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providers are now affected by the same pressures and challenges .”
Decisions don ’ t just come down to price While cost and margin pressures are clearly a factor in decisions to exit the business , cost is not necessarily the key battleground for survival . Stephen Pemberton , global head , direct custody and clearing , and broker outsourcing product at HSBC is responsible for the custodian ’ s proprietary agent network of 38 markets . “ If you look at some of the markets where we operate , you ' ll find local providers that are offering custody services far cheaper than we are or any of our big international competitors . Clients , however , recognise that there is a value from partnering with us from length of time in the market to the infrastructure we ' ve built , and the connectivity , the regulatory relationships and the insights that we can bring .” Pemberton acknowledges the challenges that Osborne identifies . “ Clearly the industry is facing huge margin pressure . The interest rate environment is very challenging . So cost , of course , is a component ,” he says , “ but the biggest clients tend to recognise that you can only price so low before a business becomes unsustainable . There are clients who tell us that they ' ve had conversations with local providers who offer very , very cheap pricing for custody , but when you lift the covers , it ' s sometimes more difficult to understand how they can provide that service with the same levels of risk management and comfort around the processing , operational capacity and capability .” A more positive reason for the popularity of regional offerings may be their ability to map with the strategic ambitions of the institutional investors themselves . “ They ' re looking for partners that will work with them to match their growth ambitions and co-create across their portfolio to drive commonality and
22 Global Custodian Spring 2021