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Outstanding SIBOS 2021 gets it: Climate change and CBDCs DO matter

Last week’s SIBOS 2021 had 150 conference sessions, featuring more than 250 industry experts, and 19,000 attendees from nearly every country in the world. The opening keynotes focused on the core theme of SIBOS 2021 which was “to recharge global finance and accelerate change for the better”.

For CTMfile, two sessions stood out: Mark Carney’s talk on climate change and a discussion on CBDCs.

Climate change

ING Bank’s advert said it all: “Reduce your emissions, not your ambitions”.

Mark Carney, UN Special Envoy for Climate Action and Finance, final keynote on “How we can – and must – work together to tackle climate change.” Focused on what the banks need to do. One of the aspects he focussed on was providing a market for carbon offsetting. First, he pointed out that currently, the off-setting market is only about $1bn/year as well as being fragmented and inconsistent, but thankfully there are now serious attempts to professionalise it to become truly global. It could be a $100-150bn market if we get it, as he put it, “get it right.” And the only way it gets that big is if it is high integrity.

His other focus was the financial challenge of transitioning to Net-zero. He pointed out that, “The world needs $100-150trn, half of which will be spent in Asia over next three decades for this transition.” How are you bankers going to help do that?

CBDCs through the bankers’ lens - challenge or opportunity?

The emergence of central bank digital currencies (CBDCs) is gathering momentum around the globe, with more than half of the world’s central banks actively exploring their use. CBDCs could have profound implications for the global financial system that needs to be thoroughly assessed and worked through – including the impact on commercial banks.

This discussion brought together senior bankers from DBS Bank Ltd, BNP Paribas, Citibank and Bank of England, chaired by John Orchard, CEO, OMFIF. Their fascinating and illuminating discussion is covered in this summary chart:

Source & Copyright©2021 – Swift (CTMfile: Congratulations to those who worked on this diagram.) 

The discussion covered:

  • Why central banks are looking at CBDCs:
    • Looking at both retail bank CBDC money (would be new) and wholesale CBDC (already exists)
    • Is there any value by a central bank providing such service or should it be provided by the private sector? General consensus was that will need both.
    • Need to think about how should regulated sector respond?
    • Not want stable coins to disrupt payment systems and circumvent regulations
  • CBDC in Asia, some of the issues reviewed were:
    • Should they be for cross-border payments?
    • Interoperability is a major issue here, but not sure how to solve?
  • Europe progress:
    • ECB project reviewed and will be a 3-5 year project/trial
    • Banks watching closely and accept any new services will need to be closely regulated
  • Citi view:
    • Will connect to the CBDC and expect that they will get more traffic
    • Have proposed new structure which involves shared network
  • DBS view:
    • Feel this offers a new way for payments but needs to be regulated
    • Like blockchains in the network
    • Have applied to join China system
  • Conclusions
    • Interoperability is essential and must be complementary to existing systems
    • Is essential but very difficult
    • Need technology to solve this
    • RTGS systems are going to be essential as part of new systems
    • Liquidity fragmentation is a serious possibility and very dangerous for banks

CTMfile take: The virtual SIBOS was outstanding in both the technology and organisation. Simply superb. The talk by Mark Carney and the one on CBDCs were brilliant.

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