Annual Report 2005
From the CEO
Building on strong 2004 results, we delivered robust financial and operating performance in 2005 and are well positioned for the next stage of our strategic evolution, SWIFT2010. We have strong momentum moving into 2006 and beyond.
Mid-year price reductions and rebates
Traffic grew a healthy 9.5 percent and we recorded five peak days in 2005, the latest being 11,566,818 messages on 20 December.
Based on early revenue projections, and the success of our structural cost reduction programme, we anticipated a growing surplus for the year, and took the proactive step of announcing mid-year price reductions effective 1 July 2005. These included an average FIN reduction of 8 percent, an improved traffic growth incentive programme for larger users and the complete waiver of up-front licence fees for SWIFTAlliance Starter sets for smaller users. In October 2005, the Board approved a 5 percent rebate on FIN messaging and raised this to 7 percent in December. The combined price reduction (EUR 14 million) and rebate (EUR 23 million) reduced our 2005 profit before tax by EUR 37 million to EUR 15 million. We expect the full year impact in 2006 of these price reductions to be at least EUR 30 million. We are on track for achieving our SWIFT Pricing Challenge set in May 2001, to reduce the overall price of SWIFTNet messaging by 50 percent over the 2002–2006 time frame. From transformation to raising our ambitions
| “We delivered robust financial and operating performance in 2005 and are well positioned for the next stage of our strategic evolution, SWIFT2010. We have strong momentum moving into 2006 and beyond.” |
Preparing for SWIFT2010
As a cooperative, we consult our membership on strategy and work closely with the Board on its evolution. With SWIFTNet migration complete and SWIFT2006 drawing to a close, we have begun the work on the next stage of our strategic evolution: SWIFT2010.
The process began in March 2004, at a Board offsite in Amsterdam. Since then, we have held multiple discussions with key customers, National Member Groups and Advisory Groups and presented our thinking to the broader SWIFT community at Sibos Atlanta and Copenhagen. A Board offsite on the strategy was just held in Cape Town in December 2005. We expect to present our final document to the Board in June 2006, but we already have good momentum as we transition form SWIFT2006 to SWIFT2010.
As you heard at Sibos, many “transformational” initiatives are under way: the Trade Services Utility is now in pilot mode. Corporate access is gaining traction via our existing MA-CUG model. The Corporate Access Advisory Group, formed in March 2005, is proposing important improvements to broaden the corporate-to-bank model. These will be voted on at the upcoming June 2006 Annual General Meeting. SWIFT is playing an important role in providing standards and messaging for the Single Euro Payments Area (SEPA), and the TARGET2 RTGS system for the Euro zone countries. SWIFT’s proposal for eliminating Barrier One of the Giovannini protocols has been widely distributed and well received by the industry. Barrier One aims to eliminate national differences in the information technology and interfaces used by clearing and settlement providers in the EU.
At its December meeting, the Board formally endorsed the raised ambitions and market initiatives of our SWIFT2010 strategy. As I write this letter, we have put forward to the March 2006 Board additional investment proposals that will accelerate our development of a range of SWIFT2010-related initiatives. We are all excited about how SWIFT can do more in the domain of global financial interoperability to help you to reduce costs, increase automation and manage risk.
Security, reliability and resilience
SWIFT is dedicated to continuously improving its security, reliability and resilience. 2005 was no exception and we are pleased to report that our full year availability statistics were the highest ever, hitting 5x9s (99.999 percent) for our FIN and SWIFTNet core systems. Following the 100 percent migration of our community to SWIFTNet, we began the dismantling of the X.25 infrastructure. On 12 December 2005, the last X.25 network node was switched off. This formally marked the completion of all aspects of SWIFTNet Migration Phase 1. Piloting for Phase 2 will commence this year. Phase 2 includes rolling out hardware security modules for storing all users’ PKI certificates, and moving from the complexities of bilateral key exchange (BKE) to our improved Relationship Management Application. Migration is scheduled for 2007–2008.In October 2005, SWIFT conducted its second crisis simulation with the SC3 (SWIFT Crisis Coordination and Communication) group. Over 50 representatives participated drawn from central banks, market infrastructures and large institutions. These simulations help improve our readiness and coordination in the event of a global SWIFT crisis.
Improving our commercial focus
SWIFT is moving rapidly to improve its commercial focus to better deliver the benefits of SWIFTNet and SWIFTSolutions to you. Over 2005, our new Global Sales Services (GSS) organisation was rolled out to work closely with our banking and securities account managers to provide better technical and product support to our customers. We have located most of the GSS staffers in our local sales offices to serve you better and more quickly. We have also increased our resources in market management, product management and strategy development.From Francis Remacle to Jim Donovan
Francis Remacle retired this year. In his 18 years at SWIFT, Francis earned the respect of the entire community and was instrumental in the development and growth of SWIFT and our securities business. I know that the entire community joins me in wishing Francis all the best in his post-SWIFT years. On 1 October, James P. Donovan succeeded Francis as Executive of our Securities Industry Division. Jim is a career securities executive, most recently with 17 years at Citibank. Jim will be leading our SWIFT2010 securities strategy to take our securities business to even higher levels of market focus for custodians, broker/dealers, asset managers, market infrastructures and hedge funds.| “Our Chairman, Jaap Kamp, challenged the SWIFT community to “raise its ambitions”. We are capable, as a community, of doing even more.” |
A special thanks to our community and staff
SWIFT is a special cooperative. Our founders barely dreamed that we would be as successful as we have been. None of this would have been possible without the continued support of our global community of national Member and user groups, working groups, advisory groups and individual Members. On behalf of the Executive, thank you.We all know how important governance is, especially for our cooperative. We are all grateful to our 25 Board members for their time and effort and especially to our Chairman, Jaap Kamp, for his guidance and support.
SWIFT would not be special without its dedicated professionals who work tirelessly to deliver the goods, 24/7. I would like to extend my special thanks to all of the SWIFT team around the world.
Off to another good year
As I write this letter, financials are good and I am confident that 2006 will be another successful year for SWIFT. On 28 February 2006, we hit a peak day of just over 12 million messages – a new milestone. We are proposing additional investments to accelerate our SWIFT2010 initiatives and anticipate further price reductions and rebates before the year is over. We look forward to seeing many of you at Sibos 2006 in Sydney, 9–13 October, where we will brief you on SWIFT2010 and the status of SWIFT.Leonard H. Schrank
Chief Executive Officer
March 2006