Change font size:   

 
Bank deleveraging has barely started

Bank deleveraging has barely started

Banks lending money to governments to help fund bank bailouts looks horribly circular

No. 6: If you don’t give it to me you’ll only lend it to someone else and look where that got us

No. 6: If you don’t give it to me you’ll only lend it to someone else and look where that got us

10 reasons to tell your boss you deserve a bonus

weeklyFiXLiquid real estate
Skip Navigation LinksHome :: Back Issues :: Banks must get the basics right

November 2001

Banks must get the basics right


On October 9 representatives from three of the leading international cash management banks sat down with treasury officials from three leading international corporations to discuss the key issues of the moment: reviewing contingency planning for any future disruption to the payments system, moving onto internet technology and reducing errors in simple payments processes. While the banks feel they must invest heavily in technology to stay in this game, the corporates can’t see why they don’t share these costs and concentrate instead on getting the basic services right.




       
Cash management banks face their customers
at London's Capital Club
How did the events of September 11 affect you all and how have they changed the way you think about the business?
Helen Glennie: I think it's had a profound effect on most people, what happened. We have offices in Manhattan, in Times Square, and we're very fortunate that was where they were. But everybody knows of somebody who was affected. I can imagine it's 10 times worse in the banking community.
I have to say our key banks were on the phone indicating whether or not everything was all right - we actually worked with them so we didn't actually make dollar payments. We have a treasury centre in New York and we basically phoned them and asked them did they need any back-up. But we were fine.
The participants
Anne Collard Head of EMEA treasury services consulting group, JPMorgan
Mark Davies Head of product management, corporate cash management, ABN Amro
Andrew England Managing director, global head of product management, global cash management, Deutsche Bank
Helen Glennie Assistant treasurer - international, Joseph E Seagram & Sons
Patrick Krähenbühl Group vice-president, group function corporate finance and taxes, ABB
Fiona Munro Commercial initiatives manager, Vodafone

I think in London we're one of the major financial centres - you have to be very aware of that. One of the things we're looking at is where our contingency office is and within 24 hours we can have that location up and running. That's where technology is superb.
Patrick Krähenbühl: We were very fortunate, we weren't that much affected. Also in terms of the funding situation we were lucky: when the markets were closed in the US we could fall back on our CP programmes in Europe and Australia. It turned out that the diversification of our funding markets was a very important precaution.
       
Andrew England
Andrew England: Deutsche Bank got badly hit since our main operations centre was 50 yards away from the twin towers. We effectively had to bring up a contingency site and provide liquidity to make sure the Fedwire which stayed open throughout September 11 would be able to settle, and also support payments activity of up to $500 billion. So we felt pretty proud that we managed to do that successfully.
We also had to be very careful in balancing the limited amount of liquidity available in the market with the needs of clients who for mostly technical reasons couldn't make payments out of other banks. So a second issue was actually taking on a lot more risk temporarily to provide services to other banks.
I think it does, yet again, show that banks, at the end of the day, do have a core competency around processing payments, and you can never dedicate enough commitment or money into doing that well.
Now of course you have a different risk: we had to stop new developments as investment needs to be channelled into maintaining the production environment, so the impact is redirecting a lot of effort and resourcing to keep going. That's the reality for many key banks, and that shouldn't be underestimated. Other issues are to re-evaluate the strategy regarding contingency sites and where to house people adequately short term. So there's a whole series of knock-on impacts.
But we at Deutsche Bank very quickly had 24-hour service support lines, both in Europe and the US, constantly available for client support, day and night, and we had people literally working three to four days non-stop because that's what it takes, that's no different from any other bank around this table.
So are temporary arrangements beginning to look semi-permanent?
Andrew England: Before you make permanent contingency arrangements, you have to fully understand how you manage new production sites, where you're going to put them, where you're going to locate servers. You've got to establish how quickly can you recover? In the short term I think the banking community and other organizations are certainly pulling together to help. In our case, we were buying a building from JPMorgan at 60 Wall Street, so we are trying to obtain space earlier. That's where the community is certainly working to the benefit of customers, although it's probably not that visible.
       
Anne Collard
Anne Collard: I think it is something that fundamentally changes the market and will change the way we will work. I can't see us ever going back to thinking about this business in the same way as we have. From our perspective, we were supporting as many clients and banks as we could through this period and, to an extent, we still are. With other financial institutions that were not able to make payments, we actually moved some of their staff to our contingency sites. We had them working both from a client perspective and from a bank's perspective at our own sites - some of them still are.
I think our experience with shared service environments has taught us to consider locations very carefully. Only three of them were in the Manhattan area - at Water Street and Wall Street. For the first 60 hours they were working off generators, keeping the processing and payments going in terms of things like lock-box environments, paper environments that people do not really think of.
Our main processing hubs are not even in that part of the world. We've invested a significant amount to ensure that these processing centres are not, candidly, targets. It is necessary for our own contingency in terms of cost infrastructures to move out of these major processing centres. This move helped us tremendously, as did support from the banking industry and support from the Fed in providing liquidity to other clients and staying open on questions of risk. Since then we've all moved forward, ensuring payments are made, lending credit where necessary, supplying people to 48-hour, even 60-hour stretches to ensure that the system kept going.
It really has had a fundamental impact on all of us. We've been very unfortunate to lose two people and, from Bill Harrison downwards, it's been a very personal thing within the JPMorgan empire. Certainly going forward I think people will look to understand what this means to the industry, what it means to their businesses and how they run their businesses in future and be very mindful of what you need to do to be able to continue and excel in these circumstances, which are beyond anybody's belief.
  Page 1 of 7  Next | Single Page






Of course it’s childish, but that’s the way the two have done business ever since Dhirubhai expired

  1. US treasury market reaches breaking point

  2. Top 10 financial definitions that are funnier since the credit crunch

  3. Top 10 reasons to tell your boss you deserve a bonus this year

  4. Nomura’s great leap forward: Will Lehman takeover help fulfil its global ambitions?

  5. Eksportfinans turns to government for funding

Latest Issue

December 2008
Ruromoney Jobs Post a job

Home | Mobile site | Contact Us | Debt markets | Equities | Foreign exchange | Banking | Alternative Investments | Regions and Emerging markets | Polls & Awards | Structured credit | Back issues | Euromoney store | Useful links and Related events | Site Map

The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms and Conditions, Privacy Policy before using the site.

All material subject to strictly enforced copyright laws. © 2008 Euromoney Institutional Investor PLC.