Fiducitation: Global Custody Update, Vol.
IV, March 2002
Author: Brian O’Keeffe
Date: March 12,
2002 © 2002 Fiducite.com, Inc.
Fiducitation: A
synthesis of public Internet resources on the topic.
Instructions: Use the Table of Contents to navigate the document. Each citation has up to four distinct parts: Annotation, Clip, Source, and Cached File. Our Annotation and Clip (text or graphic from source document) help you decide whether to view the document. The source document may be viewed by clicking on the Source URL or by opening the embedded Cached File. All information is attributed to its source.
This is a monthly update of Global Custody news concerning
the industry and the major participants: State Street, Morgan, BoNY, Citi,
Deutsche Bank and Mellon. The major topics of the newsletter include General
News; Money Won/Lost; New Products; and Other Business. Note that for the Money
Won/Lost section this report will provide asset levels as available from public
sources (i.e. Globalcustody.net). Beginning next month, we include comparisons
of asset levels to the previous month.
M&A activity, which was substantial last month (most
likely because of year end business) slowed considerably this month, and there
were no large acquisitions of note. One
deal, small in size but quite interesting, involves ING’s purchase of CSFB’s
Russian business. Russia is an
obviously fragile and small market, but it is important to note that ING has
clearly taken the leadership role in this developing market.
Most likely due to margin pressures, the industry has
shifted much of its attention to the development of cross border, seamless
settlement systems. In Europe, there is
a growing debate (and mounting tension) about the direction that the
development of a proposed settlement network should take. The most notable player in this feud is the
Deutsche Borse, which seems to have designs that are much different than those
of other European exchanges. Most of
Europe was backing a Clearstream/Euroclear merger, but the Borse’s move will
almost certainly scuttle that discussion.
Meanwhile, Asian Securities regulators are approaching the same subject
with all of the appropriate “cooperation” talk. It seems unlikely that such a
large-scale project will be completed without many of the same problems that
exist in Europe.
In addition to this debate, there continues to be an ongoing
realignment of the industry, and internal reassessments of most of the major
players strategies. Amro has publicly announced that they are shedding many of
their business units in an attempt to refocus on their core corporate banking
operations. Whether this leads to a
better custody product or not will have obvious ramifications amongst big players.
While selling some retail banking operations, they have announced the expansion
of their corporate services to new markets, including Vietnam. ING’s increased commitment to Russia also
represents CFSB’s complete exit.
As trading volumes (and market values) have fallen in the
last two years, custodians are revising their opinion of all of their
businesses, and are restructuring accordingly. There is uncertainty about the
level and location of any forthcoming security market rebound, and we foresee
this leading to continued restructuring throughout the rest of the year.
Author:
Agents of Change
Annotation: This article explores the debate over the
future of European ICSDs. Several custodians, most notable BNP Paribas, argue
that ICSDs are unnecessary and that their plans for market improvements are
only self-serving.
Clip: Jon Lloyd has had enough. As marketing head of BNP
Paribas's multi-direct clearing and custody service, he says that he is tired
of all the hype surrounding the securities industry in Europe. It is time, he
says, for the industry to stop listening to the propaganda machines of the
international central securities depositories (ICSDs) and to start examining
the business strategies [that]
those propaganda machines are designed to serve.
Source: http://www.globalcustody.net/global-investor/
Cached File: 
Asian Securities Regulators Promise More Cooperation
Annotation: In Asia, regional securities regulators have
pledged to cooperate to iron out the issues standing in the way of smoother
cross-border markets.
Clip: "The region's growth and attraction with regards
to its capital market activities is very much dependent on the credibility of
its regulators and our ability to work together towards common goals objectives
and regulatory standards", said IOSCO APRC Chairman Datuk Ali Abdul Kadir,
who is also the Chairman of the Malaysian Securities Commission.
Source: http://www.globalcustody.net/news_latest/?global-custody-news,367
Cached File:
Sunny Days Ahead for Offshore Custodians?
Annotation:
This
is a note on the current environment facing offshore fund custody. The author
takes special note of the increased regulation, but booming interest in
offshore vehicles.
Clip: In truth, as with many other areas of the global
economy, a major shift in investment patterns had been registered well before the
terrorist attacks on the US. Standard mutual fund equity returns had been
unimpressive for some months, prompting a new tier of high net worth investors
and institutions to look at alternative structures. The growth of potentially
high yielding alternative investments such as hedge funds has been one of the
major challenges for investment administrators worldwide. As many of these
funds are domiciled in offshore centres, a natural fit has been established
with offshore administrators called on to apply their expertise to serve them.
Source: http://www.globalcustody.net/news_latest/?icfa,379
Cached File:
Most Recent Asset Size Information
Annotation: Only Fifth Third Bank, of the
twenty-five largest, has updated their custody data since last month.
Source: http://www.globalcustody.net/
Cached
File:
Last Month’s Asset Size Information
Source: http://www.globalcustody.net/
Cached File: 
Mellon Improves Workbench
Annotation:
CIBC
Mellon has upgraded their web based, real time market information and reporting
tool.
Clip: "Our clients and their investment managers have
a myriad of information needs that they look to us to fulfill," said Tim
Dixon, CIBC Mellon senior vice president, relationship manager. "By
launching a customizable Workbench home page, they will now be able to benefit
from selecting the specific information they want and accessing it quicker,
which is a part of our client empowerment strategy."
Source: http://www.globalcustodian.com/main.jsp?type=newsshow&id=737
Cached File: 
CitiBank Brings Pension Plan Compliance System to Web
Annotation:
CitiBank
has added this feature to their browser-based services.
Clip: Citibank's pension compliance monitoring system
allows plans to monitor investment managers' activities to make sure guidelines
are followed and to guard against unacceptable risks, the company said.
Source: http://www.globalcustodian.com/main.jsp?type=newsshow&id=695
Cached File: 
Debate Continues Over Deutsche Borse’s Purchase of Clearstream
Annotation:
More
on the growing feud over the future of a Pan European market, this article
focuses on the implications of the Deutsche Borse’s purchase of the last 50% of
Clearstream.
Clip: The evolution of European clearing and settlement
looks set to take a decisive step in 2002 – whether forwards or backwards
remains very much open to debate. The news that Cedel International will sell
its 50% share in Clearstream to Deutsche Börse, giving the Frankfurt-based
securities exchange full ownership of the ICSD, has been greeted with horror by
many in the market. The deal gives birth to the first truly integrated,
vertical clearing and settlement infrastructure in Europe, apparently stalling
any move towards a horizontal merger between Clearstream and Euroclear.
Source: http://www.globalcustody.net/news_latest/?global-investor,377
Cached File: 
The Issues Facing CCP
Annotation:
This
is an article that discusses the current obstacles to a long-discussed European
Central Counter-Party.
Clip: The principle drivers behind CCP are firstly, the
desire to reduce counter-party risk and, secondly, the need to reduce costs and
release capital. The high cost of cross border transactions in Europe, which
have a low straight-through-processing rate compared with the U.S., is often
cited as an example crying out for a pan-European CCP.
Source: http://www.globalcustody.net/news_latest/?back-office-focus,374
Cached File: 
ING Eurasia Solidifies its Leadership of Russian Market
Annotation:
By purchasing CSFB’s Russian unit, ING Eurasia
has increased its grasp on the leadership position in Russian custody services.
While relatively small, the Russian market is extremely unique, and offers
extreme potential and tremendous risk.
Clip: The
Russian custody arena just got a lot smaller, with ING Bank Eurasia, a
subsidiary of the Dutch ING Bank, purchasing the Russian custody operations of
Credit Suisse First Boston for an undisclosed amount to add $2 billion in
assets to its business.
Source: http://www.globalcustody.net/news_latest/?securities-industry-news,380
Cached File:
SEC to Weigh Cost-Benefit of T+1
Annotation:
T+1 might cost investment advisors a lot more
than has been estimated previously.
Implied herein is the reality that the SEC is far from finalizing the
regulations that will govern the implementation, and has yet to determine the
breadth of its final ruling.
Clip: The
Securities and Exchange Commission will undertake a cost-benefit analysis of
the securities industry's move to T+1 settlement to aid in regulating the new
market structure, according to a letter sent by the commission earlier this
month in response to letters from the Investment Counsel Association of America
(ICAA).
Source: http://www.globalcustody.net/cgi-local/shownews.cgi?securities-industry-news,369
Cached
File:
Celent: Real Service of Lip Service
Annotation:
Celent has done a study discussing the huge
levels of investment that have been directed at the Global Custody industry,
and the quality of Custodian performance.
Clip: “By and
large clients are pleased with the steps being taken by their custodians,” says
Pamela Brewster, Celent analyst and author of the report. “In fact, asset
managers have been so impressed by the upgrades in their custodians’ reporting
and processing systems that they are increasingly outsourcing activities such
as fund accounting and reporting.
Source: http://www.globalcustodian.com/main.jsp?type=newsshow&id=737
Cached File:
Bank of New York Acquires Gannet Welsh and Kotler
Annotation: Continuing
the recent spree of consolidation, BoNY has expanded its investment management
capabilities through this acquisition.
Clip: Newton P. S.
Merrill, senior executive vice president of The Bank of New York, said,
"Gannett Welsh & Kotler will provide us with its distinctive fixed
income management style, which will expand the alternatives in this area for
our current and prospective clients. In addition, GW&K’s current
clients will be able to access the full array of The Bank of New York’s
products and services. We are also delighted to add the experience and
knowledge of GW&K’s management team to BNY Asset Management. The
addition of GW&K to BNY Asset Management will increase our assets under
management to approximately $72 billion."
Source: http://www.bankofny.com/Pressrel/index_2031.htm
Cached
File:
Global Custodian 2001 Survey
Annotation: This is a
summation of Global Custodian magazine’s 2001 survey of custodian performance.
Clip: After
all of their talk, global custodians now have to deliver cutting edge
technology. Those that fail are being punished by clients. The 2001 global
custody survey reveals the winners and losers.
Source: http://www.abnamromellon.com/Publications/Global
Custodian Survey 2001.pdf
Cached File: