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Swift on Course for Cost Cutting, Corporate Actions is Big Focus This Year

The first day of Swift’s Sibos conference included a press conference during which CEO Lazaro Campos elaborated on the cooperative’s plans to drastically cut its cost base and the opening plenary, which included many references to Swift’s recent successes in the corporate actions space. Delegates to the event in Hong Kong therefore got the lowdown on the plans for a leaner, meaner Swift and were also reassured of the continuing importance of reference data to its core business.

Swift chairman Yawar Shah told delegates at the opening plenary: “Customer centricity and dialogue is key for our survival. It has been a year of traumatic change for your cooperative and it has been tough for every participant in the market to tackle so many of the fundamental issues that have arisen out of the lack of trust and transparency.”

In order to make doubly sure that it will survive the market downturn and its first ever volume decline, Swift seems to be pulling out all the stops in its cost cutting endeavour. This includes hiring consultancy firm McKinsey to advise on which heads to chop and which overheads to eliminate. The project, which has been dubbed ‘Lean@Swift’, aims to cut costs by around 30% by the end of 2010.

The cooperative has already promised the market that it will cut its prices by 50% by 2011 and in order to live up to that promise in the face of this year’s volume declines (in January and February volumes were 4.5% lower than the previous year), Swift needs to take drastic action. The cost cutting will largely be centred on cutting headcounts; as noted by Campos in the press conference, 60% of Swift’s overheads are accounted for by its staffing costs. “Efficiency gains do not come lightly, especially if you want the gains to stay,” he said.

A wide scale organisational restructure has been ongoing this year in order to cut costs and expedite the decision making process, added Campos. “Lean@Swift aims for an efficiency increase of 30%: 20% will translate into structural cost reductions and the remaining 10% will fund our future,” he said during the opening plenary.

Part of Swift’s future is the decision to work in collaboration with XBRL US and the Depository Trust and Clearing Corporation (DTCC) to further the development of standards in the corporate actions space. To this end, all three made an official announcement during the conference about their intentions to automate the issuer to investor information process based on a combination of Swift ISO 20022 messaging standards and XBRL.

Shah directly referred to Swift’s successes so far in the corporate actions space during his opening plenary speech: “Our work around corporate actions plays to our core strengths in the effort to standardise and automate the messaging space.” He later used corporate actions as an example of an area in the securities business in which Swift could play a key role in the future.

During a Swift Auditorium session later in the week, Swift, XBRL and DTCC discussed their initiative in the US in the issuer to investor space, which was launched in May this year. The three key players have established a stakeholder group to work on the project and this group has been subdivided into three focused areas: issuers, intermediaries and investors. These groups are tasked with providing input, making recommendations and helping articulate the pros and cons of electronically capturing data directly from issuers and their agents in a standardised format at the point at which a corporate action is announced.

Brett Lancaster, president of DTCC Solutions, explained to Reference Data Review that the trio are currently working on educating the masses about the benefits of XBRL data tagging in the corporate actions space. “The Securities and Exchange Commission (SEC) has set a definite deadline to move to XBRL in the US and other regulators should look to see the benefits of such an approach,” he said. “Swift should also begin setting a timeline for wider ISO 20022 migration that is set in stone in order to encourage the industry to move forwards.”

In the short term, XBRL, Swift, DTCC and the stakeholder groups have a number of milestones to achieve, including building an XBRL corporate actions taxonomy that is aligned with ISO 20022 repository elements, which will enable issuers to electronically capture key data items within a corporate action document. They must also make all DTCC corporate action announcements available in the ISO 20022 format beginning in 2010 as part of plans to complete the migration of all corporate actions processing to ISO 20022 in 2015.

With regards to its longer term future, Swift is also currently consulting its users about where it should be focusing its attentions over the next five years, before it publishes these intentions in its 2015 plans at Sibos in Amsterdam next year. During the opening plenary, Campos talked about growing “beyond messaging”, a goal that Swift has been striving to achieve (with rather limited success in the securities business) for some time. The cooperative is in the process of examining a range of different scenarios for the future and hosting consultations with various customers as a sounding board for these.

One idea is for Swift to focus on its core business lines: correspondent banking (the payments end of the spectrum), custody, and clearing and settlement; in other words, refocus on its traditional core competencies. Another is to extend this focus to anti-money laundering (AML) activities, regulatory reporting and professional services, all of which are not too far from its current offerings. Swift is also pondering the idea of extending its domestic reach further, although this is largely constrained to the world of payments rather than securities.

The last and potentially most radical approach is to take a more technologically focused tack by looking to provide standards for integration of services as well as data exchange via investment in new technologies. The words used by Campos in this regard unsurprisingly included “cloud”, “software as a service” (SaaS) and “web” services. Swift could therefore take a franchise approach to its services: a significant departure from its traditionally inwardly focused approach.

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