Lunching with Iain Saville last week it
brought back many memories of yesteryear, when the UK securities markets was
reeling from the disaster that was the Taurus project. For those too young to
know or with short memories of the horror of the TAURUS project - TAURUS being
the code name for a system to bring settlement efficiencies into the UK market.
The TAURUS consultation with the market went on for years, with each interested
business within the market structure fighting to get their particular business
either protected, or to gain significantly. Consequently the TAURUS design was a
continual exercise and even to this day I am not sure where we finished before
the whole thing was canned and we were all put out of our misery, but with much
In the aftermath of this disaster, which
could have been terminal for the City of London's future prospects as a major
financial centre, the Bank of England put their hands up and took on the mantle
of saviour. This acceptance by the Bank of England alone was brave, considering
the mood of the City and its declining reputation to manage itself, let alone
major infrastructure projects. I feel there is resonance with today.
Out of the bowels of the Bank of England
came a man with real fortitude to get the job done- Iain Saville. He must have
known he was walking into a hornet's nest of anger and apathy in the markets.
Not conducive to introducing a major infrastructure project, so soon after the
previous attempt had failed; especially where the failings of firms and the
people involved were so fresh in the City's memory. In one sense it probably
helped that there was little time for blame and recrimination and we all got on
with the task in hand.
Iain would be the first person to raise the
name of Penn Kent, a Bank of England Director that skilfully paved the way for
the necessary legal and regulatory changes required for the new system. Penn's
charm was never used more effectively and with such positive results. But let's
focus on the team that Iain put together all from different aspects of society
and business, to create and the implement the CREST system.
Pulling different people together that have
different backgrounds and thought processes, with an ethos to charmingly operate
a ‘can do' culture was inspired. Each team member offered something unique to
the project and was not tainted by legacy knowledge and the failure that
preceded it. It was a key decision to recruit these people and they proved to be
a dream team in every sense.
The CREST team were remarkable in that not
only did they design a system that virtually changed every operational process
throughout the securities industry. They were unwavering in ensuring focus was
not lost but also listened to firms and people in the market directly affected
by the CREST design. I can vouch for the team's ability to listen and respond
with quiet authority and provide comfort and confidence that the project was in
good hands. This is an essential ingredient in any project and in the inaugural
CREST team we evidenced it at its very best.
As the CREST system moved from consultation
into build, the team were also heavily involved in marketing, with no end of
events covered and meetings attended. Through this phase they were in fact
selling the system. It did not feel like a sales job but just about everyone was
buying into CREST and getting behind the project. An almost unstoppable force
had been created.
The CREST design was the first and possibly
the last financial project that brought together all agents in a transaction,
from Registrars to Brokers, to Market Makers, to Investing firms, to Investors
within management control of payment banks. The visibility of exposures became a
real-time capability that could be managed intraday. This was the same for
Government debt and the Money Market. No other system brought all these products
and business into a central point of settlement and risk management. It is a
lasting legacy of the CREST team that the UK has benefited from countless
trillions of pounds of savings, within a managed risk process, since the CREST
implementation. Today Europe could do with such a change to achieve what CREST
did nearly twenty years ago.
The implementation of the CREST system did
have the odd hiccup, but hardly worth mentioning and from just a few months of
live running has not had any major fault or let the industry down. This is an
outstanding feat that has never been recognised and the resiliency in the system
considering the difficulty of the expectation it had created, is
One of the very key decisions CREST made was
to ensure that there were competing networks able to carry messages to and from
and around the markets. The competition in supplying connectivity via networks
has worked wonderfully well and has ensured pricing has never got out of
I know that it was a target for CREST to
settle foreign equities and debt and I am sure the FX market would have been a
target as well, but before this could be developed CREST was bought by
Euroclear. We could debate whether this has been good for the market, but
Euroclear has attempted to continue to tackle industry clearing and settlement
issues in their own way. Hopefully they have managed to learn from the masters
of change that were the CREST team.
Time is always the test of success and I
would like to state on the record that CREST was the best project of its type
ever to succeed. It was superbly led and wonderfully executed and it's a shining
model of what can be achieved in financial markets, when the right people are
involved and they have backing from the industry.
Unfortunately, currently the financial
markets appear to be in total disarray, with a lack of leadership, no focus, no
imagination and no industry-wide support to mandate change. The finance industry
needs to take charge of the problems that ail it. It must enforce change and
development, introducing solutions that are imaginative and most importantly are
proven to work. Who could do this? Well, I wonder what the CREST team are doing now?