GC Spring 2021 | Page 20

“ Even in terms of market presence , market advocacy and connectivity , a lot of that is done now through local market custodial associations .”
[ I N D E P T H | S U B - C U S T O D Y ]

Redrawing

the custody map

Is the growth of regional sub-custody offerings a response to client demand or an inevitable development path dictated by economics ? Richard Schwartz investigates .

A quick glance through the published results of Global Custodian ’ s agent bank surveys of the past few years will soon bring to one ’ s notice to a trend in rated providers . With the exception of certain specific markets – Russia , India , Greece and South Africa come to mind – the cohort of rated providers is increasingly drawn from institutions that have a regional , or at least multi-market , offering . Looking back to the 1990s and the early days of these surveys , the magazine ’ s pages were filled with numerous indigenous banks , who saw their local links to both market mechanisms and regulators as a source of strength . Do those advantages no longer apply ? There are indeed fewer and fewer purely local providers , says Harald Kreuzmair , division head global investor services , Raiffeisen Bank International ( RBI ) in Vienna . “ It ' s difficult to compete in your own market if that ' s the only offering you have ,” he suggests , though there may be exceptions . In certain markets , there are factors that work to support a local offering . Russia , for example , is a vast market , where indigenous providers are supported by a large domestic client base . “ To compete against some of the large local providers is always a challenge ,” says Kreuzmair . Is the move to multi-market offerings a result of client push or the successful selling of a proposition developed by providers ? A bit of each , suggests Kreuzmair . “ We ' ve always provided local custodian services in Central and Eastern Europe , since we ' re on the ground there . We are a universal bank in 13 of the countries in

“ Even in terms of market presence , market advocacy and connectivity , a lot of that is done now through local market custodial associations .”

ANDY OSBORNE , SENIOR VICE PRESIDENT AND NETWORK MANAGER , NORTHERN TRUST the region ,” he explains . Some years ago , foreign clients using the bank ’ s services in a number of markets began asking questions . " They wanted to know what the connection was between the local banks and the head office , how autonomous the local bank was or whether there was a group standard , why the invoices from each market looked different , why the reporting looked different and so on ,” says Kreuzmair . “ We decided to make the most of our position and create a standardised product from the head office rather than a hub solution , which just creates another ‘ man in the middle ’.”
Shock exits The architecture for the solution was enabled by the growing ability to connect direct to local CSDs in European markets . “ The criteria for direct connection are a regulatory framework that allows us to be accepted as a member of the CSD and , of course , it needs to make commercial
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