High-tech OPERATIONS
4
Working relations
What's NewS Issue 5 September 1995
The operations division is currently implementing and testing a cluster of
high-tech systems. Erik van den Dungen and Frans Slootman talk us through
the new applications service-oriented.
ECHO NETTING
When Rabobank and a number of other
European banks set up the Netting Insti-
tute some four years ago, many people in
the industry were very sceptical. In essence,
the Institute provides a foreign exchange
matching service for affiliated international
banks. 'It's a very simple system,' says Van
den Dungen. 'Banks do a lot of transac-
tions with each other every day. In the
past, every transaction had its own paper-
work and transfer costs. Now, at end of
business each day, the echo netting system
balances the debits and credits and works
out who is owed what. So instead of trans
ferring individual transactions back and
forth, only one SWIFT transfer per cur-
rency, per bank, is necessary.'
Confirmation, or matching, is a vital part
of this system. 'It's actually a risk manage
ment aspect,' Slootman explains. 'Each of
the banks involved confirms a transaction
Yesterday's match - the implementation of Concord and
FX Match wilI revolutionize confirmations.
and the deal is only registered as a match
when this confirmation has been received
from both. We receive a warning if a
transaction is unmatched, so we can act
immediately. In addition, it also reduces
the settlement risk to under 10 percent. It's
really much more efficiënt.'
The Institute has not only proved how ef
ficiënt this system can be, but also how it
can reduce transfer costs. 'When we first
proposed this idea, a lot of people said it
would never get off the ground,' Van den
Dungen recalls. 'Now they see it really
works, I think more and more banks will
be eager to join us.'
CONCORD/FX MATCH
Both of these new applications are elec-
tronic matching systems and their intro-
duction was prompted by corporate cliënt
requests. 'At present,' says Van den
Dungen, 'almost all our confirmations of
transactions with clients are done on
paper.' Standard procedure is that a letter
is sent to the cliënt confirming the deal.
The cliënt then sends back a letter and the
two are compared. If they match, then
they are filed. 'Maintaining voluminous
paper files is actually a ridiculous state of
affairs,' Slootman laughs. 'Clients were
asking if there wasn't a way to confirm
electronically. So we began looking at
possible solutions.'
FX Match is a fairly rudimentary system
aimed at foreign exchange and money
market transactions. 'It's an efficiënt,
simple system,' Van den Dungen explains,
'and it works very well. But the matching
is not done inhouse. A sub-
sidiary of Citibank takes care
of that. Concord, on the other
hand, is an inhouse system
which means we can handle
the matching ourselves. That's
a great advantage. But having
the two means clients can
choose which they prefer.'
Concord is a highly sophisti
cated system which also incor-
porates brokerage and risk-
management analysis modules.
'And it uses SWIFT-like mes-
sages which is a real advantage
now that SWIFT is allowing
corporates and financial insti-
tutions to become members.
So what we have here is a
really ideal risk-avoidance
system as well as giving our clients a
service they were asking for.'
COGNOTEC
This particular FX and money markets
dealing system takes the service aspect a
step further. Currently being tested by six
member banks, but slated for marketing
to corporates in the near future, the pre
sent Cognotec system allows them direct
access to the central dealing room in
Utrecht and provides up-to-the-second in-
formation on FX and money market
prices. 'In simple terms,' says Slootman,
'we install a screen and software in mem
ber banks and in clients' offices. This soft
ware and hardware gives them a direct
link to a small team in the dealing room
which acts as a kind of market maker. At
present, the screen member banks have
only provides mid-prices as an indication.
With the new Cognotec system, the
Utrecht-based team or the software itself
can input or update real-time prices regu-
RAPID REACTION
Just how fast and sophisticated today's
high tech systems are is illustrated by a
story from the financial markets division.
'We did a spot deal with a bank in New
York,'says Theo van Koningsveld/we put it
in ourTrade-Atlas deal-capture system,
which is linked directly to both our back
office system and SWIFT.The American
bank reacted six minutes later with a mes
sage that we'd made an error in the spot j
rate. Six minutes.That's how fast tech-
nology is these days.'
larly and clients can respond to fluc-
tuations and get the best possible deals
electronically.'
BACK OFFICE PRODUCT
MANAGERS
Both the Cognotec and other new systems
currently being implemented were direct
responses to internal and external cliënt
and member bank needs. 'We have been
undergoing a re-design process here in
operations,' says Van den Dungen. 'Our
point of departure has been what clients
want. So as well as streamlining, we've
focused heavily on the service aspect by
talking to clients. The result of those
direct discussions and real input from
people in the member banks is the cluster
of systems we are now putting in place.
I think we have been very proactive and
we have even appointed product managers
- a move which would have been unthink-
able for a back office even a couple of
years ago. But our area of banking has
now become so sophisticated and things
are moving so quickly, you have to be on
top of developments all the time - other-
wise you lose your competitive edge.'
■i KLANTVRIENDELIJKE
SYSTEMEN
Bij operations worden momenteel nieuwe
technisch hoogwaardige systemen geïm
plementeerd die de efficiëntie binnen dit di
rectoraat nog verder verhogen. Echo net
ting, FX Match, Concord en Cognotech zijn
een antwoord op verzoeken van klanten.
Een overzicht.
