(27 March 2019 – Global) The world’s largest Globally Systemically Important Banks (G-SIBs) are swiftly integrating blockchain technology into their operations ahead of smaller non-major banks according to new data released by UBS.
The Swiss bank polled 82 individuals in the first quarter of 2019 from banks that are either evaluating, piloting, or implementing blockchain. The most common use cases of blockchain are payments, trade finance, securities settlement as well as fraud detection and security. Commerzbank and Deutsche Boese announced they had used distributed ledger technology to execute a legally binding settlement of a repo transaction. In February, a report from IHS Markit stated blockchain technology could save investment firms US$12 billion in clearing and settlement fees.
“There is a clear bifurcation between the largest banks and everybody else on blockchain” UBS analyst Saul Martinez stated. Four out of ten (38 percent) respondents from banks with assets above US$100 billion are implementing blockchain strategies against a mere six percent of respondents from banks with sub US$100 billion assets. The largest banks are even further ahead, with 73 percent of survey participants from US$250 plus billion asset banks indicating that they are implementing blockchain strategies. Eight out of ten survey respondents from US$500 plus billion asset banks indicated that they are implementing blockchain strategies. Most banks with assets below $100 billion are not currently investing in blockchain. Respondents from larger banks are also more likely to cite revenue growth as a key benefit of technology investment, indicate that they are implementing AI and blockchain strategies, and believe it is important to be an innovator in digital banking.
Regulation could play a key part in levelling the playing field, as seen with the US Commodity Futures Trading Commission studying whether large banks take undue advantage of a rule adopted this year to increase hedging flexibility for small and midsize banks. CFTC Chairman J. Christopher Giancarlo acknowledged colleagues’ concerns in providing for a staff study in three years. “I take seriously the concern about potential misuse of this provision in ways that are not intended.”