cls group meeting joseph de feo ceo, cls group president & ceo, cls bank international 3 october...
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CLS GroupMeeting
Joseph De Feo
CEO, CLS Group
President & CEO, CLS Bank International
3 October 2003
Istanbul
2
CLS Bank: a unique achievement
First global banking settlement system
Unprecedented co-operation across the industry
Creating a global industry standard
67 shareholders, 27 vendors, eleven central banks
Major business & technical achievement
Extends finality of domestic RTGS settlement globally
Growing number of providers of third party services
Level playing field – target of one price for all
3
AustraliaAustralia - Australia & New Zealand Banking Group * Commonwealth Bank of Australia * - Australia & New Zealand Banking Group * Commonwealth Bank of Australia * National Australia Bank * Westpac Banking Corporation *National Australia Bank * Westpac Banking Corporation * BelgiumBelgium-- Fortis Bank * KBC Fortis Bank * KBC Bank * Bank * CanadaCanada - - Bank of Montreal * The Bank of Nova Scotia * CIBC * Royal Bank of Bank of Montreal * The Bank of Nova Scotia * CIBC * Royal Bank of Canada * The Toronto-Dominion Bank *Canada * The Toronto-Dominion Bank * DenmarkDenmark - Danske Bank * Nordea - Danske Bank * Nordea * * FranceFrance - BNP - BNP Paribas * Caisse Nationale De Credit Agricole * Credit Lyonnais * Société Générale Paribas * Caisse Nationale De Credit Agricole * Credit Lyonnais * Société Générale * * GermanyGermany - Bayerische Landesbank * Commerzbank * Deutsche Bank * DZ Bank * - Bayerische Landesbank * Commerzbank * Deutsche Bank * DZ Bank * Dresdner Bank * Hypo Vereinsbank * Westdeutsche Landesbank *Dresdner Bank * Hypo Vereinsbank * Westdeutsche Landesbank * ItalyItaly – Banca Intesa * – Banca Intesa * UniCredito *UniCredito * JapanJapan - The Bank of Tokyo-Mitsubishi, Ltd * - The Bank of Tokyo-Mitsubishi, Ltd * Mizuho Corporate BankMizuho Corporate Bank * * Norinchukin Bank * Sumitomo Mitsui Banking Corporation * The Sumitomo Trust & Norinchukin Bank * Sumitomo Mitsui Banking Corporation * The Sumitomo Trust & Banking Co., Ltd. * UFJ Bank *Banking Co., Ltd. * UFJ Bank * LuxembourgLuxembourg – Dexia Banque Internationale a Luxembourg – Dexia Banque Internationale a Luxembourg ** NetherlandsNetherlands - ABN AMRO Bank * ING Bank * Rabobank Nederland *- ABN AMRO Bank * ING Bank * Rabobank Nederland * NorwayNorway - Den - Den norske Bank *norske Bank *SingaporeSingapore - - Development Bank Of Singapore * Oversea-Chinese Banking Development Bank Of Singapore * Oversea-Chinese Banking Corporation * United Overseas Bank * Corporation * United Overseas Bank * SpainSpain - BBVA * Banco Popular Espanol * Banco - BBVA * Banco Popular Espanol * Banco Santander Central Hispano*Santander Central Hispano* SwedenSweden - Skandinaviska Enskilda Banken * Svenska - Skandinaviska Enskilda Banken * Svenska Handelsbanken *Handelsbanken * SwitzerlandSwitzerland - - Credit Suisse * UBS * Zurcher Kantonalbank * Credit Suisse * UBS * Zurcher Kantonalbank * United United KingdomKingdom - Barclays Bank * HSBC Holdings * Royal Bank of Scotland * Standard Chartered - Barclays Bank * HSBC Holdings * Royal Bank of Scotland * Standard Chartered Bank *Bank * United StatesUnited States - American International Group * Bank of America * The Bank of - American International Group * Bank of America * The Bank of New York * Bank One * Bear Stearns Securities * Citibank * The Goldman Sachs Group * New York * Bank One * Bear Stearns Securities * Citibank * The Goldman Sachs Group * JPMorgan Chase * Lehman Brothers * Mellon Bank * Merrill Lynch * Morgan Stanley & Co. * JPMorgan Chase * Lehman Brothers * Mellon Bank * Merrill Lynch * Morgan Stanley & Co. * Northern Trust Corporation * State Street Bank and Trust Co.Northern Trust Corporation * State Street Bank and Trust Co.
CLS Shareholders
4
CLS has changed market practice
1 day funding
Normal - 2 day risk
Historical information
Possible same day settlement
Normal - 2 day contract
CLS eliminates Settlement risk (temporal risk)
Real-time information
Intraday - Timed payments
Extends domestic settlement finality
globally
5
CLS Bank is unique
Bankers’ Bank for FX Settlement
Corporate structure and governance model
Legal governance and regulation
Real-time links to Central Banks
6
CLS now
Settling over 80,000 sides a day, around $1
trillion value
Over 80 Third party customers
of Member banks
54 banks settling live transactions in 11 currencies
27 Registered Vendors using
CLS brand
14 million sides settled in
1 year with a gross value of
$160 trillion
7
Moving 20 Day Average of Volume
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,0007-O
ct
17-O
ct
29-O
ct
8-N
ov
20-N
ov
2-D
ec
12-D
ec
24-D
ec
7-J
an
17-J
an
29-J
an
10-F
eb
20-F
eb
4-M
ar
14-M
ar
26-M
ar
7-A
pr
17-A
pr
29-A
pr
9-M
ay
21-M
ay
2-J
un
12-J
un
24-J
un
4-J
ul
16-J
ul
28-J
ul
7-A
ug
19-A
ug
29-A
ug
10-S
ep
Average of 20 days prior to
Sid
es S
ett
led
Average including Split Sides Average pre Split
8
CLS Bank values & Net Funding
Average Daily Value
0
200
400
600
800
1000
1200
USD
billi
ons
0
24
68
10
1214
1618
20
Perc
enta
ge N
et F
undi
ng
Requ
irem
ent
Value Net Funding %
9
CLS Market Potential (Sides per day)
Intra-Shareholder Transactions
100
Financial Institutions as 3rd Party
260
Other Currencies 290
Matching Field for Custody350
500
Other 3rd Party
- Future potential
- 2004 plans
- Very early days
- Good progress
Planned CLS Market Share after 5 Years
20%
50%
50%
90%
10
CLS Benefits
Major Reduction in Intra-Day Credit
Usage
Multilateral NettingBenefit > 90%
Real Time Information on Settlement and Funds Flows
Improved Funds Flow and
Availability
Consistent Legal Framework
OperationalResilience & Reduction of
Operational Risk
Business Opportunities –
Increased trading, Nostro Services &
Third Party Services
STP
Settlement Risk Elimination
11
Additional benefits for Members
In / Out swaps
Information delivery / control
Enhanced credit profile
Participation in setting future direction:Strategy, Rules, Prioritisation of product
development & market development
plus
Industry leadership & transformation
Involvement in CLS Group Governance
12
Opportunities for new Settlement Members Industry transformation
– Settlement finality
– Leadership role in local & global market
– Board & working group participation
– Access to I/O Swap to further improve currency cash management
– Access to Member experience and knowledge base
– Settlement Member web site
Risk & Operational Benefits– Risk reduction
– Improved cash management
– Increased trading revenues
– Improved operational efficiency and cost reduction
– Real time information
13
Revenue Opportunities
Increased Trading
Nostro Services for other CLS participating banks
Potential third party service revenues
Improved cash management
14
Cost reduction
Reduced payment expense (MT202)
– Payment processing
– SWIFT costs
– Reconciliation costs
Potential elimination of confirmations
– Nine Members have eliminated confirmations
100% settlement success
– Reduced error correction expense
STP benefits
15
CLS Benefits – what our members say
Post-Settlement Reporting
Pre-Settlement Information
Eliminates Settlement Risk
Reduces error ratesReduces error rates
Reduction or elimination of Reduction or elimination of credit (settlement) limitscredit (settlement) limits
Source: TowerGroupSource: TowerGroup
Increased tradingIncreased trading
16
New products and services – short term
1.14 Application and infrastructure conversion - achieved1.15 Currency expansion, NKR, DKR, SEK and SGD – now live1.16 Matching field for Custody & CLS capacity up-grade
2003 Up-grades
2003/04 plan to add five and four new shareholders respectively.
HK and New Zealand dollar, Korean won
Further Currencies
New Shareholders
SSI Database
17
Future New Product Plans
Global Liquidity Management
Currency / Member Expansion
Currency/Member Expansion New "member" category for Central Banks Capabilities for non-CLS currencies
STP for FX e-platforms links Enhanced STP efficiencies SSIs database/directory
Additional Settlement Sessions In/In Swaps High value liquidity payments
Information Services Identify products and services consequent to the significant data, historical and real time, available to CLS
Global Liquidity Management
Category
Category Product Proposals
18
CLS tomorrow
New currencies
New products and services
New shareholders
Custody enhancement
Leverage the infrastructure
“To make CLS Bank the premier To make CLS Bank the premier means by which financial institutions means by which financial institutions
settle foreign exchange settle foreign exchange”
19
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