Research on the post-trade processing practices of private banks in Singapore has revealed that nearly 60% of private banks in the region lack back office automation in trade processing.
The study was conducted by InsightAsia Banking & Finance Consulting, a division of InsightAsia Research Group, that specialises in the Asia Pacific region, and commissioned by Omgeo, the global standard for post-trade efficiency.
Against a background of the growing importance of Singapore to the global private banking sector, Insight Asia surveyed a group of Singapore-based private banks regarding their post-trade processes. The study focused on a range of issues related to trade processing, including the effects of the recent financial crisis on the private banking sector and the current mechanisms that private banks are using to process trades.
The study showed that nearly a third of private banks continue to manually carry out trade allocation and confirmation, rather than processing their trades electronically. Manual processes can make a firm more vulnerable to trade failure and create a more risk-prone environment because there is more room for error in comparing trade details.
Many of the Singapore private bank executives surveyed highlighted the importance of having efficient and flexible banking and processing systems as a key area of development. There was general agreement that higher levels of automation in trade processing would result in a reduction in operational risk. In fact, of the executives interviewed from within private banks currently carrying out trade matching in Singapore, 59% said they either wanted to make improvements to their system or were in the process of doing so.
"This study suggests that Singapore private banks are becoming increasingly aware of the benefits of introducing automation into their back-offices," said James Drumm, Executive Director, Asia Pacific for Omgeo. "At present, many private banks operate in a manual environment, but there is a growing consensus that introducing more automated processes will significantly decrease their operational and systemic risk."
In addition to the findings on electronic trade processing, the study also found general agreement from the private bank executives interviewed that, while recent events in financial markets were unprecedented and posed some challenges to the sector, Asia, and in particular Singapore, remains a key element in their global expansion strategies.
Another key finding of the research was that there was almost universal agreement among executives that the focus on counterparty risk has increased substantially over the last 12 months, and is likely to continue in the foreseeable future.
"We conducted this study against the background of the global financial crisis," Phillip King, Head, Banking & Finance Consulting for InsightAsia noted. "The impact of these events at a group level for many private banks is still ongoing; however the long term growth story in Asian wealth markets remains intact. The COOs and operations executives interviewed reveal that Singapore has a solid corps of seasoned and highly capable professionals in senior roles in its private banking sector. They are a strong collective asset to the ongoing development of Singapore as a private banking hub."