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Nordea exits sub-custody for the Nordics , agrees deal with Citi for client transition
Local sub-custody providers have faced a challenging environment amid growing competition from global custody banks and increased regulatory costs .
Nordea has decided to exit the Nordic sub-custody business and has agreed with Citi to recommend existing clients to appoint the US bank as their replacement provider . The move will significantly expand Citi ’ s market share in the Nordics , after the bank rounded out its pan-Nordic sub-custody offering with the opening of a Finland business last year . According to the bank , clients that opt to migrate will be able to leverage Citi ’ s unique European Single Legal Vehicle ( SLV ) platform through its Dublin-based office , in order to gain direct access to all major European markets , including almost all the TARGET2-Securities ( T2S ) markets , via one single access point . “ The strategic value of this deal reflects the ongoing investment into our European platform and our T2S strategy . As the Nordics come into scope , it is important for us to build our presence and our market share as effectively as possible ,” Reto Faber , head of direct custody and clearing , Citi told Global Custodian .
“ Through our systemic core platform SLV , where we service all T2S markets , Nordic clients will be able to utilise a single contract relationship to gain access to a streamlined platform delivering T2S services .” The transition of the Nordics markets to the pan-European securities settlement platform has not been entirely smooth over the past few years . Finland had postponed its T2S migration to 2023 , and while Denmark was one of the first markets to transition to the platform in 2018 , its experience has been fairly rocky . According to Faber , the agreement with Nordea could help further facilitate migration of Nordics securities settlement onto T2S . “ In order to meet the of migration of the Nordics onto T2S , it means we have had to step up capabilities in the frontoffice , strengthen our presence on the ground , to bolster our operational capacity , and to build up resources to take on the onboarding of clients and teams .” The deal is similar to Citi ’ s 2013 acquisition of ING ’ s local custody and securities services business for seven Central and Eastern European markets .
However , it is a referral agreement which will not include any automatic transfer of assets , people or systems . “ We expect the client base to already be familiar to us through existing relationships and operating models . We have the right number of front-office and client service staff in the region to take on those clients and operational processes ,” explained Matthew Bax , global head of direct custody and clearing , Citi to Global Custodian . “ We have undertaken significant planning and feel confident in our ability to support clients hitting the required time frames , especially as there is no need for complex lift outs or tech migrations . Looking ahead , our aim is to ensure a smooth transition for Nordea ’ s current clients .” The decision by Nordea follows a challenging environment for local sub-custody providers amid growing competition from global custody banks that have expanded their presence in the region . In addition , regional banks have also had to make tough choices about their securities services business in the face of increased costs from regulation , such as the Central Securities Depository Regulation ( CSDR ), which requires local and regional providers make significant updates to their systems . Norwegian bank DNB Bank announced in 2018 it would no longer provide custody services for foreign clients , ending a service it has provided since 1925 , while last year , Stockholm-based Handelsbanken revealed it would also close their sub-custody business . “ The arrangement with Citi supports our strategic objective with increased Nordic focus . Our clients that transition to Citi can be confident that their short- and long-term needs are catered for in the best possible way ,” said Martin Persson , head of large corporates and institutions at Nordea in a statement . Nordea previously sold its global custody business to JP Morgan in 2008 , transferring around € 200 billion of assets under custody and the US bank as the global custodian for its internal institutional clients such as Nordea Funds and Nordea Life & Pensions .
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