For the third year in succession, SWIFT’s annual London Business Forum has taken place weeks before the British head to the polling stations. Unlike the 2015 general election and last year’s referendum on the UK’s membership of the European Union (EU), the outcome of the upcoming ‘snap’ general election on June 8 appears to be in little doubt. It was therefore only mentioned in passing at this year’s Forum held earlier this week, which had ‘Building the Future’ as its central theme. The event again took place at Tobacco Dock in Wapping, a historic site under redevelopment that straddles London’s traditional City financial district and the skyscrapers of Canary Wharf.
Instead, the opening address given by SWIFT’s chairman, Yawar Shah, focused on fraud and cybercrime. He described them as “disruptive forces”, which have long had to be dealt with but are rapidly becoming more organised and sophisticated in their scope. The financial messaging services provider knows this only too well, the much-publicised US$81m heist in February 2016 targeting the Bangladesh central bank resulted from bogus instructions issued via the SWIFT network.
Other banks using SWIFT were subsequently targeted, triggering a beefing up of the network’s customer security programme over the past year. The most recent initiative, launched earlier this month was a new real-time payments control service to bolster customers’ existing anti-fraud controls.
However, Shah warned that regulators are about to turn their attention to individual banks’ cyber risk management measures and their adequacy. “We, as an industry, don’t have much time to get ready for this,” he warned. “We need to be ready before the end of the year for self-assessment.”
Javier Pérez-Tasso, SWIFT’s chief executive for Americas and UK region, cited recent reports of a 40% increase in cyberattacks targeting financial institutions, with the industry attracting four times the number that other industries attract. He urged more information sharing among those that have been hit, noting that innovation and cybersecurity compliance needs to be mutually reinforcing. “As banks roll out new initiatives, cybercriminals are presented with potential new points of entry,” he warned.
Globalisation on hold
Previous SWIFT Business Forums have included high-level politicians in the line-up, with last year’s event including a debate between Sir Vince Cable and John Redwood on the respective cases for and against the UK’s continued membership of the European Union (EU). An audience poll indicated a vast majority supporting the ‘Remain’ camp, but two months later the national referendum resulted in a 52% to 48% vote for Brexit.
Financial professionals apparently feel that the decision taken was the wrong one. Asked whether the UK would ‘survive’ or ‘thrive’ post-Brexit, the audience at the 2017 Forum decided by 60% to 40% that survival was the more likely prospect.
This year’s speaker was former UK foreign secretary Lord William Hague, a remain campaigner, who suggested that when the then ruling coalition government took the decision in 2013 to hold the referendum it was assumed that the electorate would regard the UK’s continuing membership of the EU as in their economic interest and vote accordingly. However, the issue of immigration steadily became a decisive issue over the intervening three years.
A further consequence was that on both sides of Atlantic the big, long-established parties of the centre Left are in trouble as traditional loyalties have broken down. This was evidenced by the recent US and French elections, where voters have chosen a leader with little or no previous political experience. Voters were also uncomfortable with the speed of technological change and the potential consequences for jobs.
“There’s no sign that the forces changing politics are here only temporarily,” noted Hague, who cited business management consultancy group McKinsey’s forecast that the impact of the impending Fourth Industrial Revolution is likely to be 3,000% times greater than that of the first some 200 years ago. It had already triggered questions ranging from whether robots should be subject to taxation to whether countries should pursue the concept already being trialled in Finland of a guaranteed national basic income for all.
In this new environment, businesses “will have to provide solutions or become redundant,” he warned. The post-Second World War trend of steadily greater globalisation had suddenly been put on hold as people once more looked to the nation to take control.
“The nation fighting back and politics will increasingly intrude into business over the next 20 years,” Hague forecast. “It’s not a welcome development, but it’s one that we’ll have to deal with and develop resilience to. It means that it will be necessary to listen to a diversity of advice, as the received wisdom will very often be wrong, while local trends will differ much more than they have done in the past.
On the horizon
Maintaining that despite greater political uncertainty and unpredictability, his outlook remained positive, Hague warned of two major challenges in the years ahead. The first was the trouble being stored up by low productivity growth coupled with loose monetary policy across many developed economies. This was a development also troubling former US Federal Reserve chairman Alan Greenspan.
On both sides of the Atlantic, household debt has now returned to pre-financial crisis levels, a trend that “can’t go on forever” he said. “The longer we put off a rise in interest rates, the bigger the problem will get – and the more central banks will attempt to avoid it.”
Second was the slowdown in global population growth, with the notable exceptions of Africa and the Middle East where – helped by improved public health – the number of people is projected to double by 2050. Many of them will look for better job opportunities to Europe, which urgently needs to develop a unified policy on migration to avoid the current crisis widening further.
This trend is, unfortunately, occurring at a time when nationalism is on the rise while the ability of nations to get together and strike agreements is becoming correspondingly more difficult. Hague believes that territorial tensions between China and Japan in the South China Sea are particularly dangerous and the situation isn’t helped by the United Nations being “ a waning force”.
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