efficiency

in their processes. key strategic priorities include risk management, enhanced visibility and the ability to improve working capital. Multinational corporates are especially interested in more flexible financing. Most of the solutions on the market today are built around strategies like reverse factoring. There is certainly interest in multi-bank solutions and standardisation. This can be supported by initiatives such as the TSU. Where is Deutsche Bank in terms of products within its trade services portfolio that are built on TSU and BPO? Deutsche bank has a rapidly growing and robust portfolio of innovative open account financial supply chain solutions. We have a robust supplier finance confirmed payables offering that is available in over 25 countries. This, together with a sophisticated receivables finance solution, will be enhanced and offered on an integrated platform. In addition, as clients increasingly look for financing opportunities earlier in the supply chain cycle we are expanding our platform-based pre- and postshipment offering. We have also automated and integrated TSU capabilities into our proprietary offerings and supply chain portal to allow us to collaborate with other banks. We are an active participant in the bank Payment Obligation Commercialisation Group and are currently in discussions with a number of clients and banks regarding pilots and a proof of concept to leverage the bPO. A key milestone for the group is endorsement by the International Chamber of Commerce as this will aid market acceptance. l

Banks on SWIFT

Visit swift.com/banks for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/banks or email us at swiftforbanks@swift.com