Transcript SWIFTNet portfolio: Enhancing your business

The Board perspective
Finn Otto Hansen
Russian AGM 20 April 2006 Moscow
SWIFT corporate governance
Governance
Members
User Groups
National Groups
Board
Committees
Business
Board
SWIFT
Customers
SWIFT Board of Directors
 Elected
at the AGM for 3 years
 Number
not to exceed 25
 All
nations ranked in decreasing order based
on number of shares owned
 Nations
in top 6 countries may elect 2 board
members for country
 Nations
in next 10 countries may elect 1 board
member per country
SWIFT Board of Directors
 All
other nations may propose 3 directors
 Russian
users support the European SWIFT
Alliance (ESA) group who propose 2 directors
 24
countries in ESA meet quarterly before each
board
 Annual
ESA operating plan and objectives
linked to SWIFT strategy
Slide 4
Evolving the model for
corporate access
Finn Otto Hansen
Moscow 2006
Context

Community consultation in December 2005 (DP138)

Overall widespread support for new proposed
corporate access model, with some concerns raised

Corporate Access Group reviewed community
concerns at its January meeting and refined the
model accordingly:
– Simplification of corporate admission criteria
– Withdrawal of international corporate user group concept:
standard local user group policy will apply
– Standard procedure will apply for NMGs’ role in corporate
admission process
Agenda
1. Highlights of new proposed corporate
access model
2. Detailed model components
3. Next steps
Progressing corporate connectivity:
Many-to-many CUG (with restrictions)
Current MA-CUG model:
Bank administered
Corporate joins several MACUGs
To new many-to-many CUG:
SWIFT administered
Corporates and banks join 1 CUG
Bank A
Corporate A
Bank A
Bank B
Corporate
Bank B
Corporate B
Bank C
Bank C
MA-CUG model
remains available
All messaging services
 No standards enforcement
beyond FIN, in a first stage

Admission criteria – Preserve SWIFT integrity
CRITERIA:
corporates
must be listed
on selected
stock markets
Only regulated exchanges in FATF
member countries (simplified criteria)
 31 countries are eligible, covering all
major stock exchanges
Which stock
markets?

Rationale?

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Information disclosure
Governance regulation
Not discriminatory
Easy to check
Addressable
market?

Around 22,000 eligible corporates
(out of which 2,000 are prime target)
External legal opinion
confirms criteria are workable
for competition laws
Around 10% of companies listed
on eligible stock exchanges have
HQ outside of eligible countries
List of eligible countries
Country
Australia
Austria
Canada
Denmark
Finland
France
Germany
Ireland
Luxembourg
Netherlands
Norway
Singapore
Spain
Sweden
Switzerland
United Kingdom
United States
Belgium
Rating
FATF
Eligibility
AAA
AAA
AAA
AAA
AAA
AAA
AAA
AAA
AAA
AAA
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AAA
AAA
AAA
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AA+
Y
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Y
Y
Y
Y
Y
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Y
Y
Y
Y
Y
Country
New Zealand
Hong Kong
Iceland
Italy
Japan
Portugal
Greece
Mexico
South Africa
Russian Fed.
Brazil
Turkey
Argentina
Rating
FATF
Eligibility
AA+
AAAAAAAAAAA
BBB
BBB
BBBBBBBB-
Y
Y
Y
Y
Y
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7 new countries eligible, as a result of the
simplification of the corporate admission criteria
Source: S&P August 2005 long term foreign currency rating
Agenda
1. Highlights of new proposed corporate
access model
2. Detailed model components
3. Next steps
Detailed model components
A. Corporate admission
criteria
A.1. User category
• Which user category for corporates?
A.2. Subsidiaries
• What about eligible users’ subsidiaries or sister
companies?
A.3. Eligibility status change
• What if a company is de-listed?
B. Financial institution
admission criteria
• Will the CUG be open to all financial institutions?
C. Traffic restriction
• What messaging services will be allowed?
• What about standards?
D. Go-to-market
approach
• Who drives the sales process?
• What role for SWIFT?
Agenda
1. Highlights of new proposed corporate
access model
2. Detailed model components
3. Next steps
Immediate next steps

Key coming milestones:
– Board decision in March
– Vote at June Annual General Meeting
– If positive, pilot and launch soon after

In addition, Corporate Access Group set up two working
groups to help steer SWIFT efforts to improve commercial
and operational aspects of its corporate-to-financial
institution offering
Appendix
Scope & rationale for new
corporate access model
Scope of a standardised electronic
Out of scope
corporate-to-financial institution communication platform
Building blocks of e-platforms
Bank A
Bank B
Bank C
Value
added
applications &
services
Value
added
applications &
services
Value
added
applications &
services
Standards

Value-added services (e.g., Cash
Management, Trade finance) are in the
competitive space

Should be accessible through the
platform but developed, marketed and
serviced by each financial institution

Standards, messaging services, security
and connectivity are in the collaborative
space. Standards will be reduced to
minimum in first phase

Common platform will generate savings
for financial institutions & corporates
Messaging services
Security
Technical connectivity
Assessment of current corporate
connectivity models (MA-CUG and TRCO)
Several roadblocks result in relatively limited
corporate take-up (104 corporates so far)

Cumbersome joining process: e.g., corporates
must join MA-CUG of each of their banks,
forms and contracts are complex, requires
technical understanding

For treasury counterparty (TRCO), admission
criteria are restrictive (i.e., 8 sponsor banks)
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Adoption is driven by few, leading corporates
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Corporates are looking for simplification to
allow for easier scalability and broader
automation
Major corporate
adoption requires
profound paradigm
change
Corporate demand assessment:
Clear interest, with strong business case
Corporate
survey
 42
corporates interviewed by CAG members, from
a wide range of industries, sizes and geographies
 Survey
highlights strong corporate demand for a
standardised corporate-to-bank platform (85%
show intend to buy) and trust in SWIFT as supplier
Business
cases
 Case
studies jointly done with two corporate users:
General Electric and Arcelor
 Both
cases show compelling economics for using
SWIFTNet (ROI of 400% and 600% respectively
over 5 years)
Business drivers for financial institutions
Key business drivers

Respond to clear customer demand

Unlock cost savings:
– Reduction in customisation efforts
for largest corporates
– Reduction in proprietary system
costs/investments, if broad
adoption

Focus energy on value-added services,
not commoditised connectivity

Prevent outsiders from developing a
solution

Suited to replace pt-to-pt
connections

Suited to connect ERP or
treasury management
systems to financial
institutions