On July 17th 2020, we had the honor of hosting leading CEOs from Luxembourg's financial services sector to share their thoughts on advances in digitalization, including the challenges, the opportunities, and how the COVID-19 crisis may have altered or accelerated their strategy. 

  • Arnaud Jacquemin - CEO of Socgen Luxembourg Group
  • Robert van Kerkhoff - Managing Director of BNP Paribas Securities Services Region Luxembourg, Ireland & Channel Islands
  • Eduardo Gramuglia - Country Head of State Street Luxembourg
  • Nasir Zubairi - CEO of LHoFT 

Below you can find the full transcript of the talk, including the Q&A section, in addition to a video recording of the session:

Nasir Zubairi, CEO of LHoFT 

Welcome to everyone, and thank you for joining us for this CEO Roundtable on the Future of Financial Services - our last virtual panel before the summer break. 

The CEO roundtable in some ways is a result of the work that we've been conducting with members of each of the respective organizations in our Fintech task forces, which we launched in January 2020, looking at the broader perspectives within the industry. We're very pleased to have the CEOs here today to discuss some of these pain points in person.

Just as a little summary, we've had about 40 virtual events (33 virtual roundtables, workshops and discussion panels, 3 Virtual Fintech Fridays, 8 training sessions on Mindfulness) over the past four months during this COVID19 confinement phase, with over 4000 participants attending from all over the world, and today we are incredibly honored to welcome three exceptional executives from the Luxembourg community. Gentlemen, thank you very much for being part of this. 

I am going to give a brief overview and introduction to all of you and then we can get going:

  • First we have Arnaud Jacquemin, CEO of Société Générale Luxembourg Group. Arnaud Jacquemin joined Société Générale group in 1993, became Deputy Chief Risk Officer of its risk division in 2012. He was appointed Group Deputy General Secretary in 2015, notably heading the transformation of the compliance division, and then Deputy Head of Group compliance in 2017. In June 2018, he became Group Country Head for Luxembourg and CEO of Société Générale Luxembourg Group which conducts all group businesses.
  • Next we have Robert van Kerkhoff, Managing Director of BNP Paribas Security Services, covering Luxembourg Ireland, and the Channel Islands. Robert started his career in Fortis Bank as Head of Risk Management for the brokerage custody and clearing activities in the Netherlands, and later became CEO of Fortis bank in Spain. In 2013, he became Deputy Head of Assets and Fund Service Operations based in Paris, building and managing the global operational model and AFIs management support. As of March 2019, Robert has been appointed head of the Netherlands Nordics and Luxembourg at BNP Paribas Security Services. 
  • Finally we have Eduardo Gramuglia who is the Country Head of State Street Luxembourg. Eduardo is the Senior Vice President & Country Head of State Street in Luxembourg, responsible for business strategy and compliance. Prior to his current role he was responsible for business development, relationship management, client onboarding and change. Eduardo is an active member of the Association of Luxembourg Fund Industry, ALFI, and contributes to the work of several working groups. 

Gentlemen, thank you very much for being here with us today. We really appreciate your time to be able to share your perspectives on the future of financial services with our community, in many respects related to the unprecedented situation that we've been facing over these past few months. That's probably a great starting point: COVID-19 

COVID-19 has initiated significant and unparalleled responses from all organizations within financial services, yours included. If I could take you back to March, when the build up of the confinement phase and COVID-19 cases began, and you were faced with a situation where you had to send your people home, you had to change the way your business is operated in Luxembourg, and shift your operations to a different model.

  • What were you thinking? 
  • How did you manage that process? 
  • How surprised or pleased were you with speed and agility with which all of your organization's could adjust? 

Let's kick off with Robert, I'd love to hear how did you manage?

Robert van Kerkhoff - Managing Director of BNP Paribas Securities Services Region Luxembourg, Ireland & Channel Islands

First of all thank you very much for inviting BNP Paribas, and I represent  BNP Paribas. 

"At that moment, you're looking around, and you see that somehow people are doing incredible stuff and I start feeling that with these people we are able to do anything."

I think when this whole situation started, I actually was in Madrid, and I was actually thinking what to do because I had a flight booked the week after going back to Luxembourg. We saw that a lot of the airlines were stopping flights, lockdowns started everywhere. So I needed to make a decision, either I stay with my family in Madrid or I was going back to Luxembourg? I decided to stay in Madrid after discussing with my management team. 

At that moment, you're looking around, and you see that somehow people are doing incredible stuff and I start feeling that with these people we are able to do anything. I think this installs a kind of trust, you know, when you work with a team and you see that things are going the right way, and that you can count on each other, the team work. So the starting point for us is that when we are in these kinds of situations we work as a team, and we are really able to do things in the way we did not before. I think that cohesion, that collective way of working is paramount. 

Secondly, I think what we saw was indeed agility because you need to understand that we are a big company, there's a lot of governance in place, sometimes bureaucratic, sometimes it's delays also the reaction of the organization of all the stakeholders there. And in this period actually we became a flat organization and to make the comparison with a Fintech, we became a little bit of a Fintech organization. I think that is agility. I think we of course want to maintain this as well as post COVID-19. 

"Very simple questions like ‘how are you doing?’ and ‘can we help you?' were really, in this tough period, embraced by our clients."

And the third element I saw was the intimacy. The intimacy between the people, within the organization, because we had only one direction, which was the direction of making sure that people are safe, and that our organization and our people were quickly going out of the organization. And secondly, I think also with our clients, we saw that very simple questions like ‘how are you doing?’ and ‘can we help you?’ were really, in this tough period, embraced by our clients, so the intimacy was the third component that I saw. 

Nasir Zubairi, CEO of LHoFT 

Okay, thank you very much for that Robert. Eduardo, how did the situation impact you guys? How did you make sure that things still happen?

Eduardo Gramuglia, Country Head of State Street Luxembourg

A lot of the story is the same. But I say, from our perspective, given our footprint, we already had a large presence in China, so when this virus started to break out and increase there, we had already taken action there. So let's say that was the starting point, and then the evolution of the virus as it made its way East was a lot of learning. In preparation, we were revising our BCP (Business Continuity Plan) plans, we were testing access, etc. By the time the virus hit in Europe, our Italian colleagues had to all go home, it became very quickly apparent that BCP was being rewritten, that thinking about going into a disaster recovery was not a solution. And so at that point, we just took a very pragmatic approach, there was a lot of red tape in State Street as there is in other larger organizations, all of that was put aside for a second. Health and safety of our employees were the first step. And so from one day to the next, in the space of a week, we went from zero to 98% of people working from home, which for an organization such as us is quite surprising, but we did it. 

"It was a question of finding quick, pragmatic solutions to the problems that were presented from one minute to the next."

There was a lot of engagement from employees. We started to institute weekly calls, where employees could ask any questions they want, there was a lot of uncertainty around what's going to happen with my taxes, what's gonna happen with my parking, ect… and so we had to engage very actively and very frequently with our staff and employees. We found as a result of that, which was very exciting for me and very energizing, is that now we have a level of engagement with our people, which we probably hadn't had before. And likewise with our clients. During the time of the virus and having to marry work from home, or a transition to work from home, not just here, but across the globe, for our clients as well with significant market volatility, that meant that we had to stay very close to our clients, constant dialogue and engagement with them because. It was a question of finding quick, pragmatic solutions to the problems that were presented from one minute to the next. I think all in all, within the tragedy that Coronavirus has been, because it has been a very tragic episode for all of us, we have found some positive things out of this experience.

Nasir Zubairi, CEO of LHoFT 

Thank you, Eduardo. Arnaud, how were things? How did you manage things at SocGen?

Arnaud Jacquemin, CEO of Société Générale Luxembourg Group

"In less than two weeks, post the decision of Luxembourg to confine, we were able to have virtually 100% of the staff working from home."

A lot of things have been said by Robert and Eduardo, a few elements on my side. I was not surprised by one thing and surprised by other things, an element which there was no particular surprise was the technological aspects, because we had already for a few years actually equipped 100% of our employees with laptops and deployed virtual workspaces (VDI) systematically and so the challenge was really to actually to open the roots and to increase the number of accesses in a short short period of time.

What was frankly surprising to me, and to the Exco, is the collective agility, as said by Eduardo and Robert, the collective agility of the Exco and of the teams to put in place the new ways of working, to bypass the written rules. And one of the key decisions of our group was to put the ‘control tower’ of the situation with our colleagues from Asia, already very early on at the beginning of the year, enabling all countries to actually take quick steps but also the collective decision from the management to decide that the crisis would be handled locally by the local management, and the local teams beyond the management. And that proved to be remarkably efficient. In less than two weeks, post the decision of Luxembourg to confine, we were able to have virtually 100% of the staff working from home. The exceptions were the people that were on vacation, etc. But we had 95% less than two weeks of people working from home, very impressive. The quality of internal dialogue was actually quite good. The quality of dialogue with the clients proved to be quite good as well. And frankly, this was not obvious because it was a crisis situation with the deleveraging exercises, with gathering information for calculation of the data set values in our security services business. Gathering information very late at night, even through to the morning, so there are no significant operational losses, so quite impressive.

Nasir Zubairi, CEO of LHoFT 

If I could just follow up on that, as you all said, one of the most impressive things really throughout all this, the problems and the crisis of COVID, is really the agility that the institutions had in terms of reacting and and on a massive scale, switching over operations without any planning as there was no precedent for this. As Arnaud said, no business continuity plan for this current situation

Arnaud Jacquemin, CEO of Société Générale Luxembourg Group 

Not to this to this extent, no.

Nasir Zubairi, CEO of LHoFT 

Exactly, everything as you said, One, two weeks, boom, everything was done. What do you take from that? Does this excite you in terms of your business developing over the coming years, and when you look at your strategy for the foreseeable future?

Arnaud Jacquemin, CEO of Société Générale Luxembourg Group

Yeah, definitely. This is one of the lessons of this crisis is that even mature organizations such as ours are able to be similar to Fintechs.

Nasir Zubairi, CEO of LHoFT 

Or to Google. Look at it. You guys behave like Google all of you. I mean, think about that, right?  

Arnaud Jacquemin, CEO of Société Générale Luxembourg Group 

That is exactly right. We do not even wear ties, you know. 

Nasir Zubairi, CEO of LHoFT 

True, I'm the only one wearing a tie. 

Arnaud Jacquemin, CEO of Société Générale Luxembourg Group 

What is highly positive is the fact that our organization was able to prove their agility. And we have conducted with the Exco, with the teams actually a session in order to see what we could draw from this experience in order to make sure that we would keep this ability of being very agile, very cohesive. When we had to prioritize the ramp up of the opening up, the access, because at that time, frankly, we were not sure that technologically the number of connections would be sustainable, for instance, there was no war between the Exco members for the prioritization, it was remarkably done. We have drawn lessons from this in order to make sure that we reinject this agility on a permanent basis. And I'm very positive about that, because we are able. And it's true that often, and many thanks Nasir for giving us this opportunity, to explain how we experienced this on a real time basis. Our organizations are mature, but we are able to prove to be extremely efficient in a completely unplanned situation.

Nasir Zubairi, CEO of LHoFT 

Robert, I think this is incredibly exciting for the industry as a whole and for your organisations. Quite honestly over the past 10 years since the financial crisis with increasing regulation and constraints on the industry as a whole, European banking from a KPI perspective has been hit hard relatively to all the industries. Luxembourg is still doing well, but performance overall in Europe is getting hard. What is this agility making you think sort of as to the changes that may come in the coming months and years around your business model and your competitiveness?

Robert van Kerkhoff - Managing Director of BNP Paribas Securities Services Region Luxembourg, Ireland & Channel Islands

That's a good question. I think what we see now and what we also foresee is that this is a difficult period and it’s not over. If you look into the newspapers now, you see Spain, but also Luxembourg, with case numbers continuing to rise. So we will remain in a very uncertain period, and that will also imply that we will see consolidation in the sector. We will also see that there is more pressure on the cost base. And also our clients, how can we look at our current operating model in a way? Do I still need to do these kinds of things? From a data perspective there are also challenges. Do we still need data normalization, standardization, do we need to do that in-house or are we going to outsource? So I definitely see for our business an opportunity there to help our clients and also to find ways to become more efficient in the future. 

Then there's the geopolitical aspect. So we also see that there are dynamics in the world that are changing, that are questioning some principles that we always took for granted, I think now it's more important than ever to look for the right partner. Those are the three things that I see are changing. And there we need to be with our clients, with the market to make sure that we help them and support them. 

Nasir Zubairi, CEO of LHoFT 

I think there's a good point. Eduardo, I'm keen to hear your opinion on this, as there is something I stuck with me very closely since our last board meeting where we had a similar discussion amongst the LHoFT Exco, where you said something very interesting. I'd like you maybe to expand on that. You said that one of your main concerns is that there's been, to some degree, this ramp up of efficiency and openness of potential now around digital and efficiency, but one of your fears is that the industry reverts to norm as it was in the past. 

Eduardo Gramuglia, Country Head of State Street Luxembourg

Yes. During the last crisis, now it seems decades ago, but it's just one, I was sitting on a board and the chairman of the board said, ‘well, this soon will be over’. The historical memory of the financial industry is 12 to 18 months. I think that even accelerated we can say the historical memory of the financial industry is now six to 12 months. So my fear is as we go back to the office that people revert to old habits, and I'm not going to use adjectives on those habits, as the way we're used to, but I think what Covid has demonstrated is that we can do things differently. When push comes to shove, we can have everybody working from home in a matter of weeks. Where people in the past used to say ‘Who works from home? No, I like to be in the office’. And now we're trying to bring them into the office. I think that's positive. But I think that we need to be careful that when we get back into the office, whatever that office is going to look like, we don't start or continue thinking, ‘well, you know, I used to do this way at work, so let's go back to that’. No, no, no, no, no, now we've been given this opportunity of seeing things differently, and realizing how much we can achieve when we're really pushed. I think even one thing that we haven't spoken about is the regulator. The regulator was very pragmatic during this whole crisis. We were able to deploy certain technology and certain methods of communication, and do without the fax machine for example. 

Nasir Zubairi, CEO of LHoFT 

Yes, can we just eradicate fax machines and all agree on this. 

Eduardo Gramuglia, Country Head of State Street Luxembourg

Yes, and now the regulator has said that they were fearful of doing these changes, but now we've seen that a lot of those fears we had might not have been well founded. We're gonna see a new circular this month, and we're really looking forward to it. But again, if we can do that and capitalize on that, then we won't fall into the habit ‘something bad happened, something good came out of it but let's forget it, let's go back to the old’.

Arnaud Jacquemin, CEO of Société Générale Luxembourg Group 

Personally, I'm optimistic Eduardo, because frankly what we were collectively able to achieve was also the result of all the preparation that our institutions, all the transformation that had undergone in our institutions in terms of more digitalization, use of the best technologies etc … Of course, the transformation, the progress is always slower than what we would like. It was also the technological aspects that helped us to test this in a real manner, but I think the trends will continue to roll. Yes this crisis is a proof that we are able to do it, and will be an accelerator for sure, because it probably has changed the mindset of many employees and their managers, but it's also the result of all the transformation work that had been going on for years, even a decade. 

So personally, I am optimistic. I'm optimistic because I believe that this will be an acceleration, and the risk of falling back to old habits is not high. Of course, it's there, it needs to be monitored. Look at the trends. Digital banking is something that becomes more and more obvious for our clients. It's something which is not new. I mean, at Societe Generale for instance in France, the pure digital bank is something that exists, started in the middle of the 2000s with Boursorama owned by Société Générale; it is something that is well functioning and continue to develop but that was actually created in the middle of this decade. So, our organizations are able to transform. The question is: “Are we sufficiently constant in our efforts? Do we make sure that all our employees are sufficiently embarked upon this journey?

Robert van Kerkhoff - Managing Director of BNP Paribas Securities Services Region Luxembourg, Ireland & Channel Islands

"This is the moment where we need to keep on going and we, as asset servicers, the positive impact and engagement that we can create with our people is very clear, and I'm very supportive with pushing that forward."

I think we didn't touch on one point that is important as well. When you look at the last crisis, the banks received some help but there was quite a negative perception from the public towards banking. In this crisis, I think we have shown that we have and can have a positive impact on society. If we look for example in Spain, we have a couple of companies that started recovery funds and we are also being a player in that in that whole setup. I think that is important to know, from an ESG perspective, from a sustainability perspective, I think we all realize, during COVID, that at the moment when we stopped traffic, when airlines stop flying, that this has a direct impact on our climate. And this is something I think also that the young generation, and all of us, are very concerned about. This is the moment where we need to keep on going and we, as asset servicers, the positive impact and engagement that we can create with our people is very clear, and I'm very supportive with pushing that forward. 

Nasir Zubairi, CEO of LHoFT 

If I may say, I know all of your organization's relatively well, and many of the projects that you've been working on and you've been some of the forerunners in terms of digitalization in the field, which is why we asked you specifically to be part of this panel. But without question, if I may say that, given that this was a surprising situation, and given some of the regulatory constraints around various things; there must have been certain elements of your processes, which there were little gaps in there in terms of how you ensured business continuity. The way I look at it is that the first phase was: 1) we need to switch everything over to be able to function but 2) now as we go into this phase of this is going to continue now probably for nine to 12 months (that's the way I look at it anyway, minimum), we now need for the business grow, we need to service and onboard new clients, etc. What are some of those areas, immediate things that you're looking at from a digital perspective: e-signatures, KYC, etc,... where you think we need to really address this now and it's become a priority?

Robert van Kerkhoff - Managing Director of BNP Paribas Securities Services Region Luxembourg, Ireland & Channel Islands

Of course. If I’m going to say now that we are the perfect organization and we have everything without any gaps, it would be silly. Of course, we have a lot of challenges ahead of us. When you look at digitalisation, we are investing quite a lot in that, and I think what is important and how I see our current industry, is that we are now much more open than we were before. We had our closed platforms and clients muddle their way entering into these platforms. What we are trying to do now is to make sure that we have open platforms. I can give you a great example. I want to address this in this panel today. We started this particular initiative in 2018, called Climate Seed. It’s now a kind of spin-off, so it is autonomous, where companies can buy ‘carbon credits’ to offset their climate footprint. It is a simple, secure, and user-friendly digital platform that allows organizations to offset their unavoidable greenhouse gas emissions by contributing to sustainable projects around the world. For me, it has all the elements: entrepreneurship; technology; sustainability. It is something that we can be proud of. This is where I think where the industry is heading, with much more open platforms. This is where we want to invest more,  and to make sure that we look at the technology, and we make sure that we are hooked into it in the most optimal way. If you are able to do that, then you will be the winners of the future, to make sure that you pick the right technologies and partnerships in our business.

Nasir Zubairi, CEO of LHoFT 

Eduardo, were they any particular areas where you found you lacked optimal tools and technologies within the business that you've been looking at addressing?

Eduardo Gramuglia, Country Head of State Street Luxembourg

Pre-COVID-19, (COVID-19, I agree with Arnaud, has been and will be an accelerator) we looked at our business as an asset servicer, and we made an acquisition a couple years ago of a front office system. And we started integrating the whole value chain of an asset manager or an asset owner from the front to the back, and back to the front. For us, that is the vision, and at the core of that vision, is the data. So for us, being able to have just one data, one truth, along the whole value chain, becomes very flexible in the way you can use that data, then will address a lot of other other aspects that are emerging stronger and stronger. Robert mentioned ESG, I completely agree, but ESG will bring complexity in the data, the data that you need to prove that you are ESG, ect. 

So that is one aspect of it. And that is, as I say, was pre-COVID-19. It's being accelerated and it's a success. Another one we're looking into, a bit different here, is tokenization, cryptocurrencies. A lot of the players that we have been in discussions with around funds that are being set up in that area, which I know it's dear to you, and which is probably a trend that is starting now - very shy for now - but with a lot of potential. it's finally making something that we've all been speaking about for some time quite concrete. So that is another area of focus for us. It will bring new technology itself because to believe that you're going to be able to serve that type of asset with the custody system is a bit far-fetched. So several initiatives and several angles that we’re looking at, even if you think about digital signatures… Even the way we're doing this webinar, it's all webinars now, but in the past, we would get together in a conference room. All this technology existed, but now we’re just forced to use it more. But then if I look at some regulated function that we have in the bank, we can see how there is existing technology, or new technology, that we can insert in the depository function, in the domiciliary function... So if we want to be specific into the ‘here and now’ and what can be done. 

Nasir Zubairi, CEO of LHoFT 

Following on that, Arnaud, I know that Société Générale has been in particular looking at the tokenization element as well. What other things aside from that? And maybe tell us a little bit about the initiative around tokenization you've been working on?

Arnaud Jacquemin, CEO of Société Générale Luxembourg Group

I am in fully agreement with Eduardo. Looking and browsing from initiatives that were really accelerated during the crisis to longer term trends is electronic signature. We had deployed this in our private banking business already one year ago. It was not very much used to be frank. And we were able, within a few weeks, to deploy this for our security services business during the crisis because the need was real. So clearly a strong acceleration on that front. 

“This crisis makes us work of course towards an acceleration of an end-to-end digitalization of the way we interact with our clients, with our regulators, etc.”

Second, I would mention the dematerialization of our paper based procedures. A lot had been done before the crisis, and frankly we finished the work more quickly than what was planned, for good reasons of course. Also, of course, acceleration of use of digital tools enables us to describe, to put in place workflows, etc. So many concrete examples of usage that were accelerated. I agree with Eduardo, and to address your point Nasir,  this crisis makes us work of course towards an acceleration of an end-to-end digitalization of the way we interact with our clients, with our regulators, etc. 

I mentioned before the retail banking space, but this is also true for the wholesale banking space; tokenization initiatives may be extremely powerful in the long term in the securities services business, but also for instance in very highly traditional wholesale banking businesses structure such as the trade finance business, that remains up to now extremely paper based (letter of credits, exchange of fax, etc…). And we have started, at group level, two initiatives over the past three years, which are working well, which are developing, and it's obviously also in the wholesale banking industry the way forward. Another example in this industry, in a very mature market that you know well Nasir, the DCM (Debt Capital Market) business and the primary business in particular, where the tokenization, the blockchain, opens very interesting horizons for efficiently issuing bonds, and more efficiently reaching a wider range of investors directly. So that's also a revolution that is about to happen. It may take some time, maybe less than in the security services where the investments in traditional systems are so huge that actually I think the transition will take longer. But for instance in the DCM business, the primary business, my personal bet is that it will take place a lot quicker. At Société Générale, we made an issuance at the end of last year of a bond, that we actually self-subscribed in order to test the system, and it works. So now the challenge is to actually implement this and convince our peers and clients of the efficiency of this. 

“We have the luxury in Luxembourg to have an agile lawmaker, and regulator, which is extremely important in terms of competitiveness on those topics. ”

I'm enthusiastic because the technology is there. Even more important, we are collectively identifying the use cases that will make sense and regulators are also clearly moving and I must praise the openness of mind of the Luxembourg authorities, and the regulator that is actually evolving very quickly. Luxembourg is not the only one, many countries are preparing or have prepared, new or adapted regulations to take this into account. But we have the luxury in Luxembourg to have an agile lawmaker, and regulator, which is extremely important in terms of competitiveness on those topics.

Nasir Zubairi, CEO of LHoFT 

I agree. I think one of the beautiful things, I hope you would all agree with, especially about Luxembourg, is how the community comes together and acts in a way which I think is one of the boons for Luxembourg.

Robert van Kerkhoff - Managing Director of BNP Paribas Securities Services Region Luxembourg, Ireland & Channel Islands

I have one topic that I would like to mention, it is actually a gap. It's not part of the script, but it is a little bit aligned with Eduardo's quote around people. I want to share that because I think it's important. So I received last week, before the panel, an email from a colleague of mine working in Portugal, and she was saying that is great that BNP Paribas and I are participating to this panel but was I aware of an initiative that was signed by our Comex last year called “Jamais sans elles”. And so I said “No, I was not aware of it”. She explained to me: “ When you have a panel and there are more than three men in the panel, and you don't have a woman participating, then our board is not participating anymore. I said “Okay”, that was my first reaction. Then I was reflecting actually and in my last panel we were only men, and what really annoyed me a bit was the fact that I didn't really see it at the time, and now I think now for me it's time to reflect a little bit and to rectify. So I will comply the next time with the same rules, although we are not in France we are Luxembourg, and I really would like also that our organizations make sure that we are going a little bit more diversified in that respect.

One last comment, because I think that it's also important, and aligned with that particular topic, we have a new country manager in Luxembourg, she's head of the Group BGL BNP in Luxembourg. Her name is Béatrice Belorgey. That's a nice step, leading in the future to more women in the management and top management within the financial services.

Nasir Zubairi, CEO of LHoFT 

I couldn't agree more with you Robert, and I know you’re supported on this panel on this. And if we are honest here, Robert, you came late to this panel if you remember because we went out to find a female panelist but unfortunately there was no agenda compatibility.

I'm gonna to ask one last quick question, and then we have a raft of questions, which I want to cover. But let's try to keep this one short: Aside from COVID-19, there is now so much uncertainty, so much happening in the world that is going to impact financial services. Brexit has kind of taken a back-seat, but it's still there. Other externalities, low interest rates and the hunt for yield in the markets. We talked about tokenization, maybe giving access to new investment opportunities... One of my topics, that some people get bored of hearing, is aging, and how we're all going to be living longer lives. It's natural anyway and the impact that may have on the fund sector, particularly on the pension sector. 

If I could ask all of you just briefly, as a closing from my side, can you give one or two key things that you see happening so in your crystal ball over the next five years, what are the key impacts to the financial industry in your businesses?

Eduardo Gramuglia, Country Head of State Street Luxembourg

That's an interesting question. Because if you had asked it four or five months ago, the answer would have been completely different. So it makes forecasting very tricky these days. 

From my perspective, ESG is a trend that is going to continue to increase, and where before it was maybe a “niche” thing, now you see investors that are asking for asset owners. We are all focusing on it, both from a diversity perspective, but also from the buildings where we sit need to be compliant with certain rules, with certain ESG considerations That will continue to grow, and shape the future in terms of where things are going from an investment perspective, and from a governance perspective. The impact is quite large. 

“There was a comment on the chat from someone that said, ‘if somebody at the end of the year has the same business plan they had at the beginning of the year, then they haven't understood much’. I completely agree.”

I'd say probably that if you think about COVID, and if you think about the environment... As I said before, COVID has been a tragic crisis, but the environment has certainly benefited from it, albeit temporarily, and let's hope we can extend that much more. But there you can see already how it has forced us all to think differently. There was a comment on the chat from someone that said, ‘if somebody at the end of the year has the same business plan they had at the beginning of the year, then they haven't understood much’. I completely agree. When I took the leadership team to do the 2023 strategy, it was pre-COVID-19, that didn’t happen… and then during COVID-19 how we thought it was going to go, it was completely different.

Arnaud Jacquemin, CEO of Société Générale Luxembourg Group

“More than ever what we'll need to drive our strategy to is our “raison d’être” which is to actually foster sustainable and responsible development of our economies.”

My conviction, more than ever, is that what we'll need to drive our strategy is our “raison d’être” which is to actually foster the sustainable and responsible development of our economies. So, that means, and this will be accelerating no doubt, that as said by Robert and Eduardo, we will accompany our clients towards more sustainable, responsible developments. We will accelerate our disengagement from certain industries...etc. We will foster a more circular economy etc. 

What is extraordinary is that banks, and our financial services, are really at the heart of the development of the economy because financing is absolutely key. So I think this trend is accelerating, our “raison d’être” being more obvious than it was 10 years ago, where banking was seen as a threat. And I've always been convinced that banking is actually an opportunity to develop and to develop in a sustainable manner. Now, we have obviously a lot of challenges to address. Let's be frank: 

It's obvious, that was the lesson from the last crisis, that we need to be less risky, because socially, the risks that were taken in the preceding decades were not acceptable.

At the same time, given the interest rate, the environments, and all the regulatory constraints that we have, we need to make sure that we have the financial means to continue our job, hence we need to be more profitable. 

So it's a complicated balance to find, and we are experiencing this on a daily basis, but the reasons we are here are more than ever present in these points.

Robert van Kerkhoff - Managing Director of BNP Paribas Securities Services Region Luxembourg, Ireland & Channel Islands

Yes, sustainability for me is where we really want to become a leader, and this is where we are going to invest more. 

Digitalization: we saw a couple of documents that were shared by the ‘big four’, that we are still lagging behind and as an asset servicer on digitalization. We need to listen to our clients more and we can all come up with nice ideas because in the end it is our clients that drive our business. So that's where we will and we need to invest more in that particular space, and I think coming back to data that was at the center of this story, we need to make sure that we can help our clients, enrich data, reporting it in a much more easier way with our API technology: when you want to get the data, where you want to get the data... it's important. 

And the last part is the engagement of our people. If we want to make that kind of transformation, we need to make sure that we are ready for that. And it's going fast. So we need to reskill, to upskill all the people, we need to find the way to bring them to that next level and to have a motivational workplace here in Luxembourg. I think we have great components there. We see the private equity market, there isn't strong growth. So we need to make sure that we are helping our clients together also with all the stakeholders in the industry. I think also the regulator was already mentioned a couple of times, I think, indeed there they were very pragmatic during this crisis.

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Questions & Answers 

Nasir Zubairi, CEO of LHoFT 

Thank you very much, gentlemen. Sebastian, I see you have many many questions that you've posted. I'm going to ask you to choose one to ask the panel, please.

Sebastian 

Sure. Hi, everyone, and thanks very much for the opportunity. It was a great talk. Thanks for showing the experience and the responses from the corporation. 

How do we see the development of shared services now that digitalization, reviewed working processes, adjustment to regulatory frameworks, all of this has been taken into account at different speeds, technology of course, so the old question of can we do more together rather than against each other, especially on non competitive spaces, is there a change to that view?

Robert van Kerkhoff - Managing Director of BNP Paribas Securities Services Region Lux, Ireland & Channel Islands

If I understand the question, due to the fact that platforms become open, and we are also looking for other values and a way to make revenues in this world, we already working more together. 

If you look at some projects we are already using data from multiple sources, including our competitors, where you have custodian data, regulatory data, etc. So we need to find, within this open architecture, a way to work more closely together. If we talk about APIs, we need to make sure that if a client has three different providers, you know, it cannot be the case that there are three different APIs. So we need to standardize that, meaning that we can only do that in a collective way. So we are working there with Swift, with other actors in the market, to make sure that we help the industry and the clients to work closely together. In the end, we all have one purpose, which is helping the client.

Nasir Zubairi, CEO of LHoFT 

In the interest of time, I'm going to jump to the next one. So we have Thibault De Barsi, running the EPA Europe Association. Thibault is  also an ex-CEO of a bank in Luxembourg (KeyTrade) so please Thibault ask your question. 

Thibault De Barsy

It is a question particularly for Mr. Jacquemin on the credit risk in the context of the COVID-19 crisis. I'd like to know what is his analysis in terms of client segments, private clients, small companies, large companies... who is more at risk right now and how can the financial industry try to cope with the situation? Asking guarantees from the State, refinancing the debt, or managing bankruptcies the best way we can and we start fresh? 

Arnaud Jacquemin, CEO of Société Générale Luxembourg Group  

The nature of this crisis is exceptional of course, it's a decision for sanitary reasons to reduce extremely significantly the activity. And this explains also the nature and the extent of the involvement of States in order to help the economy weather this crisis to a certain extent. 

At present, I would say the biggest and immediate risk is on the corporate side, especially the small and medium enterprises and all the various states programs in each and every country are designed in order to help those stakeholders. This is  where we expect the bulk of the cost of risk to materialize. Big corporations depend on the sectors: some positions on sectors that actually are benefiting from the crisis; some of course in sectors that are extremely heavily affected. I am thinking about tourism, airlines, etc. At this stage, because of the magnitude of the state programs, the consequences in our European economies, the consequences on individuals are limited. But this may change, when we will really see the impact of unemployment. I was actually quite surprised to see that the impact on financial institutions is limited. This was one of my concerns at the very beginning of the crisis, and I asked the teams to look at the situation of the hedge funds, etc. And the impact on FIs actually was really minimal. So, as you pointed out rightfully, the consequences, the dynamic but also the cinematic of the materialization of cost of risk is very different from one client base to another.

Nasir Zubairi, CEO of LHoFT 

Okay, thank you very much for that Thibault. And then I'd like to ask Maro to come online and I think this is actually quite poignant; a question about artificial intelligence:

Maro   

I would like to understand if after COVID-19, whether the skepticism that there is in the financial industry towards artificial intelligence will continue to be there, or there will be an acceleration in everything else?

Eduardo Gramuglia, Country Head of State Street Luxembourg

It's an interesting question. I wouldn't consider myself as one of those skeptics as I was actually in discussions before the crisis on the use, the adoption, the proof of concept around the introduction of artificial intelligence into some of the things we do now. 

“I challenge my team more and more when they come with problems to think about technology, and when they think about technology, thinking about artificial intelligence.”

The business that we look after here is asset servicing, not asset management, so it is a bit different than what you are thinking about in terms of use of algorithms. But in our space, there's still benefit for it, and it's already used in certain instances of reconciliations, and I think that can be increased. But also in a lot of the commercial aspects of our business, when we are negotiating fees or when we are benchmarking etc. for me the use of artificial intelligence should be much more than what we have. The  challenges that we have, depending on the businesses and on the profile of the businesses, sometimes the amount of data to crunch is not as extensive as in other areas, (in your case about asset management), but even if you look at a retail bank, versus the type of backing that we do, which is asset servicing, institutional business, large fund managers, etc. So, for me, I challenge my team more and more when they come with problems to think about technology, and when they think about technology, thinking about artificial intelligence. People may have this impression that it's something overly complicated. And I'm not saying that it's simple by any stretch of the imagination, but I think they don't push themselves to really imagine what you can do with it, and from there try to break the barriers, try to push yourself to thinking completely different from what you were thinking and what uses you can make of artificial intelligence.

I'm hoping and I'm sure there's going to be much more adoption.

Nasir Zubairi, CEO of LHoFT   

Thank you very much. Listen, in the interest of time, I know that there are a lot of Q&As. I think some of them have been touched upon in the discussion to others. I have to apologize due to the time constraints and my picking and choosing but if I could have Lucy Heavens, come online, and I thought this was quite interesting as well.

Lucy Heavens  

We've talked a lot about digital transformation from a technology point of view. And I think someone mentioned this earlier that kind of video conferencing collaboration software, it's not new, it was there already. But for me kind of what's changed actually, or the biggest impact, has been the southern kind of willingness of everybody function in the company from IT,  to finance, compliance, sales, whatever, to kind of all come together and cut through any any hurdle necessary and just make it happen.

So my question is actually in your organization what role has kind of culture made, or what impact do you think culture has made to your recent digitization initiatives?

Robert van Kerkhoff - Managing Director of BNP Paribas Securities Services Region Luxembourg, Ireland & Channel Islands

Very good question. 

We have a lot of legacy in our company, so during years what happened is that on the custodian side, the asset servicing side, we were kind of developing a lot in our organization, and sometimes we had departments completely siloed. That is changing, we're working much more with DevOps models, and teams working together in an agile mode. We are now kind of embedding - and that is the big challenge - to make sure that these departments are culturally understanding each other better, so they can work together more effectively. 

So it is something that we are in the process of doing, we are definitely not there. I think the open architecture I mentioned will also boost that collaborative model. So I think the culture there is incredibly important, everywhere in the organization, from the bottom to the top. And we also need to make sure that we help our employees because we know of administrative functions which will disappear now or in the near future. And I think this is where we need to be and to make sure that we are helping each other there. It's a big challenge, and I think this is for me the biggest challenge in the financial sector also for the coming years to make sure that we go with this objective. 

Arnaud Jacquemin, CEO of Société Générale Luxembourg Group  

I would fully agree with Robert. We have to make sure that the culture evolves and is able to accompany all the transformation that is enabled by the technology and by the evolution of the markets.

Eduardo Gramuglia, Country Head of State Street Luxembourg

I echo all that, but I’m also positive about it. I was the one that said we had all this technology, we just weren't using it. But even if you think about it, when we started using video conferencing, not everybody switched on the camera. Now everybody switches on the camera. I think we're getting there.

Nasir Zubairi, CEO of LHoFT   

Thank you gentlemen, really very much appreciate your time and insights. This has been fantastic. I believe the audience really enjoyed your insights and your comments. And what I'd love to be able to do again, actually in another six months or eight months, nine months time, maybe we could schedule that one in because it'd be great to see also how things transitioned during this period. Thank you very much, all of you, for being there. We really appreciate it. Thanks for listening in. And Antony, I will let you close up. And again, thanks a lot for joining us here.

Eduardo, Arnaud & Robert 

Thank you Nasir, Thank you All. 


 

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