Advisory services: Deloitte

Since the 2008 crisis, many central banks have faced a period of non-stop change, particularly in the areas of monetary policy, financial stability and regulation. At the same time, technological innovation is changing the way central banks think about their day-to-day operations. Strategically, there are plenty of opportunities for new efficiencies and better outcomes.

To keep up with these demands, central banks are increasingly turning to trusted external advisers. This year’s award-winner, Deloitte, has seen its central banking business expand rapidly, with an array of advisory services built on the foundations laid by its audit business.

Karen Grieve, global operations leader and head of Deloitte’s central banking business, says there was a snowball effect. Starting from a core of around 100 partners focused on central banks around eight years ago, Deloitte can now draw on a global network of more than 1,600 professionals, many of them former senior central bankers, and others with expertise from past projects with central banks. The company can also tap into some 50,000 individuals in its broader financial services business, giving it expertise in governance, technology, risk advisory and more.

“I think it’s quite unique that we can draw on such a wide range of service offerings and innovative solutions for clients in this segment,” says Grieve.

In addition to providing audit or advisory services to 16 central banks of the Group of 20 nations, Deloitte provides advisory services to more than 50 central banks worldwide. Central bankers who have worked with the firm say they value Deloitte’s wide pool of expertise, with its consultants offering fresh strategic views that might be harder to achieve internally. One central banker said their institution trusted Deloitte to come up with innovative ideas that the central bank’s own technical specialists could implement.

Bank of Canada strategy

As with many central bank advisers, Deloitte started as auditor to a central bank – in Deloitte’s case, the Bank of Canada – and its advisory work with the central bank grew out of that relationship. The central bank rotates between auditors every five years, so when it rotated away from Deloitte a few years back, it cleared away any possible conflict between audit and advisory, allowing the latter to flourish.

In 2015, the Bank of Canada chose Deloitte to support an IT overhaul. As with previous contracts, the firm won the business after a public tender. The work set the stage for a variety of projects with the central bank.

Deloitte has since helped the central bank develop its 2016–18 medium-term plan, and was recently invited back to help develop the 2019–21 plan. Launched in April 2018, the new plan focuses on the modest goal of “reinventing central banking”, as well as “renewing” the ways the central bank does business and “reinforcing a culture of innovation”. Among other things, the central bank plans to automate more of its processes and upgrade its technology, including cyber security.

Deloitte can now draw on a global network of more than 1,600 professionals, many of them former senior central bankers … It can also tap into some 50,000 individuals in its broader financial services business

Janice Horne, the partner at Deloitte who has led the work with the Bank of Canada, says the firm has “invested the time” to understand how the central bank operates, making sure consultants can “make the right connections, have relevant and meaningful interactions, and ultimately bring the right kind of approach, knowledge, experience and insight to those they engage and work with at the bank”.  The team has been trusted with sensitive parts of the central bank’s work connected to its strategic priorities. 

HKMA blockchain

While studies are increasingly showing crypto assets to be of dubious merit, the underlying technology is moving forward apace, and one of the most promising avenues has been for trade finance. Deloitte worked with the Hong Kong Monetary Authority and a consortium of banks to develop a new blockchain-based trade finance platform with the aim of boosting financial stability, as well as offering efficiency gains and protection against fraud.

Paul Sin, consulting partner at Deloitte, says the system is “very valuable” for regulators, both as a monitoring tool and in boosting the availability of credit to small and medium-sized enterprises: “The regulator or central bank can always evaluate the credit and liquidity risk in the whole ecosystem going forward, while at the same time improving the access to financing for SMEs.”

A former central banker who worked on the project praises Deloitte’s technical knowledge of distributed ledger technology (DLT), saying that the system will give supervisors a “detailed audit trail”.

The project went live for testing on September 27, 2018, and was officially launched on October 31. Deloitte designed the governance structure for the new platform and worked to ensure parties understood how it operated. It also ironed out legal issues, such as know-your-customer requirements and who was liable in the event of any problems.

Deloitte is similarly involved in a DLT-based system for Singapore, part of the Monetary Authority of Singapore’s Project Ubin. The system aims to cut settlement time for government securities from T+2 to same day by settling using tokens backed by Singapore dollars.

Saudi fintech

Another major project for Deloitte in the past year has been the launch of Saudi Arabia’s new financial technology (fintech) hub, in partnership with the Saudi Arabian Monetary Authority and the Saudi Payments Network. The project will span several years, but work began early in 2018. As part of its work developing an overarching fintech strategy, Deloitte is planning a physical fintech hub to attract tech firms – it has already developed a similar project in the UK, Level39, based in London’s Canary Wharf.

Louise Brett, head of fintech at Deloitte and lead partner on the Fintech Saudi project, describes fintech as “disrupting the traditional banking industry at pace, both in collaboration with incumbents and independently, by doing things better and increasing financial inclusion”.

Deloitte has structured the strategy in three phases, starting with educating people about fintech and its benefits, before moving on to the process of attracting firms to Saudi Arabia, and concurrently helping to grow the fintech ecosystem and make the country a globally recognised hub.

Rushdi Duqah, lead client partner and head of Deloitte Digital in the Middle East, says the project is helping to encourage conservative bankers to be more innovative: “The initiative was well-received by players in the industry, including senior banking executives, and many banks were keen to get involved with Fintech Saudi and contribute to this national agenda. By the time the initiative was officially launched, almost all banks were represented at the launch event. This is what I call a tangible impact.”

Deloitte has repeatedly demonstrated that it is a solid strategic partner to central banks as the fintech revolution continues.

The Central Banking Awards were written by Christopher Jeffery, Daniel Hinge, Dan Hardie, Rachael King, Victor Mendez-Barreira, Joel Clark, William Towning and Tristan Carlyle