What do you think this is a picture of:

  • a secret plan for the circuit board of a new ‘3D’ games console
  • the organisational structure of a mafia crime syndicate
  • a Piping and Instrumentation diagram (P&ID) for part of a nuclear power plant
  • an OBASHI B&IT diagram of a company HQ, showing how people, process and tech interact?

Actually it isn’t any of those things. (Sorry!)

It’s a section of a diagram, The Shadow Banking System, that in the words of Gillian Tett and Marcus Roberts of the FT ‘depicts how money goes round the modern world, particularly (but not exclusively) in the US’ (subscription needed). The complete chart can be found on page 2 of a paper, Shadow Banking, published (pdf) by economists at the Federal Reserve Bank of New York (NYF).

The report ‘documents the institutional features of shadow banks, discusses their economic roles, and analyzes their relation to the traditional banking system’. Finance companies and credit hedge funds are examples of ‘shadow banks’.

The Shadow Banking paper is interesting to us here at OBASHI because it seeks to understand flow of money (which in today’s world is the flow of data) between financial institutions. As I read a few weeks ago on the recent posts made by North Shore Advisory, there is a pressing need for finance to ‘understand precisely how its product [money/data] flows and interacts with people, process and technology’. While the The Shadow Banking System diagram is only a large-scale ‘birds-eye’ view of part of the overall financial system it will hopefully help to stimulate debate in finance about how it works.

As Gillian Tett says,

“the best thing the NY Fed could do right now is print thousands of copies of that poster – and dispatch it across the world. I suspect it would be far more persuasive about the need for debate than any number of pious G20 speeches.”

The Reserve Bank of India (RBI) may welcome a copy. A big cheer went up at OBASHI HQ when we read that the RBI and Indian commercial banks are seeking to ensure “accuracy and integrity of data flow from the banking system to the Reserve Bank.”

The banks in this ‘Core Group’ are to embark on a period of ‘self-assesment’ to determine ‘current state’. The aim is to achieve a ‘common end-state’, which is, ‘complete automation of data flow’.

“An automated data flow from the IT systems of banks to Reserve Bank with no manual intervention will significantly enhance the quality and timeliness of data. This will beneft the Indian banking sector by enabling more informed policy decisions and better regulation. Over and above the regulatory benefits, there will be many other benefits in disguise to the internal operations, efficiency and management of banks…” (Approach Paper on Automated Data Flow from Banks to Reserve Bank of India, pdf p.24)

Since the Industrial Revolution, understanding flow has been vital for business, economy and society. History has shown that if you understand flow you understand how your business works. And if you can clearly demonstrate that understanding you can create trust. And where there is trust people are more likely to do business.

But there cannot be trust without transparency. And without transparency you can’t create business clarity. We’re not evangelical enough about OBASHI to suggest that it can help you see the light, just that it can help you see things more clearly.

And that has to be a good thing, especially if you are standing in the shadows.