Share page with AddThis

Magazine Issues » October 2020

Custody directory 2020


Pierre_Cimino_CaceisPIERRE CIMINO, HEAD OF INTERNATIONAL DEVELOPMENT, CACEIS

Standardisation across the asset servicing industry is vital to back-office efficiencies. Has standardisation gone far enough to reduce operational friction and costs for asset managers and their clients? What sticking points remain, if any, and what needs to happen?

As always, there is a balance between cost-efficient standardisation and more expensive client-friendly flexibility that is difficult to strike. The asset servicing industry has made huge leaps in standardisation, especially in terms of data transmission, using standard formats, templates and methods that have enabled much of the manual processing part of the operational workload to be offloaded to machines. The standardisation permits robotic process automation (RPA), optical character recognition (OCR) and some artificial intelligence (AI) to free up human resources from repetitive tasks, lowering cost and risk at the same time. These cost and time savings are passed on to asset managers and their clients.

Some client types have resisted the switch to digital communications, favouring fax or other non-standard methods of data communication, but the current pandemic and uptick in teleworking has seen many clients make the switch to more standard formats and processes.

Please tell us something about the stresses and strains of delivering asset services during 2020, due to the onset of the virus and lockdown.
CACEIS was fortunate that it had the foresight to equip all staff with laptops and a secured IT infrastructure for remote connections in 2019, so there was little difficulty for staff to connect to all the systems and software required for business continuity during lockdown. Telephone communications were simply switched to Skype for Business with its secure protocols. A skeleton staff was always present on site to handle any particular issues, but other than that, teams functioned well and managers organised regular virtual team meetings to keep staff up to speed on projects and developments.

We have had very positive feedback from our clients on our ability to ‘get the job done’ as we even managed to perform two large international client migrations while all staff were working from home.

One standout achievement for CACEIS was the acceleration and full roll-out of order-placement functions on TEEPI Market Place distribution platform designed specifically for investors working remotely. Thanks to the hard work of all the teams involved, investors with no access to traditional means of subscription/redemption order placement could continue their activities.

What will custodians be focusing on most in the year ahead, both generally and with respect to asset management clients?
Investment in technology will continue throughout the coming year, especially in the KYC/AML [know-your-customer/anti-money laundering] field where ensuring compliance is costly, slow and somewhat of a barrier to entry for investors due to the administrative burden of mailing in original documentation.

Many companies, including CACEIS, are pushing ahead with plans to digitalise and simplify this process and the pandemic has given custodians an excellent opportunity to lobby regulators to do away with paper-based compliance requirements and digitalise.

A number of jurisdictions are behind on SRD II implementation and custodians like ourselves will be focusing on assisting asset management clients with their compliance obligations via specially designed services.

There will also be a focus on maintaining and furthering the business agility gained from Covid experience, where virtual meetings, fewer delays-by-PowerPoint and snappier decision-making have been combined with the realisation that high-quality personal service doesn’t have to be delivered ‘in person’.

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 number of employees working in custody: 2,500
Global assets under custody: $4,340 billion
Global assets under custody EMEA: $4,300 billion

Senior executives in Europe: Jean-François Abadie (Paris), CEO; Joe Saliba (Paris), deputy CEO; Pierre Cimino (Luxembourg), head of international development


Pervaiz_PanjwaniPERVAIZ PANJWANI, GLOBAL HEAD OF CUSTODY AND FUND SERVICES, CITI

Standardisation across the asset servicing industry is vital to back-office efficiencies. Has standardisation gone far enough to reduce operational friction and costs for asset managers and their clients? What sticking points remain, if any, and what needs to happen?
The asset servicing industry already benefits from a highly standardised operating environment, with high levels of STP [straight-through processing]. Market infrastructure-led initiatives such as T2S [Target2-Securities] in Western Europe have dramatically improved standardisation in the settlement space, but there do remain pockets of fractured processing at the CSD [central securities depositary] level, particularly in relation to core asset servicing. Similarly, while core custodial activities may be relatively standardised, more ancillary activities are not. To name a few:

    • Proxy services: Proxy Vote Processing remains a laborious process. Citi’s solution was to roll out a new market utility, Proxymity, which connects issuers and end-investors directly on a unified platform, allowing instant acknowledgement of proxy votes. We hope to see the deployment of Proxymity to as many markets and issuers as possible.

    • SSI [standard settlement instruction] management: A growing percentage of the asset management community is transitioning to Omgeo GC Direct. We see this as a positive step in the right direction and have built functionality to ensure automated input to GC Direct, rather than manual upload and maintenance of SSIs. 

    • Tax processing: Many local markets have manual processes that make it hard to standardise the lodging and processing of tax documentation to avail of tax relief. Citi invests considerably in its tax platform, to ensure automaton and value to clients through fewer missed reclaims.

Please tell us something about the stresses and strains of delivering asset services during 2020, due to the onset of the virus and lockdown.
While remote working certainly added a layer of complexity to the functional operational actions required to maintain asset servicing functions and manage exceptions, by and large there was no degradation in the ability to deliver asset servicing from our experience.

This is not to say that this has been an easy time for our staff and we are proud of how well they have delivered for our clients in this environment.

Some of the main challenges we face include:

    • Materially increased settlement volumes in Q2: Our operations and technology infrastructure coped with a double-digit increase in daily volumes over a sustained period during the worst of the market turmoil with no disruption to our clients. This is a testament to the professionalism of our operations teams and the resilience we have developed through investment in our technology over the last several years.

    • Maintaining continuity of BAU [business as usual] in a work-from-home environment: Through our continuity of business protocols, which were enacted as a precaution at the onset of this crisis, we were able to ensure that all critical operations could be performed from alternate locations as needed. At the peak of the lockdown, over 90% of our staff were supporting clients from their homes.

    • Management of physical records and wet-ink signatures: Support from regulators around the world in temporarily waiving the more onerous of these requirements has been key in allowing us to support our clients in account opening and processing.

    • Employee engagement: We are all faced with the prolonged effects of enforced isolation, be that juggling childcare and family commitments or feeling disconnected from colleagues at work. Citi’s focus has been on ensuring transparency, with managers actively checking in with their teams on a regular basis. As a franchise, we are also attempting to ‘over-communicate’ with our workforce to ensure that staff know what the strategy of the firm is in managing through this crisis.

What will custodians be focusing on most in the year ahead, both generally and with respect to asset management clients?
In our view, custodians will be focused on three main objectives in 2021 to support our asset management clients:

    • Completion and roll-out of their data and digital programs: In the remote environment we are all currently operating in, self-service and efficient data delivery become even more critical. Citi has been focused on completing the roll-out of its CitiVelocity Clarity Platform including the deployment of NLP [natural language processing] for better query processing. Streamlined digital on-boarding process will be key to self-service, with Citi deploying an online on-boarding platform with transparent workflow to enhance the client experience.

    • Regulation: Implementation of key European directives will come to the forefront in 2021. With the roll-out of support for SRD [Shareholder Rights Directive] II in September of this year, the uncleared margin rules for derivatives, and the forthcoming AMLD5 [anti-money laundering] directive, there is plenty to keep custodians busy.

    • Seamless integration of custody and middle-office services ensuring accurate and timely life-cycle updates for all custody services with the transparency to allow effective management and oversight. Data accuracy, integrity and consistency ensuring reconciliation of not just real cash, position and transactional-level data, but ancillary security-related information.

Citi
Citigroup Centre, 25 Canada Square, Canary Wharf
London, E14 5LB, UK
[email protected]
+44 2075082528

Ultimate parent company origin: US
Global number of employees working in custody: 6,900
Global assets under custody: $21,600 billion
Global assets under custody EMEA: $8,200 billion

Senior executives in Europe: Pervaiz Panjwani (London), EMEA head of custody and fund services; Rob Ranson (Dublin), EMEA global custody and fund services; Eoin Moylan (Dublin), EMEA CIS product head