Silvia Attanasio, is the Head of Innovation at ABI (Italian Banking Association). Previously to that role she worked for 17 years at ABI Labs, the centre of research and innovation at ABI. Her present mission is to support the innovation amongst the banks within the Italian Banking Association. In this podcast she shares with us the exciting journey ABI has taken in launching a blockchain for Italian interbank reconciliation. We are also very grateful for her to be recording this podcast with us from her home in Milan during the Coronavirus Pandemic.

 

What is blockchain?

From Silvia’s point of view, blockchain is a way to organise a history of events and guarantee the integrity of the data in order to make it easy for a group of people or companies to agree on it.

However, Silvia also wants to say that blockchain isn’t a cost cutting technology. She agrees that the technology has the potential to bring efficiency gains but from her point of view we have yet reached that point.

 

What is Spunta?

Spunta is the reconciliation of bilateral accounts, a sort of nostro and vostro account. It’s a process aimed to clear the mismatch in a double entry bookkeeping.

Quick definition: (source: Investopedia)

* A Nostro account is a reference used by Bank A to refer to "our" account held by Bank B. Nostro, is a shorthand way of talking about "our money that is on deposit at your bank."

* Vostro is the term used by Bank B, where Bank A's money is on deposit. Vostro is a reference to "yours" and refers to "your money that is on deposit at our bank." A Vostro account is like any other account held by a bank. The account is a record of money owed to or maintained by a third party, typically another bank, but it can be either a company or an individual.

In Italy the way bilateral accounts are used is where you have a single account, co-owned by two counterparties that have an automatic matching process. After that the operators deal with the suspended movement – operations that need to be confirmed before being registered in the bilateral account. This interbank process, based on bilateral registers, can be quite complex because it is based on a single account that requires the point of view of Bank A and of Bank B to match on the same ledger.

To complicate matters even further, there is a rule that states that the ownership of that single account has to switch every three years form one bank account to another. When a bank has ownership of the account they see all the information, movements, and balance. But when the ownership switches to the corresponding bank, they can’t see the information anymore and have to request it from the corresponding bank via phone calls, emails and fax. This is a very cumbersome process.

Opportunities and challenges to updating Spunta

In 2010 ABI attempted to reform this process. However, it was realised that there wasn’t the will to issue a new banking agreement. The Spunta process is ruled by an interbank agreement dating from 1978. It was only when ABI discovered blockchain technology that the necessary commitment was found by the banks to explore reforming this process for two different reasons:

* Individuals closely linked with the Spunta process were eager to try new approaches to reform the process

* Innovation departments within the banks were looking for opportunities to run experiments with new technologies

The interesting thing was that no one from the Spunta world knew about blockchain and no one from the blockchain world k...