October 2017

CUSTODY DIRECTORY: Looking at the safekeepers

Vault_custodyFor this year’s Q&A with senior custody executives, we focused on interest rate normalisation. Plus, listings for the firms that took part in our custody report.

 

 

 

 

BNP PARIBAS SECURITIES SERVICES
Bruno Campenon, head of financial intermediaries and corporates

How do you anticipate that interest rate normalisation will affect the custody banking business?
The drop in interest rates across the world has affected custodians’ margins, but has been tempered by operational efficiency gains. The normalisation of interest rates as the world economy recovers will help finance the digitalisation of services offered by custodians, which will benefit the entire industry.

Which event in custody banking has most interested you this year?
A recent report by SimCorp found that 46% of European fund firms rated the removal of manual operations from trade processes as a top priority. A lot of the enhancements we have undertaken this year go in this direction: from FundLink, which streamlines KYC [know-your-customer] requirements associated with fund distribution to forthcoming initiatives to use blockchain to digitalise asset servicing.

In the next five years, how do you see the asset servicing sector changing?
Our sector will benefit from the digitalisation of our reporting, processes and services. New technologies such as distributed ledger will bring solutions to specific industry pain points such as KYC, onboarding and data distribution or sharing. This is already happening. Within the workplace, repetitive tasks will become a thing of the past thanks to robotisation and further process automation made possible by artificial intelligence. This will free staff to focus on building solutions and supporting clients.

BNP Paribas Securities Services
9 rue du Débarcadère
93500, Pantin, France
www.securities.bnpparibas.com
+33 (0)1 42 98 10 00

Ultimate parent company origin: France
Global assets under custody: €9,001 billion
Global assets under custody EMEA: €8,322 billion
Senior executives in Europe: Patrick Colle (Paris), general manager; José Placido (London), global head of client development; Alan Pochet (Paris) head of clearing and custody services


CACEIS
1-3, place Valhubert
Paris 75206, France
www.caceis.com
[email protected]
+33 1 57 78 00 00

Ultimate parent company origin: France
Global assets under custody: €2,647 billion
Global assets under custody EMEA: €2,647 billion
Senior executives in Europe: Jean-François Abadie (Paris), CEO; Joe Saliba (Paris), deputy CEO; Philippe Bourgues (Luxembourg); managing director – CACEIS Bank, Luxembourg branch member of the CACEIS executive committee


CITI
Pervaiz Panjwani, Emea head of custody and fund services

How do you anticipate that interest rate normalisation will affect the custody banking business?
We anticipate that charges will be dropped for deposits and that assets will return to fair costing. However, the time horizon for this change and expected spreads are uncertain.

We expect that effective return will be measured by quality of deposit, the balance sheet need and the client type, with governmental and corporate cash topping the ‘deposit pyramid’.

These factors will lead to increased sensitivity in balance sheet management and interest rate-return partnerships, as well as being central to the bidding process for new and existing transactions.

In the next five years, how do you see the asset servicing sector changing?
Advances in technology are leading to significant investment in data strategy – early, easy and flexible access of data will lead to improved digitisation, creating efficiency with service providers/custodians and clients to allow quicker time to market and investment decision-making.

Cyber security will become a key area of focus and will demand greater investment and transparency to protect client data.

Fintech, led by distributed ledger technology and artificial intelligence, will take centre-stage from the niche offering. Fintech will increase competition and will drive significant industry growth as it finds a way to integrate into wider market systems with an industrialised solution.

A drive towards efficiency and transparency combined with regulatory changes will lead to innovation and change in products and pricing. We are seeing a significant shift from active investments into passive, which is mainly led by the ease of accessibility and cost differentials. There will be many other products and pricing trends developing to digitise the value chain.

Citi
Citigroup Centre, Canada Square
Canary Wharf
London, E14 5LB
www.citibank.com/mss/products/investor_svcs
[email protected]
+44 20 7986 6000

Ultimate parent company origin: US
Global assets under custody: €14,460 billion
Global assets under custody EMEA: n/d
Senior executives in Europe: Sanjiv Sawhney (London), global head of custody and fund services; Pervaiz Panjwani (London), EMEA head of custody and fund services; Rob Ranson (Dublin), EMEA global custody product manager


NORTHERN TRUST
Clive Bellows, head of global fund services Emea, Northern Trust

How do you anticipate that interest rate normalisation will affect the custody banking business?
The direction and level of interest rates are important factors in our earnings and our business. As and when interest rates move up, financial organisations, including Northern Trust, will look for interest rate spreads to widen. This will allow for a less compressed environment and may bring gradual benefits for our custody business.

However, we are mindful that despite the expected interest rate rises that have taken place so far this year, such increases have been very measured. Interest rates globally remain near historical lows and there does not appear to be an immediate end in sight to the wider low interest rate environment that has persisted since the 2007-08 global crisis.

Which event in custody banking has most interested you this year?
The impact of technology (blockchain, artificial intelligence, robotics) on improving efficiency, streamlining processes and ultimately changing the financial services industry - 65% of asset management CEOs foresaw technology reshaping or significantly impacting competition.

In the next five years, how do you see the asset servicing sector changing?
  •  Asset servicers will have to embrace technology to become more scalable and efficient.
  •  Asset servicers will need to become data providers and managers - capturing the middle-office investment data to derive business insights and value from this data.
  •  Asset managers will see technology innovation, data delivery and ease of integration as key differentiators for asset servicers.

The Northern Trust Company
50 Bank Street
London, E14 5NT
www.northerntrust.com
+44 0207 982 2000

Ultimate parent company origin: USA
Global assets under custody: €6,467 billion
Global assets under custody EMEA: €1,962 billion
Senior executives in Europe: Teresa Parker (London), CEO Emea; Penny Biggs (London), UK SMF Regional Practice Executive Ins Sls/RM; Toby Glaysher (London), executive vice president and head of global fund services


PICTET & CIE
Claude-Joseph Pech, head of PAS front group

How do you anticipate that interest rate normalisation will affect the custody banking business?
Low interest rates have impacted custodian profit and loss for the past several years, to a recent extreme of negative revenues as major currencies introduced negative credit interest rates. Cash on balance sheet has become a real issue for custodians as it costs money and clients are not willing to pay fees for this. In this regard, higher interest rates will be beneficial for custodians.

Which event in custody banking has most interested you this year?

Blockchain initiatives are definitely of interest to us. Indeed, we are open-minded when it comes to fast-moving evolutions in our industry and the growing amount of fintech initiatives. We believe that leveraging digital transformation will bring even more added value to our customers.

In the next five years, how do you see the asset servicing sector changing?

We believe there will be further consolidation of the sector and an increase in outsourcing of medium-sized asset servicing players. Ultimately, there will only be room left for large asset servicers, providing extremely standardised services and niche players.

Pictet & Cie
60, route de Acacias
Geneva 1211, Switzerland
www.group.pictet
+41 (0)58 323 23 23

Ultimate parent company origin: Switzerland
Global assets under custody: €438 billion
Global assets under custody EMEA: €202 billion
Senior executives in Europe: Marc Briol (Geneva), CEO; Claude-Joseph Pech (Luxembourg), head of PAS front group; Gilles Paupe (Geneva), head of institutional CRM CH; Bettina Graeber (Luxembourg), head of institutional CRM LUX


RBC INVESTOR & TREASURY SERVICES
Sébastien Danloy, CEO, RBC Investor Services Bank S.A.

How do you anticipate that interest rate normalisation will affect the custody banking business?

Given the historical period of low interest rates we are emerging from, we expect central banks to approach normalisation with caution. RBC I&TS is well positioned to pursue the opportunities created by the changing environment, given our strong approach to capital and risk management, and solid investments in our employees, business and technology.

Which event in custody banking has most interested you this year?
The past year has seen the introduction and implementation of a significant volume of regulatory changes. The overall aims of investor protection and transparency are commendable, but the volume and pace of regulatory change present unprecedented challenges to asset managers and service providers. The costs of complying with new regulations may result in the unintended consequence of increased charges to underlying investors.

In the next five years, how do you see the asset servicing sector changing?
Technology is bringing significant change to financial services firms, including how they interact with clients. RBC I&TS’ Advanced Client Experience technology programme is designed to align our clients’ requirements with system enhancements to digitise the client experience, enhance operational efficiency and reduce risk.

RBC Investor & Treasury Services
2 Swan Lane
London EC4R 3BF
www.rbcits.com
+44 020 7653 4000

Ultimate parent company origin: Canada
Global assets under custody: €2,023 billion
Global assets under custody EMEA: €1,580 billion
Senior executives in Europe: Harry Samuel (London), CEO; Francis Jackson (London), head of global client coverage; Joanna Meager (London), global head of client operations and head, UK; Sébastien Danloy (Luxembourg), CEO, RBC investor services bank S.A


SEB BANK
Tomas Engel - head of investor services sales

Which event in custody banking has most interested you this year?
There are a number of elements that really catch my interest. I will stick to one, which is financial sector collaboration. This has been evident in many areas and I will highlight three: • Industry openness on cyber security has increased tremendously as ‘dark side’ activity has increased in areas where they are looking for the secrets, the money, the damage or the cause and whether the threats are direct or indirect. Industry collaboration is evident in order to identify, protect, detect, respond to and recover from such threats.

  • Industry collaboration in terms of due diligence. Credit to the initiative co-ordinated via the Association for Financial Markets in Europe (AFME) to construct a standard due diligence covering 80% or more of the important needs and providing more space for focus on areas of specific individual organisation needs.
  • Regulatory collaboration. We applaud the EU’s European Post-Trade Forum initiative where intense focus was given from all concerned post-trade parties to identify and prioritise the need for focus on remaining barriers in the post-trade space.

In the next five years, how do you see the asset servicing sector changing?
Providers must be able to service the complete needs of an investor and we think that will happen only in collaboration between the provider and various ‘sub-contractors’ that provide specialised solutions in areas where white-labelling is possible (agency lending, voting, private equity, etc). Only then will a best-of-breed solution be delivered.

Robotisation and use of DLT will play key roles here.

SEB
Kungsträdgårdsgatan 8
106 40 Stockholm, Sweden
www.sebgroup.com

Ultimate parent company origin: Sweden
Global assets under custody: €72.3 billion
Global assets under custody EMEA: €72.3 billion

Senior Executives in Europe: Tomas Engel (Stockholm), head of investor services sales; Göran Fors (Stockholm), deputy head of investor services; Joachim Alpen (Stockholm), head of large corporates and financial institutions; Johan Torgeby (Stockholm), group CEO


SOCIETE GENERALE SECURITIES SERVICES
Etienne Deniau, head of strategic marketing

How do you anticipate that interest rate normalisation will affect the custody banking business?
Custodians are suffering from negative interest rates and have organised invoicing of negative creditor rate on long balances when their information systems were not necessarily designed for it. This was made reducing creditor margin to almost nil.

The return to positive interest rates could restore a creditor rate margin. Its impact would be differed because part of overnight liquidity from clients is locked into longer-term investment according to the ALM run by most players.

Which event in custody banking has most interested you this year?
Implementation of regulations such as PRIIPS or MIFID II has been challenging throughout 2017.

A wider use of robotic process automation and AI systems have helped to make quick wins in efficiency and a better understanding of large amounts of data.

The silent revolution is socially responsible investment. That continues to grow, changing from a conviction of asset owners to a motivation for asset managers.

In the next five years, how do you see the asset servicing sector changing?
We foresee more standardisation and safety in markets leading to a greater internationalisation and diversification of investments.

There should be a consolidation of global asset servicers that will need to rely on more specialist providers, similar to what has happened to the aeronautics industry.

As data volumes will continue to expand, finding and visualising relevant data will become a core activity.

Societe Generale Securities Services
189, rue d’Aubervilliers
Paris, 75886, France
www.securities-services.societegenerale.com
[email protected]

Ultimate parent company origin: France
Global assets under custody: €3,947 billion
Global assets under custody EMEA: €3,950 billion
Senior executives in Europe: Bruno Prigent (Paris), head of SGSS; Christophe Baurand (Paris), head of coverage, marketing and solutions; Didier Rolland (Paris), head of securities banking operations; Olivier Blanc (Paris), head of fund services operation


STATE STREET
Elizabeth Nolan, co-head global services Emea

How do you anticipate that interest rate normalisation will affect the custody banking business?
In the current financial climate, US custodians with Europe operations have little appetite to retain cash on their balance sheet. Under an interest rate normalisation backdrop, we could expect this to be beneficial to custody, due to increased ability to sustain and support client cash balances. So, although recovering interest rates will ease the balance sheet burden for custodians, the economic uplift of interest rates is likely to be felt in our clients’ greater ability to borrow cash and seek out additional alpha.

Which event in custody banking has most interested you this year?
Regulation in Emea remains at the forefront of State Street’s focus. Given the upcoming impact of MiFID II, Priips, GDPR and other regulatory changes in Emea, we must not only evolve our internal governance and organisation in preparation for this change, but we must also look to our clients; understanding their needs and offering our expertise as a trusted partner.

In the next five years, how do you see the asset servicing sector changing?
Advancements in data technology over the past few years, combined with unique and truly vast quantities of data held by custodians, means clients are looking for further insight from their back-office functions. State Street is leading this charge with our Global Exchange business, creating unique tools and an advanced data platform.

State Street
20 Churchill Place, Canary Wharf
London E14 5HJ
www.statestreet.com
+44 20 3395 7000

Ultimate parent company origin: USA
Global assets under custody: €20,507 billion
Global assets under custody EMEA: €3,505 billion
Senior executives in Europe: Jeff Conway (London), chief executive officer EMEA

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