Sibos 2016: collaborate to drive correspondent banking

Sibos 2016: collaborate to drive correspondent banking

More collaboration is required among members of the correspondent banking community, despite the progress that has been made through efforts such as the Global Payments Innovation (GPI) initiative.

In yesterday’s session at Sibos, Evolution of correspondent banking: Can compliance help defend the model?, Sberbank’s group head of compliance, Larisa Zalomikhina, said banks “could go further working together to see how we can build up the knowledge and trust for each other and build a compliance piece into the platform”.

Deutsche Bank’s managing director of institutional cash management, Patricia Giangrande, added that banks need to work with their clients on education and perform onsite due diligence.

Also, as customers’ expectations have changed and they demand real time service, the best way to meet these demands is to join forces and innovate as an industry, she said. She called on the market to take up GPI – Deutsche Bank is one of its founding members – and also contribute more to Swift’s KYC Registry, which “is still not fully populated”, she said.

Sberbank’s Zalomikhina cited an example of a data sharing initiative in Russia. “Our financial intelligence system is going to share information with banks about individuals and legal entities that are involved in suspicious transactions. This will push the compliance costs down.”

Compliance has delayed the disruption in correspondent banking, observed Olivier Denecker, director of knowledge at McKinsey. And although this will be something for industry participants to deal with, there is no doubt that correspondent banking needs to change to become “faster, more open and transparent”. Perhaps technology could help with this task, he mused, “to help to run cheaper and better”.

Alexander Karner, deputy state secretary, Swiss Finance Ministry, and chair of the FSB Correspondent Banking Coordination Group, spoke on behalf of regulators, emphasising that compliance in correspondent banking does not mean “regulators versus the private sector. We are all on the same side here”, he commented.

But technology by itself is not enough, he observed. The FSB group is working on four work streams:

  • Data-related initiatives, including sharing, technology and monitoring
  • Regulatory clarification
  • Confidence in the system, that is, strong risk management, compliance and “state of the art banking supervision” (the latter is lacking in some countries);
  • Technical solutions such as legal entity identifiers and the KYC Registry, which are “mainly private sector driven”

“Correspondent banking is here to stay, but it needs to evolve,” concluded Denecker.

So what does correspondent banking need the most for this? “Innovation, communication and trust,” summed up Zalomikhina.

Want to know more about the correspondent banking developments at Sibos 2016? Click here to read our Daily News at Sibos feature, “Energising correspondent banking”.