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Low value payments in a high value world

Wednesday, 16 September, 15:00 BST

In our final call of the series, Maarten Van Rossum, Global Head of FIG Sales, is joined by a panel, discussing how to improve the efficiency of cross-border payments and the evolving role of Financial Institutions in this process.

Operator: Maarten, we are now live. Please begin.

Maarten van Rossum: Thank you, Ashely. And good morning, everybody. Good afternoon, or indeed, good evening to our audience who's joining us from around the world. My name is Maarten van Rossum, and I'm responsible for cash management sales for the FIG client segment here at Barclays. And like many of you, I am currently working from home. In my case that means I'm working from Amsterdam.

So you may hear some church bells ringing in the background there. So if you do, just ignore them. I have been trying to do the same thing for the past four months. In any case, wherever you're joining from today, thank you for spending your time -- your valuable time with us today.

So I have the pleasure to host the fourth and final instalment of our FI Forum. It's a series of virtual events which we've hosted over the past few months for our FI clients globally. And it's our attempt really to keep the conversation going in the run up to [Syblos] next month and also in the absence of physical meetings and opportunity for events.

Previous sessions that we've held have focused on topics including the return to work amidst a pandemic, ESG within the trade finance world and cybersecurity. And today we'll be taking a closer look at cross-border payments and specifically the low value kind.

So let me explain first what we're going to be -- what you can expect from the coming hour. In order to set the scene, I'll just start with a brief overview of the topic and some of the latest developments that we'll be exploring today.

And then we'll jump right into discussion with our panel that we have of industry experts. Now we'd like this session really to be as interactive as possible. So at the bottom of your screen, you should find a Q&A option. If you have any questions, please pose them there. We will be putting them and trying to incorporate as many of those as we can directly into discussion with the panellists.

So cross-border payments. Well, I started working in global transaction banking about 20 years ago, and at that time I would never have thought this would become such a hot topic that it is today. We've seen an influx of new market entrants. We've had great advances in digital and mobile technology, and all of that has really shook things up. But for all of these changes over the past two decades, the simple act of making a cross-border payment has really fundamentally not changed all that much.

What has changed, though, is the profile of those cross-border payments. And driven by globalisation of the marketplace and also of the workforce, we see higher payment volumes, and they often have a relatively low value.

Now without going into too much detail, and I think all of you will be familiar with this, I think it's fair to say that the traditional correspondent banking model is simply not fit for purpose for these kind of new flows.

The existing frictions in the model, the relatively high cost disproportionately impact low value transfers. And many of those are originated by retail customers, by migrant workers, SME clients that are beginning to do cross-border activities. And all of that is holding back economic activity, economic growth, international trade, development and financial inclusion. And for that reason, this has been on the topic for quite some time.

And Saudi Arabia in their G20 Presidency this year, they have made it a priority, and they requested the Financial Stability Boards to investigate this. They've coordinated a three-stage process with the ultimate aim of developing a roadmap for the enhancement of cross-border payments. A Stage 1 report, this was issued in April, that provided an assessment of the existing arrangements and challenges of the cross-border payment market. And in July, the Committee on Payments and Market Infrastructures issued the Stage 2 reports.

And in this they outlined 5 focus areas and 19 associated building blocks for building a roadmap to enhance cross-border payments. And the third and final report is expected in October, and this will be building upon the previous two reports that have already been issued to outline a detailed roadmap forward. Now I encourage all of you to read those reports, if you haven't done so already. They are available for download on the FSB website. And we will also be sending you an email after this session, which will contain the web links as well.

So with that bit of background, I think it would be a good time to introduce our panel. And as you can see, I am joined today by three esteemed guests with a long career in the payments industry. So Ashley, if you can put that slide up.

First we have Vikesh Patel. And Vikesh is Head of UK and Ireland at SWIFT where he's charged with strengthening and [do captures] key relationship, delivering commercial performance across its portfolio of products and services. Prior to SWIFT, Vikesh was the Chief Operating Officer at LCH. And he also held roles at Goldman Sachs and Morgan Stanley, with the primary focus on market infrastructure and post trade strategy.

Next we have Martin Runow, our very own Martin Runow. He's the Global Head of Digital Payments and FX here at Barclays Corporate Bank. He joined us last year from Deutsche where he was the Global Head of Digital Clients Connectivity Products. And during his 26 years at Deutsche, he held multiple client roles and product-related cash management roles, including leadership roles in New York and Zurich and last in Frankfurt.

And finally, last but certainly not least we've got Stephen Grainger. He is the Executive Vice President, Business Partnerships, New Payment Platforms at Mastercard. And at Mastercard, he is responsible for determining how the organisation realises its vast existing network and capabilities to attract new business.

Prior to joining Mastercard, Stephen held the position of Managing Director at SWIFT where he was responsible for its North American business. His career spans more than 18 years with previous roles at Goldman Sachs, Bank of America, Merrill Lynch and Citi.

So all together, I think we've got a panel with a wealth of experience, many years in the industry that we'll be able to tap into in the coming hour. So welcome, everybody. Thank you for joining us. And we'll start with the first questions. And I'd like to focus those questions really to draw the view from our panellists on the challenges that we face in the cross-border payment world.

So first for Vikesh, you joined SWIFT in 2017. That's the same time, the same year that SWIFT launched the Global Payment Innovation Initiative. And GPI was designed to address many of the same issues that are highlighted in this report. So looking back at that experience and the things that happened there, what kind of lessons can we draw on from the experiences of SWIFT GPI?

Vikesh Patel: Yes. Thank you, Maarten, and I'd like to thank Barclays for the kind invitation to the Fixed Income Forum today and also for everyone who's joining and giving their valuable time on this topic. I think as we look at the environment, the need to stay connected, have open, honest conversations with each other, it is ever more important. And that's great that you're putting this on, and thank you again for the kind offer to be here with you.

And yes, SWIFT GPI, I'd like to say that my joining SWIFT was some kind of catalyst for its success, but actually it's the reverse. I think the innovation that was being undertaken by the industry, which SWIFT was working for the good of the ecosystem, was a huge draw for me to join. And actually, SWIFT GPI was in its genesis many years before we actually launched as a concept and was discussed with banks in various forums.

I think what we've seen with SWIFT GPI and what we try to bring as a tool for the good of the community is speed, naturally. But actually a lot of payments were speeding up anyway. Organisations were increasing their processing and upgrading technology.

And secondly, traceability, which really touches to the client experience, the ability to see transparency where payments may be at any time. And I think those two things at its inception were really important and have been hugely beneficial for both the client experience, but also financial institutions in terms of removing some of those back office processing efficiencies -- inefficiencies as well.

Over the last few years what we've seen, and the report talks about this, frictions still remain. And whilst the second report doesn't go into a lot of detail around the work that's being done by the industry, a huge amount has been done by many different areas of the industry, and I think it's important to recognise that.

But what we now see is that GPI provides while that concept of kind of transparency and speed, provides a good backdrop for overlay services. And then ability to then address some of the other remaining frictions or start to really address those piece by piece. For example, confirmation of paying your pre-validation of certain fields before payments were initiated, case resolution and other areas.

So I think where we see GPI's already made a step change in that we're tracking that data. We're seeing a huge amount in the industry of payments, something like 39% crediting the end beneficiary in under five minutes, nearly 100% within seven hours. That ability to track it is important, and then we can build on that and have the industry to really look at those remaining areas of friction, which I think's important.

Maarten Van Rossum: Thanks, Vikesh. And I think that is definitely fair to say that we should recognise the work that has been done within the industry already. It's only been five years, and one of the things that GPI certainly showed was the fact that a lot of these transactions already were settling within a matter of seconds or just minutes.

So yes, Stephen, if we look at other ecosystems, you look at Mastercard's division to enable domestic and cross-border payments from, as your bio says, from any source to every destination for any need. And one of the first focus areas in the report that it talks about is to create public and private sector to jointly develop a common cross-border payment division. So you've done that at Mastercard. How do you see that happening on a much broader scale as is being proposed here?

Stephen Grainger: Well, I think it's quite interesting that CPMI called that item out upfront. Because although there's a lot of work that has been done, and we shouldn't undermine at all the work that SWIFT had done through GPI. It certainly moved the cross-border banking business a long way forward.

But the fact that CPI and CPMI are calling out that public and private sector need to do more together tells you that it, for me, it's a stark warning that the public authorities feel that we, the private sector, are not moving quickly enough to address what are a number of the core challenges they see, particularly as they think about low value payments.

And low value payments, it's an entirely relative construct. But I would look at a low value payment as anything that is under something of a benchmark of about $100,000. And even then you've got a very broad range of outcomes within that from very low value remittances to what are relatively low value B2B payments and B2C payments.

And it's -- and while a lot of progress has been made, while there's been a lot of individual action by a lot of individual firms and individual banks were striving to do things differently, what it says to me is that unless the private and public sector can find a way to come together to identify that vision and make commitments towards delivering against that vision, the likelihood of any of those individual actions getting to a place of being able to scale is going to be very difficult.

And so I sit here as Mastercard in establishing a brand new business and defining what Mastercard's cross-border services strategy looks like. And so I'm in that unique position of the people in this panel of not being the incumbent, if you like. And not being the incumbent in this space is a really difficult place to be because there is a lot of challenge to get over.

And the biggest challenge of course to get over is inertia; why do I need to do something different? And I think we collectively need to figure out how we do something different because the nature or form of competition is changing rapidly, and it knows no boundaries.

So that is very much what is on my mind. So I was really pleased to see that called out. And in calling that out right up front in the CPMI story, I look at what else is in that paper. And until you get to Section E, which talks about new settlement outcomes and new platforms and new business models, a lot of it is we can think about as excuses for why not to do something or why we haven't made progress. But really what we need more of is a willingness of organisations to come to the table to want to work together to drive more change. There you go, Maarten.

Maarten Van Rossum: Thanks, indeed. And yes, that certainly is -- that was a lesson from GPI as well. It was lesson in general that none of us in the industry can do this alone. None of us are largest enough scale-wise in order to move this forward. There's not a single company that can do that. And what we've seen a lot indeed up until now are individual initiatives that have been well received, but no global answer, indeed.

So Martin, you joined Barclays, as I said, a little about a year ago. Your mandate here was to deliver digital channels and connectivity tools. One of your primary focus that you always mention is client experience. And even last week I heard someone mention, I thought it was a good example that banks are -- they don't need to compete with the other banks on client experience. Today they're competing with entities like Amazon and Google on client experience. So from that lens, can you kind of see how that would apply to this topic from a client experience?

Martin Runow: Yes, totally. It's quite interesting. You mentioned inertia. That's actually one of the biggest things we have to get over in any of these topics to begin with. But if you boil this down, or if you boil many of these market problems, client problems down, then you see a couple of very interesting trends across payments, but especially also across digital [right] payment.

Like everything in our shiny new digital lives, I'd say the consumer -- and I will include corporate clients in this experience -- is that the payments generally should be faster, should be cheaper, should definitely be transparent. And GPI in just the track-and-trace has clearly, clearly proven that.

And there's maybe a level of inclusion that is not quite there yet. So you don't -- you cannot expect and you should not expect as a financial services firm that your user needs to be a messaging expert or a cross-border payments expert and FX expert. So those things we took for granted. Now when you look at -- when you overlay sort of those themes with how we have been approaching our client, and then we see competition come in through fintechs and other people, how they approach the client experience, then you see the big difference.

So you see solutions that are really geared towards solving very specific problems with I'm going to call it design, a workflow or design that is just natural and simple. And it's geared towards the digital lifestyle that all of us have. Everyone here in this virtual audience, so the virtual room is carrying around a smartphone. We all use online shops.

We use tablets. We use laptops. And there's a certain way, a slickness to how things should work. And then when you think back to how we all operate in our payment systems and how we make people log into online banking tools today, then -- Stephen, you were saying that, right? So where's actually the line? What's the low value payment versus the high value payment?

I'll say it's completely irrelevant. The experience has to be a simple one. I need to be able to go in and say I need to pay Martin in Frankfurt. I'm in the UK. So most likely it's going to be a cross-border cross-currency payment. But that doesn't mean that I as the consumer or as the corporate treasurer need to figure out is this now a wire? Is this -- do I need to do FX here or there, right?

So I'm expecting us to drive the transparency. So it's been an interesting ride. And Maarten, you were dating us all a little bit. I predated myself with my number of years I spent at the other firm. But I do remember sitting in a bank department and processing cross-border payments on a Telex terminal. And those days are quite clearly over.

So if you look at, I think there is an element of community. And both my engagements with my fellow panellists here, we've seen some of that, which is this public-private engagement model where you cannot expect one bank to create all of this or one entity like Mastercard or one entity like SWIFT. There needs to be a bit of a community approach to solving the faster, cheaper, transparent and sort of inclusive topic.

And the neat little compartmentalisation that we've been used to -- this is a wire, this is an ACH -- that's falling away. And we have to kind of stop thinking about it, really putting sort of the client experience into the middle. That's sort of how I view this space.

Stephen Grainger: I would agree with that, Martin, by the way. At the end of the day, nobody wakes up, not even a corporate treasurer wakes up in the morning and says, great; I'm going to make a payment today. Payments are always -- somebody might do, but I'm not sure I necessarily want to meet them. But what it says to me, payments are a byproduct of an action. People don't care about the payment.

They expect it to work and expect it to be transparent. And they have all these expectations that are wrapped around what increasingly is their own personal experience. And if their own personal experience means that payments are cheap, fast, transparent, whatever, then the expectation is they transfer into their business life is that they become cheap, fast, transparent. And I think that's what's embedded within a lot of the CPMI report.

Vikesh Patel: Yes. And I think just to kind of build on that a little bit, because as you see goods and services across borders increasingly get quicker, it's only natural that the payments piece will be focused by regulators. If you're a personal – you’re personal shopping on Amazon, you can in certain areas get your parcel in two hours. So it is natural that there will be a focus on this area.

But I just wanted to pick up on something Martin said as well around this kind of, I guess this view to make payments cheaper, and I can understand that. But also I think it's important to understand there's an element of risk that the initiator is going to take relative to the business need of that payment. So if I'm sending a payment into an international jurisdiction to pay for supplies for my manufacturing plant, naturally and that's a large value, then I'm going to want to have more protections.

I'm going to want to have more certainty. And with that there's going to be a cost differential, because if I'm making a payment that's to me relatively -- or further, it's a smaller amounts, you may want to take actually a bit less of that protection knowing it's going to go quicker, and therefore, the cost may be a bit cheaper. So that differential is going back to what Martin said which is important, which is the customer experience is really important and the level of risk associated with what you're doing.

Maarten Van Rossum: That's a really good point. Then there's another point here actually that was raised by one of the audience members here is a question is there's also a risk of payment. So you have an inherent risk with making a cross-border payment. It doesn't really matter whether that is a high value or a low value payment. Banks will need to treat them in the same way. Do any of you have a view on how banks, or other players for that matter, should be able to mitigate that risk?

Vikesh Patel: Yes. So maybe if I kick off, I think it's a really good question. And I think my answer or my view on that is kind of two-fold. Firstly, you'd want as much of that risk mitigated upfront as you can. So whether that's screening or financial compliance type checks or validation at the end beneficiary such that you can kind of take some pre-active action and have some early warning before a payment's kind of already left and on its journey. Secondly, when it's on its journey, you want to be able to kind of stop and kind of reverse that.

And I think that kind of option is important. And I think the combination of those two really are the key things. So you want to be able to in as automated a way do those two areas: upfront preventative alerting and in-flight kind of stop or reversal.

Maarten Van Rossum: Yes, and that's an interesting -- that's actually an interesting leeway into one of the particular building blocks that was identified by the reports. And that is potential for corridors that potentially could be used where compliance checks can be reduced.

So Stephen, this is one of the things that they are proposing there that'd be almost like a safe travel corridors that have been introduced in the current corona crisis whereby you would identify specific areas, payment types and specific corridors for where you can reduce barriers to entry and lower the compliance checks. How do you see that working? Do you have a view on how that would be able to benefit?

Stephen Grainger: A lot of it makes a great deal of sense. And another level what we just need to be mindful of as we think through that is not to get pulled into a layer of complacency. But clearly there are corridors that are extremely -- I'm just having a memory blank, actually. So there are corridors in that play that are highly commoditised, and you know, we have a lot of certainty in terms of the way they work. And you can look at GPI stats, for example, and see not just how quickly those things get processed, but also on the what likelihood there ought to be to have been checks along the way. It makes a lot of sense.

I think that as you get -- as you start to push down the payment value dimension, then the nature of payments in their own right necessarily changes. And that I think comes to a place where it becomes a -- at some point there should be a risk decision on this for the people that are initiating it, or are actually initiating and then processing a payment. And what I mean by that specifically is right now everybody's scared of a regulator. Everybody's scared about what any one of the sanctions regulator will come in and say and take a view on how either sanctions are being controlled or AML is being monitored.

And I think that's where this need for getting to a place of having sound business principles underpin payment processing is fundamentally very important. Because right now on that type of topic, imagine trying to introduce some kind of screening utility and their attempts to do it. It's never a question of going down to the lowest common denominator.

It's always following the very high standard. And so to avoid that and to avoid what comes with that, whether we're talking about highly commoditised corridors or exhausted corridors, you still need to be able to get to a place where you've got some semblance of business rationale looking at the type of payment, who it's being sent from and on what the purpose of that is, all of which is most likely going to be known -- going to be known at the point that that payment is initiated.

The challenge really comes as there are more payment intermediaries in this space who don't look like banks. And that's one of those components that we're all going to have to find a way to deal with much more effectively.

Maarten Van Rossum: Indeed. That is a good point. And with that introduction of additional parties into the payment chain, we also are increasingly seeing that the payment chain is getting longer. And I have an interesting question here from the audience from Keith Wright at Bank of America saying that the traditional formats that we have for payment messages, they are only allowed for the introduction of so many parties.

But as we add more parties as more payment service providers and payment service providers of payment service providers to the chain, it becomes impossible almost to input that information. So we -- on the one hand we have a requirement to meet regulatory obligations, and on the other hand we have too much information. Maybe Vikesh, do you have a view on this given the introduction of the new XML formats?

Vikesh Patel: Yes. And just very briefly, just to touch on the question earlier, I thought it was a really good question. And I like the analogy of the holiday thing and I think with the COVID. And I think that's a good thing. The analogy is very strong. You don't want to be stranded on holiday in Portugal and then your government tell you, by the way, we're changing something at midnight tomorrow and you've got to come back. And inevitably what happens, your cost goes up. So it's important that whilst you have those kind of arrangements, predictability, timing and all of that's important as you can see in maintaining sanctions, et cetera.

But one thing I did want to say, from our experience, it's currency controls in a domestic market that are a big contributor to payments taking a long time. So I mentioned earlier 100%, nearly 100% of payments are crediting the end beneficiary within seven or eight hours. The lion's share with the payments that fall out of that 5, 30-minute, even an hour window is because a domestic market has currency controls, and there are requirements to see either a business purpose for the payment, whether that's in China or in other markets. So it's important to know kind of the nail you're trying to hit with the hammer.

And the question's a really good one around the chain. And I think, again, we've seen and I think we're tracking end to end in certainly in some of the tests that we've done more recently where we have connected up to cross-border GPI into domestic schemes. We've done that in Asia a couple of years ago, we did that with ECB last year, and we've got other exciting markets this year that will be coming out pretty soon. That the end-to-end timing of that kind of is pretty quick.

So the point that was made around formats and how to ensure that, I think from what I understand, we feel that actually some of the 20-022 formats are structured in a way that the data transmission should be there. And actually, we think that managing those transactions kind of -- we've got some exciting ideas that will be coming out in the coming weeks as well around about how that might look as well. So I think there are -- there's a good backdrop of things out there that we in the centre are enabling for these cross-border claims ecosystem to be able to meet some of those challenges, so maintaining speed whilst transaction chains may be longer.

Maarten Van Rossum: Yes, indeed. And yes, after I used that analogy of the travel, the flight corridors, I immediately thought, hmm, maybe not such a good one, indeed, because they keep changing. But you're right. That's exactly what we need to avoid.

Martin Runow: Maarten, can I quickly add something to what Vikesh just said? I guess I'm doing it anyway. I guess thinking --

Maarten Van Rossum: Please. Please go ahead.

Martin Runow: Really good point also on having data available. I think GPI and other things that we've done across the industry now actually give us much more granularity around why are payments taking long -- longer. What are the characteristics of those things? Because we have been facing a lot of generalisation things. Banks are slow, traditional payments are complicated, cross-border banking is expensive and not transparent.

And so a lot of that, that may be fair in part, but not across the board. So I think the GPI actually has helped us tremendously putting more granular data around it just to say, okay, this is the stuff that's holding things up.

And as maybe one more point, again with my digital channel hat on, if you look at clients in the beginning. So the idea of pre-validation I think is a great one. And I know SWIFT has been playing around with it. We've seen actually really good benefits from the fraud prevention angle with the confirmation of PE that has been rolled out in the UK. And there's obviously something -- some of that in the Netherlands, if I'm not mistaken. So those things, while I would have to admit they're painful to build, obviously very, very helpful to make sure that clients don't actually go and do something they then don't want to do.

And I say that for us, if we look at fraud vectors and things that are happening especially on the retail side, but also with corporate clients, the things that I mentioned earlier are obviously also quite interesting from a fraud perspective. So instant payments, faster payments, things that just go quickly are obviously nice, because as you were saying, these things you cannot actually recall and get your money back, at least not easily.

So in terms of what sort of security or features you want in this new payments world, it's not just the sanction screening that we need to figure out and get that done right. We also need to make sure that we take care of things that could happen and payments that go wrong, like fraud prevention very, very early on in the process. But just to add to what was said earlier.

Maarten Van Rossum: Yes, indeed. And there's actually another question here that's sort of -- well, it's kind of related. If you look at SEPA, essentially SEPA created kind of a -- they harmonised the payments world for a region. We really, we should need a SEPA on a global basis.

Part of the problem that we have with SEPA here is that it is closed system. You can only use it for domestic payments, and it doesn't allow one leg out transactions. So a question from the audience here is what are our expectations around that rule changing anytime soon? I know that there's been a lot of discussion about that. Actually Martin, you're close to that. Any thoughts?

Martin Runow: I could only speculate, which I'm kind of always happy to do. So generalising a little bit from my end, I don't believe in this connected world, COVID notwithstanding, that closed systems are the future. So I would personally rather see some of these systems open up and then have good controls around the data that goes in and out rather than trying to protect it from the outside.

So that's kind of my take, but I may quite totally be wrong here. It's just if I look at everything that's happening across the globe with instant payment schemes showing up everywhere, and a lot of effort going into by players in the industry, individually, bilaterally, or on a larger scale to look at how can you actually connect real-time payment schemes with each other across borders and across regions, then to me, keeping everything nice and closed tight in Europe for the main ACH scheme doesn't look quite right to me. But that doesn't mean I know that rule change will pass or not. I do not.

Maarten Van Rossum: Okay. So no false hope for us. We have another question, and this one is related to pricing. So maybe Stephen, if I could ask you for this. You're at Mastercard. There's of course focusing on very much on low value payments. There's a question here from one of our audience members saying how should the pricing for a low value proposition compare to what we have today? Keeping in mind of course that even though it's a low value proposition, a lot of things still need to happen to it just, even if it was high value.

Stephen Grainger: Yes. So there are a couple of angles on that. And so there is an expectation that pricing -- and when we talk about low value, you can lead yourself to a place that says, oh, it's low value. The expectation I have in my domestic market is -- why should it be priced any differently to a domestic real-time payment, which is pennies, not pounds? But I don't necessarily buy into that.

In the CPMI report itself, Sir Jon Cunliffe talked about the fact that cross-border payments are in their own right much more complicated than domestic ones. There are more actors involved, there's more things that need to be done. And because of that, we shouldn't necessarily associate the fact that low value payments necessarily have to be cheap, but they have to be relatively cheap.

And I think part of the problem, part of the reason we're discussing this and part of the reason it's all out in the open with the CPMI is in large part that low value payments are a problem if you try to push them through the correspondent banking model. This is not about correspondent banking model more broadly.

This has nothing to do with SWIFT. This has nothing to do with Mastercard. It's more the fact that trying to push through that type of payment, a low value, whatever the purpose is, through correspondent banking mechanism typically does not yield value formally.

And that's for a whole host of reasons. Partly because of all the functions that are carried out or the cost that's embedded there, but more than that because the correspondent banking model is a profit source. And in my mind, we've got to address that fundamental business need to think about what are the customers who we're trying to serve more effectively to be able to get to a point of figuring out what is the right way to kind of price for that type of activity.

It will not be lost I don't think to anybody on this call, but arguably the biggest customer, our most profitable customer for any of your banks' FX desk is either your retail business or the corporate business. And that can't continue to be the case going forward as more banks start to think about how they transition to becoming more relationship-orientated rather than being necessarily transaction-orientated.

So in this space, if we want good services, people have still got to make money. And so we shouldn't be thinking about a race to the bottom. What we should be thinking instead of about price is about what's the value that we're actually offering to our customers. And in some cases that might be speed, and speed should be a factor that's charged for, I think. It might be data quality, and data quality might be something that is charged for. It might be greater levels of predictability and certainty.

And I think you can't answer this question about price without really getting to the point of fundamentally understanding where's the value and who is that value accruing to, and then you can make decisions based on the outcome. Right now what I see all too often is that kind of logic goes out the window, often for good reasons, and it is I need complex services provided at fractions of pennies and I don't want to give away any FX.

And so everybody's in desperate need of wanting to retain profit and not see any value in that. And I think it's a phenomenally complex issue to actually try to resolve as we think about the conduit for these payments being potentially the correspondent banking model.

If I come back to the question about structured payments, this whole notion of nested risk is predominantly nested risk in capturing payee details. It's complex because structured messaging doesn't allow for that. But also, the move to XML and ISO 20-022 is not straightforward either. And I can tell you, trying to roll out new APIs or enable API-led services to deployment into banks is also phenomenally difficult.

And that's one of the most accessible forms of what people actually would need technology, and that's not new at all. So we have a challenge, what do we want to be when we grow up and how do we want to service the customers that we have. And we need to have sensible discussions around value and price and service.

Maarten Van Rossum: Yes. And I'm glad that you said that indeed that even though there is an expectation, there shouldn't be a race to the bottom. I think that that's a very fair point. And talking about these, the different providers and the downstream nesting of payments and the various layers.

But one of the focus points that's being raised in the report is the need for additional access to schemes. So right now that access is very much limited to a number of clients, primarily banks. Martin, we at Barclays is one of those banks that plays a major role in providing clearing access to third parties and other parties. I guess it's fair to say it's easier said than done. What do you see as the challenges and opportunities that go along with expanding access to those clearing schemes?

Martin Runow: That's not an easy one. So it's -- well, we do, as I say, we do have a pretty strong agency banking business in the UK. So we have a lot of banks that use us to access systems like BACS or Faster Payments. And that's a bit different than what you'd typically see in Europe in the SEPA where most banks are [not] connected directly.

With everything that comes with it, so the liquidity, the cost, the running of everything. So it's actually quite complicated and costly to do all of this and be a [reoccurring] member. And I think that's probably, especially for non-banks, is probably the biggest hurdle to get over. We do see some payment service providers, fintechs, whatever you want to call the new, at least these newer companies. You see some of them becoming Dart members or Faster Payment scheme in the UK.

But we are still a backbone provider to quite a lot of them because it's costly, it's complicated and quite old school to do all this. And then also managing all the rest of the liquidity, the testing, the constant updates of that. So it's a bit -- actually, I like what Stephen said. There is value in us banks or service providers providing these services. And the value is it's maybe not always fully priceable and not fully priced.

So I would say, Maarten, you said it. It's easier said than done to just open it up. It also would potentially or could potentially be a bit of a problem for overall just security, liquidity, management, et cetera. So it would require quite an effort by central banks, by the market infrastructures and by all the players to come up and do these things.

And it's a considerable effort for those banks, especially non-banks that are trying to do this. So not easily done, and I don't have a really super answer of this is what it would take, what it would take to get there. I wanted to actually add quickly some  

Maarten Van Rossum: Go ahead. No, please go ahead.

Martin Runow: No, I just wanted to add something to what Stephen said earlier. It's a value for money. I do believe in value for money, despite my cheaper, more transparent comments earlier. And I think that's a conversation that with some corporate clients you can have. With fintech clients, it gets a bit more different. That's not my segment, obviously.

But there's also value for money there. There's different ways of creating value or paying. It doesn't have to be fees. You can do what all of us basically do with our private lives. You can pay with all your private data to Facebook or whoever you're dealing with. So that's also a price you pay.

So there, that will ask the question in the room or the elephant in the room really is what's the business model in commercial correspondent banking going forward? And the answer is it's not an easy answer. I will expect the drive for transparency is going to make charging random fees quite impossible, which I don't think is a bad thing. It's just fair. And the other side of price or revenue if you're looking at profitability obviously is cost. So for us, that does mean that, putting my digital hat on, we do have to drive cost out of our own system and out of the system at larger scale.

And if you look at -- I'm sure that's true for most banks on this call. If you look into your money transfer operations department, and you still will see a lot of manual intervention. If you look at, we talked a bit about sanction screening. If you look at those teams, there will be hundreds, if not thousands, of folks sifting through false positives.

So I think there is still -- there's still some opportunity for us to just get way more efficient and better in the way that we do process the payments that we process. But we also need to make sure that we don't do this race to the bottom, Stephen, to your point earlier, and also explain the value that sits in some of these more complex things. So just side track. I just thought that was --

Stephen Grainger: And just as my own example in that, right? So I used to live in New York. And when I was moving back, we were trying to do up our house and we were applying [stupid] doors that needed to get paid for. So I transferred our money back into the UK from the US. And there, I banked with a very large bank in the US and held my UK bank account in a very large bank in the UK.

Now this is only two years ago, two and a bit years ago at the time. By the way, they were both banks on CPI. And I made the mistake of making my payment on a Sunday night, and it took until the following Monday -- I don't mean next day -- I mean eight days later, for those funds to have got credited into my bank. At that point in time, I would have paid $50 to know that my bank, that my funds, were going to hit my bank account in eight days' time, rather than keep going in everyday thinking, did I put the wrong bank details in because it's such a convoluted process?

There is value -- value comes in many different ways, and different people will pay for different concepts of where they perceive value to be. And I think that's not just the same for me as a retail banking client; it's the same for corporate clients as well. There's different expectations for the different types of payments that are being executed.

And as we see, as this debate continues to rage, I think what is also happening is that payment processing is becoming increasingly commoditised, and it's becoming much more technology-enabled. And the challenge for everybody is how do you keep up with that technology? And I think what we'll find is there'll be more emergence of PSPs who can handle the commoditised processing in a more effective way.

And over a period of time, what is it that most of the people on this call care about? You're all risk managers. How do you manage your balance sheet most effectively? How do you provide execution services most effectively? And I think that we'll see an increasing trend of banks outsourcing payment processing to third parties, because it just makes more sense to drive that from an efficiency standpoint rather than necessarily trying to consolidate all of that complexity in-house, because margins are forever decreasing.

There's more and more pressure on bottom line. And that's not a good outcome, at the end of the day, for us or for our customers.

Maarten Van Rossum: It's interesting you mention, indeed, technology and that we need to keep up in this. And then if we take just a completely different look, the final focus area of the report looks at what potentially could be happening in the future. I think there's a very -- well, there's a risk that while we're all talking about these things, there's a kid sitting in his parent's basement in California who will come up with something that will have wiped all of this out in the payment. Although we do have regulators that might -- that is probably our one big advantage.

But some of the things mentioned in here in the report is things like stablecoins. There's talk of central bank digital currencies. And there's talk of just completely throwing everything out and starting with the establishment of a completely new multilateral platform. So I'll just go down the panellists just to see your views on this in the last few minutes that we have and which one of those you think has the best credentials. Vikesh, how about you?

Vikesh Patel: Yes, thank you. And this is always dangerous territory, kind of crystal ball gazing. But I think I'd kind of, my closing points would be around four themes. I think to the point you just made, innovation is rife. And at SWIFT we talk about responsible innovation and the need to know what the business processes that you're innovating for, to do so in a regulated environment.

The fact that CPMI-IOSCO have written this report means that they are looking at this clearly but equally where they intervene. The intervention could be in a way that's not as it's been written just around frictions. So we need to make sure that that innovation is done responsibly, knowing the environment we work in is highly regulated.

The second thing I wanted to kind of touch on is I think the future looks a lot around, as has been touched on, open ecosystems as Martin was saying. And we and I firmly believe the future is on open ecosystems. I think if you're a closed loop system, your days may be okay for a while, but they'll be numbered eventually.

You just can't give your client what they need if they have to hook in and get what they need from 15 different places, or that there's no means to leverage that enrichment or value add.

And an extension of that is really looking at data elements. 20-022, we talked about it as a messaging format. It's a data dictionary. It's a dictionary of business functions, business processes that have been defined globally that you can transmit.

Now if you focus on that, you can then not worry about the envelope that you're putting your parcel into, that you think about the data in your parcel and you put the right envelope around it, whether that's an API or something else. And that's important to keep in mind. I think that's going to have a key role.

And then the last area really is around choice that I touched on earlier, choice for the end user. That choice is driven by risk, how much risk are they willing to take. But equally, I touched on the GPI instant pilot where we've connected up and domestic and instant schemes. Now in one way, you could high five yourself and go, wow, it kind of went end to end in 15 seconds. And look, that's no small achievement. It's quick. But the corporate treasurers who talked to us in Asia gave a different view.

And they said, look, speed is good. But actually if you're a Chinese corporate sending an Aussie dollar payment into Australia and using the Reserve Bank of Australia, your cut-off is midday on Friday in China to meet cut-off. Now if you can use an instant scheme with no upper limit, suddenly you have different optionality open to you, that you can send payments through a different group.

And that's kind of my last thought that I can get from my house to the North of England using a motorway. That motorway kind of may be a bit poor and rubbish. I can think of creative ways to get around that. But actually the right answer is to fix the motorway, and where do I want the choice of coming off the motorway because I want to?

And that's probably giving those end-to-end point benefits across the cross-border space. And that's what we're focused on, making instant schemes and the benefits they've had bringing them into the cross-border space and giving the end customer and our FI customers choice about which channel they use when.

Maarten Van Rossum: Well, thanks for that. Thanks for that, Vikesh. And then indeed, Stephen, same question for you. How do you see the future?

Stephen Grainger: So we're doing a lot in this space. Actually, we're doing some stuff with Barclays and with some of the other people on this call around how do we -- how can we leverage distributed-led technology in a different way to be able to manage data differently and more effectively.

We're also exploring what the future is around tokens and tokenisation and what role do they have to play particularly around just think about the challenges associated with liquidity.

But again, I keep coming back to the CPMI report. I didn't write it. I promise I had nothing to do with it. But I actually thought the report was actually pretty interesting. One of the observations that's made in the report is that you can get to a whole series of new outcomes, but the building blocks for getting there are what are outlined in Sections A, B, C and D which kind of says there's no quick and easy way to get to any new outcome.

And we've seen that. In all truth, we've seen lots of new entrants come to the market with, particularly with new technology-based solutions that without scale, the likelihood of any of them being able to take off is extraordinarily limited. And I'm not going to name names here, but you can't bring in a challenger to SWIFT and only have 10 banks on board in a limited capacity. That doesn't do anything to move the needle on anybody. And as Vikesh said, the answer is not necessarily can we find a new answer to SWIFT. The challenge is -- there are many different challenges.

I think for me, actually, and I think the conversation we're increasingly having is the role of data is super important. And actually think about things like digital identity and the importance of digital identity, whether you're dealing with individuals or corporates, actually being able to have that notion predefined, and actually to do an awful lot upfront, irrespective of what the technology is that's underpinning it.

So I think finding a way to be able to establish identity meaningfully gives us a much more effective way and arguably could deliver a much more scalable way to drive new business and new business models forward. But all of them involve one crucial moment, which is kind of where I started, and that is we've got to find a way to be able to evolve beyond the inertia that exists today.

And without that, then it doesn't matter whether you've got, whether the kid in parent's basement in California has come up with the most ground-breaking way to think about payments differently. It won't matter if people don't adopt it or can't be bothered to adopt it or don't have the ability to be able to adopt it.

And that is the biggest mindset change actually I think for me. Vikesh talks about responsible innovation. Innovation has got nothing to do with technology. Technology is purely an enabler. Innovation is a mindset. And we have to want to innovate. And unfortunately, I think there are too many people who are quite happy with where they are and don't see the need to change. And I'll leave it there.

Maarten Van Rossum: Yes, indeed, it's very clear. Thank you very much. And, well, final then. Martin, any thoughts from you, final thoughts?

Martin Runow: It's always easier to --. Stephen, what you said makes a lot of sense to me. I will counter, though, to most of us on the call who are part of correspondent banking ecosystem. Inertia is a problem, and it's really, really hard when you see a business change and your business model change to disrupt yourself. So we have awesome on the PowerPoint, go disrupt yourself. It's great.

But you are giving up profitability and revenue that especially in this year and more than ever I think we need. We need the fee income. At the same time, none of us wants to go the way of the dinosaur, right? So responsible innovation, I like that a lot. I think it's hard, but we will have to look at this business model changing. It's been shifting around us massively, and more in the last two, three years than the last 20 before, right? So that there's no way around it, that we have to keep an open mind there.

What I will say then with my, again, my digital client experience hat on, one way to make sure that your clients, our clients, they can see value in what we do is by creating good products which will be created with our clients in mind, with our clients actually together and deliver a really, really outstanding experience for them, right? And again, the things I said earlier about transparency and speed, but especially transparency, I think that will be totally key for me.

And then just be mindful that the world is going to change, and we will not be able to ride this one out into retirement, even though Maarten made us all sound really old when he said we're all distinguished panellists, right? So I think that's going to change for all of us. There's no way we're going to stop change.

Maarten Van Rossum: No, indeed. I'm afraid that we're all too far from retirement to sit this thing out, indeed. Well, thank you very much. I want to thank Vikesh and Stephen and Martin for sharing your time with us today and your expertise. Also the audience, of course. Thank you for the interaction and the great questions that came through. We hope that this has been a session that's been useful to you.

More importantly, we hope that we'll be able to once again interact with you in real life to talk about topics such as this one or the many other topics that impact all of us.

So after this call, you will see a feedback form. We'd love to hear from you. Love to hear what other things you'd like to talk about, how you experience this. And with that then, I will go ahead and close the call for today. And thank you and goodbye.

Cyber Security

Wed, Aug 12 2020, 09:00-10:00 BST.

The world has changed and with enhanced digital functionality comes increased online risk. Damaging cyber-attacks are now an everyday reality. In our next FI Forum, our host, Lauren D'Arcy, Global Head of Partnership Bank Relationships, will be joined by a panel, discussing how protecting your business and your clients from cyber-crime is critical for success.

Good morning, and good afternoon to all of our clients and friends dialling in to this, or indeed listening to the playback from all around the world. A very warm welcome to you all. My name is Lauren D'Arcy, and I'm the Global Head of Partnership Bank Relationships at Barclays.

We are so appreciative of you taking the time out of your day to join us. This is actually the third in our FI Forum series, which we have set up in order to ensure that we are staying connected to you, our clients, but also to share thoughts and insights into matters that are no doubt affecting all of us.

During our first session, we explored COVID and the return to work. We have also explored ESG within trade finance. And today, we are attempting to tackle the important topic of cyber security -- something that is, of course, of critical importance and focus for all of us on this call in a BAU environment, but perhaps has taken on an additional nuance in the age of the pandemic that we are all living through at the moment.

So, let me first explain the running order, and then we'll jump straight in. To kick us off today, we will have Mike Brookes, Head of Cyber Operations Intelligence at Barclays. Spend a few minutes setting the scene, and sharing with us some information about what the current threat landscape looks like.

We will then move to a panel discussion, and I will be joined by esteemed guests, who will help me explore this important but complicated topic. We'll then move into a Q & A session, and I'd really like to make this as interactive as possible, so please do make use of the question box that you will see on your screen, and we will also pop up some polling questions throughout the panel discussion, just to make sure you're all still listening.

With that, let's begin. As I mentioned, Mike Brookes is the Head of Cyber Operations Intelligence, and he leads a team that aims to proactively understand and defeat cyberattacks from the most active criminal and nation‑state threats. Mike has spent 10 years at Barclays, starting in information security consultancy, building secure architecture for the global business units. And then shifting into incident response, investigating sophisticated criminal and nation‑state cyberattacks. Mike set up the first cyber threat-hunting team in 2015, and established a practice devoted to uncovering undetected threats, and proactively mitigating threats before they manifest in the network.

So Mike, over to you to help us set the scene for us today. Thanks very much.

Mike Brookes: Thank you, Lauren, and good morning, everyone. Go to the next slide, please.

I think 2020 is no exception in showing the world has changed very, very quickly in recent months, and all these events will add a layer complexity to the equation, which will make global reliance on technology even more paramount. We face a world where the lines are blurred between electronic attacks and potential acts of war. You'll need to look at the number of attacks against SWIFT interbank systems for various financial institutions in recent years. And going back a few years, looking at the Ukraine accounting software attack, known as NotPetya perpetrated by a nation‑state.

For global organization, this extension of cyber threat raises the risk of collateral damage beyond traditional cyberattacks. Global organization, in some cases, takes on the risk of individual countries it operates within. In some cases, large brands may be seen as legitimate cybertargets in geopolitical events. Again, looking at Saudi Aramco and Maersk as part of the fallout of the NotPetya attacks. Where you line cross hairs often depends as much on your industry, your organization itself, and the ongoing global politics at the moment.

In the large and small, we're in this together. Our businesses are interconnected. Our markets are global. We share the same risks and must defend interconnected economies together.

As mentioned, the world has morphed significantly over the last few months. A historic globalization has led to an increased interdependencies alongside magnified technological dependencies that ultimately put us at more risk, as much as they create greater efficiency. Add the pandemic into the mix, and the risks go more digital for many organizations at even more complexity.

Before the pandemic hit, the last 10 years have seen a marked evolution in cyber threat landscape. The traditional views, antivirus software, and firewalls won’t  keep attacks at bay.

Increased global interconnectivity means the private and public sector threats are closer together. And in fact, in the private sector may have implications to way of public life, and vice versa.

Could you go to the next slide, please?

First we have the nation‑states, criminal organizations, and individual threat actors. You can see in the infographic there, sourcing the FBI, the kinds of threats that we face that are increasing. Fundamentally, within all of this, there's two ways that these cyber risks manifest against your organization. The first one is the prevention of business, and the second one is the stealing of data or funds.

Within prevention of business, you all have heard about denial of service attacks. And these can be quite public and reputation‑impacting, but often not long‑lasting. It's been one of the key areas of innovation in the last few years is network technology and the ability to defeat those kinds of attacks.

I'm sure many of you will have read of ransomware recently, especially in 2020. These attacks are often limited in scope, but there can be some extraordinary cases that makes it into the press. Often what you might read about in the press is only the tip of the iceberg as to what is actually going on and the amount of funds that are being bled out of Western organizations.

The thing is, these cases can actually be preventable if you get the basics right. All of your basic patching and information security can prevent this kind of thing. If you can fully recover and restore business from a ransomware attack, then the more is the better.

What this presents, though, is a shift in the past 12 months or so in completely in the way that criminals operate. They've moved from a very complex ecosystem of a lot of criminals and fake bank accounts, called mules, where they needed to shift fraudulent money around. Now what they can do within this new ecosystem is sell each other direct access to breached companies. Another criminal will then demand payment in cryptocurrency. Their supply lines for obtaining untraceable funds have gotten much, much shorter, and the impacts have got much, much greater to you as organizations.

In terms of stealing money, everyone will have heard about business e‑mail compromise and invoice redirection, and that's probably the least of your worries, while it's one of the most prominent threats.

Intellectual property theft and espionage by similar nation‑states is one of the key concerns, especially with the arc of geopolitics going forwards. What you face with deep compromise of your network, and often the most difficult to see.

It will be a very silent type of attack, and often they will use- they will not use malware, but they will use embedded technology within Microsoft Windows, such as PowerShell, and they will try to gain access to your networks that way. Equally, these are actually the most difficult to maintain for the attackers, so there are some opportunities versus defenders in the organizations.

Customer credentials or private information is one of the most reputationally damaging things that we face in terms of theft of data and funds. Once it's gone, it's gone. It will affect your share price, and recovery costs are very high.

And that was my section. Lauren, back over to you.

Lauren D'Arcy: Great, thanks very much, Mike. Very interesting. Mike is going to stick around in case we get any really tricky audience questions.  We'll save those for you, Mike. But for now, let me introduce you to our panel, who I'm very excited can join us today.

First, we have Paul Gillen. Paul is the Head of Cyber Security Operations, and has been working in the area of cyber and fraud since 1996. Paul is the founder and leader of Barclays' global suite of joint security operations centres in the UK, US, and India.

Paul joined Barclays from the European Cybercrimes Centre in the Hague, where he was the head Of Cybercrime Operations and Intelligence at the European Law Enforcement Agency. Paul was founding chairperson of Europol's European Cybercrime Training and Education Group, and he was also founding vice‑chair of the European Union Cybercrime Task Force, a group made up of all of the heads of federal cybercrime units across the EU.

Next, we have Stevie Wilson. Stevie is the Chief Executive Officer of the Cyber Defence Alliance. Prior to this, he was the head of the European Cybercrime Centre at Europol in the Netherlands, and his responsibilities included supporting international investigations into high‑level cybercrimes, online child sexual exploitation, transnational non‑cash payment frauds, and dark web inquiries. He has had a 34‑year career in law enforcement, including serving as the senior detective in Scotland, where he performed a range of roles with national responsibility.

And finally, we have Dan Pilling, who is our Global Payments Technology CIO here at Barclays. In this role, he is accountable for all payment platforms, payment gateways, SWIFT infrastructure, and payment sanctioned platforms. Prior to this role, he was responsible for the implementation of the strategic global payments utility. And prior to that, was head of strategic change management, with responsibility for defining the strategic change road map across all business clusters within corporate banking. Dan started his career in payment operations.

Very warm welcome to our panellists. Thank you so much for joining us today. That was a very quick snapshot of your careers and backgrounds, so I'd like to ease you in gently and kick off by asking you each a question, which will hopefully allow you to share more about your focus as it relates to cyber.

Paul, starting with you, you've been here within Barclays for about five years, I believe, as Head of Cyber Security Operations. I'm guessing this world of cyber security is very fast moving, and Mike spoke about there being a shift even in the last 12 months. Can you tell us a little bit about what your role looks like as Head of Security Operations, and what your focus is, and maybe what keeps you up at night, apart from this hot, warm weather we're experiencing?

Paul Gillen: I'm actually dialling in from Dublin, so the whole warm weather things does not apply for me.

Lauren D'Arcy: Okay.

Paul Gillen: Yes, I guess just when we listened to Mike there ‑‑ and first of all, good morning or good afternoon, everybody. It's great to be here. As Lauren actually said, I've been doing some sort of cyber for the last 25 years. It wasn't cyber at that time. I think it was computer forensics.

I think when Mike outlined -- I think the modus operandi of the threat actors, they have changed over the last five years, we say in Barclays. So I've been responsible for cyber security and all front-line security operations for the bank globally for the last five years.

Although the modus operandi of the threat actors have kind of changed in the times, as Mike outlined, really at the end of the day, there are only two consequences. Those consequences, I have to say, have pretty much remained the same pretty much over the last 20 years for me, as I've been either investigating cybercrimes or responsible for defending against them here in Barclays.

And as Mike had said, it's something that prevents you from doing business. And the two that he outlined were DDoS and ransomware. So he's outlining exactly what keeps me up at nighttime. The denial of service attack where so much data has been sent to one of our online services that it can no longer cope with the amount of traffic that's been sent towards it. Then we can no longer legitimate ‑‑ customers can no longer log in and do business with us on that particular channel.

Then obviously, much more destructive is, and obviously keeping every cyber security professional awake at nighttime, is the threat of ransomware, where someone can ultimately breach the network, manage to get on to the network, manage to once they get on to the network, to move from one machine to another until they get somewhere that they can deploy some of this ransomware, and lock up machines silently at nighttime or over a bank holiday weekend, or whatever it is they're going to do. Hopefully, it will not be detected until everybody comes back into work.

Then the second one obviously, which is both the legend – you know, has happened all the time is where they get in, they do a data breach, they steal a whole bunch of data, credentials, user names, passwords, credit card credentials, whatever the case may be.

Or ultimately, as we saw with some of the business e‑mail compromise, they get on to the network, compromise the network, sit on somebody's inbox for a protracted period of time -- I mean their e‑mail inbox for a protracted period of time. And then look to gather enough information that they can do some sort of really convincing scam.

So I guess ultimately, the modus operandi has changed over the 20 years, but the consequences haven't. I saw an interesting stat then as a result of COVID in the current environment, we’ve never—like in my lifetime, I haven't lived through a pandemic. It's been interesting to see that. So IBM published recently that they saw a 6,000 percent increase in malicious e‑mail attacks that were leveraging COVID‑19 as a theme, between March and April. Not the whole year, just March and April. I thought that was pretty astounding.

The threat actors will always look to gain advantage. They'll always use whatever is relevant to the day, whether that's a geopolitical event, or some other event, that they use that as a lure in order to attract us to do something, or some of our employees or our colleagues to do something nefarious, et cetera.

Probably a very long answer to your short question, Lauren, but I think they're the things that Mike had outlined. They're the things that keep me awake at night, and they're the things that I worry about. They are more the consequences than the modus operandi.

The modus operandi just continually change, day in, day out. You have to stay really, really alive to changes and the threats that the cyber criminals do, their tools, their tactics, their procedures. You have to be completely alive to that literally 24 hours a day. If not, you're going to get caught in it.

Lauren D'Arcy: Right, okay, you're scaring me now, Paul. I'm just kidding. Thank you for that. Maybe moving to Stevie. Stevie, you've had a very long and impressive career in the area of law enforcement, most recently with Europol, and now currently with the Cyber Defence Alliance. Can you tell us a little bit about what your role entails? Because I'm sure no two days look the same. But can you give us a sense of what your focus is?

Steven Wilson: Lauren, thanks very much, and thanks for the invite to be here. Commonly known, eight months into my journey into the financial sector, it's been an interesting two months during the epidemic, as Paul speaks about. But firstly, Europol, 120 staff from 24 countries all working together as a collective team to tackle the top‑end cybercrimes. Not just in Europe, because back to what Paul spoke about, it's a globally interconnected problem.

Looking at what we do in the Cyber Defence Alliance, we're a small team, 30 staff in total between parent and seconded staff. What we're looking to do is between our eight member banks, Barclays being the founder bank, what does as to pool the collective resources to understand the threat. That involves setting on a daily basis, taking calls from the members, pooling everybody's understanding, assessing intelligence feeds, working and developing major incidents, and also understanding the geopolitical problem and what's likely to happen.

We have this problem starting to merge, escalating that into member expert calls. And then once that ongoing monitoring of dark web forums intel providers for that earlier limit. The whole point of what we are trying to do is to collect a security response together from all of our members. And again, ultimately making us all collectively stronger together.

Actually, I'm struck by the similarities in the role, the mission between Europol and what we do at the CDA. We're a central resource, but we have to support our members. Those members have got different capabilities and different priorities. We've got no front-line operation responsibility, but we have to support the guys on front end. Again, because we're multiple members, all with different and varying priorities, what is core to both what we've done at Europol and most pertinently what we do at CDA is that idea of information sharing.

Collectively sharing information, developing that trust, and the idea of the more you put into the pot, the more you get back out. And ultimately, combining those efforts to collect the benefit. Because sometimes we find it's almost like a jigsaw puzzle we're dealing with. That one single piece from one member can actually put the whole picture together for all of us, to make us collectively safer.

So back to you, Lauren.

Lauren D'Arcy:  Great, thanks, Stevie. If we have time, we might explore that sort of concept of collaboration a little bit further later. So Dan, over to you. In your role running technology for global payments, I'm sure you think a lot about resiliency. But how much does cyber now factor into the things you worry about as it relates to our payment business?

Dan Pilling: Morning, afternoon, and thank you, Lauren. Resilience ‑‑ there will be three reasons in payments, and our SWIFT infrastructure is the forefront of everything we do on a daily basis. As we moved into an always‑on posture -- we're moving year on year to more payments moving around the ecosystem, 24/7/365 -- that resilience posture has become increasingly important. The cyber-resilient aspect of that carries the absolute same focus. It's gone from maybe being slightly in the background maybe 10 years ago, to absolute the forefront.

One thing that resonates with me, when I took this role on a few years ago, was the group's COO at the time clearly telling me that from his perspective, cyber security and getting it right or getting it wrong is the single biggest financial risk to the bank. You can understand why, having heard from Paul and Stevie earlier. It absolutely is something that is forefront of mind and is part of everything we do on a daily basis. 

And Barclays has been running a security program for a number of years now. Myself in payments have a fully funded dedicated cyber program which we run, focusing on all the key areas. This is reported up to group XCO level, obviously the full focus of the bank from top to bottom. So yeah, it's very much, in my mind on a daily basis.

Over to you.

Lauren D'Arcy: Great, and I think that's a shift, isn't it?  Previously, the lines were a bit blurred between cyber security professionals and the business, if you like. Now we're seeing very much where the CSOs are reporting directly into group, and presenting to boards. I think that's been a shift, hasn’t it, in recent years as well.

Good, so we're going to pause now for our first polling question. Sharon, if you could send that question to the audience, that would be great. So hopefully you'll see that on your screen coming up shortly. The question is, "Cyber attacks are the greatest threat to the financial system we have today."

You've got some options there ‑‑ strongly agree, agree, disagree, or strongly disagree. We'll just wait a few seconds for those results to come through. So again, "Cyber attacks are the greatest threat to the financial system we have today."  What's your opinion on that?  Great, okay.

Super, so whenever you're ready, Sharon, we can push those results to the audience. You'll see the results pop up in your screen shortly. Not surprisingly, the vast majority of people, so 97 percent, either agree or strongly agree with that statement. That's probably not a surprise, particularly based on the opening comments from our panellists.

Okay, good. We'll move on now. Maybe based on that response, it's clear everyone is aware of the threat that cybersecurity poses. But I'm curious to know how much we understand, because we always hear that the criminals are a step ahead, the bad guys are getting worse, faster. Are the good guys able to keep up?  And what impact has COVID had on this?  So maybe Paul first, and then Stevie.

Paul Gillen: Thanks, Lauren. Yeah, I think our understanding of cybercrime and its consequences, certainly in my experience over the last 20 years, it's definitely improved. I think there was a case of that 20 years ago, anyone that was talking about this was a bit of a John the Baptist in the wilderness talking about it.

I don't think anyone really took it seriously. It evolved over those 20 years, where it's now, we get surveys like this where people are saying that 90‑odd percent, or 97 percent of us believe that it's probably the greatest threat to the financial systems that we have today.

So I think we've come a long way in relation to understanding and appreciation of the threat, and I think we've seen all of the examples of all the various different breaches and the fines that have been handed out by regulatory authorities, for example. And the recovery costs that have been incurred by so many companies who found themselves in the unfortunate positions. I do really feel sorry for them. And of course, I always hope that it's never going to be me.

But there seems to be at this stage that criminals are so forward‑leaning and taking every opportunity, and there's so many of them. It's like crime in the physical world ‑‑ can you ever beat it?  Probably not, but can you defend better?  Answer yes, yes, definitely we can. Can we work together better?  Yes, no question we can.

And the second part of your question was about COVID. And I guess COVID has been like a really unusual event. I'm not 100 percent sure of the consequences that COVID has had from a cyber perspective. I mentioned earlier on about the 6,000 percent, which I was kind of staggered by, increase in malicious e‑mails that are being sent to organizations, trying to get our employees or colleagues to click on them, and compromise their machines, et cetera.

I'm not 100 percent sure. We're certainly seeing ‑‑ we're replicating those, increasing simulations, and sending about to repeating what it is that we see from criminals, and letting it out into our colleagues, and see what it is they're doing. And so far, they've been pretty good. I think that's part of an education program we've been standing, and the click rates on those are at an all‑time low.

I suppose that's the balance is, I think we do understand it more. I think we're educating people more. I think there's a greater level of appreciation. We're testing our colleagues and testing ourselves. We're sharing more and better information between ourselves as organizations.

I'll hand over to Stevie, and I think the Cyber Defence Alliance, for any of you that are in it or that are not in it, it's certainly worth a look at. We find ourself in a position where we're sharing good, sensitive information on helping each other out in the event that we see things.

So I think overall, yes, we're getting a better appreciation. Overall, no question, the consequences-- we have a greater appreciation of the consequences. COVID, I'm just not sure about yet.

I just—I anticipate that in five, six months when we see results of various different breaches, and hope myself or nobody on the call is part of an organization that suffers from it but there will be people who will be sitting on our networks that we do not know about, as Mike spoke about a little bit earlier on. I think it's a little bit early to say the consequences of COVID yet, Lauren.

Sorry, Stevie, I'm not sure whether you agree or not.

Stevie Wilson: Yeah, thanks, Paul. Totally I agree. Some really interesting points in there. I think back to that point, I think it's getting much better. I've seen law enforcement capability grow. However, the problem is the bad guys have grown significantly in that period as well. I think for me, the biggest development has been that law enforcement and the industry cooperation, and intra‑industry cooperation as well to try and prove that collective front to tackle it.

And if we go back Mike’s first slide, if you look at the complexity of the problem, state‑sponsored, state‑condoned and taskable where we have organized crime groups watching as criminals by day, and potentially agents of the nation‑state by night. We have cybercrimes of service, a loose affiliation of cyber criminals who all combine together to actually subcontract parts of the cybercrime ecosystem to attack.  We also look at the hacktivists, the Script Kiddies. Some of themselves, some of these young kids involved are hugely talented. But they can inflict massive harm.

That's the evolving, challenging, complex world we're facing. Also the big problem, I think, why we stay behind the cyber criminals sometimes, if you look at the challenge of location. We've got non-cooperative regimes, where they will not extradite or do anything regarding cyber criminals, even when positively identified. We look at the problems and challenges of attribution. We see that increasing sophistication I've spoken about, and the idea of encryption and anonymization makes it more and more challenging for both industry and law enforcement to tackle this.

But again, back to those ideas of the industry and law enforcement cooperation. We see the disruptions, detections. Take the dark web, for instance. Jobs over the past couple of years, AlphaBay, Hansa market, deep dark web, again, industry and law enforcement working directly together.

And on to your second question, Lauren. COVID, that's beenvery interesting in this area. I think in some aspects, we've actually seen a reduction. I think some of this comes down to the inability of many real networks to actually cash out. Again, that's hugely important to cyber criminals. That's probably held some of it back and shut down operations.

But Paul makes a very good point. They will be doing an act of reconnaissance. They will be getting places in the network to try and monetize later stage. But certainly on the scam side there's been a massive increase. COVID‑related PPE, delivery Phishing scams, or mine scans, they've all been through the roof because of what we're seeing just now for COVID. That's how I see things just now.

Back to you, Lauren.

Lauren D'Arcy: Thank you, thank you both. Very interesting. Maybe we'll bring Mike back in for this next question. I was curious to know if innovation is seen as a weapon in fighting cyber demons, so to speak?  So I'm thinking about AI, machine learning, biometrics, or anything else. Is this a help, Mike, in fighting these criminals?

Mike Brookes: Thanks, Lauren. I think it's probably the only weapon that we should really start to focus up and towards. To my perspective, research into what the criminals do, what the nation‑states do, they're the real innovators.

They constantly push themselves, constantly try, and try new things and incorporate the techniques of each other. They all learn from each other, because one of the problems that is we have in the cyber security industry is we write nice blogs and do marketing about what the criminals are doing, and that also acts as a playbook for them to learn from each other.

The key thing here is, is a phrase they have been aware of for many years. They only need to get it right once. We need to get it right every single time. So you have this set of adversaries, be they Script Kiddies in their parents' bedroom, be they heavily funded with all the apparatus of a nation‑state's intelligence behind it, they only have to get it right once. That's the kind of sphere that we're in. So we have to try and constantly out‑innovate them as best we can and put the [consummations] in before they come.

So to tick off some of the things that you've mentioned, machine learning, definitely. There are more and more and innovative new companies coming through. Barclays runs a program called the Rise Innovator Labs, and we kind of incubate a lot of these companies and put them through and trial them ourselves.

From a machine learning perspective, the amount of data we now have, the size of organizations that we need to protect, the only way we can do this is to use some of these more advanced machine learning techniques that spots these kind of nuances in the data. We've had some limited success with that internally in Barclays as well, and developed our own model that highlights threats.

From a biometrics perspective, yes, that's something as well that exists as toolsets, and if you run online platforms, interact with your customers, there are tools, technology that can help you biometrically kind of a fingerprint what a customer looks like, and what a fraudster looks like.

And then within that as well, if you're not a big corporate, there is actually a lot you can do yourself, by just adopting an innovative mindset, and realizing as long as you understand your business, where it operates geographically, and what those threats might be, there are lots of free tools that are out there that are available to cyber security professionals with a bit of minimal investment in people, and some free rein and some trust that can put some really fantastic solutions that can defend your business intelligently and proactively.

I hope that answers it.

Lauren D'Arcy: Great, yeah, really interesting. Thanks, Mike. That leads me then, I thought, to the next question, maybe for you, Paul, which is around digital adoption. So we obviously know that digital adoption continues to grow exponentially, and we've seen it spill into all aspects of our lives.

Does that mean, then, that the attack surface is much larger?  And then if the attack surface is larger, does this mean it's easier for it to be hacked? I know we discussed this as we were prepping for this, and you weren't convinced. But what are your thoughts around digital adoption, and is that a further concern to help protect ourselves against cyber attacks?

Paul Gillen: Yeah, it's a good question. I guess, obviously, to state the obvious, digital adoption is absolutely inevitable. No question our reliance on it will absolutely increase. If anything the pandemic offers, as COVID has proven that our economy survived literally because, even though we've had ‑‑ there will be recessions, et cetera, after,

if we didn't have 21st century technology, we just simply wouldn't have survived, because the technology allowed us all to work from home, like literally, tens-- for example, with Barclays, tens of thousands of people began ‑‑ left the offices and then began to work from home.

So I suppose if we part that and go that ship has sailed, no question. Adoption is inevitable. Our reliance is only going to increase. And as a result, I guess technology, again, I'll accept, technology will continue to be the focus for criminals and other threat actors.

No question. If we're all working on it, if that's where the money is, if that's where the data is, if that's where the funds is, if that's how they're going to be able to blackmail you or going to be able to ransom you, et cetera, then they're going to focus their attentions on that.

To kind of quote Mike from earlier on, we need to be ready to defend the networks. We all rely on each other. We're all absolutely connected. If one goes down, it's going to have a domino effect on other businesses, no question about that, either. However, however, because the attack surface is broadening, and it makes, I guess, a new frontline.

That frontline becomes bigger and more difficult to defend. I guess the quote was Frederick the Great, "He who defends everything defends nothing."

I guess the advice I would say, or this is what's in my head, is that this is the way I'm approaching it anyways, that we need to know our most valuable environment. So the systems grow, and as the technologies increase, we need to know what our most valuable environments are, and we need to protect them, and we need to protect the people who have privileged access to them. We have to make sure that they're patched. We have to make sure that people who supply services to those environments are safe, secure.

We have to make sure that the third parties that provide or enhance the delivery of the services in those most valuable environments are safe and secure, and that they conform with the standards that we would expect of them. I beg your pardon, the standards, I suppose, we would expect of ourselves probably better way to describe it.

I think the second thing also is that if you sit and you wait to be attacked, then have that reactive cyber security posture, I think that's going to go badly. So therefore, the threat landscape changes. You do need to be aware of what the threat landscape is in your industry sector.

That's because, as you know, as the attacks surface, as our reliance on technology gets bigger, and the reliance on your third parties gets bigger, and their reliance on technology becomes bigger, and we all don't have the same cyber security posture, you definitely need to know what the threat landscape is in your industry sector.

Who are the threat actors that are attacking you? What are the tools that they use? What are the techniques that they use against you or other people?  What are the processes that they use against you or other people?

And then obviously, the next biggest thing for me would be, again, what Stevie was saying. Get together, work and join in sharing groups, and be forward‑leaning. Make sure that you know what it is that the threat ‑‑ who are the people that are attacking you. Be in a position to maybe change your cyber security posture as you see an attack against somebody else, and you get to put these knowledge, the TTPs -- I mentioned them earlier on, too, techniques and processes, TTPs.

As you know what TTPs have been used against another poor victim, if you can come back and get those TTPs and then look at your own network to see if you can ‑‑ could you withstand that same attack and what changes would you need to be in order that you don't fall victim to similar?  That's really it. We need to check our security posture against those signals. Absolutely, no question about it.

As well as to synopsize here. The attack surface is getting bigger, yes, it is. If you try to absolutely defend everything with the same level of rigor, you're probably going to fail, because there isn't enough cyber security or enterprise security professionals in the world in order to do that. But you certainly need to know what your most valuable environments are. Know what your dependencies in those most valuable environments are.

Be a bit forward‑leaning. Know what the threat landscape is. Join sharing groups. And then make sure you check your posture against real‑world attacks to make sure that you'll be able to withstand them and do it in a peacetime mode, where you're not the one that's under attack and running around with your hair on fire. Which I think anyone that's been involved in cyber security will recognize that term.

Lauren D'Arcy: Great, thank you, Paul. Lots of things to think about there. I suppose the biggest thing is that it's just no longer acceptable to just react to cyber security risks. We must be proactive and then anticipate what adversaries will do next. Lots to think about there.

Okay, let's pop up our next polling question then, please, Sharon. We will send that to the audience now. And the question is, "What is the greatest cyber security threat to your bank in 2020?" So the options there are A, phishing, B, data breaches or data leakages, and C, ransomware. We'll just give you a few seconds there to respond.

So phishing, of course, is the fraudulent attempt to obtain sensitive information by disguising oneself as a trustworthy entity in an electronic communication. Data breaches is obvious.  And then ransomware is a type of malicious software that blocks access to a computer system or data, usually by encrypting it until the victim pays a fee to the attacker.

Okay, so let's send the results there to the audience, so the audience can see. Bit of a mixture there in the responses. Roughly half think it's phishing. Sorry, the responses are still coming through. But more than half think it's phishing. More than 30 percent believe it's data breaches. And a bit more than 10 percent think that it's ransomware. So a bit of a mixed bag there. I think probably the real answer is that they're all risks and threats to our institutions.

But maybe if we look at the question on data, and maybe this one is for you, Stevie. Data has become the new currency on the web, from intellectual property to financial, health, and personal data. And at the same time, monetizing data has become easier than ever, thanks to dark web marketplaces and crypto currencies. I suppose in the first instance, preventing and mitigating attacks should be step one. But what advice would you have to help companies or institutions to not fall victim to system compromises that result in data loss?  Where do you even start?

Stevie Wilson: Thank you. It's important to put it in context, Lauren. I think the question actually is really partially a trick question, because all those parts of them are connected together. But you're correct. It's continually evolving how they monetize the data stolen on the web. At the simplest level, credit cards, again, immediately transferable into cash or goods. Again, so far this year, at the CDA we have repatriated something like 250,000 cards to member banks. Again, that gives you an indication of the scope of the problem.

Again, picking up personal data, turning it into a fraud tip for wider frauds. One aspect I'd like to really go into in that evolution is the ransomware business model. If you look a few years ago, back to what Mike spoke about, there was ransom, "Pay or lose your data." That was a simple decision. Now we see the bad guys have evolved their business model.

They're publicizing their attacks. Reputational damage for companies. Potentially a fine from the information commissioners, potentially four percent of your turnover. And then threatening to advertise that data. And ultimately, if you don't pay the ransom, then they will monetize that data by selling the data.

I looked at 8 o'clock this morning. The two most recent breaches been advertised NA Lab, a major computer hardware company in the U.S., 94 gigabytes of data stolen. Employees, partners, internal correspondence. TME Group, an international corporate producer, the same amount of data been put up for sale. My question to the audience is can you afford to lose this data?

You think back to what Paul spoke about. What are your crown jewels? What is going to make your company go under?  And understand and protect that stuff. The idea of encrypting your own data so it can't be monetized for the bad guys is a major start. The idea Paul spoke about as well, understanding the threat, what's coming over the hill, and the tactics by the bad guys. And push a backup policy in relation to the recovery of data.

And putting all that together as part of our cyber security prevention strategy, to me, is absolutely fundamental to existing, because again, you don't want to be in the situation. Take Travelex most recently, where we've seen that significant breach. And whilst their situation is complicated by COVID, that initial ransomware incident probably was rather significant in their demise.

Back to, Lauren.

Lauren D'Arcy: Thank you, Stevie. Very interesting. Dan, maybe we'll switch to you now. And a question around some of the things that SWIFT are doing. So SWIFT has introduced the customer security program, which aims to prevent and detect fraudulent activity through a set of mandatory security controls. Does this help in the fight against cyber attacks? What's your view?

Dan Pilling: As a very large user of SWIFT, as we are all on this call, we’re fully supportive of this CSP program that SWIFT has introduced. We've been working very closely with them in collaboration on the mandatory as well as the advisory controls they've been introducing over the past few years. I think we're now up to 21 mandatory controls and about 10 advisory controls.

The controls they sought to bring in, especially the mandatory ones, were very closely aligned with initiatives that we were already running in the bank through the cyber program that I mentioned earlier.

So we absolutely do endorse and support that program of work. And the decision we took very early on is that we would adhere to all the mandatory and all of the advisory controls as they come through, and there are a few more coming through each year. So there's a few more mandatory controls that banks need to meet and attest by the end of this year.

And the sort of bracket states have bundled their controls into, again, as I mentioned earlier, to align with our strategy. So it's securing the environment. Obviously talking about the SWIFT environment here, but also we're talking about everything that aligns to this and connects to the SWIFT environment, which typically is the payments estate.

As mentioned earlier, you need to identify your most valuable environments, and those are the ones, the crown jewels, that you need to protect and protect 100 percent. That's what these controls really address. Securing the environment, both physically as well as virtually, so through techniques such as network segmentation, to make sure that you really are segregating those core payment and SWIFT infrastructures away from the rest of the broad environment that may not be your most valuable environments.

Limiting access is another sort of theme that comes through. Again, really key, and one that we were running a very big program of work on. Making sure that the right people have the right level of access to the right environments.

The right credentials, and making sure that when they access those environments, they do it in the most secure manner, using multi‑factor authentication, technologies, methods, to really ensure that the surface attack area is limited, because we have a very tightly controlled, access control, to our environments, both application level and infrastructure level.

And then the final area which is the sort of detect and respond, and this is where we work very closely with Paul and with the joint operation centre, is, firstly,  we need to be able to detect any anomalous activity, and then we need to be able to react to that activity as and when it happens.

It's all about being proactive, making sure we have playbooks, making sure we would know what would happen. And that broadly does align with this sort of strategy that SWIFT laid out with their SCSB programs. Yeah, we continue to work closely with them, and yeah, we fully support the program. We do genuinely believe it is having a real benefit of providing that extra layer of security.

Lauren D'Arcy:  Great, thanks, Dan. I think that will resonate very strongly with the audience today. I want to ask a question around collaboration, and we touched on this ‑‑ it's come out both through Stevie and Paul's previous comments, where it's critical that industry and law enforcement collaborate directly.

But I was curious specifically within the financial institution sector what sort of collaboration you see, because we have an audience of FI clients on this call here today, and to a certain extent, we may be competitors of one another.

But there must be a strong element of collaboration between banks in the cyber space, because an attack on one is an essentially an attack on all. Do you see it as a shared crusade?  So if we had an attack or saw something that was a bit worrying, would we pick up the phone to your counterpart in another bank?  How does it work?  Maybe first Paul, and then if Stevie has any comments.

Paul Gillen: Sure, Lauren. Certainly I think it's a critical element. I think it was one piece of advice I would give anyone. Collaboration entirely. And you know, don’t--  if there's anyone on the call that are enterprise security professionals, don't do security to the business. Make sure security come on—the security—make sure that the business comes on the security journey with you. You just want do it on your own.

Then externally, having external contacts with industry organizations, intelligence sharing groups, being a member of as many of them as possible, and particularly effective for ourselves have been ‑‑ obviously, we have Stevie on this morning. I can hand over to, has been the Cyber Defence Alliance.

I will say, based on my years of experience, I would say that the Cyber Defence Alliance is something that's probably very unique in relation to sharing information and intelligence, and then helping partners through difficult times or through incidents by giving advice or help or carrying out intelligence in the background to help people, to avoid and deflect attacks.

I would say it's very important, and I think, to hand over to Stevie, it's been really good for us. We've had a really good experience in it. And we’ve done things, I would say, in the Cyber Defence Alliance, that I'd say we haven't done anywhere else is in one member would have had an incident, and again, let's use that term jokingly that used earlier on, they're running around with their hair on fire.

And then other members can actually carry out tasks on their behalf that allow them to have a better information position when they're about to make decisions, because when you're running around and you are under attack, it's a very difficult and arduous situation you find yourself in. You're trying to respond to the attack. You're trying to then give briefings up to the organizations. You've got regulatory relations that are asking you questions as to how ‑‑ where are we now, where are we now?  You've got thousands of people doing it.

And then if you're in a position where you have a bunch of friends who are in the position who are not in the same position as you, and have the time to relax and actually do the research or intelligence gathering or the information on your behalf that allows you to make better decisions at critical times. I think that's been really, really benefit, and I'd say that's been the differentiator here the CDA has given to us in Barclays, compared to any of the other intelligence sharing forums that we've been members of.

I just hand over to Stevie. I'm sure he probably would agree. We've found it very beneficial and it’s been pretty important.

Stevie Wilson: Thanks, Paul, very much nodding all the way through your comments there. I think you can’t  underestimate the importance of that collective security posture, information sharing, and actually that realtime understanding of the evolving threat. Because it may look slightly different to every single one of our partners. But back to the jigsaw puzzle analogy I spoke about earlier. When you put all those parts together, you start to see a clearer picture. So that was firstly, in normal times when it's not critical as the proactive network defends, to actually understand what might be developing.

Back to Paul's point there, when everybody's hair is on fire, those critical incidents, understanding, being able to fall upon your peers to be supported. Also, for the banks that are not being attacked at that time, being able to benchmark among the membership and go to your board and say we have a clear understanding of what's happening.

Let's reserve decision. Do not underestimate the importance of that. And again, when the incident is over, being able to interface with law enforcement to present a collective picture from the financial sector. The gathering of the actual cost and threat. That's what can elevate something to a national investigation, rather than something at a local level. Unfortunately, our colleagues in the law enforcement have got limited capacity. But eventually as well, again on projects, back to the points on innovation and opportunity, why develop complex projects individually at a bank? 

The whole point is actually pool the resources to develop something for our collective good. And again, ability to benchmark, to understand where you stand with, and along with your peers, is hugely important for that collective response.

Back to you, Lauren.

Lauren D'Arcy: Thank you, thank you both. That's very interesting, and again, will resonate with the audience, I'm sure. Just a reminder, we do have a couple of minutes left for questions. If you would like to ask one, you should see a question box on your screen. Just pop the question in there.

And I do see we have a couple of questions, so we'll go to Q & A now. So the question is, "If you were to give some positive advice to executives on this call who are beginning or improving their cyber security posture, what would you say in one minute?" Maybe start with you, Paul.

Paul Gillen: Oh, okay, I've already used up five seconds. I think getting ahead of the problem, that's the key to it. I would say the vast majority of organizations in the world have ‑‑ there's three types of cyber security posture. None, where you just don’t do anything. I don't think anyone is in that position. Two, reactive. I'd say the vast majority of organizations are in that. So something bad happens, we redouble our efforts, we defend against it, successfully defend against it, and the organizationfeels happy now.

Or the third one is, the more advanced one, is the proactive defence. Getting to a proactive defence, where you are members of sharing organizations. You know what the threat landscape is in your organization. You adopt one of the cyber security frameworks. We in Barclays, we adopted the Unified Enterprise Defense Framework and we achieved the status of intelligence‑driven defence organization.

Which means that we see in advance of anything coming to us more often than we don't. So we do less reaction and we see what happens to other people. We help other people. We actually physically will help other people in organizations who find themselves in difficult positions. And then we use that information intelligence then after we’ve helped them to see if we would be able to withstand the same attack.

So go on a program of work. And to the cyber security professionals, I would say don't be defensive, and get all the dead cats out on the table. All the bad things that are in the organization, all the cyber security and things that are just not quite right. Get them all out on the table.

Document that program of work over a protracted period of time. Put some program management staff in charge of that, because you're already busy enough. Execute against the program of work over a period of time. And then benchmark yourself annually on a two, three, four‑year journey. Benchmark yourself only to make sure that you're making the right level of progress on that journey.

And then you, as an executive in the organization, at least have the assurance that A, if something bad happens to you on the journey, at least you have that book of work to say, "Well, it was on this journey. It was well‑funded. We were making incremental progress in the right direction. We have been benchmarked. We showed that we were worse last year. We're now better this year, and we're better,” et cetera, et cetera.

So something happens in the meantime, at least you have some sort of defensible position in the event that fines are going to be levied at you at the end of a breach. That's like a really bad scenario. And then obviously, the good side of it then would be that you are actually making that incremental progress. You're using your resources wisely. Your resources are less reactive, so therefore are not constantly redoubling their efforts in order to react to incidents, which gives them no time to plan and make themselves better as an organization.

And then last and not least, which we found it actually reduces costs. Once you achieve that status, it actually reduces the costs of security to the organization, which was a very pleasant benefit to the organization.

So there; I don't know if that was a minute or a minute and a half. But anyway, there you go. Off the top of my head.

Lauren D'Arcy:  Brilliant, brilliant, a very full answer. Thank you very much, Paul. Stevie or Dan, anything else just in the last minute or two to add to that?

Dan Pilling: Sorry, after you, Stevie.

Stevie Wilson: OK, I'll take 20 seconds. I have been saying with the exec, and the list of your company priorities, what's your company culture?  How do your staff view security?  It should not be just a cost. It should be a differentiator. And finally, where do you think your company sits in relation to your competitors by way of your response and ability to tackle this?  Over to you, Dan.

Dan Pilling: Yeah, I'm going to echo a lot of the points. Education overall is important to make sure that the, really, understanding of how important it is. You have to be run, as Paul mentioned, as a dedicated fully funded program of work. We need to identify those most invaluable environments, and then identify the controls that you need to implement that gave you the most benefit.

So trying to do everything everywhere will end up giving you probably a very poor end result. Identifying a small number of things across your most invaluable environments will give you the biggest bang for the buck, and then you just iterate from there.

That's it for me.

Lauren D'Arcy:  Brilliant. Thank you very much. That brings us nicely to the finish. We'd like to finish on time to let you all get back to your days. But a huge thanks to my panellists today, to Paul, Dan, Stevie, and Mike. It's been wonderful to have you here today. Thank you to all of the audience. We're so grateful that you've taken time out of your day to spend this time with us.

We know it's holiday season, so it's really fabulous to have you with us here today. We will have the fourth in our FI Forum season coming up in September, and we'll be focusing on payments specifically. So please look out for the invite for that coming soon. And thank you very much for joining us today. Enjoy the rest of your day. Thank you. Good‑bye.

Sustainable Trade Finance - reshaping the way companies trade and the role of Financial Institutions

Tuesday, 7 July 2020, 10:00-11:00 BST

Environmental, Social and Governance standards are increasingly in focus for investors, the public and regulators alike. Within trade finance, how can we encourage customers to opt for sustainable sourcing, low-emission transport and providing ESG-friendly products? Our second call from our Financial Institutions Forum will be hosted by Sabry Salman, Global Head of Banks & Head of UKFI, and Divyesh Modi, Head of UK Trade & Working Capital Origination, who will be discussing ESG financing trends, sustainable trade financing, and the impact of technology on the sustainability agenda.

Operator: Sabry, we are now live. Please begin.

Sabry Salman: Thanks, Ashley. A warm welcome to many of our customers and colleagues who have joined us today from around the world. This is the second in our FI Forum series discussing sustainable trade, debating the topic of reshaping the way companies do trade and the role of financial institutions, of course.

I'm your host, Sabry Salman, Global Head of Banks Coverage for Corporate Bank. I have been told that there are over 225 customers registered today, which is really encouraging both for the important topic at hand and, clearly, a testament to the fantastic panel we have here today.

So, it's my role to give you a glimpse of what to expect in the running order today. We have Divyesh Modi, U.K. Head of Trade and Working Capital for Barclays, who will of course introduce the panel in a moment. Divyesh will tackle some really important questions and, on occasions, I think difficult questions, as well, with the help of the panel. I do encourage you to pose questions as we go along – I believe it's the bottom-left of your screen – and we will try and answer them all or weave them into the narrative, of course.

I personally will appear and reappear from time to time to ensure you as our virtual audience is engaged, by posting a survey question on this platform. So, please do vote, as your response will inform the panel of the mood of the audience.

But listen, let's have some quotes first. Dr. Maria Mogilnaya, from the panel, says, "Trade is a powerful tool for positive change, and the future of trade is green." Shona Tatchell, also on our panel, says, "Post COVID, the world must seize this unique opportunity to build a renewed, resilient and sustainable economy built on the pillars of fairness, transparency, balance and responsibility." And of course Marco, from Barclays, says, "Make it easier to be good."

So, there you are. We have trade, ESG, technology. We have pretty much everything going on today. But what we do not have is an abundance of time. So, Divyesh, that pretty much opens up the show. Over to you to take it from here. And I'll be back at 10:20 and 10:35, if you give me a nudge. Over to you, Divyesh.

Divyesh Modi: Thank you, Sabry. And a warm welcome to what promises to be an engaging and thought-provoking panel discussion today.

Sustainable trade and sustainable trade finance are very wide topics. If you were to ask this audience today a definition of sustainable trade finance, I suspect most of us would land around a broad consensus definition. I suspect all of us probably have similar ideas about why sustainable trade is important and why sustainable trade finance has an important role to play in its development.

But that is probably where the consensus would end. I suspect we'll have a huge variation in views on the nuances and the details. There would also be a huge variation in who we think should play what role in furthering the sustainable trade finance agenda. We will struggle to find common ground on what constitutes success and how do we measure it.

And that's exactly why we have an excellent panel from three distinct parts of the value chain today to help us think through the multiple facets of this important but complex topic. So, let's go right into that. Let me first start by introducing the panel quickly.

Dr. Maria Mogilnaya is Principal Banker and Lawyer in EBRD's trade facilitation program, specializing in promoting green trade finance in EBRD regions with a keen interest in supply chain finance and sustainable supply chains. Multilateral agencies have a very important voice in this debate and a huge role to play. So, Maria's views will be very important to hear today.

Shona Tatchell, having worked in trade finance across multiple geographies with various banks, including Barclays, Shona is now CEO and founder of Halotrade, a blockchain-enabled fintech startup focused on the delivery of sustainable supply chain financing. She has made the transition from banking to sustainability-focused technology entrepreneurship. So, I'm very keen to hear her views on this topic.

And finally, Marco DeBenedictis. Marco heads Barclays' Corporate Banking Sustainable Product Group, which was established recently to support the company's 2050 decarbonisation ambition. His responsibilities include origination, focusing on both sides- on growing both sides of the balance sheet, portfolio management of the existing book and sustainable product innovation. Having just made this transition from a traditional banking role to a role specifically focused on sustainability, Marco's views are very relevant to today's debate.

So, as you can see, we've got an excellent panel today. Maria, Marco, Shona, a very- a very warm welcome to today's program.

Let's start by understanding this topic from the perspective of your current roles. Maria, if you don't mind, we'll start with you. Multilateral agencies, multilateral trade facilitation programs have been the cornerstone of credit risk mitigation for decades now. What are multilateral agencies doing specifically in the space of sustainable trade finance from your perspective?

Maria Mogilnaya: Thank you, Divyesh. Thank you so much for inviting me to speak. The EBRD has been investing into this space in terms of sustainable finance since 1994. We are one of the first MDBs – multilateral development banks – or multilateral agencies that has started, and our strategy is to start with energy efficient financing and now have grown over the years to include all sorts of climate change mitigation and adaptation finance. And to date we have supported over €34 billion worth in sustainable finance.

One of the main products that we've had since 1994 were credit lines to local banks for lending to SMEs or to the residential sector, and the EBRD has been really mainstreaming green finance, in general, for a long time. What we have come to understand is that the regions of the EBRD, the countries where we invest, they don't have a lot of manufacturing capacity to produce high-performance technology for materials.

So, basically, everything that would be green or would make their life or economies greener, that cannot be found in our regions, and these technologies need to be imported. And this is the link that we have made with our trade facilitation program that has been operating since 1999. I know many – Barclays is one of our oldest confirming banks, but also many of the listeners today are also taking part in our program on either issuing side or confirming side.

And you are right that we have- we are there to support trade, trade flows and let the trade go even in times of crisis. We take the risk on the financial institutions, and we allow trade to happen. When it comes to green trade finance, what we do is exactly what is missing in the EBRD regions: we support banks to bring those technologies and materials that are needed to improve the energy efficiency or resource efficiency of the economies. And we do it under what we call Green Trade Facilitation Program.

But we not only support through finance or green trade finance. The EBRD has a special role to play when it comes to knowledge transfer or know-how transfer, but also technology knowledge transfer. And not only, we can hire engineers. In fact, one of my colleagues who works with me on the Green Trade Facilitation Program is an engineer.

Commercial banks often don't have such a luxury to hire engineers, specialists who can come and help them to understand all the intricacies of climate change and different technologies. And that's the role of development banks. We are here to really support the private sector with the know-how and to understand what is green.

The other part that we also do – and here's a bit of promotion, but it's a good thing for everyone – we have a database of technologies that we have pre-assessed or pre-approved as high-performance technologies. It's called Green Technology Selector. This is something that we give to the world free of charge, and banks and corporates and SMEs can use it to channel the best performance technologies to the regions of the EBRD where they are very much needed.

Divyesh Modi: Thanks a lot for that, Maria. It sounds like a like a full program of activities across the EBRD regions.

Marco, if I can move to you next, most banks have dedicated sustainability programs now. You lead such a program at Barclays. What are your key priorities right now?

Marco DeBenedictis: Thanks, Divyesh, and thanks for the invite to speak on this event.

And to answer your question, I'm going to use a quote the Sabry used right at the start. It's really about "making it easier to be good." So, what are we doing in our team? We're thinking about things like product availability. So, what is that like internally and externally? So, what is the whole market doing? How can we really drive value for all of our customers? What does governance and reporting look like? That's a point that I'm sure we will touch on later.

Also, I guess another key thing is focusing on what our clients really want and need. So, around product innovation we need to sort of improve the feedback loop between product managers developing products, but also what our clients are saying are really important to us.

And then, finally, I guess on my side, it would really be about internal consistency. So, that's really driving change from the inside out. So, ensuring that we're not just – my team are a team of bankers, right? We're front-office people. But I think what we all really have is a real passion and a real drive for this in our personal lives and pushing that outside into our professional lives.

Why do things change as soon as I walk through the door at work, right? I want to source my clothes sustainably or buy fair trade food, but all of a sudden I go into work and I decide that things are done differently. Now, that doesn't make sense.

So, really, those intangibles there are at the real core of what we're doing. And I think that as we look to the future and grow the whole pie for everybody, contributing for all banks to look at key partnerships and strategies and work with MDBs, for example, you know, I can only see a positive future for sustainable financing and products.

Divyesh Modi: Thanks for that, Marco.

Shona, fintechs and the technology sector, in general, is seen as this very nimble sector that is able to effectively blend the profit motive, if you like, with the larger societal purpose. You've made this transition from a banker to an entrepreneur active specifically in the sustainable trade finance space. What's your view on what role fintechs and technology sector can play?

Shona Tatchell: Hi, Divyesh, and hello to everybody.

I want to tell you a little bit really about the motivation behind why I made this transition from banking into fintech, because I think it lies very much at the heart of the question that Divyesh has just posed.

So, I believe – and I'm going to quote somebody who's much, much more famous and much more important than me here, which is Paul Polman, who is the former CEO of Unilever.

Unilever is probably one of the best standout examples in the corporate world of companies that have not just talked about taking action, but have actually done it and have actually demonstrated to the world that it's possible to change your entire business so that you can essentially do the right thing and still make money at the same time. And I think it's a really great quote. It's very simple, but here goes. He says, "We cannot choose between growth and sustainability; we must have both."

Now, sustainable trade finance, to me, really means that it has to be that the trade has to be sustainable. So, in order to be sustainable there has to be (inaudible) However, that profit cannot be at the expense of the environment, nor of the human resources involved in the trade. Otherwise, there is no future for trade. If we just deplete all of our resources, we're going to very quickly find that our supply chains collapse and our natural resources disappear.

So, it's with that purpose in mind that I really came up with the idea of Halotrade nearly- nearly five years ago, when I looked at how we could possibly leverage technology to help our customers – so, I was in Barclays at the time – how we could help our customers to actually be able to produce and resource their businesses in a much more responsible way by using a combination of technology and finance together.

And the reason for technology being such an important tool in all of this is because it's through the emergence of new cutting-edge technologies – things like blockchain technology, IoT, and of course the marvels of AI and machine learning and big data – that we can actually get to the heart of the behaviour change that is needed in how goods are produced and consumed.

We can harness the ability of these technologies to give us traceability inside the supply chain. So, there are some fantastic tech companies out there that are able to track items as they go from origin, all the way through on container ships, all the way through to warehouses, and actually track every moment of that product's journey so you get full visibility of chain of custody.

We can get complete transparency of data, because data can come from sources – we can trust the data because we know who it's come from and the fact that it's been recorded in immutable records.

And we can use that information to then engineer preferential trade finance. And that preferential trade finance is what we've needed in order to actually cause and sustain behaviour change in the supply chain.

And that was really sort of the motivation behind me getting into this space. There are lots of amazing companies doing many amazing things. I think, as yet, the whole area of fintech and sustainable trade finance is yet- still quite, I would say, a lonely space.

I feel as if Halotrade at the moment is one of the only companies out there that's actually trying to bring everything together. And I really would like to be joined by many more, because this is such a big, big challenge that it needs the efforts and the heft of many parties and people with some amazing – even yet to be developed – technologies to come and join the space.

Divyesh Modi: Perfect. Shona, of course we at Barclays have seen your journey at Halotrade with much- very closely, so clearly, it's an exciting space that you're operating in. I think you briefly touched on a question that has come in from one of our audience members. Just I want to go into that question.

He asks, "Can any initiative, including ESG, be really successful if it not underpinned by strong commercial viability?" And I think you touched upon that. "Can ESG initiatives survive merely on participants' sole payoffs being brownie points and press and annual reports, rather than any commercial incentives and costs of achieving ESG goals funded by philanthropy or government subsidy?"

I think this whole commerciality of ESG initiatives is an important topic, isn't it? Any quick comments on that question?

Shona Tatchell: Yes, I'd loved all of those questions. So, thank you to the three people that submitted those because they actually are right at the heart of this whole issue.

We can't build a sustainable future built on subsidies. It's impossible. Banks can't be expected to give preferential finance on the basis of pure subsidies because it will – as a strategy that will only last, potentially, as long as it's in fashion or as long as the board signs off on taking underwater assets onto the bank's books. So, there has to be some fundamental change in our entire financial environment, including on the regulatory side, I believe.

We're not there yet, and we wouldn't ever be able to make that argument to the regulators unless we actually have data to prove that a sustainable supply chain, for example, is one that is so much more robust, so much less likely to fail, and, therefore, should attract – potentially attract – preferential capital treatment. That is the way that we will get away from greenwashing.

That is the way that we will get away from a lack of  – I was going to say a "lack of trust" – cynicism in data. If we can actually prove that companies are genuinely making these behavioural changes and we've got the secure, transparent, shared, trusted data to prove it, I believe we'll be able to actually try and influence some of this change and move away from the idea of pure subsidy and into a world where, essentially, green and sustainable trade genuinely can be treated more preferentially.

Divyesh Modi: Thanks, Shona. That makes a lot of sense.

And I think it's a good time for us to take some audience views on a key topic. Sabry, can I pass it back to you for that question?

Sabry Salman: Thanks, Divyesh. We should – you know, I agree. We should probably send the first survey out there. I'm going to read it, while Ashley presses the button. I know it takes a 10-second delay, I'm told. So, the question you will see soon is, "Who should take the lead in driving sustainability standards for long-term change?"

"Who should take the lead in driving sustainability standards for long-term change?" You will probably see a choice of three there, and we're starting to see the results come in already, Divyesh, and I'm pretty sure this will moderate the audience—sorry, the panel discussion, as well, for sure.

Divyesh Modi: Yes. Yes, I can see some of the results coming in. Let's give it a few more seconds to kind of allow the audience to vote, and then we can kind of have a brief chat about what we are seeing here.

It's interesting to see that – because most of the audience is made up of bankers, it will be good to see what the banks' view is of this topic.

Sabry Salman: I can see the regulators leading the polls already, Divyesh.

Divyesh Modi: We do expect our regulators to do this, do a little bit of the heavy lifting here.

I guess – I think this kind of sets the tone a little bit, Sabry. Should we pick up from here? Just to kind of talk about the results, it seems that more than 50% of the audience expects that the standards will be set by the regulators. But interestingly, nearly 30% of us feel that us bankers also have a key role to play in setting the long-term standards.

Sabry Salman: Yes, I think that's a reasonable-sized sample, Divyesh. I'll hand it back to you and the panel to take it from here. I'll come back with the next two surveys.

Divyesh Modi: Thanks a lot. I think we've got a little bit of discussion coming in, in terms of standards.

I suppose the one point to kind of talk about here is that while we have a difference in who should be setting the standard, one clearly can agree that standards are really important in furthering that, kind of the cause of sustainable trade finance. But if I can just kind of point that one question to you, the audience clearly sees that standards will help in developing sustainable trade finance. What would be the key parameters for such a standard in your experience of kind of dealing with this?

Maria Mogilnaya: I think the key parameters, if we bring it to trade finance and something that commercial banks can use in the area of green trade finance and sustainable trade finance, there is an ongoing working group within the ICC Banking Commission, a working group on sustainable trade finance, and Shona and I are part of that.

And I have seen a very positive, in my opinion, positive change over the last half a year, or so, when we within the working group went from the exclusion lists, something that has been prevalent in trade finance before, when we decide what we will not do, and we go away from that. And this is very important, of course, for due diligence and risk assessment. But we need to go beyond that. We need to go and start being more proactive and trying to figure out what actually is sustainable trade finance.

So, the stance, we haven't got there yet. I must say the working group is still debating how to define sustainable trade finance. So, I can tell you there is no standard definition, or at least within the ICC, the International Chamber of Commerce, but we are getting there. And I think that was one of the questions that came in about whether there should be, actually, a general standard, or not, because each country will have their own requirements.

And this is true, but I think what banks need to come up with and agree and use all the means necessary – be it regulators, be it corporates working together, all of them – is to find a minimum requirement on which everyone can agree. Because then, if there is a basic understanding in the banking sector, what is green trade finance – for example, do we look at the counterparty assessment? Do we look at the goods that are being traded? This is one of the key questions that we have been debating in the working group.

And I think once you have this minimum understanding how to approach it, each bank can then build upon that and they can really align this minimum understanding with their own vision, because each bank will have a different vision towards sustainability.

They will have different goals that they want to achieve. Some banks may want to give a specific deadline and say, "by that date we will not finance any coal," for example. Some banks go and want to develop sustainability within their bank, within their operations, and they meet all the ISO certification standards to become an environmentally run bank.

So, each bank will have their own objectives, goals and vision, but I think in terms of trade finance it's very important to come up with a minimum understanding of what is green trade finance so that each bank can interpret it and build upon this minimum standard and develop this area.

Divyesh Modi: Thanks, Maria. An interesting observation also from one of our audience members, on the previous question, actually, that some of the sustainability changes can also be bottom-up and driven by investors, both institutional and retail. That's a really good point. We had banks, corporates and regulators, but clearly investors have a big role to play in this, as well.

Continuing the topic that we started on standards, if I could ask, Marco, I think in your overview, Marco, can you please give us an overview of the current landscape of how these initiatives are currently measured and compared across the industry?

Marco DeBenedictis: Yes, sure, Divyesh. Thank you very much. So, I guess the thing that we really need to understand is really where we are today. We're kind of looking at growth from €5 billion in 2012 in the sustainable debt and bond market, to €465 billion by the end of 2019. And pre-COVID, the expectation was that this was going to grow further into 2020, to achieve over €1 trillion. So, I guess the point is, is these are incredibly – these are growing incredibly quick, these numbers.

I think that the really interesting thing is that also we've got depth in terms of not just green bonds, but we've also got social bonds or blue bonds. There are a number of different key things that we have here that we can see are really pushing the market.

So, I guess, though, if we look at the trade finance lens and I think one of the key areas is education – low awareness of what sustainable finance means and confusion over terminology – that's the key thing here. But the frameworks, so as we look at relevant bodies, and I guess the question that always comes up is really who has authority to drive these changes in these standards?

And this is why we come to the regulators, right? I would say that this is not bankers voting or pointing fingers at the regulators, but it's probably a number of bankers that are voting, saying we need some consistency. And who provides consistency and stability across the banking sector? That would be the role of potentially a regulator, or such like.

So, definitely, even when we review transactions that we look at, administrating KPIs, we do have a framework that we follow. It has still got some grey areas, particularly when we get to slightly more tricky sectors. But I think as we think about this from a trade finance perspective, we've lacked some traction, I would say, because the transactions are typically smaller.

There's a trickle-down effect from the bonds market to the loan market to the trade market. I would say the transparency – so, access to data – is potentially an issue, as well as these education and frameworks. So, it's not just the fact that we're seeing that there's lack of consistency, but there are also a number of other factors.

Now, there are a number of things that are pushing us all in the right direction. So, there's a lot of focus on sustainable practices in light of COVID. The European Commission is talking about prioritization of green financing in their recovery packages. We've got Unilever, who was mentioned before, offering €500 million to their supply chain.

There's so much that's going on that is really good from a double-impact perspective. One, it's a really good thing to do. Two, it's also really good PR. But I think, three, the brand loyalty that you can build through doing these things is much greater than just brownie points.

I guess the one thing that I'd probably like – you'd like to finish this question on, would be more around linking in to things like the securitization market. So, thinking about investor money from asset managers, pension funds. So, how do they look to invest in portfolios or co-invest in portfolios of bank assets?

What are they looking for? All of these, yes, I agree would be much simpler if there was standardization. The costs are high, and we've already mentioned it before. Greenwashing, right? That's something that everyone is scared of at the moment and presents a reputational risk for a number of things.

So, it's not an easy sector at the moment, but I think it's a niche that continues to grow. And the role of us all should be really trying to expand the pie for everyone so that when we look to the future and digitalization, technologies, transparency, all of these things that should aid us in the future, it's just the tip of the iceberg that we're seeing now, Divyesh.

Divyesh Modi: Thanks, Marco. And I think you're right: there is a lot of activity in the sector and, like you say, just the tip of the iceberg at this point.

Let's take one more question for the panel before we pass on to one more audience poll. Shona, I think based on your experience as an entrepreneur I think the key for your business is probably the collaboration between technology and banks. What has your experience been over the last five years?

Shona Tatchell: “Interesting,” is probably the short answer for that, but also incredibly exciting.

So, as I mentioned earlier – and obviously, as you're very aware of, Divyesh – Halo began its life, began its journey inside Barclays. And the reason for Halo being spun out, with the help of Barclays, from the bank, was a realization that in order to be able to actually achieve its broader aims of bringing together technology and finance in the supply chain it essentially had to be a, let's call it, a multi-bank, multi-party application that wasn't owned by any one institution.

And we had the privilege of being invited into an incredible consortium, called the Trado Consortium, which was actually convened by His Royal Highness, The Prince of Wales – so, Prince Charles – who is the patron of the Cambridge Institute for Sustainability Leadership, CISL, that runs the Banking Environment Initiative. And I'm sure there are many of the people on the call who work for banks that are part of the BEI, which does some amazing work and essentially is sort of one of the leaders in terms of thinking around sustainable finance.

And this consortium was convened and brought together an incredible array of partners in, I think, quite a unique collaboration that I don't think really has been seen before or necessarily since. And that included four banks, of which, obviously, Barclays was one of the founding banks; so, Barclays, BNP Paribas, Rabobank and Standard Chartered. So, we had a really nice sort of spread of big global banks that are all incredibly committed to the area of sustainable finance.

Unilever. Sainsbury's, the U.K. supermarket, who are also incredibly focused on what sustainability means for their brand and what fairness in the supply chain means for their brand. And a paper and pulp company, called Sappi, that makes packaging. Together with an NGO, called IPH, which is the Dutch government; they're essentially a sustainability NGO. Another NGO, called the Ethical Tea Partnership, also played a very important role in the consortium.

And then we had three fintechs – rather, Halo was probably the only fintech, but two other technology providers that came in as partners to help us to build a system to test. And those partners were a company called Provenance, who essentially provide, let's call it, the story of the origin of goods and the identity of products, and another company called Meridia, that works with smallholder farmers to map land and land rights, which are obviously seen as a sort of bedrock of sustainable agricultural practices. If you own your own land, you'll look after it.

And the U.K. government, in the form of DFID, which now has sort of gone through some transition itself, but at the time were incredibly helpful in sponsoring this project.

And that we did was we built a system together to test the concept of a financial benefit in return for trusted data coming out of the supply chain, and the supply chain that we worked on together was for Malawian smallholder tea farmers who were producing tea that went into the supply chain of both Sainsbury's and Unilever. And we were able to actually use trade finance techniques – so, payables financing – as a way of being able to accelerate lower-cost finance for the producers.

So, all together, as a partnership it was unique. We proved that the model could work.

We were able to generate savings out of the efficiencies of the technology and the willingness of banks and of the corporates to lean in to this new way of trading and actually generated financial savings that were able to go back to the smallholder community to then be invested in learning in places at [farmer field school] to ultimately make those farmers better farmers over time, who would achieve better prices for their product, which is truly a sustainable model, because it's addressing the whole economics of how supply chains operate.

So, yes, a sort of long way of describing what we did and the answer. But I think, as I said, it was a unique consortium and absolutely is a model that should be repeated everywhere.

Divyesh Modi: Sure. I think I obviously remember the headlines around that, and it was a great example. It also addresses one of the questions we've got from one of our audience members, which is how do we – how easily and successfully can sustainable trade finance practices be rolled out in emerging markets? And this is a good example of how it can be done. Obviously, the question for us in the industry is can we actually scale this up to a commercial proposition, which is obviously what we'll be watching quite closely.

I think it's probably time to take a couple more of the audience questions and see what our audience is feeling on some of these topics. Sabry, can I pass it back to you, please?

Sabry Salman: Yes, Divyesh. Good timing, because the second question really links very well to Shona's example just now. So, Ashley, let's send Question 2 for now and come back later on 3. A really interesting question. "Banks have the required capabilities and expertise to lead sustainable trade finance programs." That's the question. It's actually a spectrum of answers. So, what we're really looking for is a temperature check, rather than an absolute answer. And on the basis we have over 150 dialled into this audience today, it might be really interesting to see a good response rate.

I know there's a bit of a delay there with the responses coming in, Divyesh. So, bear with me till we start to see the responses coming in.

Divyesh Modi: Sure.

Sabry Salman: Divyesh, while we're waiting for the responses, do you want to take the third question now or later?

Divyesh Modi: Actually, why don't we take the question now itself. I think there's a lot of people coming in.

Sabry Salman: Yes. Okay.

Divyesh Modi: So, I can...

Sabry Salman: Okay. Yes, let me just finish this, and I'll ask Ashley to send the results to the audience. So, I think we have a good sample there, Ashley. Let's give it a couple of seconds more.

Yes, that's a decent sample. Ashley, why don't you press the button and send the results to the audience. Brilliant.

Divyesh, that's done. I think- it’s hard to really-- 

Divyesh Modi: I guess on this point – sorry. Before we move to the third question, I think it's interesting that a lot of our banker audience members feel that we do have the required capabilities and expertise, though around 30% feel that we don't. So, I think it's a good split, though the majority feel that we have the necessary expertise and capabilities in this space.

Sabry Salman: I agree, Divyesh.

If it's okay with you, I might now move on to Question 3, which should be good enough time for you to lead the last segment.

Divyesh Modi: Sure.

Sabry Salman: All right. Ashley, we're going to the audience participation Question 3. This is an equally sort of spectrum of answers. The question is, "Standardization of ESG requirements for trade finance products will help in expanding the trade finance market and attract new types of investors." And let's see what our audience says.

Yes. I can start seeing – oh, this is probably going to be pretty much a one-way vote, Divyesh.

Divyesh Modi: Yes, it looks like that.

Sabry Salman: (crosstalk) a bit more towards the left. Here, there's obvious agreement from the audience.

Divyesh, I think what I might do now is ask Ashley to send the results and then hand back over to you to take the last leg of the session.

Divyesh Modi: Yes, makes sense. I think, Ashley, while you're sending the results out, it's very clear and kind of overwhelming that standardization of ESG requirements seems to be the key for the success of this area.

And I think that has been also proved to be one of the most knotty issues, in terms of just simple definitions of what the standards could be, how can they be compared, how can they be measured across different areas. And I think Marco did touch upon this a little bit earlier in the session, in terms of how, while it's a difficult area, progress is being made in this space.

Let's get on with the discussion that we were having on sustainable trade finance. But taking a cue from the second question, which was about the capabilities and talent that we have across our various functions, if I can go to Maria, Maria, in terms of the EBRD agenda, obviously, kind of trade facilitation as an agenda is something which we are very familiar with.

But again linking this with the whole resources and capabilities question, what proportion of kind of resource capability within EBRD, for example, or within MLAs, in general, is now being allocated to sustainability-linked programs? Do you feel like enough resources are being allocated here?

Maria Mogilnaya: Yes. I'm just smiling now because I was also looking at the survey results. And here, it all sounds very interesting. I'm actually very happy that banks feel that they have enough capacity internally and knowledge to do this.

At the EBRD, yes, we are a multilateral development bank. We are not a commercial bank. We have a lot of different departments. We have economists. We have economists split in different ways. We have engineers. We have policy advisors. We have lots of different specialists. And that's what is, on one side, unique about us, that we look at everything from all the different angles that you can think of, but also it's a resource that commercial banks can really use.

And the development banks, like the EBRD or any other multilateral agencies, they are there to really help with any issues when it comes to it. If you think about sustainable finance, our role is really to translate climate policy into climate finance.

It's not a surprise that whenever you talk about climate change and how we can combat it, everything is transferred into dollars or euros or any other currency in terms of finance that is needed. And that's the role of development banks really, to help commercial banks to find a way to translate the need that is there in the market, the demand for different solutions for climate change, to the climate finance.

How we do it? We help banks, commercial banks, to align their products with the requirements. For our region, we have a very good understanding of what each country or region is doing in the space.

So, we come in and we really help local banks, but also foreign commercial banks who want to be confirming banks in the trade finance transactions or who want to maybe co-invest with local banks in some projects. We help them to understand how to position themselves, how to structure their policy and sustainability agenda, to meet the local but also regional and international requirements.

We help them also with assessment and disclosure. The EBRD is an active player in most of the international initiatives. We work with UNEP FI. We work with TSFD, Principles for Responsible Banking. We work with a very interesting institution, called Climate Action in Financial Institutions. It's like a peer-to-peer knowledge sharing platform and a very important element of our work. And we help banks to really be in the know when it comes to what are the latest requirements.

And of course, capacity building. You asked me about the resources. At the EBRD, we do have resources, but the banks in our regions, they don't. So, what we do, we help them to hire consultants. We secure funding for flagship projects.

We hire consultants, international experts, local experts, who can help local banks in the emerging markets where the EBRD invests to really take this to the next level, to look at their portfolio. If they don't know where to look in terms of what to look for, what type of clients, what type of financing, we help them with that.

We help them to structure new products. We help them to find gaps on the market. Each country is different. Some countries have 300 days of sun. So, of course, any solar energy generation would be important. So, we can provide very specific expertise when it comes to specific markets.

And I think that's this is not going away. So, every bank will have to think about this. And I can only encourage the audience on this call to really look at the regions where you are active, find the multilateral agency that is active in that region and approach them and find out what they do and what can they do to help you, because we have a lot of institutional memory. We have a lot of knowledge and capacity to really help commercial banks.

Divyesh Modi: That's a really good point that you end on, Maria. One of the questions coming in from the audience is exactly that, that what are the first steps for a bank to put sustainability into practice? And I think, particularly for some of the smaller institutions, it might be that working with multilateral agencies might be that first step that they can take in this journey. Thanks for that, Maria.

Let's move to Marco. Marco, this is about, again, differentiating between what we see in the headlines and kind of your view on what is the activity level in the market in reality, particularly for trade finance. Do you see an active market for trade finance instruments? But also, we'll be keen to understand your views on unfunded instruments, like guarantees and LCs, which is what is used for a lot of international trade finance.

There's also one question from the audience which you might want to kind of address, is what happens –? How do you see smaller-flow instruments, where there's a lot of volume but not value in individual instruments? Are there any portfolio solutions that you've seen in operation? So, it's a slightly broader question, but what is kind of your view on the current market debts?

Marco DeBenedictis: Great. Thank you. Yes, of course I can. If we drop in the context of the idea of sustainable recovery, the role of third parties like governments and MDBs, I think this is definitely an area that is continuing to grow.

So, I guess the key thing that I would always think about from trade finance and why that's great is that we've always got, like, an underlying – we're funding core business, right? So, there's always an underlying product or a contract or something like that that we're looking, that we're really focusing on.

And if those proceeds can be or the use of those proceeds can be identified in some kind of sustainable fashion – so, whether it's something like the Levi's transaction that they did in conjunction with IFC in 2014 or something similar that Puma did – there is always a way to look at fundamentally supporting the working capital cycle with incentives for certain types of behaviour.

Now, the question comes up – and this is where I think where it's interesting – the burden of that incentive will always fall on whoever wants that the most. So, is it a government that is trying to push a certain agenda – for example, be a leader in solar power – they're more likely to provide subsidy. Or is it something like you are now the Barclays Head of Sustainable Finance and you want to grow balances, for example? So, then you would have a different kind of incentive structures based around each one.

I think the thing that is consistent, though, and definitely what I have experienced in my previous role in portfolio distribution – so, selling large portfolios to institutional investors – is that trade finance, particularly in the securitization market, is an asset class that many investors want to get an exposure to.

Why is that? I think it's because of the same things that mean that it hasn't actually made as many headlines as the loans or the bonds space. And that is that the transactions are small by nature, or relatively small by nature, meaning that there's high levels of granularity. So, that is excellent when you're pulling together a portfolio. You've got diversified risks. You've got diversified geographies.

So, really, to answer that idea about scale – the high-volume, low-value or low-profit margin products – those are excellent types of asset classes to be securitized because they have a lot of characteristics that make it very attractive for an investor to achieve some alpha out of that, versus a relevant benchmark. Also you do, though, have things like the illiquid nature of the asset class. Typically, there's not often a traded secondary market.

So, what I think the trade finance space will benefit from is those standards that were referenced before, that we were talking about; so, building and delivering standards that we can hang our hat on and then using the benefits of the product or the asset class to actually then drive activity.

One other final point on the unfunded parts. Yes, it's a valid question. I think from the analysis that we've been doing and from the entities that we've been working with, yes, looking at things like import-export guarantees, etc., there is definitely something that can be done to help incentivize and to help grow those asset classes.

I would, however, say that there is a need for it to be – for professionals to be fully ingrained across all of the bank. So, if it is a high-volume, low-margin product, then you really need to be slick in digitalization or operations, right?

So, I would say that those kind of decisions typically happen quite high up in the institution. But if you can find an area and support talent that goes across your institution that will be able to touch in portfolio and touch in ops and touch in trade, they will have a much broader and more rounded appreciation, rather than necessarily just a front-office originator.

Divyesh Modi: Sure. And that's a good point, Marco. And I think as kind of standards and structures develop, I suppose we'll see more and more of these instruments getting digitalized and ready for kind of used in sustainable trade finance practices.

We're coming to the end of the session. We've got sort of five minutes more. Why don't I go back to the panel with a fairly open-ended question. If you guys can keep your responses brief, to maybe one minute each, what I'm keen to understand from you is what are the one or two developments or events that you're most looking forward to in the field of sustainable trade finance, let's say, over the next 12 to 18 months? Shona, if I can start with you on that question, please?

Shona Tatchell: Yes, I'll be really brief. So, first of all, the entrance of new technologies. Obviously, I'm going to say that. So, as technologies like blockchain begin to actually gain traction in the real economy, I would like to see more of those joining up with or collaborating with IoT-type applications and AI and machine learning applications. And I think that is beginning to really sort of gain some ground. I would like to see that continue to develop because that's incredibly helpful for us and for helping us to achieve our objects.

COP26 in Glasgow next year, hopefully, I think will position the U.K. to take a lead and will certainly incentivize the U.K. to really take a lead. And I know that there's a lot of really good work being done by organisations, like the Green Finance Institute, to really try and position the sort of thinking and the strategy for the U.K. as we head towards that.

And I think also the E.U. taxonomy that was referred to earlier in the call, to start to see that really gaining ground, as well, and adoption, because that will then help us with this whole area of standardization of green finance against all that. I'm conscious of time.

Divyesh Modi: Thanks, Shona. Thanks for that. I think there are definitely a few things to look forward to, and hopefully some of these events will go ahead in spite of the current disruption.

Let's move to Maria. What are you looking forward to over the next 12 months?

Maria Mogilnaya: I will also try to be brief. I think I would say three things. One, tomorrow the EBRD is discussing the New Green Economy Transition Strategy 2.1, and it will be discussed at the board.

So, I'm personally looking forward to that. It is an internal event, but it's very important because whilst we were planning for 2.0, with COVID it had to become 2.1. So, it will be an interesting discussion. And I would really be following that, looking forward, to see how the countries where the EBRD invests would really team to green as they recover from the pandemic.

In terms of externally and if we keep it to trade finance, I really look forward to the results of the working group by the ICC Banking Commission on sustainable trade finance. There were quite a few questions about this.

So, there is a working group, and everyone in the audience who wants to learn more should approach – I guess from me, from the development bank, I don't know exactly who would be the right person, but I guess if your bank is part of the Banking Commission of the ICC, please find out more. It's an interesting working group, and I really look forward to seeing the results.

So, I guess that would be two things from me.

Divyesh Modi: Thanks, Maria. And Marco, finally, what are you looking forward to?


Marco DeBenedictis: Yes, Divyesh. Thank you. So, the embedding of the E.U. taxonomy, that for sure is the #1 thing for me. I think, though, as practitioners we should all be mindful of the trade-off. When there's uncertainty, there is risk. When there's risk, that's the way that banks – because it's our job, is to take risk.

I would also just be slightly aware of the commoditization of products and what-have-you. And therefore, you need to as a bank ensure that you're following the right strategy for your bank. Are you highly bespoke? Are you commoditized? Are you a volume player? Etc.  And from that, that's where I'd end.

Divyesh Modi: Thanks a lot, Marco.

We are out of time, but let me pass it back to Sabry to wrap up the call for us.

Sabry Salman: Thanks, Divyesh. Well, that was pretty much as predicted. We seemed to have an exciting debate. There were clearly answers to questions raised; perhaps many more questions, as well. However, if we have elevated your knowledge on this topic, provoked some thought and opened up a channel for further debate, I guess we have done our job for the day.

My thanks, of course, to Ashley, helping us move things along and keep us tidy; Divyesh, for expertly managing questions and managing our time; the superb contribution by Marco, Maria and Shona; that was informative and definitely instructive.

Wishing our virtual audience well and a big thank you. See you all on our next FI Forum podcast or FI Forum series, whichever way you consume this, on cyber; mid-August, I'm told.

Thank you.

Returning to BAU after Covid-19

24 June 2020, 15:00-16:00 BST, 10:00-11:00 EST

The Covid-19 pandemic has had a huge impact on businesses across the globe. As lockdown is starting to ease in some countries, many of us are looking forward to things returning to business as usual. Our host Phil Bowkley, Global Head of Financial Institutions Group, will be joined with Charles Lindsey, Head of BI Resilience and US Physical Security, Steve Allen, COO, Corporate Banking, and Fabrice Montagne, Chief UK Economist.

They will be discussing how the way in which we define BAU has now changed, and why businesses are faced with a complex set of decisions that they need to navigate when returning to a more normal working environment.

Phil Bowkley: A very warm welcome to the first in the series of Barclays' FI Forum. We're really excited about these forums and we see them as a key way of virtually connecting with our FI clients, share best practice and insights, and talk about industry challenges and themes and how we as an industry can work together to adapt and succeed in these changing times.

Of course, under normal circumstances we would all be gearing up towards the (inaudible)Sibos event in Boston. I'm real sorry to see the physical event has had to be cancelled, but we see our monthly FI Forums is a key way for us staying in contact and connected with all of you.

The Barkers Barclays FI team has been working successfully in a virtual work-from-home environment since the lockdown rolled out globally, and we're here and ready to support our FI clients across the globe. So, please do reach out to your relationship director if we can help you with anything or you would like to discuss further any of the material that we cover in today's event.

And rather topically, in today's event we'll be discussing our experiences of operating in the COVID-19 pandemic and the lessons learned and the challenges of how transitioning to a new business-as-usual environment. If we reflect on how we were all feeling coming into 2020, I doubt any of us would have predicted the situation that unfolded globally during March or the knock-on impacts.

That said, I think the banking sector has reacted well to the pandemic, both in terms of the operational resilience we've shown but also the role we played in conjunction with governments, central banks, and regulators to help provide support to the real economy where it's been needed most.

We hope you agree that today's forum is timely and informative, as looking forward there are still many uncertainties as we move to the next phase, with governments and companies alike looking to restart the economy and lift lockdowns and we get back to some level of normality.

So, with the technology today we want to make this session as interactive as possible. So, the agenda is going to be we're going to start off with just some audience polling and ask you a few questions, which we'll refer back to. Then we'll have the meat of the session, which is going to be a panel discussion. And then we're going to move to audience questions.

So, you'll be able to ask questions as the event unfolds, and we'd encourage you to do that. And then at the end of the event we'll share a short survey link, and it would be great and we'd really appreciate it if you could fill in the survey, because it will obviously help us tailor subsequent events, going forward.

Questions can be asked throughout the session with the Q&A text box on your screen. And as I said, we'll cover those after the panel discussion.

Okay. So, let's start with some audience participation. We're going to ask you three multiple-choice questions, and your aggregated answers will be shown on screen at the end of the questions. These answers, we'll then refer back to in the panel and help inform our debate.

So, let's move to the questions. So, Question 1, "COVID-19 will have a long-term impact on working patterns, such as working from home." And the potential answers are: (a) strongly agree; (b) agree; (c) neither agree or disagree; (d) disagree; or (e) strongly disagree. So, if you could answer that question now, please.

Okay. Moving to Question 2. "COVID-19 has dramatically accelerated the trends towards digital transformation." And I won't read out the answers (a) to (e), as they're the same as the previous answers. So, "strongly agree" is (a), down to (e), "strongly disagree."

Okay. Moving to Question 3. "In a post-COVID-19 world, I expect the frequency with which I travel internationally to dramatically decrease." And you'll have got the hang of this now: (a) is "strongly agree," through to (e), is "strongly disagree."

Okay. Great. So, if we could bring up the answers to Question A, please – Question 1.

Okay. So, the answer to Question 1...

Sorry. We can move back to Question 1, please.

Sorry. Sharon, I can see Question 3.

Okay. I can see the survey tab, Sharon, but I can't flick through the survey results. I can only see Question 3. Okay. Good. As you can see, we're testing this technology and I'm getting used to it.

So, the answers to Question 1 are – very overwhelmingly, the majority of the audience agree that COVID-19 will have long-term impact on working patterns, such as working from home.

Good. So, turning to Question 2, "COVID-19 has dramatically accelerated the trend towards digital transformation." Interestingly, again, majority of the audience "agree" or "strongly agree," but not quite so many in the "strongly agreeing" category. But again, very few of the audience "disagree" or "strongly disagree." So, I think clear message coming out there, as well.

Sorry. Just going back to the second question, so COVID-19 has dramatically accelerated – sorry. Second question, "In a post-COVID-19 world, I expect the frequency with which I travel internationally to dramatically decrease." That is interesting, because actually there's a fairly good spread across there, from 23.9% of people "strongly agree"; the majority – 38% – do actually "agree"; though there's a good proportion who "disagree," which is interesting. We can't see any regional split on that, but it would be interesting to see how that goes by region.

So, good. We'll refer back to those results during the panel, and hopefully that'll go a bit smoother that time.

Good. So, now we're going to move into the panel part of the session, and I'm really pleased to introduce and welcome our panelists for today's session. They have all been at the forefront of Barclays' response to COVID-19 to date and are all involved in the planning and thought process around what happens next.

So, first up we have Fabrice Montagné, who's our Chief U.K. Economist, based in London. We've got Charles Lindsley, who's Head of BI Resilience and U.S. Physical Security at Barclays, and he's based in the U.S. And we've got Steve Allen, who's based here in London, who's our Chief Operating Officer for Corporate Banking. So, welcome, and thank you for your time today.

So, turning to the panel, we have three subject matter experts with you here today. So, let's open up with getting some commentary around what has been the biggest challenges you've faced over the last three months and what have been the biggest learnings. So, Charles, maybe if we can turn to you first.

Charles Lindsley: Thanks, Phil, and thank you very much for inviting me. Hello, everybody.

So, there have been a number of learnings, I have to say, in the resilience space. I think when it comes to our sort of preparation for an event like this, we do have a pandemic plan. We do have a sort of crisis leadership team focus which can dynamically manage the organization. In fact, these teams still are running across a large part of the bank. And we obviously have work area recovery. All of which have been utilized.

But the surprises for me really has been the scale of this particular crisis. In the 15 years that I've been involved in resilience, I haven't seen anything like it. And also, I think since 2008, it would be fair to say that the requirement for effective corporate leadership in such a crisis hasn't been higher, either.

For me, there are three paths to the current COVID crisis. The first is and has now taken place at Barclays, which is effectively the crisis management piece. Next is the new BAU which we find ourselves in at the moment. And of course, a return to office, which is the primary focus of this conversation.

What I would say about the learnings from the crisis management stage is Barclays adopted a view very early on, which we branded as "holding the line." Now, the reason for that is, as many of you will recall, there was a huge amount of pressure from the media and social media to react in a way that was actually quite extreme.

And with all of this, we've got to remember that although our priority at Barclays, as with all of you, is the safety of our staff, dealing with a serious health issue – this wasn't the zombie apocalypse – and some of the early reactions that we saw and was reported to us from other organizations really drove a feeling across some sections of Barclays, which is a big organization, as you know, and global, to react in quite extreme ways.

So, holding the line was a way of ensuring that right the way across the board, managed by our crisis leadership teams, that any responses, local responses, were managed and considered with the rest of the bank in mind.

Now, what that did was it gave us time to prepare for the next stages. And to give you an example, obviously work area recovery for our traders is a key area that we have in place.

But what we don't have in place and we didn't have in place were sort of production-level trading desks at the work area recovery sites, because that wasn't their purpose. So, within a week we stood up those trading sites so they could actually walk into our work area recovery site and be familiar with their day-to-day equipment as they are on the production floor.

We built out a brand new trading floor in New York, as well, to ensure that by the time we had moved to social distancing our staff could move and continue to be productive. And the same with our contact centres – our call centres, as many refer to them – where instead of just sending staff home, staff went home with a laptop and the ability to work from home.

So, not only did that maintain the business and the business productivity, but it also gave people something to do and to think about, rather than sitting on their hands at home. So, that really drove us to where we are now, which is a situation where we are, as an organization, stable from a Resiliency perspective. We've got around 90% of our staff working from home.

And we're thinking about return to office. And we're thinking about that in relation to the population of Barclays in two parts. The first part, the large population densities, of which they are U.S., U.K., and India, and they're being examined as sort of a bulk and a very, very sort of careful planning build-out for those locations as and when we decide to activate Phase 1 of return to office.

For all the other sites in the globe, the smaller size, there is a process through which the site lead needs to go, which is managed by the crisis leadership teams and, essentially, revolves around a thorough risk assessment, a legal assessment, a common sense assessment of that particular location and a proposal for who and why they wish to reopen.

And what that has allowed us to do from a global side of things is we've been able to, obviously, open our Hong Kong office to quite a substantial degree, and we're looking at sort of smaller offices in Europe and also in the Americas and Canada to ensure that we can bring staff back into the office safely, but that they're not so slowed down by sort of the bigger move with the sort of block populations that we're considering.

So, that's broadly where we are at the moment I think, Phil. Learnings have been many. But also, I think one of the things that I've really enjoyed about this is how through the crisis leadership team structures we were able to move extremely quickly as an organization, and to see trading floors being set up from bare metal within a week for 100-odd traders was fabulous and demonstrated the commitment to the technologists and also the trading staff and trading support.

So, I think that's broadly where we are when it comes to the current situation where we come from.

Phil Bowkley: That's great. And thank you, Charles. I'm sure we'll come back to some of those points in future questions, as well.

So, Steve, maybe if I could turn to you?

Steve Allen: Sure. Thanks, Phil. And likewise, thanks for the opportunity to join you and clients today.

So, look, as Charles outlined, he's been doing his thing for many years. And I've been running ops and tech and infrastructure functions in multiple different countries for 25-odd years, and I've come up against some pretty tough times. We'll all remember the Crisis, of course, and other major events, like a 9/11, and so on. But this has really – this really challenged – this crisis – the conventional wisdoms on almost every level. And the rule book, as probably all of us know it, was well and surely out of the window.

A couple of things, just for context. For the Corporate Bank, I have responsibility for running all of operations and technology globally, in addition to tech change and running the bank functions. And one of the teams that I'm responsible for is for the Payments team, and I run the Payments team globally for Barclays. So, through this crisis being able to send and receive payments, as you guys will know only too well, has been absolutely critical.

And I think that a couple of things that we certainly learned, Phil – you (inaudible) can let the conversation with me through this, as well – we've certainly learned that working from home works and it works at scale. We've pivoted to thousands of people working from home in a relatively short time. So, we certainly learned that.

We can certainly radically simplify process when we've no option, and I think that that's something that we're going to look to harness and continue to leverage, going forward.

We can certainly tech (inaudible) change quickly. People often complain that technology changes take too long. I can sympathize and sometimes agree with that view. We were able to make some tech changes very, very quickly, in a very agile way, and that was great to see. And again, we've got to harness that so we can continue at that pace.

We also learned that some of the things that we do internally and, indeed, for some clients weren't actually that important to some clients, at all. Because as we had conversations with clients around, "Do you want us to do this for you in a digital way?", they said, "Look, don't worry.

We don't really need it that much anymore." So, I think it's given us the opportunity to really approach the services that we do provide and connect with clients in a way that challenges both our clients and ourselves as to are we doing the service that is really value-add and are we doing it in a way that is value-add.

And of course this will be no news to any of you on the call, but digital and self-service was a huge winner and continues to be a huge winner through the crisis. Enabling technology to allow customers to do what they want to do, when they want to do it, versus just when a call centre is open, that has been a massive win for us and I'm sure many of you guys, as well, as you're all on your own digital journeys.

And I think, lastly, we have a view – and Charles mentioned it just a second ago – that these big call centres with hundreds and hundreds of people on a floor in little hutches, and we've learned that we can make and receive calls from clients safely and securely outside of our standard offices, and that's worked really well for us. And I know that that technology has been used extensively in financial services and more broadly.

So, I think we've learned a lot, Phil, and I think we've learned a lot of positives. I do think that we've got to harness and capitalize on that new way of working, that collaborating with clients, and that simplification and digital journey, and capitalize on that and perhaps redouble our efforts. And I'm sure many of you guys on the phone today are having those same conversations within your own organization.

So, that's probably the headlines for me, Phil.

Phil Bowkley: Great. Thanks, Steve. And we'll certainly come on to debate some of those points around what we take out of this and how we take the learnings into sort of more of the business environment as we move forward. And I think just to reiterate, I think the speed and the resilience with which we've sort of rolled out technology and scaled technology and the usage of technology has been really impressive.

Fabrice, maybe if I can turn to you now and sort of change tack a bit and ask you what we've been seeing from an economic perspective?

Fabrice Montagné:  Sure. Thank you, Phil. Good afternoon, good morning, everybody.

From an economic perspective, listen, I'm tempted to say we learned a lot, but to some extent that's true for every crisis. Otherwise, we would be able to predict them. But for sure, what we went through this time had nothing to do with a usual recession, where, if I had to sum it up, you're able to identify a given imbalance that builds up – think about house prices, think about equity valuations, think about loans and leverage, etc.. You see my point.

So, this imbalances builds up and then the crisis basically leads to that imbalance to be corrected. The economy overshoots, and that creates the recession. And to some extent, economics are fairly well equipped to describe that. We have a bunch of economic indicators and economic relationships that might not work at the second decimal but work well enough to broadly understand what we're going through.

Now, in the current situation we're facing something really different, because it's not – it started not as an economic crisis; it was obviously a sanitary situation. And the lockdown, in itself, is not an economic situation, in the sense that all the economic relationships are shut off. The government basically shuts down entire segments of the economy, where economic relationships do not operate. To give you one example, we are still measuring month-after-month inflation, but the inflation we're measuring is different because entire goods or services are not available for consumption during a lockdown.

So, the usual economic aggregates that we are discussing and trying to forecast this time around have changed a little bit, the concepts have moved, and our job has been quite different, as well. We spend a lot of time trying to assess the magnitude of the downturn during the various interpretations of lockdown, because lockdowns were not the same from one country to the other. So, we had to figure out what it actually meant.

We are now extremely busy in trying to figure out whether and how the economies will recover, and we are already eyeing towards what the long-term story is; meaning, what is the landing zone? Is it less favourable than we were pre-virus? Is it the same? Is it much less, etc.? The uncomfortable truth on all these is that we have no precedent.

To give you an example, during the recovery phase we have – in the U.K., the private consumption dropped 30%, or so, during the months of lockdown. So, that's – if you're usually at 100, you basically dropped to 70. So, that's not a usual recession. A usual recession is, like, between zero and five percentage points.

So, here, we dropped 30 percentage points. So, the second we move out of the lockdown it's normal to have, like, double-digit growth numbers on a weekly basis. And indeed, we had, like – think about transports, individual transports, think about fuel consumption. As the lockdown got removed, we've seen, like, these numbers nearly doubling every week.

So, this is something that, first of all, we were never doing weekly forecasts, because that's a concept that doesn't really work in macroeconomics. So, we had to go into a higher-frequency analysis to see how fast the economy was recovering, if it was recovering. And that still takes up a lot of time in what we're trying to do.

The other element that I'd like to highlight at this stage is labour market. We feel that what's usually creating long-term scarring from a recession is the labour market, because as people lose their job they move away from active work, they lose skills, they struggle to come back to permanent employment, and that creates a drag and that's why the recession takes sometimes forever.

But in the current crisis, as the government shut down the economy, the government also provided income support to everybody and virtually keeping employees on payrolls, even if that meant that the government was paying for those wages. I'm simplifying. It has not been the case like this everywhere: we're talking about outright transfers in the U.S.; we're talking about job retention schemes across Europe.

But still, what remained here and what is radically different from other crises is that employments are virtually still employed, but paid to stay at home. And the cost of it, the bill, is footed by the government.

Now, the question obviously is what happens when the government takes away that transfer, that support? Will we start fresh, as if nothing happened? Or will we start on a very different basis? And on that, we are anxiously watching labour market data month after month to be able to double check this, our assumptions, basically.

The last point I'd like to make is a little bit related to the question that you asked in the survey here. What will stick? What will remain from this crisis? And I'm not a big fan to say that everything will be different afterwards. The reality is that across Asia, after SARS or MERS or various virus outbreaks people continued thereafter to go in restaurants, to take the planes, to work from their office.

People were much more aware of what a sanitary crisis is, but people continued to live their lives, by and large, as they did before.

So, we have to acknowledge that there's a risk – let's put it this way – that we will go back to normal or very close to normal, even if at the minute that situation seems to be very, very far away. But at the scale of a couple of years, this is something we have to consider and incorporate in our forecast.

Listen, I think I'll end here. Obviously, a lot of other things to say, but we can have questions later. Back to you, Phil.

Phil Bowkley: Great. Thank you, Fabrice. And definitely a lot in there to take in. And I think the interesting point around some of the regular economic models and the sort of frequency with which we monitor and assess things is not valid just because of the pace things are moving is very pertinent.

Good. So, I'm just going to refer back to the results of Question 1 now. So, just to remind you, this was – you should be able to see it on your screens – "COVID-19 will have a long-term impact on working patterns, such as working from home." And I think there was a resounding sort of "strongly agree" with that.

So, we're now four months, or so, into the crisis, and we've already discussed some of the big challenges and what they've been. Maybe to focus now on the various sort of considerations – and some of you touched on this – just in terms of how we move into sort of back into a normality and sort of starting to return people to work.

Charles, what issues are you wrestling with from sort of physically moving colleagues back into the office space?

Charles Lindsley: I think really it's – the requirement for social distancing is absolutely key with the return. And to that end, actually, once we've had a look at our buildings, particularly our high-rise buildings, the opportunity for – we were originally thinking about 30% return to work in the first phase. That is now much reduced now we have more of an understanding of actually how to manage that social distancing ask and keep staff safe.

I think the other thing is around culture. And in different parts of the sort of Barclays footprint there are very different approaches to the crisis, in general; and so, the messaging which drives the outcomes.

And at the moment in the U.S., for instance, we're dealing with a surge in cases, which is actually becoming quite concerning, in the south of the country, mainly due to the fact that they opened up prematurely, effectively. So, the cases have gone up. And what we've found is that as we track the cases within Barclays we're obviously now finding one of our contact centres in Nevada is, in particular, picking up some infections.

So, it's how we communicate to staff in different parts of the world is really important. And when there is a lack of leadership, then we need to lead as a corporate and ensure that individuals know their obligations when it comes to social distancing and the challenges that all this faces.

The other thing that is quite interesting – and there are a couple of questions that I'm seeing on the questions board and (inaudible)I’ll probably knock off a couple at this point, as well – we work very closely with industry bodies, like SIFMA and SIBCMG, in the resilience space and I know all of you will have for, as well, and compare notes. And broadly, Barclays, as with those members, are approaching things in similar ways.

But in some of the polls – particularly, around temperature screening – we find that in the U.K. the willingness and the thinking around putting in temperature screening on the return to office is actually relatively low – it's about 30% of organizations considering that – whereas in the U.S., it's around about 70%.

And as a result of that and the fact that when it comes to the culture we look from a U.S. lens, we look with a U.K. lens, we are actually at the moment going through a process of considering how we would implement temperature screening in our major sites.

But it just goes to show when it comes to looking at the efficacy of all of these different sort of corporate options that we're faced with, there is no silver bullets until a vaccine is found. And really, the responsibility for ensuring a safe workplace ultimately and primarily rests with the individual not coming to work unless they are fit to do so.

But those are some of the challenges we're working through at the moment. There's a lot of work going on. And the other thing I'd just say very, very briefly because I know time is short is we're obviously – as well as our own planning, we are reviewing and looking at what various states and governments are saying about the requirements, as well, and obviously accommodating those regulations, which again is complex in the U.S. and complex in parts of Europe, as well. And that's probably what I'll say on that, Phil.

Phil Bowkley: Great. Thank you, Charles. Steve, what are your thoughts on returning to a sort of new normal working environment?

Steve Allen: So, if anybody knows what the new normal is going to be, maybe they can ping me a note, Phil, because I think that we are far, far from being close to a new normal way of working, would be my view.

A couple of things for me, and these are some of the things that we're grappling with and I'm sure everybody else is, as well. When a colleague walked into one of the Barclays buildings, they essentially had everything set up for them: desk, PC, a great phone, super-fast connectivity externally through to the internet, catering, meeting rooms, VC. It was there for virtually everybody when they walked into the building. And that has been taken away from huge swathes of our organization as everybody transitions to work from home.

So, we've gone from a scenario where it was almost perfectly equal for everybody in the office, to undeniably unequal working from home. People have got different setups, children, dependents, slow broadband or, indeed, no broadband at all, no room to set up a big monitor and so on, and juggling the challenges that COVID has thrown our way from a general life perspective. So, I think that's very different. Figuring out how we can help people with kit and setup so they can be really, really efficient and feel efficient I think is going to be key.

And how we transition people out of some established habits, Phil, as well. A lot of people like to print stuff, and you can't do that when you work from home. And so, there's been new ways of teaching established people what technology on their desktop could actually do pre-COVID but they just never had the need. So, I think that training and investment in new skills for people I think is going to be another hallmark of how we switch to a part office, part work from home.

And I think, lastly, the key that I think can help us really leverage a different way of working will be how we deploy and use the collaboration tools – we've got, obviously, something like the Webex going on today; there's a lot more out there, as well – because we have to make it easy for people to do their work even if the environment is fundamentally different.

And the easier we do that and the better we do that and the more consistently we do that, I think the better engagement we'll get from colleagues; obviously, better output for clients and for the bank. If we make it hard for them I fear, Phil, that we could lose that hearts-and-mind battle. And I think for most of us on this call that discretionary effort that every single one of our colleagues has demonstrated through this crisis has proved priceless, certainly for my organization.

So, making it easy for colleagues to do business with clients I think is going to be a real game-changer if we can nail that one, Phil.

Phil Bowkley: Great. Thanks, Steve.

Fabrice, how do we balance or how are you thinking about how do we balance the economic imperative of sort of returning to work and some of the challenges that, particularly, Charles talked about with how do we also speed up and mitigate some of the economic impacts?

Fabrice Montagné: That's a really good question. Now, what's fascinating about the virus and the different reactions across countries is that it goes at the core of what culture and sociological factors mean for each individual country. Some countries have a greater tolerance for – I'm going to say very abruptly – for excess deaths, for instance.

They would tolerate that more people suffer from that disease just because it's unavoidable, while others might have a much lower tolerance. And that will lead to radically different economic outcomes, which are a choice of each individual society. So, on those choices there's not much that we economists can say, because it's a social, it's a clinical, it's a medical choice. It has nothing to do with economic policies.

Now, when it comes to economic policies, where we have been amazed is by the scope and magnitude of policy reaction in the wake of the various lockdown decisions across different countries.

We basically had within two weeks what we had to wait for two years during the Great Financial Crisis, and the quality response stems from liquidity operations by central banks like we haven't seen ever, ever before, to labour market policies from the government keeping a lot of people on payrolls or subsidizing for income losses, households for income losses.

Now, the question now – and I guess that's more your point – what can governments do to speed up the recovery or to allow for the recovery to happen?

Listen, let me give you one example. France has been one of the worst hit – I don't know because we're still missing the actual numbers of comparable numbers – but for sure, the lockdown and the implementation of a lockdown has been restrictive internationally.

Even if you were living in the middle of nowhere, you could not go out and take a walk in the forest or on the mountaintop or on the beach, and that was police-enforced. The consequence of that very strict lockdown is possibly that the drop-down during the lockdown is bigger than in other countries.

But when you look at the signals that we get from the country today as the country lifts restrictions, that exit happens with much more force and much more confidence than in some other countries. And the government reopened cinemas and movies on Monday this week. So, that means that the country is pretty much back to normal.

And when you compare this to, for instance, the U.K., I think back to normal in the sense of minimal restrictions will be somewhere, sometime in July. But obviously, the joke over here is that nobody really knows what kind of restrictions still apply or not, because there's a little bit of confusion. And the result of it is, yes, we do have a recovery but it lacks a little bit of that confidence in the numbers and that confidence in households that it is now safe to leave home.

So, I think the element that I'm trying to get at here is the government has to provide clarity and security to households, in the sense that it has to make clear that it is now safe to live your life as you want to live it.

The other element is how do you exit all those policies that have been triggered. And we've seen states pivot quite aggressively away from immediate response – think about grants, transfers or think about the job retention scheme.

Whether that is chômage partiel or Kurzarbeit, in France and Germany, or Job Retention in the U.K., or whatever – pivot very forcefully away from these immediate short-term responses and onto something that looks like medium- to long-term industrial policies where they're throwing not only adjusting and setting up the economy to be more resilient in case of another medical crisis or a second wave or whatever.

But they're throwing also climate change, they're throwing for energy efficiency, everything to set up the economy for the 21st century – kind of, if I can phrase it – and that pivot has a lot to look for something else, to have something else to look at, whether that is in the industrial growth in some very promising sector or anything else.

And I think one way to make this exit out of lockdown a success is, one, to provide confidence in the present and, second, to provide confidence in the future. And that means that you pivot towards medium- and long-term topics and how you set up the economy on that front.

Back to you, Phil.

Phil Bowkley: Great. Thanks, Fabrice. And I think, yes, so much in there and I think we could definitely continue looking at the different models and debating which ones are likely to be more successful. But I'm conscious of time, and we've had some really good audience questions.

So, I'm actually going to combine the answers. So, if we just recap on the answers to Question 2, "COVID-19 has dramatically accelerated the trend towards digital transformation," "strongly agrees" and "agrees" definitely the predominant viewpoint from the audience there.

And then, "on the post-COVID-19 world, I expect the frequency with which I travel internationally to dramatically decrease," less of a skew there towards "strongly agree," but more of a distributed sort of views I think there. But predominantly people do agree with that.

So, maybe turning now to, clearly, if those two things play out then there's going to be some quite significant implications for how we run businesses, how we run banks. More broadly, I'm interested to hear from the panel on what this all means for sort of potential human capital considerations and talent considerations as we emerge from the crisis. So, Steve, maybe start with you because I know we've talked about this quite a lot.

Steve Allen: So, I think this is a really complicated one. If you think about mental health and well-being – and we have, as you know, Phil, some pretty robust programmes underway in Barclays, as I'm sure many other organizations do – it is stressing people, I think, working from home quite a lot.

I'm sure many of you, similar to me, I'm sitting at this desk at quarter to seven in the morning and I'm still probably here until quarter past seven, eight o'clock at night. And it's very easy to let that consume you. And it's a different way of working, because you're back to back on phones and videos and so on, which was not how it was. So, it's challenging in many different ways there.

I think a couple of factors for me, Phil, that can make a difference. I think it will be sponsorship from senior management in organizations that that work-life balance, that that click-screen balance is important and it's not just said, but it's demonstrated through behaviours up and down the organization. I think that's all important.

I think the quality of the communication as leaders into our teams so people still feel connected, they still feel valued, they still see that what they're doing in their own work-from-home space is still contributing to client satisfaction and collaboration and so on.

And I think one of the other challenges, as well, and certainly for me – and I've got quite a large people organization – is how do I convey to them that there's still a career in the organization and they can still progress and still learn and still grow, even though the way that that historically may have been partly achieved was by stopping by people's desks and offices and saying hi and networking, going to client events or industry events, and so on, because there may be less of that for some time to come.

So, I've got to convey to people that you can still grow and that investment in you will still occur.

And I think there are some of the things that I think we're all going to be grappling with. I don't have – I've got some answers. I don't necessarily have perfect answers there. But I think they are the types of things that we're going to be wrestling with, not just in my two functions, Phil, but more broadly, as well, I think.

Phil Bowkley: And Steve, definitely (inaudible).in client coverage I think all of those things are valid. And just the travel question, as well, I think we all agree or we predominantly agree that we're going to be travelling less. So, the challenges of managing large, globally dispersed teams, as well, and keeping them energized and focused, I think many of us have that challenge. So, definitely a lot to think about there.

Charles, maybe get your thoughts?

Charles Lindsley: I agree with everything Steve said. I think from certainly my previous lives in the police and the army, as well, the leadership and the crisis leadership that has gone on at Barclays has been extreme, and unlike most crises of this intensity which sort of blow out after two or three days this has gone on for months. So, there is absolutely the resilience of leaders, as well, as something to be taken into account.

And there's a dilemma for me with that, because resilience itself has never been more prominent than it is at the moment. So, I want to capitalize on that. But I also recognize that people need to rest.

And in actual fact, whilst we're in this situation at the moment, we need to think more more carefully about that. Because to Steve's point – and certainly, I see that on my team – there are individuals who are working from home who are beginning to become extremely tired.

And as a manager, I need to manage that. But it's an interesting observation that certainly is going to be on the agenda at the Americas CLT on Friday, just to talk through that side of things, because I don't think we can underestimate the importance of mental health for our leaders and also for the rest of the staff and to ensure that they can be as productive and as happy as possible.

Phil Bowkley: Yes, definitely. And I think one of the challenges I think going from working physically in the same place with people to working more remotely through digital channels is how do we as leaders pick up on those cues effectively and spot when those sort of issues and challenges are happening and then manage them effectively.

Fabrice, anything from you to add on that?

Fabrice Montagné: Listen, very quickly maybe. Every crisis, every recession from a macroeconomic point of view is an accelerator of inequalities, because it inevitably leaves people behind. I think this time around, given the magnitude of the shock, the theme of inequality is and will remain predominant.

I'm not even talking about economics, but think about education. Your experience of a lockdown or restrictions is radically different if you live in a house with good internet connection – if as a child you live in a house with internet connection, a garden, and a lot of space, as opposed to a flat, overcrowded and hardly any internet connection.

So, these inequalities are building up during the lockdown and will persist many, many years afterwards. So, I think when it comes – and the same holds if you think that the virus will have long-lasting effects because some sectors will not be able to operate anymore as they did or if you think that from one day to the other everybody will work remotely, well, that comes with different skill sets.

So, any kind of policy reaction that is targeted to the medium term needs to acknowledge the situation of inequalities and needs to address them full on. Otherwise, you kind of risk having those inequalities deeply entrenched and become a drag on medium-term growth. I just wanted to make this point because I think it feeds into this skills, investment, education, etc., that needs to be addressed after the crisis.

Phil Bowkley: Yes, definitely. Thank you, Fabrice. All good points.

So, I'm conscious of time. So, I think that that brings to an end the kind of panel session for today. And I'd really like to thank our panelists, Charles, Fabrice, and Steve, for their excellent insights.

There's now an opportunity for people to answer Q&A, ask questions to the panel or to me, through the box at the bottom of your screen. And we've got some great questions already.

So, Fabrice, maybe if you can answer this question that's come in from Christian at UBS. "Can you speak about the economic differences and impacts between the U.S. versus European economic support: furloughing staff in Europe versus paychecks from the U.S. government?" And I know you've touched a little bit on this.

Fabrice Montagné: Listen, I think there will be many, many books written on that for many, many years.

But what's interesting is that at least in the first months of the crisis both approaches have been relatively equivalent, in the sense that when you try to measure how well safety nets have worked, whether in the U.S. or in Europe, by measuring how much income dropped or savings households have been able to either build up or protect or whatever, you find actually very similar numbers across the Atlantic.

And think about households basically having stashed away 2% to 2.5% of GDP of saving cushion during the restriction months, because the drop in consumption was much more than the drop in income. And in the U.S., it was because, well, the government sent out checks. In the U.K. and in Europe, it was because the government basically paid businesses to continue to pay something like 80% or 70% of people's wages. So, during the crisis it seems to have been fairly equivalent.

Now, the right question is, how well does one scheme or the other allow for a return to work? And I think in Europe schemes have been extended towards, think about, September/October. So, there is very little incentive in the first months, at least in the current couple of months, for businesses to take back employees because there is a free option here to keep them away, to keep them at home, not to pay their wage because the government does, and see what happens. So, the incentive is probably not really there in Europe.

But similarly in the U.S., there's also talk about a second round of fiscal package and fiscal spending. So, we could have another couple of checks sent out to households in order to allow them to – in order to compensate the drop in income.

But I think key will be how well these policies are phased out, are phased away, and how well the incentive structure is reestablished once you have more certainty that this is going in the right direction. As I said, we have initial signals that it might be equivalent in protecting people's income, but we still don't yet have the full picture on employment. And in the U.S., we'll get employment report for June next week that will be a very, very important data point to watch out and to see whether or not businesses are starting to create jobs again.

Phil Bowkley: Great. Thanks, Fabrice. Steve, a great question from Standard Bank. "Regarding the migration of call centre activities to working-from-home setups, how has Barclays experienced productivity levels? Has this had secondary impact on retail sales, credit collections, or other items directly correlated to the activity?"

Steve Allen: That is an excellent question. So, look, I can't comment on collections and sales, for obvious reasons, though I understand why that's in there. But what I can tell you and talk about is productivity.

What's happened has been quite remarkable, and this has been true across all of my organization, more broadly, and it's about 4,000 or 5,000 people. So, productivity is up, and it's up anywhere between 12% and 18%. Now, volume has dropped and volume has dropped almost uniformly across my organization, which is probably understandable. But that productivity increase has been quite interesting.

It's happened for a couple of reasons. One, I think people got behind the need to get the work done and to help clients and to help each other. I think everybody just uniformly embraced the mantra of "we have to be there and we have to get the work done." And I think everybody jumped through hoops and everything to get the work done. And I think that that was one of the key reasons for the productivity pop.

The second reason is we actually made process easier. COVID forced us to challenge ourselves on maybe some things that were embedded within a front-to-back process that were just getting in the way, weren't value-add, triple checked, quadruple checked, unnecessary handoffs, and so on, and so on. So, what COVID forced us to do was actually simplify the way that we do work. And obviously, everybody will know, you simplify the way that you do work, you can get more work done in any allotted time.

So, the third thing I think, as well, we digitized a lot of our process. We were on the cusp of it pre-COVID. Some came during COVID. And I think that helped.

So, I think it was a combination of those three things.

One thing that I am bothered about, Derek, to be honest with you, is people are getting tired. I'm sure people in all of your organization are getting tired, because they've been working flat out now for a long, long time.

So, we've got to think about the mental health impacts of that, getting people holidays and encouraging people to take those holidays, getting those new collaboration tools in, and embedding the best-practice ways of working that we've identified as BAU so we don't see that willingness and that productivity dip away, because clearly we've found some good ways to be more efficient.  And obviously, that's good for customers as well as Barclays.

So, that's how I see that one, Phil.

Phil Bowkley: Great. And thanks, Steve. And it's a good one to finish on I think.

Fabrice Montagné: Phil?

Phil Bowkley: (inaudible) there's clearly more to do.


Fabrice Montagné: This is Fabrice. Can I add some points here? Because this is very interesting. On productivity, we see the same at the aggregate level. Basically, the cut in employment once you take into account furlough schemes or equivalents has been more than the drop in GDP. So, indeed – even on an aggregate level, GDP increases by something like 10%.

And in addition to the reasons that have just been mentioned, there's also the less heroic reason, that you tend to furlough your less productive employees first because you're facing kind of a huge cash sort of squeeze and you need to survive that one. So, that is one point that is very visible on the aggregate level.

The other one, on retail sales. Now, it might not be exactly the question asked, but we are lucky in the U.K. to have a data set called Spend Trends. This is leveraging our Barclays Card franchise and basically looking at what people are spending, where. And we're lucky to have that on a daily basis. Now, for an economist that's a dream. I see those curves, like, evolve on a daily basis. I love it.

And what it tells you is that after the initial shock of the lockdown people have started buying into home improvement – think about furnishing, think about home equipment. And this has partially to do with the phenomenal weather we had in April, but also with the fact that we are all stuck at our home trying to make the best out of the situation.

So, there have been a radical shift in spending patterns that has to do a lot with the way people are now – this new normal at least during the months of the lockdown and even the immediate aftermath after the lockdown.

Phil Bowkley: Great. Thanks, Fabrice. And some great insights there linking back to the economy to finish with.

So, we're slightly over time. So, we're going to end it there. So, I would just like to thank the audience for listening and thank again our panelists, Steve, Charles, and Fabrice. We've certainly covered a massive amount of ground, and it's clear as an industry we have a lot of work ahead of us all to successfully transition and shape the post-COVID operating model.

But we've also learned a massive amount and seen a lot of things that have worked well through this crisis that we need to ensure we take through into the new way of working.

Whilst we all face similar challenges, there's no set answers or play books for success. So, we're certainly keen to stay in contact with you all, share our experiences and lessons learned. An invitation to the next in our FI Forum sessions will be shared with you soon. So, please look out for that and sign up and share with colleagues.

We really value the relationships we have with you, our FI clients. As I said at the beginning, we're still here, we're very much ready for business and to support our clients around the globe. So, please do reach out to your relationship directors.

Please feel free to share any feedback or suggestions for themes you'd like us to see in the future. We'll be sharing links for the call today, plus a replay to the call and the materials, and you're welcome to share this with colleagues.

And lastly, as I mentioned at the beginning, in a minute a few questions will pop up, giving you the opportunity to provide feedback on the session. So, I'd please ask you to do that, and that will be very helpful to us.

So, thank you for attending, and we look forward to speaking with you at the next FI Forum. Thank you.

These briefings should not be deemed to constitute investment or tax advice and Barclays excludes any liability for reliance on the materials.

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