There is huge change underway in the investment banking sector as it recovers from the banking meltdown that began in 2008, and IT is central to it. Investment banks like HSBC Global Banking and Markets (GBM) are moving more to electronic platforms across their businesses, facing regular changes to industry regulation, while becoming digital from front to back.
And the provision and support of IT hardware and software is not the end of the story for the industry’s CIOs, with data king in the digital era.
HSBC GBM CIO Sumeet Chabria is a computer science graduate at Stony Brook University in New York. He has worked at the group for about 20 years in a range of senior IT roles, including CIO for the global banking and markets division in the Americas.
He is now global IT head of HSBC’s investment banking business, where he manages thousands of IT staff across the world, works with hundreds of IT suppliers and supports hundreds of business-critical IT systems.
These include trading systems and settlement systems, as well as interfaces with clients and exchanges to name a few. “There is no one core piece of software – we run a plethora of platforms,” says Chabria.
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As well as being responsible for all things IT, Chabria’s role includes overall responsibility for data and it is this, as much as the nuts and bolts of IT, that he is focussed on.
“In a more connected and automated world, where we are sending information to regulators, third parties, exchanges and clients in almost real time, the quality of the information coming out of a system is at least as important as the system itself,” says Chabria.
“IT departments and CIOs have been worried about uptime, downtime resilience and disaster recovery. Now is the time to spend as much time ensuring the quality of information is as good. One of the top priorities for me is making sure the information is correct,” he adds.
According to Chabria, in the past when things were less digital, timely manual checks could be performed on the data quality – such is the importance of getting it right. But today, as a result of the industry becoming digital through automation and making activity electronic, this is not possible.
“We look at IT and data together. Data is the blood in the system and we want to make sure it is healthy,” he says.
Good quality data vital to meeting regulation
Good quality data is not just important to the businesses competitiveness, but also to meet regulatory and other obligations. If banks cannot prove they have met the rules, hefty fines from the Financial Conduct Authority (FCA) in the UK or the Securities and Exchange Commission (SEC) in the US are not uncommon.
We look at IT and data together. Data is the blood in the system and we want to make sure it is healthy
Since the banking crisis of 2008, regulation in the sector has gone into overdrive. Thousands of pages of new regulations are published on a monthly basis and regulators need banks to report activity to them regularly. By moving to electronic business processes there is far more data to report.
Where once only the stock exchanges were dealing electronically, digitisation means investment banks, dealers, brokers and customers are connected, creating more data that needs to be sent – including to regulators.
Regulations and the need to meet them, combined with the incessant drive to be competitive, means projects are constantly in progress at HSBC GBM. But Chabria sees these challenges as an opportunity to make wider improvements.
He says if you are opening up a system to customise it to meet a regulation or a mandatory requirement, that is the perfect time to make other changes: “It is like opening the bonnet of a car. It is a good time to do maintenance, and an opportunity to make strategic change.”.
Developing and implementing non-core systems
The bonnet is not the only thing Chabria wants to open up. He says different ways to develop and implement non-core systems can be explored, whether through third-party suppliers, joint ventures with other institutions or working with smaller, innovative startup firms.
For example, 12 banks – including HSBC – are creating a standardised language and a messaging system, known as the Neptune project, in the corporate bond market.
We need to access talent wherever it is present and use it for innovation
Investment banks are known for their large in-house IT resources and developments, but the current changes being faced by businesses in the sector is changing.
"If customers want bespoke products, we have to customise – but where the industry is moving to simplified business models there can be common platform sharing between banks. I am open to that,” says Chabria. Joint ventures are another option, he adds.
For example, Chabria says HSBC was among four banks who worked with business process outsourcing (BPO) supplier Genpact and financial information service Markit on the creation of a centralised know-your-customer (KYC) service, which verifies and identifies clients for due diligence.
But he says the industry needs to look beyond in-house teams and established technology suppliers for innovation and has identified the startup sector as a source: “We need to access talent wherever it is present and use it for innovation.”