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State Street axes Deutsche Bank as its sub-custodian in over a dozen countries
Deutsche Bank ’ s sub-custody business dealt a huge setback as its biggest client severs ties , casting a shadow over the German securities services provider ’ s future .
State Street has terminated its long-standing global sub-custodian relationship with Deutsche Bank , dealing a major blow to the German bank ’ s local custody business , Global Custodian understands . According to multiple sources , State Street has decided to replace Deutsche Bank in over a dozen markets across Europe and Asia , and instead will use a combination of BNP Paribas Securities Services , Citi and HSBC . Global Custodian understands the decision to switch local providers was based on fees and a perception that Deutsche Bank was not as committed to the sub-custody business as State Street would like them to be , according to sources familiar with the matter . “ Despite the periodic changes in our sub-custody relationships , Deutsche Bank remains a long-standing and strong partner of State Street and we plan to continue working together and engaging with them across a number of products and services ,” a State Street spokesperson told Global Custodian . While State Street will no longer be a securities services client , it remains a user across Deutsche ’ s corporate and investment banking businesses . The switch by State Street is part of a more stringent stance towards its counterparties and the fees it pays for local custody services , according to two people with knowledge of the move . State Street currently uses Citi as its sub-custodian in 16 markets including Brazil , Colombia , Russia and Singapore , while it utilises HSBC most for Asia-Pacific and Middle East markets , including Australia , China , Hong Kong , Kuwait , Saudi Arabia and UAE , among others . BNP Paribas Securities Services , Citi and HSBC declined to comment . State Street has been Deutsche Bank ’ s biggest client for its sub-custody business since 2003 , when the former acquired the Frankfurt-headquartered organisation ’ s global custody and fund administration business . Deutsche Bank then became State Street ’ s preferred sub-custodian in select markets including France , Germany , India , Indonesia , Korea , the Netherlands , Pakistan , Philippines , Spain , Taiwan and Turkey , among several others . Speaking to Global Custodian , experts have queried Deutsche Bank ’ s commitment to the sub-custody business following the departure of several high-profile executives , the sale of its hedge fund administration and prime brokerage businesses , and a reduction in investment . Michaela Ludbrook , who has been Deutsche Bank ’ s global head of securities services for just 18 months in New York , is also understood to have taken a new role in the US after the bank recalibrated its corporate client offering . Deutsche Bank is currently undergoing a search for her replacement , who will become its fourth head of the securities services business in just three years . In addition , it saw two senior executives depart last year including Marton Szigeti , a top securities services salesperson , who joined Clearstream as head of sales and relationship management for the UK , Americas and Nordics , and Chay Thurow , its former head of securities services operations , who joined Citi as global head of custody operations . Sources also suggest that Deutsche Bank ’ s recent restructuring to focus on its core businesses has shown that there is a feeling among internal decision makers that the importance of running a costly global sub-custody network has declined . However , Deutsche Bank stated it has no intention of shrinking its sub-custody business and remains focused on growing its presence organically , particularly in Asia where it most recently won regulatory approval to offer local custody services in China . “ Deutsche Bank is 100 % committed to its securities services franchise . The bank has invested substantially into digital and IT and will further expand this business to new jurisdictions . We see strong growth particularly in APAC and other emerging markets ,” a Deutsche Bank spokesperson told Global Custodian . In Global Custodian ’ s Agent Bank in Major and Emerging Markets Surveys , Deutsche Bank scored high marks in several countries , where it was a ‘ Market Outperformer ’ for Germany and a ‘ Global Outperformer ’ for India , Turkey and the UAE . Deutsche Bank had also rolled out a number of new technology offerings for securities services clients during 2020 . These included the launch of four application programming interfaces ( APIs ), one of which was developed in collaboration with global custodian client BNY Mellon to automate FX confirmation times in emerging markets . It also launched an early warning service for securities settlement delays to help other banks , brokers and buy-side firms to avoid trade failures and penalties under the Central Securities Depository Regulation ( CSDR ).
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