Welcome to your Global Sales Convention

Keynote Presentation

Arindam Das – Regional Head of HSBC Securities Services, MENA

February 2013

SWIFT Global Sales Convention

PUBLIC

MENAMore people than the US,….Larger GDP than Brazil… More oil than the rest of the Planet

Morocco

Algeria

Tunisia

LibyaEgypt

SyriaLebanon

JordanIraq

SaudiArabia

Kuwait

Bahrain

QatarUAE

Oman

Yemen

Iran

· 56% of world hydrocarbon reserves1

· $383 billion worth of current account surplus2

(US Deficit = $1.4 trillion6; Euro Area Deficit = €561 billion7)

· $1.6 trillion GCC external assets3

(Russia ~$1 trillion; Brazil & India hold ~ $0.5 trillion7each)

· $2 trillion worth of infrastructure projects4

· $1.7 trillion HNWI wealth in the region5

· $104k GDP Per capita of the Qatar 10

(UK ~ $39k ; US ~ $49k ; France ~ $41k ; Germany ~ $42k ;Japan ~ $48k)

· 45 million GCC population with 51% below the age of 259

( Europe & Japan ppn. expected to decline by 2050; US ppn. may increase marginally but old age ppn. expected to increase)11

Source: 1- OPEC; 2&3 – IMF; 4 – Citi; 5 – Cap Gemini Wealth Report, 2011 6- Whitehouse Website, 7- DB research, 8- IMF, 9- Markaz research dt June12, 10 – IMF , 11 PRB.org

PUBLIC

The region has strong ambitions ….

Sources: Images from various websites, facts and figures as announced in media

Dubai in 1991 & 2005

• Dubai announced the Mohammed Bin Rashid City:

i. a park equipped to receive 35M visitors, ii. largest shopping mall in the worldiii. largest area for arts galleriesiv.environment for entrepreneurship and innovation

costing

King Abdullah Economic City - KSA

Bahrain Qatar Causeway

Al Maktoum International Airport

Louvre Museum , Abu Dhabi

Guggenheim , Abu Dhabi

Qatar in 1991 & 2005

PUBLIC

• Under the “Dubai World Central” theme , Dubai aims to become a global center for logistics, tourism and commerce costing $32Bn

• Dubai is also expanding the creek with a “suspended canal” at a projected cost of ~$400M

• Abu Dhabi - Louvre & Guggenheim museum in Saadiyat Islands costing ~ €108M and $ 200M resp.

• Qatar announced spend worth $100 Bn to gear up for the World Cup in 2022

• SAGIA in KSA to invest US$900 billion by 2020 on developing energy, ports, logistics and education

• Qatar Bahrain Causeway link announced with estimated cost of $ 5 billion

• GCC states are constructing the largest interlinked rail network costing $16 billion

To be the Financial Centers of the World !

Sources: Bahrain Economic Board, Ministry of Foreign Affairs , Arabian business.com, DIFC and QFC websites

Bahrain

Widely regarded as the best-regulated financial centre in the Middle East, for more than 40 years

Gained prominence after Lebanon had civil war in 1970s replacing Beirut as the ME’s financial hub.

Financial services currently make up 27.6% of Bahrain’s GDP, over 400 licensed financial institutions based there

QFC

Set-up in 2005, with an independent regulatory authority, Civil and Commercial Court and a Regulatory Tribunal. It is a fundamental part of the Qatar Vision 2030 strategy and has around 160 registered firms

QFC allows investors to do business on an onshore basis irrespective of where they are based. Registered firms are also allowed to deal in any currency (unlike DIFC)

QFC won the “Best Financial Center in the ME” award from Global Finance last year for the second occasion

DIFC

Offshore Financial hub with independent regulators, Common Law framework, supportive infrastructure and tax-friendly regime

Fills the time-zone gap between London and New York in the west and Hong Kong and Tokyo in the east

Despite the global crisis, DIFC has registered 256 new companies, the largest absolute annual increase in its history since inception in 2004. Total 899 companies by June 12.

PUBLIC

2012 – Still not out of the woods!!

• Gap between MENA’s oil exporters and importers

has widened

• Eurozone crisis dampening demand for goods and

services

• The US debt ceiling worries are also looming

• High socio-political risk following the advent of the

Arab Spring

• Fear of Iran’s nuclear ambitions are still sensitive

• GCC Monetary Union – still uncertain

Syria turmoil

Arab Spring

China slowdown

Fiscal cliff Iran fears

US election Gaza conflict

Unemployment

PUBLIC

The region at a glance

Sources: Zawya dt 31-Dec-2012

PUBLIC

ADX7% Bahrain

2%

DFM4%

Egypt7%

Jordan3%

Kuwait12%

Lebanon1%

Oman2%

Nasdaq Dubai

3%Palestine

1%Qatar15%

Saudi Arabia43%

Market Capitalization

ADX

Bahrain

DFM

Egypt

Jordan

Kuwait

Lebanon

Oman

Nasdaq Dubai

Palestine

Qatar

Saudi Arabia

$1 $500,000,000 $250,000,000,000,000,000

$23,745,796

$1,127,383

$52,492,126

$82,103,136

$10,850,137

$103,644,369

$1,347,662

$10,522,553

$1,999,064

$1,194,822

$61,752,960

$2,032,769,640

Daily Average Turnover

Sample AMEDA Markets Nigeria Egypt Morocco South Africa Kuwait Oman UAE QatarMSCI Classification Frontier Emerging Emerging Emerging Frontier Frontier Frontier Frontier

Openness to foreign ownershipInvestor qualification requirementForeign ownership limit (FOL) levelForeign room levelEqual rights to foreign investors

Ease of capital inflows / outflowsCapital flow restriction levelForeign exchange market liberalization level

Efficiency of the operational frameworkMarket entry

Investor registration & account set upMarket organization

Market regulationsCompetitive landscapeInformation flow

Market infrastructureClearing and SettlementCustodyRegistry / DepositoryTradingTransferabilityStock lendingShort selling

Stability of institutional framework

MSCI Market Accessibility Review 2012

No issues No major issue, improvements possible

Improvements needed, extent to be assessed

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Key Initiatives

• Regulatory:

­ Kuwait: Independent CMA set-up; new Mutual Funds regulation to be included in the CMA laws

­ Qatar & UAE: New regulations announced on Short Selling, Liquidity Management, SBL and Market Making

­ Bahrain: New Regulations for CIU (funds) announced

• Market Developments:

­ Qatar & UAE: Implemented DVP, Key to MSCI upgrade

­ Kuwait: New X-Stream trading system

­ Saudi Arabia: Depository rules published and signed agreement with MSCI on data usage

­ Oman: New trading system; Planning to introduce DVP

­ Bahrain: Planning to introduce DVP; Looking to implement end-to-end SWIFT connectivity

• New Products :

­ Qatar: Introduced T-bills & Sovereign Bonds; planning introduction of ETF’s

­ Bahrain :Implemented IBANs

­ UAE: Planning to introduce SBL

­ Egypt : Announced the introduction of ETFs and Rights trading

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Opportunities and Challenges

Challenges

• Political Instability

• Sensitivity to Costs

• Legacy mindset, Procrastination & Indecisiveness

• Market participants not very tech savvy

• Shallow markets , more retail oriented, lacks scale

• Resistance to international solutions for national requirements (RTGS)

• Compliance & Sanctions

• Expand reach into the corporate world

• Corporate governance not at par with international standards

Opportunities

• Growth in volume along with economic progress

• Capital Markets infrastructure (especially post trade) not very developed

• Regulations - opportunities, not challenges! (E.g.: IBAN, custodian regs)

• Corporate information not easily available, lacks standard

• Regional market integration – interoperability amongst CSDs

• Market penetration - Increase usage of existing users

• Multiple markets with multiple currencies lacking a standard messaging infrastructure

• Documentary credits (DC’s) back in fashion in MENA, hence an opportunity for a further increase of traffic in trade PUBLIC

Action Plan

• Educate the Buy Side and Intermediaries on the advantages of SWIFT

• Set up a Securities Market Practice Group in the key ME markets

• Introduce cost effective alternatives for the region

• Engage closely with Regulators, Exchanges and Depositaries to drive reforms - Interoperability

• SWIFT needs to help us

­ continue to reduce costs

­ ensure backward compatibility (to ease legacy issues)

­ make it easy and cost effective to connect to SWIFT - and provide services to further ease connectivity

­ address our sanctions and compliance challenges

­ improve standards of corporate governance based on international best practices

PUBLIC

Thank you

PUBLIC

Gottfried LeibbrandtSWIFT

$ 1 000 000 000 000

Mobile, devices

Internet of things

Virtualisation

Regulation

Data location

Cyber security

Resilience

Gradually evolve the core

+

+

Invest in core platforms

Expand connectivity

Reinvent MI business

Expand the core

Grow in APAC

Platform

Connectivity

Apps20

30

Traffic MIs

15

15

10G

eographic Expansion

FIN Price before rebate(EURcent / msg)

FIN Traffic(Millions of msgs)

0

5

10

15

20

25

30

35

40

45

50

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

3,500,000,000

4,000,000,000

4,500,000,000

5,000,000,000

Increase non-NBI revenue

2010 2012 2015

Revenue

NBI

Non NBI

40%

50%

More efficient

More investment

2015

Cost

2010

BAU

Total

2012

Investments

Javier Perez-TassoHead of Marketing, SWIFT

27

PerceptionsTeamMission

28

ConnectivityTraffic & MIsApps

Perceptions

Team

Mission

29

30

Collaboration

Fabian Vandenreydt,

Securities and CoreBusiness Development

Panel:Traffic Development

Juliette Kennel,

Market InfrastructuresAndré Boico

Pricing

4 4.55.5

Progress vs 2015 metrics

FIN G FIN Msgs / YearIA Mios kChar / YearFA Mios kChar / Year

FIN

6.0 (hi)5.0 (lo)

‘10 ‘12 ‘15

1.6 1.75

3.2

4.32.5

InterAct‘10 ‘12 ‘15

0.91.7 2.8

3.72.3

FileAct‘10 ‘12 ‘15

Luc MeurantHead of New Business Development

Why is non-NBI so important?

Reduce TCO for customers

New source of revenue… and profit

Increase stickiness

There is more…

Sanctions Lite2 MyStandards

Matching 3SKEY/BPO Bus. Intel.

Integration Services Ref Data

And also…

Full speed ahead!!!

Welcome to the Chat roomsand the Deep Dive sessions