Lunching with Iain Saville last week it brought back many memories
of yesteryear, when the UK securities markets was reeling from the disaster that was the Taurus project. For those too young
to know or with short memories of the horror of the TAURUS project - TAURUS being the code name for a system to bring settlement
efficiencies into the UK market. The TAURUS consultation with the market went on for years, with each interested business
within the market structure fighting to get their particular business either protected, or to gain significantly. Consequently
the TAURUS design was a continual exercise and even to this day I am not sure where we finished before the whole thing was
canned and we were all put out of our misery, but with much lighter pockets.
In
the aftermath of this disaster, which could have been terminal for the City of London's future prospects as a major financial
centre, the Bank of England put their hands up and took on the mantle of saviour. This acceptance by the Bank of England alone
was brave, considering the mood of the City and its declining reputation to manage itself, let alone major infrastructure
projects. I feel there is resonance with today.
Out of the bowels of the
Bank of England came a man with real fortitude to get the job done- Iain Saville. He must have known he was walking into a
hornet's nest of anger and apathy in the markets. Not conducive to introducing a major infrastructure project, so soon
after the previous attempt had failed; especially where the failings of firms and the people involved were so fresh in the
City's memory. In one sense it probably helped that there was little time for blame and recrimination and we all got on
with the task in hand.
Iain would be the first person to raise the name
of Penn Kent, a Bank of England Director that skilfully paved the way for the necessary legal and regulatory changes required
for the new system. Penn's charm was never used more effectively and with such positive results. But let's focus on
the team that Iain put together all from different aspects of society and business, to create and the implement the CREST
system.
Pulling different people together that have different backgrounds
and thought processes, with an ethos to charmingly operate a ‘can do' culture was inspired. Each team member offered
something unique to the project and was not tainted by legacy knowledge and the failure that preceded it. It was a key decision
to recruit these people and they proved to be a dream team in every sense.
The
CREST team were remarkable in that not only did they design a system that virtually changed every operational process throughout
the securities industry. They were unwavering in ensuring focus was not lost but also listened to firms and people in the
market directly affected by the CREST design. I can vouch for the team's ability to listen and respond with quiet authority
and provide comfort and confidence that the project was in good hands. This is an essential ingredient in any project and
in the inaugural CREST team we evidenced it at its very best.
As the CREST
system moved from consultation into build, the team were also heavily involved in marketing, with no end of events covered
and meetings attended. Through this phase they were in fact selling the system. It did not feel like a sales job but just
about everyone was buying into CREST and getting behind the project. An almost unstoppable force had been created.
The CREST design was the first and possibly the last financial project that brought together
all agents in a transaction, from Registrars to Brokers, to Market Makers, to Investing firms, to Investors within management
control of payment banks. The visibility of exposures became a real-time capability that could be managed intraday. This was
the same for Government debt and the Money Market. No other system brought all these products and business into a central
point of settlement and risk management. It is a lasting legacy of the CREST team that the UK has benefited from countless
trillions of pounds of savings, within a managed risk process, since the CREST implementation. Today Europe could do with
such a change to achieve what CREST did nearly twenty years ago.
The implementation
of the CREST system did have the odd hiccup, but hardly worth mentioning and from just a few months of live running has not
had any major fault or let the industry down. This is an outstanding feat that has never been recognised and the resiliency
in the system considering the difficulty of the expectation it had created, is amazing.
One of the very key decisions CREST made was to ensure that there were competing networks able to carry messages
to and from and around the markets. The competition in supplying connectivity via networks has worked wonderfully well and
has ensured pricing has never got out of hand.
I know that it was a target
for CREST to settle foreign equities and debt and I am sure the FX market would have been a target as well, but before this
could be developed CREST was bought by Euroclear. We could debate whether this has been good for the market, but Euroclear
has attempted to continue to tackle industry clearing and settlement issues in their own way. Hopefully they have managed
to learn from the masters of change that were the CREST team.
Time is always
the test of success and I would like to state on the record that CREST was the best project of its type ever to succeed. It
was superbly led and wonderfully executed and it's a shining model of what can be achieved in financial markets, when
the right people are involved and they have backing from the industry.
Unfortunately,
currently the financial markets appear to be in total disarray, with a lack of leadership, no focus, no imagination and no
industry-wide support to mandate change. The finance industry needs to take charge of the problems that ail it. It must enforce
change and development, introducing solutions that are imaginative and most importantly are proven to work. Who could do this?
Well, I wonder what the CREST team are doing now.
By Gary Wright
