The automation technology, introduced to cut costs, has made banking more capital-intensive than ever.
The first aim of automation in banking is to establish clean data streams between counterparties, in order to cut the cost of handling paper. Netting systems arise in response to this need. The world's money clearing networks--Chips in New York, Chaps in London, Sagittaire in France, Zengin in Tokyo--are essentially netting systems. By offsetting debits and credits between the major counterparties, they condense the movement of money to the minimum.
Subsidiary netting arrangements are starting to emerge. The Chemical Bank inspired FXNet in London will clear out the forward foreign exchange market in the UK, reducing the payment costs and minimizing daily settlement exposures in a market that trades over $100 billion on a brisk day. IP Sharp has developed systems for netting international securities (Securities Clearing International Corporation), and some groups of corporations (like the oil majors in the US, or the motor trade in the UK) participate in informal netting processes.
The second aim is to furnish the customers with up-to-the-minute data on all their transactions. For corporate or bank treasurers this means cash flow information on balances, payables and receivables, positions, limits and exposures.