CACEIS NEWS 46 EN

No. 46 - June 2016 - caceis news 5

ogy CACEIS shares new approach- es with the Credit Agricole group’s entities.

existing banking infrastructures. CACEIS can capitalise on its strengths as a leading asset ser- vicing provider, reputation, trust, financial robustness, market recog- nition and a privileged relationship with customer, while implement- ing the advanced technologies of digital revolution. In an increasingly digitalised fi- nancial environment, CACEIS is fully aware the importance of hu- man relations and client wealth management and takes a compre- hensive approach to the subject. Post-market is caracterised by fun- gibility, speed and plurality of ac- tors, as financial markets, can be adapted to what clients, individual or institutional, want: some need security and a higher level of com- pliance; others would really benefit from speed and transparency. A flexible and resilient response to clients’ needs would be the best choice for the implementation of blockchain in banking services. In this respect, building up a block- chain could offer two great benefits for clients: ▷ The matching of transactions, collateral management and recon- ciliation could be facilitated. ▷ Transparency and traceability and confidence of investors that have a view of the security life cy-

cle, thanks to “chained” data could be strengthened. As a result, the blockchain could meet the need for a trustworthy re- cord. It could make banks deliver more information all along the fi- nancial value chain and also pro- vide regulators with an auditable, easy access to transactions. BLOCKCHAIN SOLUTIONS IN CACEIS'S OFFER Digitalisation is already advanced for asset servicers. Having overcome the initial suspi- cion, Blockchain can be seen as a new technology enabling them to improve their offer. CACEIS has always been adapt- able and has shown its ability to facilitate collaborative work and evolve when required and that is why we joined different initia- tives: The bank participates in a dedicated “Blockchain working group” set up at Credit Agricole group level. Technology watch, knowledge sharing, exploration of the use of this new technology and experimenting across the group’s entities are the main objectives of this working group. CACEIS also participates to the first French initiative on block- chain, coordinated by the Caisse des Dépôts, launched on December 15, 2015. The first objective is to perform “proofs of concept” ex-

perimentations. However, the chal- lenges of implementation are huge.

IMPROVEMENT OF CLIENT EXPERIENCE THROUGH

The first is to comply with regu- latory requirements, in the highly regulated and supervised post- trade environment. The second is interoperability and interfaces with IT legacy and with physical assets. The third and most important is market adoption: if the simplest cases identified are in small net- works with low regulatory require- ments, the broader network cases need the commitment of all the actors of the financial value chain including regulators. The financial industry is at a ear- ly stage of the Blockchain pro- cess. According to many analysts, “2016-2018" will be a period of many small scale but very impor- tant “proof of concept” initiatives. There may be 5 to 10 years before the real enterprise distributed ledg- er platforms start to challenge the post-trade infrastructures and se- curities processing. Nevertheless, one should not un- derestimate the power of technol- ogy and this is the reason why, as one of the main players in the asset servicing world, CACEIS is involved in the process that might lead to new industry standards and solutions for its clients

A CLIENT CENTRIC APPROACH

An inspiring definition of dis- ruptive innovation from Clayton Christensen, disruptive innovation expert, is that it “allows a whole new population of consumers at the bottom of a market access to a product or service that was histori- cally only accessible to consum- ers with a lot of money or a lot of skills” . Simplification is the key to disrup- tion, because what really changes is clients’ behaviour on a market. The Internet brought disruption to information, now blockchain brings disruption to money, value and risk, with crypto-money and crypto-security. Banks can include blockchain in the range of services they provide. The success of financial innova- tion is underpinned by the capac- ity of asset servicing companies to include innovation to their op- erating model, reforming their ser- vices and simplifying the relation between investors and markets. CACEIS is looking to make a suc- cess of the technology, to offer new services to its clients across its dif- ferent locations.

SECURITY safeguard of assets

SIMPLIFICATION easier customer relationship

CONFIDENTIALITY permissioned and protected data

AUTOMATISATION OF CONTROL proof of digital identity and ownership

AGGREGATION OF INFORMATION comprehensive and unfalsifiable data TRANSPARENCY trusted records

VISIBILITY consensus on transactions and ownership

Blockchain technology is provid- ing the opportunity to overhaul the

CACEIS's offer, towards innovation source

CACEIS INTEGRATED MODEL

CACEIS INNOVATIVE MODEL

TRADITIONAL MODEL

CACEIS OFFER

ORDER

BROKER

EXCHANGE

DEPOSITARY

EXCHANGE

EXCHANGE

CUSTODY SERVICES

GIVE UP

CACEIS OFFER

CLIENT

CLIENT

CLIENT

DLT: DISTRIBUTED LEDGER TECHNOLOGY

CLEARING MEMBER

GIVEUPCONFIRMATION

CCP

POSITIONANDMARGIN REQUIREMENTSTATEMENT

COLLATERALCREDIT INSTRUCTION

EXECUTION TO CUSTODY

CCP

FUND ADMINISTRATION

COLLATERAL DEBIT INSTRUCTION

CCP

CUSTODIAN

ISSUER SERVICES

Timeline: a blockchain integration prospective

2018

2015

2016

2025

y + 2

y + 10

Launch of Crédit Agricole S.A. wor- king group on blockchain February 2016

Crédit Agricole S.A. strategic orientations on blockchain July 2015

Modular innovation: CACEIS’s internal use cases and by component

Information hub for clients

Trusted ledger

French Innovation Lab on blockchain coordinated by Caisse des Dépôts December 2015

Nasdaq 1 st blockchain securities issue January 2016

High value market transactions

1st Proof of Concept between market actors

Market shared ledger