As Gothenburg basked under the late summer sunshine, the Nordic members of ACI – The Financial Markets Association, representing Denmark, Finland, Norway, Sweden and, for the first time, Iceland, gathered for their fifth congress.
The congress, which drew 418 delegates, took place between August 23 and 24. Jan Tradgardh, president of ACI Sweden, spoke of ACI’s increasing recognition as the voice of the FX market, and education as becoming more and more vital. He noted that a formal, accredited exam was recently introduced in the Swedish equities market, and a FX exam would not be far behind.
The first of two panel discussions, “Central Bank Perspective on the Nordic Economy”, began with a typical Scandinavian compromise between moderator Klas Eklund, chief economist at S-E Banken (SEB), and the panel, comprised of heads of the five Nordic central banks.
Bodil Nyboe Andersen, governor of Danmark’s Nationalbank, spoke of the country’s experiences as part of the exchange rate mechanism. She said the links provided to the wider European community have led to a stable monetary policy, even it has meant sacrificing some control.
Urban Backstrom, outgoing governor of Sveriges Riksbank, discussed the longer term prospects for the region’s economies, and questioned what happened to “the new economy”? Three years ago, he observed, investors were accepting everything, now they are questioning everything. This, he said, is a pattern that has been repeated many times in history. His concluding message was that the economy is never as good as it seems during the good times, or ever as bad as it seems in the bad times.
Governor Svein Gjedrem of Norges Bank pointed out that the Nordic markets, in comparison with the rest of the world, have been somewhat insulated from the recent economic correction and suggested that the diversity of the economies may go some way towards explaining this.
He also memorably suggested that the Nordic nations’ differing levels of commitment to the ERM and single currency could be described as a mixture of the ins, the outs and the out outs. This was echoed by Birgir Isl. Gunnarsson, governor of Sedlabanki, who also outlined some of the unique aspects of the Icelandic economy.
Matti Vanhala, governor of Suomen Pankki and member of the governing council of the European Central Bank (ECB), warned the audience against reading too much into short term figures. He pointed out that a few months ago, US economic data showed signs of a recovery that has yet to emerge. In fact, current data is pointing once again to a slower recovery (ie, what was expected six months ago). His view was supported by Backstrom, who suggested that inventory contractions mean that double dip recessions are virtually inevitable.
Vanhala concluded that while tying monetary policy to the ECB makes life less exciting for the national central bankers of the Eurozone, it is better for the region’s economy.
The question and answer that followed the panel discussion began with Eklund’s suggestion that the markets are currently suffering from the hangover that followed the party of the late nineties. The ensuing debate included comments about the relative health of the Nordic region’s banks; the logic of central bank intervention on asset prices; and Norway and Iceland’s shared isolation from EMU. Gunnarsson said that Iceland would be unlikey to ever join the EMU because the country does not want to lose control of its fishing policies.
David Clark, former president of ACI, currently a senior advisor to the UK’s Financial Services Authority, acted as moderator of the second panel, entitled “A Look into the Future”.
Eric Hoh, part of SEB’s Financial Services Development team, discussed the move to electronic markets. He suggested that there is a three to five year lag between the implementation of an e-trading platform and when it affects the bottom line. He also shared his belief that it will always be the relationship between intermediaries and clients that counts in the financial markets.
Martin Gravare, of the SKF Treasury Centre, pointed out that the Swedish conglomerate has been a global company for a century, and has had a central treasury management system for just a few years. Electronic platforms are changing the industry, he said, noting that there is one bank with which they would not have had a relationship were it not for its electronic platform.
Managing director of Garban Intercapital in Denmark, Erling Schiotz, recalled the fear some years ago that brokers would cease to exist as a result of electronic trading, but noted that voice services are still vital in the market. In his opinion, a mixture of voice and electronic trading is the best recipe.
Marco Bosma, head of treasury developments at Reuters, asked the audience, “How attractive is it to be in the banking industry at the moment?” With an average of 8% return on investment over the last decade, his answer was that it could not be very attractive. He noted that proprietary trading is becoming very expensive and that banks are asking whether they need to take part in it in order to be successful.
He added that over the last 10-15 years, the front and middle offices have enjoyed improvements in efficiency, but those improvements are not filtering into the back office. He concluded by pointing out that most corporates only deal with four or five banks, so offering 70 over a multibank platform is unnecessary. As a result, in his opinion, single bank platforms would continue to be the most important to the corporate community.
“Multibanks are Useless”
Gravare later supported this suggestion, and indeed went further, saying that while multibank interfaces into proprietary bank websites would be of interest, as the situation stood, from SKF’s point of view “multibanks are useless”. He qualified this by saying that the organisation had no interest in introducing a multibank black box into its internal systems, and that it took three months for them to sign-off any new bank relationships because approval has to come from board level, nullifying the potential benefit of the multibank platforms.
Peter Fisher, managing director of Finance Trainer, gave his perspective on the development of e-learning tools, calling them one of the key modern developments of the past five years. In his opinion, CD-Rom based learning systems are too static, which is what led his company to create Internet-based trading tools with interactive cyber trainers to support users’ personal development.
The following Q&A followed a familiar path: that a machine can never replace a human being; there is a need for a broad spread of players in the market, as well as for a 24-hour bank that provides liquidity; and the question of whether the industry is actually getting value for money from technology.
Concluding discussions covered different approaches to change management. Most agreed that while it is better to implement change management and stick with the process rather than stop or institute a new programme every six months, the reality in the ever-changing financial industry is that organisations need to react to changes in the environment.
“The Nordic countries depend on each other, and have industries that depend on each other,” said Tradgardh. “There are fundamental differences. For example, Finland is in the euro, Denmark, Sweden, Norway and Iceland are out to different degrees, but there is always a shared pride and friendship that runs between the countries. This is why it is so important for us to get together, and why we have every reason to do this again in 2006