Sibos 2012: The Impact of Regulation on Cloud Computing

As many others in the Finextra Community did, I recently attended the Sibos 2012 annual conference in Osaka, Japan. Not surprisingly, the three main topic areas for Sibos 2012 were:

• Global shifts of economic power
• Regulation: Tangled in red tape?
• Technology: Keeping pace in an interconnected world

Global shifts of economic power

As we’ve seen in other regions, the banks headquartered in Asia-Pacific are expanding their geographic reach and expanding their transaction banking solutions in order to compete with the global players. While some of the global banks shrunk their Asia-Pacific presence due to balance sheet pressures from the financial crisis, banks such as JP Morgan are building out their corporate capabilities to grow with their clients that are expanding into Asia.

Regulation: Tangled in red tape?

Sibos sessions and publications focused on regulatory challenges in the financial sector contained some great sound bites:

• “Innovation is a luxury, because there is a constant scramble to meet regulatory and other requirements as well as to deal with legacy systems”, Cathy Bessant, global technology and operations executive, Bank of America Merrill Lynch
• “Regulation, one of the few growth sectors in our industry” Barbara Ridpath, CEO, International Center for Financial Regulation
• “On average, Citi has to implement 6,000 additional lines of code to its core banking systems every weekend to cope with ever-shifting regulatory targets.” Francesco Vanni d’Archirafi, CEO, Transaction Services, Citi “
• “Regulation – which still differs greatly between countries, markets and regions – often leads to fragmentation in what is otherwise a global, interconnected world.” Satvinder Singh, Global Head, Trust & Securities Services/Cash Management for Financial Institutions, Deutsche Bank

Technology: Keeping pace in an interconnected world

There were a number of product announcements by technology providers at SIBOS, many of which rely on data collection across cloud-based networks. Examples are: SunGard IntelliMatch Operational Control, SAP Financial Services Network, SWIFT / SmartStream Partnership for the Accord Matching Service and BankersAccuity Global Payments Web Service. Providers designed these solutions around an assumption of global network interoperability.

Impact of Regulation on “Extraterritorial” Cloud Computing 

One Sibos session discussed the challenge that global banks face when coping with competing “extraterritorial” regulatory requirements. Of course, global banks, as well as multi-national corporates, are subject to local laws and regulations across their geographic footprints.

While Europe implements cross-border regulatory initiatives such as the Single Euro Payments Area (SEPA) and TARGET2-Securities (T2S) to streamline payment processing and securities clearing, fragmented data protection initiatives across Asia-Pacific countries threaten the growth of cloud-based technology solutions in the region. Fragmented data protection laws also pose challenges to corporates seeking to establish regional shared service centers and could negatively impact the adoption of hosted, Software-as-a-Service (SaaS) treasury management systems.

Providers of cloud-based solutions are already seeing the negative impacts of fragmented regulation in Asia-Pacific. Our Asian customers seek the benefits offered by cloud computing to expand their geographic reach and product suites, but struggle with interpreting the disparate regulations, laws and guidelines being issued by across the region. As another Sibos session pointed out, “Asia in particular could stand to gain from some of the steps that Europe has taken to improve regional integration.”