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The Board perspective

The Board perspective. Finn Otto Hansen. Russian AGM 20 April 2006 Moscow. Members. User Groups. National Groups. Board Committees. Board. SWIFT. Customers. SWIFT corporate governance. Governance. Business. SWIFT Board of Directors. Elected at the AGM for 3 years

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The Board perspective

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  1. The Board perspective Finn Otto Hansen Russian AGM 20 April 2006 Moscow

  2. Members User Groups National Groups Board Committees Board SWIFT Customers SWIFT corporate governance Governance Business

  3. SWIFT Board of Directors • Elected at the AGM for 3 years • Number not to exceed 25 • All nations ranked in decreasing order based on number of shares owned • Nations in top 6 countries may elect 2 board members for country • Nations in next 10 countries may elect 1 board member per country

  4. SWIFT Board of Directors • All other nations may propose 3 directors • Russian users support the European SWIFT Alliance (ESA) group who propose 2 directors • 24 countries in ESA meet quarterly before each board • Annual ESA operating plan and objectives linked to SWIFT strategy Slide 4

  5. Evolving the model for corporate access Finn Otto Hansen Moscow 2006

  6. Context • Community consultation in December 2005 (DP138) • Overall widespread support for new proposed corporate access model, with some concerns raised • Corporate Access Group reviewed community concerns at its January meeting and refined the model accordingly: • Simplification of corporate admission criteria • Withdrawal of international corporate user group concept: standard local user group policy will apply • Standard procedure will apply for NMGs’ role in corporate admission process

  7. Agenda • 1. Highlights of new proposed corporate access model • Detailed model components • Next steps

  8. Current MA-CUG model:Bank administeredCorporate joins several MA-CUGs To new many-to-many CUG:SWIFT administeredCorporates and banks join 1 CUG Progressing corporate connectivity:Many-to-many CUG (with restrictions) • All messaging services • No standards enforcement beyond FIN, in a first stage Bank A Bank A Corporate A Bank B Bank B Corporate Corporate B Bank C Bank C MA-CUG model remains available

  9. Admission criteria – Preserve SWIFT integrity Which stock markets? • Only regulated exchanges in FATF member countries (simplified criteria) • 31 countries are eligible, covering all major stock exchanges • Information disclosure • Governance regulation • Not discriminatory • Easy to check • Around 22,000 eligible corporates(out of which 2,000 are prime target) CRITERIA:corporates must be listed on selected stock markets Rationale? Addressablemarket? External legal opinion confirms criteria are workable for competition laws Around 10% of companies listed on eligible stock exchanges have HQ outside of eligible countries

  10. Rating FATF Eligibility Country Rating FATF Eligibility Country List of eligible countries Australia Austria Canada Denmark Finland France Germany Ireland Luxembourg Netherlands Norway Singapore Spain Sweden Switzerland United Kingdom United States Belgium AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AA+ Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y New Zealand Hong Kong Iceland Italy Japan Portugal Greece Mexico South Africa Russian Fed. Brazil Turkey Argentina AA+ AA- AA- AA- AA- AA- A BBB BBB BBB- BB- BB- B- Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y 7 new countries eligible, as a result of the simplification of the corporate admission criteria Source: S&P August 2005 long term foreign currency rating

  11. Agenda • 1. Highlights of new proposed corporate access model • Detailed model components • Next steps

  12. Corporate admission criteria A.1. User category A.2. Subsidiaries C. Traffic restriction A.3. Eligibility status change B. Financial institution admission criteria D. Go-to-market approach Detailed model components • Which user category for corporates? • What about eligible users’ subsidiaries or sister companies? • What if a company is de-listed? • Will the CUG be open to all financial institutions? • What messaging services will be allowed? • What about standards? • Who drives the sales process? • What role for SWIFT?

  13. Agenda • 1. Highlights of new proposed corporate access model • Detailed model components • Next steps

  14. Immediate next steps • Key coming milestones: • Board decision in March • Vote at June Annual General Meeting • If positive, pilot and launch soon after • In addition, Corporate Access Group set up two working groups to help steer SWIFT efforts to improve commercial and operational aspects of its corporate-to-financial institution offering

  15. Appendix Scope & rationale for new corporate access model

  16. Building blocks of e-platforms Out of scope Scope of a standardised electronic corporate-to-financial institution communication platform • Value-added services (e.g., Cash Management, Trade finance) are in the competitive space • Should be accessible through the platform but developed, marketed and serviced by each financial institution Bank A Valueadded applica-tions & services Bank B Valueadded applica-tions & services Bank C Valueadded applica-tions & services • Standards, messaging services, security and connectivity are in the collaborative space. Standards will be reduced to minimum in first phase • Common platform will generate savings for financial institutions & corporates Standards Messaging services Security Technical connectivity

  17. Several roadblocks result in relatively limited corporate take-up (104 corporates so far) Assessment of current corporate connectivity models (MA-CUG and TRCO) • Cumbersome joining process: e.g., corporates must join MA-CUG of each of their banks, forms and contracts are complex, requires technical understanding • For treasury counterparty (TRCO), admission criteria are restrictive (i.e., 8 sponsor banks) • Adoption is driven by few, leading corporates • Corporates are looking for simplification to allow for easier scalability and broader automation Major corporate adoption requires profound paradigm change

  18. Corporate demand assessment:Clear interest, with strong business case • 42 corporates interviewed by CAG members, from a wide range of industries, sizes and geographies • Survey highlights strong corporate demand for a standardised corporate-to-bank platform (85% show intend to buy) and trust in SWIFT as supplier • Case studies jointly done with two corporate users: General Electric and Arcelor • Both cases show compelling economics for using SWIFTNet (ROI of 400% and 600% respectively over 5 years) Corporate survey Business cases

  19. Key business drivers Business drivers for financial institutions • Respond to clear customer demand • Unlock cost savings: • Reduction in customisation efforts for largest corporates • Reduction in proprietary system costs/investments, if broad adoption • Focus energy on value-added services, not commoditised connectivity • Prevent outsiders from developing a solution • Suited to replace pt-to-pt connections • Suited to connect ERP or treasury management systems to financial institutions

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