Talk Series with BIS’s Jaime Cortina

Jaime Cortina, Deputy Chief Representative and Regional Head of Treasury and Asset Management at the Bank for International Settlements (BIS) in Mexico City, talked with Julie Ros from the floor of the new BIS Americas dealing room about the BIS’s Innovation 2025 strategy.

Julie Ros: Why was Mexico City chosen as the location for BIS to expand its scope in the Americas with a new dealing room?

Jaime Cortina: The BIS established this representative office for the Americas in Mexico City back in 2002. Since that time, the BIS has strengthened its relationships with the central banks in the region, promoting cooperation among them in areas such as economic research, financial stability, development of local financial markets and more recently, payments and the digital economy, among other things.

We have also started to offer banking services for reserve management purposes, including deposits, financial instruments such as FX products and gold, as well as asset management products, which are a very important part of the service that BIS offers to central banks.

JR: Are you in the new dealing room right now?

JC: Yes! Despite the lockdowns in Switzerland and Mexico we managed to open on schedule. But most of us are working from home at the moment because of needed social distancing. We are starting small. Right now we are just four people, but have the infrastructure for a team of nine. To start, our back office operations are being done in Basel, however, we have plans for seven people, including me, in the front office, plus two in the back office.

JR: How will the new dealing room help BIS better serve its central bank clients?

JC: It’s going to benefit the central banks of the region, but also central banks worldwide should benefit from this trading room, because this will allow the BIS to cover financial markets on a 24-hour basis. There are actually many central banks that, in spite of not being located in this region, have offices in this part of the world. Many Asian central banks which have representative offices in New York, trade their US dollar and Canadian dollar books from this region.

So having a trading room in the Americas will allow us to give them access to BIS products and BIS coverage during the entire trading day, which is something they didn’t have before because they were covered by Basel. So once Basel closed, which was around 12:00pm New York time, access to the BIS was not there for them anymore until the next day. So, central banks of the world should benefit from having a 24-hour operation.

JR: What are the key initiatives of BIS’s Innovation 2025 strategy?

JC: Innovation 2025 was launched back in 2018 as a new strategy for the way we approach different issues and address the change the world has seen over the past 10 years, particularly after the financial crisis that we experienced in 2008-2009. I think it’s important that this strategic plan reaffirms our core mission, which is to provide the highest quality, cutting edge knowledge and financial services to central banks. Also important is our ability to promote cooperation and collaboration between the central bank community to support a well-functioning global financial system.

The strategy in place has three main pillars. The first one has to do with economic analysis and research, broadening the focus to include new themes and respond to current and foreseeable changes facing the central bank community, particularly, all the implications of technology and the digital economy. That is something in which this strategy is very focused on in terms of economic analysis and research, and also the implications that technological innovation and digital economy have on the financial system as a whole.

The second pillar, which I mentioned earlier, is that one of the main functions of the BIS is to be a global forum for cooperation and collaboration among central banks and other financial authorities. So we will continue to strongly support this function, which, through the innovation hub, we are able to collaborate and share knowledge regarding new technologies, innovation and the implications that those can have on banking systems and the financial sector in general.

The third pillar, is basically where this new trading room fits in. Part of the role that the BIS plays as a bank for central banks is to expand the range of financial products and services that we provide to central banks. By expanding our global presence, we are able to upgrade the IT environment to more effectively support our banking activities and provide a better service to our customers.

JR: The new facility complements the existing BIS trading rooms in Basel and Hong Kong SAR,allowing the BIS to offer 24-hour services to its central bank customers. How will the Mexico City dealing room work with the other two trading rooms – is it purely time zone coverage or does it include pricing for regional currencies and other instruments?

JC: It definitely complements the activities of the other two dealing rooms. In that respect, we will expand the coverage of what is already being traded in Basel and Hong Kong. Going forward, the idea is that we include local financial markets into the portfolio of products that will be offered here in the Americas and I foresee a similar evolution to that which we saw in the trading room in Hong Kong. The dealing room there was the first to offer the same products as Basel – and it’s still the case – however, as time progressed, they have been adding additional products that Basel does not offer.

For example, Hong Kong offers an ample range of balance sheet and asset management products in CNY, which have become very appealing for central banks. CNY has become a currency in which reserves have been diversified, and in Hong Kong, having the knowledge and being very close to mainland China makes it a main hub for those products. Actually, the books and the asset managers of the CNY products are based in Hong Kong. Hong Kong also offers asset management products in Korean won for example, which are also managed by asset managers based in Hong Kong. Going forward, something similar could happen here in Mexico. Right now we will start offering the same products as Hong Kong and Basel.

We may at some point start including some of the local markets, which would be similar to what happens in Hong Kong. Right now, though, we can market products that are offered in Hong Kong, so for example if we have a central bank in the region that wants to invest in asset management products denominated in CNY, we can certainly do that and we will coordinate internally with Hong Kong.

But at the end of the day, central banks in the region have access to all those products. So we will be offering all of the local products that might only be traded in Hong Kong; however, we would not be actively pricing those products.

JR: So we should expect to see expansion in stages?

JC: Right, we are starting by pricing products that are denominated in US dollars, Canadian dollars, euro and sterling, and progressively, we will include the rest of the currencies. We will also be quoting FX and gold in all the currencies that the BIS currently prices. The idea is that there will be a fully fledged trading room, exactly the same as in Basel and Hong Kong.

jros@profit-loss.com

@jros66

Julie Ros

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