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SEB’s Da Silva and Lascoux: “ We see the industry trying to pull itself together to find a standard to handle the changing regulatory requirement”

By The Asian Banker Live

SEB’s Da Silva and Lascoux talked about how collaboration between multiple parties was driving rapid cross-border payments integration in the Nordic region and discussed SEB’s corporate strategies amid heightened global de-risking.

Here is the transcript of the video with Paula:

Boon Ping: Countries are integrating cross-border payments in the Nordic region. What is the project and how will that impact the banks, businesses and consumers in the region? And how does the timeline for this initiative appear.

Paula: The project is called P27, Project27. It is 27 million people in four Nordic countries, Sweden, Norway, Denmark and Finland. Finland has euro while the other countries have a krone. So, we are trying to harmonize all the payment types and we have many payment types for being small countries. We have quite a complex infrastructure with cover control being done at different times of the day and also all kinds of payment types being very complex. We are trying to simplify from many payment types to only a few per country so that it becomes much cheaper and this will migrate the new payment types, not the old, to this new project. The general idea is that we use a vendor from Europe where they have a big volume that we can adhere to that platform because we have too small volumes in the Nordics. The premise is based on taking down costs, increase simplicity, and get all the benefits and gains all the way out to the end customer between the banks. So, we will migrate from the local to the cross-border, cross-country element. As for timeline, it is difficult to know as we are still setting up a company and we are also setting up the rulebooks, but we aim to have the first project during the beginning of 2020 and we will probably start with something that we don’t have today. Real-time payments, for cross-currency or cross-country, would be one such thing. That is not yet decided fully. We have to choose the vendor first, set up the company, and get all the approvals done, and then we go. We are used to, in this region, to collaborate in a quite good way and we done that for many years. There is a utility discussion on KYC going on with the same countries adhering to P27.

Boon Ping: Is the collaboration by the central banks of all the four countries or is this a private sector? How is this in any way aligned to open banking around Europe

Paula: It is a privately-driven market adoption for all countries and that makes us more driven. But we are working with the regulators to put the rulebook in place. We are trying to harmonize it as much as possible to Single Euro Payments Area (SEPA) and meet the euro demands so that we don’t have a complex area between the two. This will enable open banking in a much easier way because with few APIs, you can really reach all the countries and all the products. So, it could enable a smoother on-boarding of open banking.

Boon Ping: Use of blockchain for trade digitization, many banks are experimenting. What is your view on the commercialization and the maturation of blockchains for trade?

Paula: It is about the use case and trade finance is especially about export letter of credit which is such a complex, very manual and a non-transparent product. You send quite a lot of the documents still via post. We are looking into making these much more transparent and seamless so the importer and the exporter, together with the two banks, are part of a blockchain, which is a fantastic use case. But there is a need to have the regulator in terms of the customs or the freight forwarder and the insurance companies being part of the ecosystem. When we get that, you can imagine that it will be a seamless product which can speed up the whole chain.  

Boon Ping: With Brexit and with the unilateral trade tariff tensions between the U.S. and many other countries including Europe, is the world taking a step back on globalization? What does it mean to Sweden’s emerging market business and where do you see an opportunity with decline in multilateralism?

Paula: The world is not taking a step back on globalization. The U.K. itself is not a very big market for Sweden. Although, Sweden is a very large exporting country proportional to its size. But any renegotiation of the agreement with EU and U.K. will be cumbersome. We have a branch in London, but we believe that locally, the business is going to be still quite similar and from Sweden, of course, with the other countries, we are still part of EU. So, we hope that the impact is lesser than it could be. It is just a pity that we have to renegotiate so many things that it is cumbersome, but we don’t think that trade will decrease.

 

Here is the transcript of the video with Juliette:

Boon Ping: What are some of your key priorities and challenges for your emerging market business today and how are you helping your customers to address them?

Juliette: I think the key priority by far is how to ensure our corporate customer needs in terms of their exports to emerging markets are well taken care of by banks as the service provider. I think this is the single biggest priority we have when it comes to SEB’s emerging market strategy. The first challenge is the changing landscape of the world politics and the importance of geopolitics. This is a trend that we have seen during the last year and that has made it more difficult to work with country risk in emerging markets so as to assess the risk and provide the needed risk coverage capacity for our corporate clients and likewise them to analyze the situation and understand the risk exposure towards emerging markets. Last year with the commodity price fluctuation and macroeconomic challenges in a few major emerging markets, exposed corporates to increased risk, thereby increasing the coverage needs by banks. The banks in turn are struggling to provide the needed coverage.

Second big challenge is the regulatory environment today is vastly different from yesterday meaning that certain emerging markets and a lot of players in them are marginalized or de-risked. Following this, our corporate’s export trade finance needs cannot be satisfied in the same way that we traditionally do. Costs for banks are getting higher and higher and the business case is getting more and more difficult. Banks need to work on a solution and hopefully the industry could, with joint effort, and make the corresponding banking infrastructure solid, so it doesn’t make certain players marginalized.

Boon Ping: Is there an industry response to these challenges and what are some of the steps already taken by SEB?

Juliette: I believe that there is a lot to do in terms of cooperation. Not least the SWIFT, KYC registry is such an attempt and there are other attempts as well.  I see the industry trying to pull itself together to find a standard so that we can handle this changing regulatory requirement in a more efficient way and facilitate trade even more efficiently in the future by not pulling ourselves out of the game. I see individual steps taken scattered in different areas of the world and gradually we can consolidate as way to obtain the highest efficiency. SEB’s emerging market strategy has always been to help our corporates in their export or even local needs in emerging markets. Being customer-focused, we have not done de-risking in any general manner because we view our emerging markets correspondent banking relationship as the infrastructure we built to facilitate our corporate clients’ needs. So far, we have been able to maintain that infrastructure to the degree and extent that we need, but we see growing challenges in that area as well.  SEB will need to both join the global efforts as well as to keep on with its own strategy of being client-focused.


Categories: Cross-border Payments, Trade Finance, Transaction Banking
Keywords: Sibos 2018, De-risking
Institution: SEB
Region: Europe
People : Paula Da Silva And Juliette Xue Lascoux
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