SPECIAL REPORT:

40th International ACI Congress, Geneva

FROM 4 JUNE THROUGH 6 JUNE of this year some 1,400 delegates and partners gathered in Geneva, Switzerland, for the 40th International Congress of the ACI — The Financial Markets Association. Small in numbers, but inspired with enthusiasm, thirteen delegates from Toronto and Montreal were on hand to represent Canada and FMAC at the annual gathering of the world’s financial markets practitioners.

Some members of Team Canada: (left to right) Karl Berger (CIBC), Ambrose Campana (CIBC), Gary Macleod (Freedom/Marshall), Sharon Grewal (Royal Bank), Bernard Gauvin (CIBC, Singapore), Simon Côté (NBC, Montreal).

The theme of this year’s congress was “Challenge the future” — an anthem appearing on many congressional banners and official publications — and a catch phrase reverberating throughout the many speeches and professional dissertations during the congress. But more than just a slogan, this theme was cleverly integrated into the social and business aspects of the congress. For this, we can thank Michael Terrier and the organizing committee for delivering a visionary and portentous event which certainly lived up to its billing.
Exactly how challenging our future might be was conveyed dramatically at the Opening Reception of the congress. Shortly after their arrival at the Palexpo (Geneva’s principle convention centre and site of FOREX ’98) delegates were welcomed by a deafening crescendo of drumbeats accompanied by dazzling strobe light effects. Shortly thereafter, a small army of black-clad ninja commandos rappelled from the ceiling into the delegation swiftly surrounding the group of now bemused delegates. Was the global banking community being held hostage? As some commandos began to spray paint the walls with graffiti, others began to crash and tear down a walled enclosure in the centre of the hall revealing — to everyone’s delight — a large and well-stocked cocktail bar.
As delegates settled in for a fine evening the message seemed clear if a little disturbing: a financial institution must challenge the future and prepare for all eventualities or become its unwilling captive. The Business Session of the congress, presented on the Friday and Saturday in a series of three panel discussions and two lectures, took up the challenge by highlighting the changing trends in the global financial community and emphasizing the need for individual institutions to adapt to survive. However ominous, the talks were incisive and well organized, and judging from delegates reactions were the genuine highlight of the congress. Hats off to the organizers for attracting such a notable array of world-class speakers a few of whom deserve special mention; Kaspar Villiger, Minister of Finance, Switzerland; media pundit Frances Cairncross, the Economist, London; central bankers Peter R Fisher, Executive Vice President of the Federal Reserve Bank of New York and Jean-Pierre Patat, General Manager, Banque de France; eminent economists William Roy White, BIS Basel and Dr C. Fred Bergsten, Director, Institute for International Economies; and finally managing directors of investment banks, Andrew Siciliano of SBC Warberg Dillon Read, Phillip Vasan of CSFB, and Paul Kimball of Morgan Stanley.
To encapsulate two days of detailed panel discussion, the call to “challenge the future” focussed on three principle themes:

1) Rapid dissemination of information technology
2) Emergence of the Euro
3) Globalization and the economies of scale

In sweeping terms we can summarize these trends as follows:
The pervasive impact of information technology and the “externalization of information” that comes with it could have a leveling effect between large and small banks. Cost effective information services available to large and small banks alike could render small banks more competitive and larger banks (with their existing costly and bulky information infrastructures) left at a competitive disadvantage. In short, as information technology marches on, banks will have to “downsize” existing infrastructures and “outsource” information technologies to stay competitive.
In a global market characterized by mergers, globalization, and huge capital flows, the theory presented by the panel that smaller banks could stay competitive by outsourcing cheap information technologies lacked depth or at least needed to be supported with examples and more analysis. The contention, however, that bulky infrastructure need to be revamped seems prudent in our ever-changing and cost-conscious financial market.
It was generally agreed among the panelists that when the Euro finally arrives in January, 1999, its impact on global markets would be instantaneous and massive. There will be no grace or trial period before it becomes a major currency. Banks should be ready to trade it as such now. It will quickly become a reserve currency on a stature with the American dollar. Because of this and the massive capital market of the EU, the Euro will likely appreciate between fifteen and twenty per cent after January, 1999. Price stability will be the primary objective of the European Central Bank. And after the Value at Risk models have been considered the Euro will probably look alot like the DM.
The panel “Trading in the Future” presented by five global heads of investment banks, gave the delegation its biggest wake-up call as it highlighted trends that are permanently changing the global market. Banks will be given two choices — adapt or die. This point was graphically depicted by Andrew Siciliano, SBC Warburg Dillon Read, who displayed a large skull and crossbones on the overhead projector during his dissertation. Here are some of the trends the panel discussed. Mergers and acquisitions in the banking industry will continue at an accelerated pace leaving only a handful of trading institutions in the next fifteen years or so. Globalization is an essential aspect of cost effectiveness. So too is the effective exploitation of information technologies. Huge capital flows will necessitate huge trading tickets putting smaller players permanently on the sidelines. Advances in currency price transparency and electronic models designed to offset foreign exchange exposures will likely signal the death knell of institutional desks as we know them. “Smile and Dialers” and “Newsjockeys” will all soon be looking for work, according to the panel. As derivative products are employed more pervasively in the future’s highly competitive market, resources devoted to education training and customer support must be augmented.
Whether one agrees with their ideas or not they are guaranteed to spark heated debate on the future of bank trading. Hence the moniker, “Challenge the Future.”

The technology exhibition at the Palexpo in Geneva.

The Trade Exhibition at this year’s congress which delegates could attend at the Palexpo throughout the two-day event saw a record 63 vendors setting up shop. On display were a variety of cutting edge electronic trading products. These included upgraded dealing systems, software for derivative pricing models, convergence systems with synthetic rate histories, as well as a host of products for internet trading. The champagne and cocktails offered at many of the booths allowed delegates to not only “challenge the future,” but drink to it as well. One vendor tried to capitalize on World Cup fever by offering a prize winning “beat the goalie” competition featuring UK football stars Peter Shilton and Bruce Grobbelaar.
Rounding out the congress was a highly entertaining and diverse social programme which proved a welcome respite from the weighty business sessions. The Swiss Evening on Friday sponsored by E.B.S. was a spectacular celebration of the history, culture, and cuisine of Switzerland. While delegates and partners dined on such regional specialties as Raclette and Rosti, colourful pageants highlighted the history of Switzerland including a fully-costumed, mock Napoleonic battle on the massive central stage. On the following night, at the Gala Evening sponsored by Reuters, the congress wrapped up with a glorious and glitzy flourish. Under a massive white tent on the shore of Lake Geneva, 1,400 delegates and partners enjoyed a four-course gourmet dinner amid a surrealistic carnival of mimes, jugglers, and musicians climaxing in a state-of-the-art fireworks display over the lake. The Opening Reception, the Swiss Evening, and the Gala Evening were the brainchild of artist Michel André Rachat of “Love and Trust,” Geneva, whose creativity helped make the social programme at this congress a truly unforgettable experience.
The fond memories delegates take away from Geneva, however, will not be the only measure of its success. The congress made a serious effort to tackle some of the difficult issues that will challenge our community as we head into the new millennium. If this information can be used by delegates to effectively “Challenge the Future” then the real value of Geneva ’98 will be realized.