Following the global financial crisis of 2008, global regulation was enacted to safeguard banks labeled as “too big to fail” (TBTF). Part of this regulation was creating a list of defined banks that could cause threaten stability of the banking system if left to fail. The two most referenced lists are the Financial Authority Board’s list of 30 banks labeled as Globally Systemically Important Banks (G-SIB) and Domestic Systemically Important Banks (D-SIB).
With a recent shift from reactive to proactive reporting and compliance, banks have dedicated more resources to exploring innovative and disruptive technologies. The goal is to utilize these technologies to lower risk, increase transparency, and reduce the margin of error across all functional departments. Blockchain technology can accomplish this by utilizing smart contracts to manage and process large quantities of information in relatively short timeframes - all while ensuring accuracy and safety.
In fact, it is estimated that blockchain technology could reduce a bank’s infrastructure costs by as much as 30% and that over 90% of major North American and European banks are currently exploring blockchain solutions.
Here are a few recent initiatives within the banking community.
Barclays Successfully Adapted to Real-Time Reporting Paving the Way for Massive Change
Barclays is a Globally Systemically Important Bank and operates around the globe. Barclays made the news in 2015 as the first bank to process a global trade transaction using blockchain technology. The technology, created by Wave, was used to send original trade documentation through a secure decentralized network, helping reduce the time to process shipments from 7 to 10 days down to a mere four hours.
Isabel Cooke, Barclay’s Blockchain R&D Development Manager, referenced blockchain tech as providing “real value” and mentioned “clear audit trails” as one example of a potentially value-added benefit of using the technology in banks.
Barclay's Adoption of Blockchain Tech Caused Ripples Throughout Europe’s Largest Financial Institutions
Eight European largest banks have signed a Memorandum of Understanding (MoU) to develop blockchain technology for cross-border trade finance. A Digital Trade Chain Consortium was founded and is now being rebranded to we.trade. Banco Santander has joined the venture, bringing the we.trade consortium to eight founding members. It’s believed this consortium will enable faster access to funding for SME’s - something that’s needed in all EU states.
The seven original banks to sign the MoU include 4 G-SIB recognized banks; Deutsche Bank, UniCredit, HSBC and Société Générale. Furthermore the remaining banks are either D-SIB recognized (Rabobank, The KBC Group) or G-SIB recognized (Natixis) in their respective countries.
Four of the world’s largest banks are making strides into real-time reporting, with a few large national banks following suit.
The hope in Europe is that by using real-time reporting, SME’s will get faster access to trade finance. Barclays paved the way with their successful pilot of real-time reporting and now the goal is that the same technology can be applied to cross-border trade finance.
Conclusion: Blockchain is Making Huge Strides in the Banking Space, Even in its Infancy</3>
Accenture reports that nine out of ten banking executives are exploring blockchain for real-time reporting. The big banks are already there and setting a fast pace for technology advancements to change how banking is done. Blockchain tech is crossing borders and speeding processing up, enabling faster transactions and cutting costs.
The good news is this is only the beginning. Collaboration with other fintech companies and the financial backing from huge banks will help enable faster growth.
Among the newest and revolutionary blockchain advancements is Auditchain. Built using Blockchain Base Layer Protocol in collaboration with DCARPE™ Alliance - a community of financial experts in investment, accounting, audit and financial reporting - Auditchain is enabling cross-border real-time reporting that’s beyond what any auditing system on the market can do.
While the largest TBTF banks focus on expanding their reach and getting finance to SME’s and other sectors faster, Auditchain is making the real-time reporting of all transactions accessible to the finance market.
Stay up to date with the latest developments of Auditchain on their website Auditchain.com, including information on their upcoming Token Generation Event.