Networking continues in Warsaw

Thu, 06/07/2017

The Network Forum Annual Meeting brought together industry and thought leaders in the custody world. By Sven Trahan, Head of Relationship Management, GSS

         

The event, expertly organised by Andrew Barman and Edward Jones, and proudly supported by UniCredit, was a resounding success with more than 420 attendees turning up to listen and learn about some of the big trends currently impacting the custody industry.

Global politics: intense times

Proceedings began with a fascinating talk by John Hulsman, president of John C Hulsman Enterprises, who gave his expert views on global politics.

Having successfully predicted Brexit at NEMA in Dubrovnik in 2016, Hulsman acknowledged that the UK’s divorce from the EU was not going to be a painless process and expressed scepticism that a deal would be agreed given the precarious political situation and absence of a clear majority for the incumbent UK government.

On the election of Donald Trump, Hulsman highlighted the new government was staffed by internationalist leaning Republicans, who tend to be less reactionary and more pragmatic.

He added that the recent travails impacting the White House around Russia were unlikely to precipitate in Trump’s impeachment given the Republican majority in the legislature and judiciary, although pointed out US political institutions were doing an effective job in holding the government to account.

A lot of the Network Forum participants raved about this panel, and it set the context for a fantastic two days of informative presentations and discussions. Perhaps the biggest takeaway is that we as an industry are living in very uncertain times, and it is important that we are able to move quickly and thoughtfully with change and disruption.

The sub-custodian of tomorrow

Susanna Scheffold, Global Head of Securities Services at UniCredit, participated in an excellent panel discussion chaired by industry journalist Dominic Hobson, in which she gave a forward-thinking account of where the sub-custody industry is heading.

She highlighted that while technology such as Blockchain and Artificial Intelligence (AI) would have a role to play in certain components of the securities services industry, integrating these tools onto existing legacy platforms had potential risk.

That being said, she acknowledged industry-wide initiatives built around collaboration to achieve standardisation and harmonisation would help cement the role of the sub-custodians by reducing inefficiencies across the entire chain.

One of the most notable examples of custodians joining forces to implement such positive change was through the Association for Markets in Europe (AFME) due diligence questionnaire (DDQ) which has simplified network manager sub-custodian reviews.

Susanna also cast light on fee structures at sub-custodians, which are under pressure from network managers and consultants, something which is likely to precipitate in an unbundling of charges.

This unbundling would bring transparency to clients enabling them to identify where sub-custodians provide added value, namely around highly knowledgeable and experienced client-facing local experts.

Many participants at the Network Forum recognise that change will happen in the industry, and this panel gave a measured account of how it can be managed.

Clearing: Brussels calling

Günter Schnaitt, Head of GSS Austria at UniCredit, participated in a riveting panel on the status of over-the-counter (OTC) derivative clearing in Europe.

The session began with an enlightened talk by Kay Swinburne, Member of the European Parliament (MEP) and vice-chairman of the Economic and Monetary Affairs Committee at the European Parliament, where she acknowledged that OTC clearing was going to be a focal point during Brexit discussions.

This talk was highly topical given the European Central Bank (ECB) in the days preceding the Network Forum had given its blessing to the European Commission’s stance on relocating euro denominated clearing to the EU 27 once Brexit is completed.

The UK is of course the main centre of euro denominated clearing, but the EU is keen to ensure oversight takes place within the Single Market. The EU’s position directly contradicts with statements emanating from the Bank of England, which said euro denominated clearing can remain in the UK without posing a systemic risk given the excellent regulations in the country.

The ECB is also pushing for greater responsibility – given its role as an issuer of euros - in monitoring OTC activity at CCPs at the expense of national central banks. Swinburne’s comments provided attendees with a rounded overview about the complexities which Brexit is going to bring to the workings and mechanics of the EU’s clearing regime.

The big fear for many at the Network Forum is that any politicisation of OTC clearing risks fragmentation, higher collateral costs and potential systemic risk.

Günter then gave his unique take on OTC clearing regimes in Central and Eastern Europe (CEE), a region which is of growing interest to network managers and their end clients. CEE clearing regimes are fragmented, with markets such as Russia, Poland and Hungary being at fairly advanced stages of development.

Other markets are either uninterested in building CCPs or are assessing whether to build such infrastructure.  Hesitation in certain countries is down to an unwillingness to assume the costs of creating a CCP, particularly if OTC trading volumes are low. 

The clearing panel provided a lot of useful insights. Clearing is going to be a major battleground in UK-EU negotiations over the next few years, and network managers and sub-custodians were full of praise about the honesty of the panel around the challenges that lie ahead.  

Parting comments

The Network event has firmly entrenched itself in the calendar of the custody industry. These events have always enabled clients and providers to engage with each other, and share opinions, thereby helping the industry reach new heights.

But it also allows old friends and colleagues to reconnect through informal networking evenings and drinks receptions. UniCredit – along with HSBC, Citi and Deutsche Bank – sponsored a drinks’ reception at Endorfina Foksal, a beautifully renovated palace turned restaurant in the heart of Warsaw.

 

Despite the monsoonal thunderstorms, the event was excellent, and offered a perfect opportunity for Network Forum attendees to wind down after the conference.

Rumours were already circulating that Vienna is likely to be the next destination for the Network Forum’s European conference. UniCredit GSS would be delighted to welcome the Forum in Vienna next year.

Sven Trahan
Head of Global Sales & Relationship Management
UniCredit Global Securities Services
Sven.Trahan@unicreditgroup.at