Investor Services Journal European Custody Market Guide 2006
Investor Services Journal European Custody Market Guide 2006
EUROPEAN CUSTODY
MARKET GUIDE
2006
investor
intelligence partners
WWW.ISJFORUM.COM
ESCMG 2006 FINAL ML3 13/4/06 7:27 pm Page 2
The Investor Services Journal European Sub Custody Market Guide aims to
provide insight into the securities services market on the Continent.
In this Guide, we highlight the developments of the sub custody landscape
and provide an insight into what lies ahead.
Contents
INTRODUCTION
INTRODUCTION TO
SUB -CUSTODY 4 AN INTRODUCTION TO SUB CUSTODY BY BUTTONWOOD INTERNATIONAL GROUP
PERFECT EVOLUTION 6 IS THE EUROPEAN SUB CUSTODY MARKET ON THE VERGE OF MAJOR CHANGE?
BRIAN BOLLEN REPORTS
STRENGTH IN DEPTH 12 CORNELIA KETH HIGHLIGHTS THE STRENGTHS OF THE GERMAN CUSTODY MARKET
ASK THE EXPERTS 16 EUROPEAN SUB CUSTODY EXPERTS ANSWER A HOST OF FREQUENTLY ASKED
CLIENT QUESTIONS
Serve
with providers who have the expertise, the local language
and the systems to make investing into an unknown mar-
ket an easier process. In its first European Sub-Custody
Market Guide, Investor Services Journal presents the
development of Europe’s major markets and showcases
the financial strength of the Continent’s major providers.
As investment trends continue to diversify and the
Janet Du Chenne highlights the appeal of emerging markets gathers momentum, we
present Europe’s sub custody providers, which can help
changing investment landscape in investors to focus on managing money while their assets
Europe and the ability of its are taken care of. Investors can be assured of top credit
sub-custodians to meet this evolution ratings and a range of core and value added services in
each market.
EUROPEAN CUSTODY GUIDE 2006 INVESTOR SERVICES JOURNAL 1
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CITCO
2002
1998
1995
2005 plan
1996
1999
2001
1997
2004
1994
No. of
Year Ending Source: Buttonwood Further information can be found by visiting the
global 13 19 20 19 15 12 12 10 10 10 10 10 website www.buttonwood.com
custodians
in survey
other related services around derivatives and exe- though, that it is under severe threat from fee
cution to clients,” he says. “If you need to do pressure in combination with ever increasing serv-
something, you can either do it yourself, or use a ice level requirements. “Trends for regional supply
specialist. In our case here, to do it yourself you are growing stronger by the year and we are seeing
need an enormous infrastructure and expertise the growth of quasi-regional providers in the
and an intimate knowledge of fine detail in the region,” he says. “Competition is becoming severe
market to make sure you’re properly positioned at as local suppliers deploy the only weapon they
all times. If you use a sub-custodian, you tap into have to counteract the regionalisation trend
their intimacy with and knowledge of the market in (price), while European regionals expand their
question.” In any event, Euroclear's and regional reach, often by playing the price and credit
Clearstream's market participation is much more game. Utility-type competitors, meanwhile, are
geared to Financial Intermediaries than to end- entering the sub-custodian space by expanding
investors, says Etienne Deniau, deputy head of their utility offer into various commercial banking
Investor Services at SGSS. arenas.” In other words, we live in interesting
times. And most market participants would proba-
“The landscape is very competitive, bly regard that as a curse, rather than a blessing.
“The regionalisation trend has always been a bit
and evolving rapidly at least ahead of the consolidation in the
in terms of the number of market infrastructure,” continues Ulf Noren. “In
our own region, OMX has done a lot of good
providers in the market” things in achieving a technology solution that is
common for eight markets, having a full or partial
"The most successful firms in the custody and ownership in six of the eight markets and striving
sub-custody markets will be those who have scale for more. On the CSD side the two largest markets
and experience, and are investing in technology have merged and are working flat out to achieve
that will help them keep pace with their clients' more consolidation benefits while the other six are
needs,” says Mary Baker Balady, global head of everywhere on the scale from
Custody for JPMorgan Worldwide Securities. very positive to outspokenly negative” (the eight
“Clients are looking for firms that can provide markets to which Ulf Noren refers are: Denmark,
more than custody services, including a wide array Finland, Norway, Sweden, Latvia, Lithuania,
of value added services and solutions such as Estonia and Germany).
securities lending and capabilities and expertise to Does the latest bid for the London Stock
support alternative investments. Most of all, those Exchange have any implications for sub-custody
firms that are focused on making their clients suc- providers and their customers? ISJ asked Ulf
cessful will do well." Noren. Not directly, he replied, but he is not alone
Not the least of the problems presenting them- in seeing it as a catalyst for a further round of
selves is the widespread disparity between differ- empire-building, market-exiting, and shape-shift-
ent EU countries, exacerbated by the expansion to ing. “The bid itself, not really, but it fits well into
25 countries. Until a United States of Europe the bigger picture, sure,” he replied. “It focuses a
comes into existence, with harmonised tax, legal, lot on the value proposition offered by an
and regulatory systems, those differences will Exchange and the effects that can be achieved by
remain. Harmonisation looks a long, long way into consolidation. The London debate has been inter-
the future, possibly stretching to infinity given the esting as national power interests, as well as per-
French and Dutch rejections of the proposed sonal power interests, have been so openly
European constitution in May and June respective- exposed. Maybe the most interesting characteristic
ly last year. “Until that happens, sub-custodians of the London bid is that the debate has been
have value to offer,” says Steve Chew. A similar more about clearing and settlement than it has
CSD consolidation process to that being witnessed been about trading! I believe that anyone who
in western Europe is under way in the Nordic believes that a merger of London with any other
countries, where the Swedish and Finnish CSDs exchange group will leave them unaffected must
are in the process of merging. “Here again we may re-think. It will be a new trigger for a massive wave
consider whether The Bank of New York will be a of additional mergers. I also cannot believe that
direct member than use a local sub-custodian,” the most important financial centre in Europe, and
says Paul Bodart. maybe in the world, will let this go by without
While we wait with bated breath for CSD consoli- securing at least as much influence over the value
dation to transform the face of the industry, the chain as it has today and probably more.”
European sub-custody market is booming both in “I see a possibility that the NYSE bid could suc-
terms of rising transaction volumes and the recov- ceed, and we could see the creation of the NYLE,
ery that is taking place in the continent’s equity while talks between Deutsche Borse and Euronext
markets, observes Ulf Noren, of SEB. He agrees, could result in DEX,” adds Jorgen Kragor, the
soon-to-retire in-house guru at DnBNor in Oslo. and establishing a new bank in the Baltics.
“This will represent a shift away from the Euroclear DnbNort is 51 per cent owned by DnbNor, and 49
versus Deutsche Borse stand-off of recent years per cent owned by Norddeutschelandesbank. This
towards an Anglo-Saxon versus European debate. expansion wlll enable the bank to establish custody
And competition is, of course, good.” operations in Russia and the Baltics, and provide
While the drive towards consolidation in the local sub-custody services to Nordic and other
European Union could accelerate if the European investors, but there are currently no plans to do
Commission forces individual countries to literally so.
get their act together, no observer of the European There are clearly too many providers, he argues
Union would gamble the mortgage on that hap- passionately. “This is, above all, a volume-driven
pening any time soon, or action unfolding rapidly business and without substantial volume additions
if it does. combined with efficient operative solutions and
Jorgen Kragor agrees that there is change ahead, the inclusion of more layers in the value chain,
but is at pains to stress that it will not happen in business will not be sustainable. Relying on one
the near future. There is a lot of ambition around, individual market’s growth might save a niche
and a lot of talk being talked, he says. “The plans provider or two but on a different scale than we
and the strategies are all in place but there see the single market providers have today. All
remains a lot of hard and complicated work to har- across Europe, single market providers will go,
monise rules and regulations across borders. “The regional providers will stay on and fight with other
merging process has already been underway for regional providers and CSDs/ICSDs.
around 10 years, but even in regions such as the DnBNor’s own ambition is to be the best
Nordic area where most of the neighbouring coun- provider of Norwegian custody services to domes-
tries share so many similarities with each other, tic and international investors. The message has
differences of language, culture, law and regulation recently been passed down from the CEO that
still get in the way of progress.” Sweden is to be included in the bank’s definition
of its home turf, meaning that it will be looking to
establish the same level of performance and serv-
“Anyone who believes that a ice there as in Norway. We realised we are at pres-
merger of London with any other ent unable to establish the required processes in
the other Nordic countries because of the cost and
exchange group will leave them the time it takes to translate an idea into a market
unaffected must re-think” offering.” The bank has in the meantime struck up
what it calls a Nordic custody alliance with
Swedbank (Sweden), OKObank (Finland) and
The clear consensus is, though, that there are Amagerbank (Denmark). Jorgen Kragor belongs to
too many custody providers and further consolida- the school of thought that although Euroclear is
tion is inevitable. It will be survival of the fittest, emerging as an alternative custody and sub-cus-
except for those cases where a bank has an excep- tody provider, it does not represent a clear and
tionally large local custody customer base. At the present danger to BNP Paribas and Citigroup. He
extreme end of the scale of views, sub-custodians does not believe that all clients will automatically
will disappear from view, slowly, but as surely, as move to Euroclear. “It’s not sound for us if we face
the famous Cheshire Cat. Albeit without the trade- a monopoly,” he elaborates. “Euroclear might be a
mark grin to be left behind. quality provider but we see it as a European CSD, a
"Consolidation in the European sub-custody huge and dominant European CSD. If they’re to be
market is creating more competition that ever a bank, a custodian and a CSD, I’m reluctant to
before,” says Ed Neeck, SVP, JPMorgan Network see those roles mixed. I want competition; monop-
Management. “Global custodians are faced with oly provision is not good for clients. I don’t believe
several options such as using existing traditional it will ever happen. It is undoubtedly in the process
sub-custodians, having a direct interface, a combi- of growing, though, and it could be a signal to the
nation of both, or buying services ala carte. The rest of the community if giants such as Merrill
question remains whether the current level of com- Lynch successfully implements its decision to
petition and options will remain once consolida- move assets to Euroclear.”
tion is completed." He sees comparisons between what is happen-
Who will leave the business? “It’s tough to men- ing in the Euronext zone and the experience of the
tion names,” says Jorgen Kragor. DnbNor will, of Nordic countries. “Big players have hesitated to
course, be one to survive, he predicts with a smile, use the services of just one institution for the
but then his own bank is itself the result of a rela- whole region. For quality and security they are
tively recent merger. DnBNor is positioning itself instead using the dominant provider in each indi-
to take advantage opportunities that might arise vidual market, rather than putting all their eggs in
elsewhere, recently buying Monche Bank in Russia, one basket.” Who could possibly argue with that?
The outlook is very different, though, beyond EU tributed to have this done quicker than would oth-
boundaries, and sub-custodians will continue to erwise have been the case. In any new market for
play a vital role in the wider world, enabling access an investor, it is important to conduct thorough
to markets what would otherwise remain stubborn- due diligence and to never take for granted that the
ly out of bounds. ING Bank and BankAustria markets are run just like the traditional hemisphere
Creditanstalt Bankverein in its various guises, of mature markets. An investor should also be thor-
remain the major players in Central and Eastern ough in outlining expectations at agreement level.
Europe. But they, and Citigroup, have most recent- Don’t underestimate the level of engagement
ly been joined by RZB, and Deutsche Bank as it required initially. Take a close look at how manage-
makes an intriguing new move to extend its sub- ment is executed – is it a culture you know or a cul-
custody beyond its own borders, with the sale of ture you do not know? Having done this and in a
direct relationship, don’t make the mistake of
“Consolidation in the European always thinking that the mature market representa-
sub-custody market is creating tive is always a representative of the best industry
more competition than ever before” practice……
infrastructure does not always serve the interests of investor services' environment. The belief that
the market participants. At the end of the day we asset managers will become obliged to outsource
do, however, support the idea of a single Baltic their back office is widely held by many in the
market in line with developing the services provid- investor services industry. As investors’ attitudes
ed to market participants in each of the markets. evolve, third party product distribution will also
increase. Despite the current large amount of of
‘Top Tips’ on selecting a custodian for customers investor services outsourcing propositions, a large
who require sub-custody services number of asset managers still perform their own
Top Tips: Dos middle and back office functions. RBC Dexia
Look at the structure of the potential supplier, is Investor Services foresees great opportunities to
it technology-wise fit to handle geographical expan- help managers with some of these functions as
sion What has driven the addition of more mar- well as banks, thanks to pending regulation. It is
kets? Is it a growth plan or a survival strategy? important to understand that current regulation
What ideology does your potential supplier protects the end investor; however, new regulation
embrace; is it protectionist or expansionist? What is coming from the SEC in the US and the European
the value proposition [compared with your current authorities (CESR, ESC) will drive the de-concen-
supplier]? If there is no financial benefit, the resist- tration of the industry whereby certain functions
ance within your organisation to change will be will need to be taken care of by specialist
obstructive. Is your supplier of choice today also providers. While speaking of funds, on 4
your supplier of choice tomorrow? If not, act now. November 2005, the Spanish collective investment
Examine very carefully the underlying case for institutions regulation introduced for the first time
investing in a new, unfamiliar geography in Spanish legislation, both hedge funds (free
investment collective investment instruments) and
Top Tips: Don’t fund of hedge funds, providing a regulatory frame-
Don’t do nothing. Don’t put competition in the work that is expected to allow for the growth of
driver’s seat by sticking to tradition and avoiding hedge funds. This will mean that collective invest-
the additional work that follows from a sub-custodi- ment vehicles will be able to invest in new prod-
an change. It can be a pain but it can be worth it. ucts to make their offer more attractive. The regu-
Don’t rely purely on the remote, impersonal RFP lation allows the use of omnibus accounts by non-
process in making your choice. The selection residents which will aid commercialisation. Are
process must be hands-on, and interactive. You are there too many providers? Are we likely to see fur-
buying a three- to five to 10-year relationship; you ther consolidation in the sector? In terms of com-
need to know who you’re climbing into bed with. petition, there is a definite market for outsourcing
Don’t worry about due diligence of the sub-custody and regulation is driving the depolarisation of
provider; that is the custodian’s responsibility. functions typically performed by asset managers.
In order to be able to compete in the bundled serv-
Thoughts from Madrid ice arena, the third-party service provider is
Sally Maddick, Head of International Sales and required to maintain high standards in all areas of
Relationship Management, RBC Dexia Investor activity. This leads to a concentration of investor
Services Madridof RBC Dexia Services views the service providers who are top-notch all around.
market from the Spanish perspective. In terms of Likewise, competition in the value-added services
custody, fund administration and transfer agency, arena is increasing. As clients tend to look toward
bundled services can be most helpful to the end service providers for additional value added servic-
user. Larger end-users look for integrated solutions es such as data analytic tools and performance
in each local market or directly via a global network. enhancement tools, those providers that are capa-
Integrated solutions provide for additional syner- ble of efficiently servicing these needs and that are
gies and increased efficiencies. In Europe there is a an expert in this domain, will also distinguish
definite market for outsourcing and regulation is themselves from the competition. Iberclear, Spain’s
modifying the current landscape. Proximity central depositary, is likely to harmonise the settle-
remains an important criterion for smaller end- ment platforms which are currently separated
users and market harmonisation allows for between equities and fixed income. This will
increased transparency in processes as well as an undoubtedly change the settlement processes as
extended geographical choice of custodians and they are known today. Iberclear has been instru-
sub-custodians. With increased market harmonisa- mental in making moves to bring the market up to
tion, the need for strict compliance and increased date and has implemented various measures to
system investments follow. increase the efficiency of the Spanish market. The
Directives such as Mifid, an extension of ISD, latest of these has been the implementation of the
are important to take into account in the changing SUC pre-matching system.
STRENGTH
Frankfurt. Due to its vertical silo structure,
which has often been subject to criticism at
in Depth
European level recently, Deutsche Börse AG is
the operator of the Frankfurt stock exchange
(FWB) with its electronic Xetra trading platform
and at the same time the sole proprietor of the
German CSD Clearstream Banking Frankfurt
(CBF). Furthermore, Deutsche Börse is the
owner of the ICSD Clearstream Banking
Luxembourg (CBL) and holds 50% of the
world's largest futures exchange Eurex . It
remains to be seen whether this silo structure
might be broken up in the near future under
competition law. The German market partici-
pants appreciate the close link between trading
Cornelia Keth and clearing and settlement as it simplifies
processes and minimises infrastructure costs.
highlights the Experience has furthermore shown that estab-
strengths of the lished structures in securities clearing and set-
German tlement tend to be maintained even if legal
parameters change. For example, although
custody market Deutsche Börse opened up its structures at the
beginning of 2004 to allow CSDs other than
CBF to clear and settle transactions, no other
market participant has applied for a licence to
Cornelia Keth do so yet.
Another initiative aimed at harmonising the owned savings banks and cooperative institutes
German stock exchange structures was taken by (according to the German central bank 2,149
the federal government in 2003 in an effort to institutions had a banking licence in Germany
centralise the regional authorities supervising as at 16 January 2006) is very fragmented,
the stock exchanges in the German Federal transaction banks are a very promising business
Financial Supervisory Authority (BaFin). segment. dwpbank, which is already managing
Although this topic was soon out of the news, it securities worth almost EUR 1 trillion, is one of
the most prominent players in this segment. Its
In the last few years we have competitors in the transaction banking league
include TxB Transaktionsbank and Xchanging.
seen more and more German International Transaction Services GmbH, a
institutional investors looking joint venture founded by HSBC Trinkaus &
Burkhardt and T-Systems in 2005 is a newcom-
for best of breed providers er on the market.
has been taken up again in the current coalition The global custodians on the German market
agreement. This kind of merger would in any include the “usual suspects” that are looking to
case make sense from an overall German per- get a fair share in the German securities market
spective. In addition to concentrating know- worth EUR 4.6 trillion in total. In 2004, State
how, it would also put an end to supervisory Street won, for example, the mandates from the
arbitrage between the regional states. German airline Lufthansa and the insurance
group VHV. BNP Paribas was able to profit
As far as post-trading activities are concerned, from the transfer of Deutsche Bank’s global
the German market, and clearing business in custody business to State Street by acquiring a
particular, has gone through fundamental few of their clients.
change in recent years. Once the central coun-
terparty (CCP) was introduced at Deutsche KAS-Bank is successful as a regional custodi-
Börse in May 2003, the number of transactions an with top marks in the relevant surveys. The
cleared via Clearstream in 2003 fell from 82.1 positive assessment was confirmed when they
million to 61.8 million. The number of transac- won the VW custody mandate worth EUR 75
tions traded via Xetra rose in the same period million in October 2005.
from 60 million to 71.4 million. While only
domestic papers held in collective custody prof- The local custodians in Germany paint a
ited from the new netting function in the early rather ambivalent picture. On the one hand,
days of the CCP, the new system now also Dresdner Bank, which had been the leading
caters for foreign securities held in collective German sub-custodian for decades, decided to
custody. With the export of the CCP concept to exit this business in 2003. On the other, BHF-
Ireland in December 2005, Eurex Clearing AG BANK, which had withdrawn from this segment
was officially recognised as one of the most in 1995, rejoined the market in the same year.
important central counterparties. BHF-BANK has shown that even small fish can
be very successful. The bank won the sub-cus-
The German custody market has also been tody mandate from The Bank of New York in the
quite dynamic in the past few years. A look at autumn of 2004. Acquiring Tradition as a new
the number of foreign custody providers enter- client also underlined BHF-BANK’s standing as
ing the German market in the recent past sug- a very attractive clearing house.
gests that Germany still offers a great deal of
business potential. State Street took over the So what is it that makes niche providers such
global custody business of Deutsche Bank, BNP as HVB, Commerzbank and BHF-BANK on the
expanded by building up its own marketing and German market so attractive? The complexity of
sales channels in Germany and The Bank of German tax law, the numerous regulations that
New York cooperates with BHF-BANK in their vary in the different German states and the well-
joint venture BHF BNY Securities GmbH. As known German perfectionism in administrative
the German banking market with its traditional processes all make it very difficult for foreign
three-pillar structure of private banks, state- investors to operate in the German custody
EUROPEAN CUSTODY GUIDE 2006 INVESTOR SERVICES JOURNAL 11
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market. This is where German custodians can ing permanent changes, the legal parameters
offer market know-how and networks that can are changing as well. One of the most impor-
hardly be matched by a non-German provider. tant changes was the introduction of the new
Investment Act in Germany in 2004 with hedge
A change in the perspective from the custody funds being admitted to this market for the first
suppliers on the German market to those time. The pace of reform is expected to acceler-
requiring this service, shows that historical ate further under the grand coalition: the intro-
duction of REITs is to make headway, corpora-
One of the most important tion tax is to be reformed and the corporate
changes was the introduction governance rules are to be adjusted to meet the
international standards. There has also been a
of the new Investment Act in lot of talk in the specialist papers that the inter-
Germany in 2004 est withholding tax, which is considered to be
an advance income tax payment, might be
structures are disintegrating. In the last few replaced by a final tax on capital gains. On top
years we have seen more and more German of this, the federal government is busy dealing
institutional investors looking for best of breed with a number of European regulations in proj-
providers instead of sticking with their house ects on the MiFID and the Giovannini barriers.
banks. It is, however, interesting to see that “Within the EU we are often like preachers in
their market research does not always lead the desert,” Jochen Sanio, president of the
them to the global custodians as many press German Federal Financial Supervisory Authority,
releases would suggest. Based on the results of recently commented on his efforts to prevent
their analyses, some decide to keep their net- the most excessive EU regulation.
work of depository banks or opt for a combina-
tion of local and global custodians. But whatev- Yet, irrespective of the legal parameters that
er the outcome of these analyses, there will be are applied, the German custody market will
many changes to come before the German cus- grow further. The growing domestic demand for
tody market calms down, if it ever does. investments as part of the increasing interest in
private retirement provisions and the low capi-
The new trends are very evident in investment tal market interest rates are just two factors that
fund business. Whereas the investment compa- will help to expand this market. Foreign
ny in a banking group would normally also investors have also rediscovered the German
assume the role of asset manager, there is now investment market, which has been strength-
a clear trend towards separating the asset man- ened by the crises of the last few years.
agement and fund administration functions.
This resulted in the new concept of a Master- We are very keen to see what will happen on
KAG (master investment company). The activi- the German market in the near future. Who will
ties of the different asset managers are pooled be there and get what part of the market? Will
in a central fund administration unit which pro- there be new ingredients and new products?
vides the investor with all the required informa- We cannot wait to see what happens next...
tion in an aggregated form. A master custodian
bank can offer even more as it can provide con- Cornelia Keth started her career at Dresdner
solidated reporting services for the entire secu- Bank’s securities settlement department. In 1991
rities portfolio. In addition to third-party assets she became head of marketing at BHF-BANK’s
(usually investment funds for institutional Custodial Services department. Following BHF-
investors called special funds) managed by BANK’s leave from Custody Business she started
asset managers, this reporting service also working in 1997 as Sales and Relationship
includes the assets managed by the investor. In Manager for Deutsche’s Global Securities Services
both cases, pooling the different depositories division, where she witnessed the transfer to State
means that investors benefit from clearer and Street in 2003. In 2004 Cornelia was appointed
more concise information so that the best of head of Custody Sales & Solutions at BHF-BANK,
breed strategy can be fully implemented. where she is now promoting German sub-custody
and depotbanking business.
But it is not just the market that is undergo-
As the transfer from one custodian to anoth- think local is supported by another trend.
er is connected with high efforts and costs, Cost saving seams to stop being the one and
we understand that custody clients have to only goal of the demand side. Quality is part
rely on long term business relations. This is of the game again.
why customers are very interested in a mar-
ket player’s future concept when talking to So its not only about having a long term
potential custody providers. We at BHF- strategy but also to present a unique selling
BANK are pleased to provide potential cus- proposition to the market. Although the shift
tomers with the statement that our custody in the German market has not yet come to an
services have just recently been confirmed as end, we see good chance for specialised local
a strategic business segment. players with long term commitment to lead
the market to a new era.
It is quite natural that - especially when
observing the German market, where several
participants have sold their business, have
committed themselves to custody while with-
drawing within a glimpse of time - one gets
concerned about its custody provider’s future
plans. From our point of view, many of the
custodians seem to be obliged to present an
ongoing flow of headlines in order to satisfy
the information desire of the financial com-
munity. Private owners on the other hand
have the time to see their seed bear fruits
and are therefore more likely to presume long
term strategies.
All Norwegian shares are held in fully ficial owners upon request. This is one of
dematerialised and registered in book-entry the criteria to be accepted upon seeking a
form in which ownership and transactions nominee licence.
related to securities are recorded. There are
no physical securities. All listed securities A further consequence of such registra-
and limited companies must be registered tion is that shares registered in nominee
at the VPS - The Norwegian Central accounts are without voting rights. It is,
Securities Depository. A majority of the however, possible to reinstate the voting
most frequently traded, unlisted equities rights by transferring the subject shares
are also registered in the records of the into a securities account, which reflects the
VPS, whereof Limited Companies on a vol- real beneficial owner.
untary basis.
Transfer of the shares to sub-accounts
Shares cannot be held in Street Name in must take place ahead of the general meet-
Norway. The Norwegian Companies Act ing and will be transferred back once voting
requires all shares to be registered in the has taken place.
name of the beneficial owner.
However, according to the Norwegian
Public Limited Companies Act, a foreign
trustee or custodian can be registered as
such in the VPS, and thereby represent a
number of beneficial owners in the share-
holder registers.
In accordance with the new regulation relat- Bente Iren Hoem is Head of Global
ing to registration of nominees in a securi- Relations and Support at the leading
ties fund register of unit holders, which Norwegian provider of securities services DnB
came into force as per 01.01.04, a NOR, a position she has held since December
Norwegian or a foreign bank 2003. Prior to that she worked as a project
leader in DnB within the securities services
may be granted permission to be listed as a area. She has 15 years of experience within the
nominee in the register of a unit holder. custody business, from Christiania Bank og
A separate licence application to the Kreditkasse, where she headed up
FSAN must be made. In addition, the nomi- International Securities Services and from SEB
nee must provide the issuing company or where she established and headed up its
the authorities with the identity of the bene- Norwegian securities operations.
The reorganisation of the German regulatory and risk control as well as report-
Investment Laws in 2004 has permitted the ing of HF performance.
establishment of hedge funds (HF) for the
first time and allowed institutional investors Citigroup’s Master KAG is recognized to be
such as insurance companies and pension one of the largest in servicing several large
schemes to invest in this asset class. This single HF in Germany. Citigroup has estab-
has created a strong business potential for lished capabilities to also provide services to
HF in Germany. Despite a slower than funds of HF as well as long funds.
expected initial pickup of HF in Germany, we
have recently started to see increased activity
in this arena with market volume expected to
double in 2006.
There is no Nominee Concept for foreign custodians How is the registration process performed?
currently according to Russian legislation. The Registration of shares is performed in most cases by
Nominee Concept is in place only for Russian custodi- registrars, which are professional market participants
ans. Foreign custodian will be recognized as a licensed by market regulator (Federal Services for
Beneficial Owner of securities held at the custody Financial Markets), and act under an agreement with
account. In that case foreign custodians should take an issuer of shares. For joint stock companies with
into consideration the following aspects: number of shareholders under 50 there is a possibility
- taxes relevant to foreign custodian’s tax domicile will to keep register by their own. There is also a number
apply irrespective to the foreign custodian clients’ of Settlement Depositories in Russia. The major are
countries of incorporation. National Depository Centre (NDC), which provides
- dividend and interest proceeds are being paid to the safekeeping and settlement services for MICEX Stock
foreign custodian as to the beneficial owner of securi- Exchange, and Depository Clearing Centre (DCC) serv-
ties icing RTS trading system. There is a possibility to use
- voting might be performed only by the foreign custo- these Settlement Depositories for OTC settlements. In
dian (not by its underlying clients) and no split voting that case Settlement Depository becomes an addition-
is possible al entity in the registration chain. It is up to a foreign
- disclosure requirements will apply to the total hold- custodian to decide whether to use Settlement
ing at the foreign custodian’s account and disclosure Depository for OTC settlements and shares safekeep-
reporting should be performed by the foreign custodi- ing or not. It is required that foreign custodian
an – account owner instructs its local sub-custodian in Russia on the
Therefore, IMB has developed various account place of safekeeping: directly at registrar or at a
structures for its foreign custodian clients: 1. A foreign Settlement Depository.
custodian opens accounts for each client in IMB nom- Corporate and Municipal Bonds. It is a market prac-
inee. The Custody agreement between IMB and each tice that corporate bonds are placed for centralised
client of the foreign custodian is signed by the foreign safekeeping with a Settlement Depository. Currently
custodian on the basis of the power of attorney the majority of corporate bonds issues are at safe-
received from each client. In this way each client will keeping at NDC.
be recognized as beneficial owner of Russian securi- RUB denominated Government Bonds.
ties and will be disclosed as such. Although submit- Centralized safekeeping of these securities is per-
ting standard sets of documents (including Custody formed by NDC. Bookkeeping of RUB denominated
Agreement between IMB and each client of the for- Government Bonds requires disclosure of the benefi-
eign custodian) may be deemed as burdensome and cial owner, according to the terms of the Russian
inconvenient for the foreign custodian, it is the only Federation legislation. Only exchange trading is possi-
way for the foreign custodian not to be recognized the ble for RUB denominated Government Bonds.
beneficial owner according to the Russian legislation. MinFin Bonds.
2. A foreign custodian opens a master account with MinFin bonds are USD denominated bearer securi-
IMB with sub-accounts allocated to each client of the ties, issued in individual certificates form. Custody
foreign custodian. No documents are submitted for safekeeping of these securities is not compulsory, but
the clients of the foreign custodian. The foreign custo- a market practice. Over 90% of MinFin bonds are
dian will be recognized as beneficial owner of Russian dematerialized at Vneshtorgbank and
securities kept on sub-accounts of each client. Clients Vnesheconombank, which are de-facto Clearing
will not be disclosed and thus the sub-accounts can Depositories for them. Each MinFin bond certificate
be deemed to be opened only for convenience/recon- has a unique number. Records of each bond are kept
ciliation purposes. 3. A foreign custodian opens one in connection with its unique number and holder.
omnibus account for all clients and is recognized as Vasiliy Permyakov has worked in Custody Sales &
beneficial owner of Russian securities kept on this Relationship management at International Moscow
account as a foreign nominee concept is not recog- Bank since May 2005. Prior to joining IMB, Vasiliy spent
nized in Russia. There is no CSD currently in Russia. four years working for Vneshtorgbank Custody and being
Safekeeping and registration of securities vary responsible for sales & business development.
depending on their type.
Find us at www.globalcustody.net
ESCMG 2006 FINAL ML3 13/4/06 7:27 pm Page 18
The above question has been raised by differ- investments required. Value added products will
ent participants in the market. On the one hand have much shorter life cycles and require higher
it seems very logical to provide these services investments in the future. The time-to market
both globally and locally and many banks are becomes shorter year by year. Price erosion will
doing so. The reason behind this seems straight continue and can only be compensated by
forward. Some universal banks are providing growth in volume. The quality of service will
their global custody services purely for their need to increase too. Each provider needs to
internal business and are trying to generate focus on that what he is either good at and or
additional revenues by providing these same what he will be able to provide in the future
services to third party clients. It is all about the given industry developments. Most banks, that
law of large numbers, i.e. optimizing the cost are not part of the selective group of truly global
structure of the bank’s operations by allowing custodians will need to make up their mind and
other clients to use its services. Sometimes it is decide to depart the arena of global custody or
used as a commercial argument, i.e. if you want to form alliances or joint ventures with the
to provide custody to your clients you can only Global Custodians in the world. The same
be taken seriously if you can directly offer local focus will imply that local custody becomes a
custody in a selection of countries combined more important area for these banks that do
with a ‘third party’ global custody network. accordingly. The true Global custodians will in
Custody business has over the years expand- the future only do business with true local cus-
ed with all kinds of value added services. In an todians only. That is an inevitable trend of spe-
adult stage of the product-life cycle value added cialization in the market of custody in the years
services can quite quickly be regarded as a com- ahead of us. Obviously there are always excep-
modity. Only in developing markets like for tions like some global custodians that maintain
example Central and Eastern Europe profit mar- a network that includes a number of their own
gins are still relatively high due to all kind of affiliates but this always concerns the large
market imperfections like differences in proce- global custodians. ING is considering changing
dures, cultural elements and regulations. its strategy given these future developments.
Once that becomes effective ING intends to
What kind of developments can we see further? transfer its global assets to the alliance part-
The global world around us becomes smaller ner/global custodian and at the same time
due to technical developments, more interna- focus on local custody in a large number of
tional cooperation by governments, perform- European countries. The question that remains
ance issues that drive market-participants more is not will there be other second tier providers
internationally and so on. In an environment who will follow this strategy but how quickly will
like this, large financial institutions tend to they react to the changing environment in the
become larger and larger as empiral evidence interest of their clients and shareholders ?
shows these days.
What does this all mean for custody-providers Titus van Heur, Director Custody and Clearing,
in the future ahead of us given above develop- ING. Titus began his career at Euronext and has
ments? In a few years time assets under cus- worked at Kas Bank. His expertise include sales
tody with global custody providers will be quot- and risk management within clearing and settle-
ed in trillion of euros or dollars. Billions will not ment. Van Heurs was Managing Director of a semi
be sufficient in order to maintain the high hedge fund firm before rejoining ING.
On the face of it the current structure of ket will continue to feel marginalized, as contin-
Custodians in Europe looks as it has always ued pressure on revenue lines is balanced with
done, a mixture of local domestic banks and the cost of additional investment to meet the
foreign providers all vying to offer an increasing- new environment. Custodians who are unable
ly similar level of service delivery. The pace of to offer a solution in at least, the Euronext mar-
change in the custody map has been slow since kets or provide a mini regional service (say 3-4
the introduction of a single currency environ- markets) will struggle against those who have a
ment, through the Euro in 2001, deemed at the larger presence in the medium term. However,
time to be one of the biggest barriers to cross those offering a single regional solution through
border investment. People outside of the cus- a Pan European offering will be in the best posi-
tody industry could be forgiven for thinking that tion. In conclusion, RBC Dexia Investor
nothing has changed in the last five years, but Services continues to monitor the changes in
this is not the case. Perhaps the largest change the structure in Europe, both in custody and
has been through the expansion policies beyond. As the European Union continues to
employed by Euroclear. The addition of the expand the number of member countries and
French, Dutch and Belgian depositories have greater investment flows are seen it will be
clearly shown Euroclear’s intent and drawn cries those providers who are able to offer standard-
of foul play from custodians in these markets. ized servicing across multi jurisdictional coun-
Further expansion has been delayed while these tries that are best equipped to continue to offer
concerns and the full impact of a Single business in Europe.
Settlement Engine are both understood and
addressed. At an industry level recommenda-
tions to standardise trading and minimise
Operational and Financial Risk environments Jim Harris is senior manager, Network
through Giovannini, G30, Basel II and CESAR Management for RBC Dexia Investor Services in
are bringing both challenges and opportunities the United Kingdom. Harris is responsible for the
to organizations, truly testing their flexibility and development of the global business strategy for
willingness to change. Many of the changes markets and relationships within the Americas and
noted above make considerable alterations in Asia regions, and for our Global Market
the way in which custodians in Europe will oper- Information products. Jim also has responsibility
ate in the future. The result has been that a for the custody and related services relationship
series of strategic partnerships and alliances with Euroclear. Jim joined RBC Dexia Investor
have been announced through either full inte- Services’ predecessor business, RBC Global
gration of businesses or agreements to partner Services, in 1994. Prior to his current role, he was
in specific areas. The creation of RBC Dexia responsible for the European markets within the
Investor Services is an excellent example of tak- Network Management team.
ing investor services to a new level by the com- Jim’s career includes close to two decades with
bination of two businesses to create a premier TSB Bank, now Lloyds TSB, in a variety of roles
provider of services beyond the realms of a core with the Securities Department and Internal Audit
custody product, facing and servicing clients in and Banking divisions. Mr. Harris is a member of
Europe through its network of branches. The the Association of Global Custodians Depository
future map will therefore be one where the Information Gathering Project and has just com-
providers of domestic custody in a single mar- pleted his tenure as chair of this committee.
Corporate actions in Russia are traditionally ly realize the importance of capital markets as a
understood (similar to the Anglo-Saxon securi- source of funding and change their attitude to
ties market model) as actions of the issuer of investors respectively.
securities, resulting in the change in structure A new level of corporate governance of com-
and size of its shareholder capital, including the panies was achieved after the wide adoption of
change in rights of shareholders and the distri- the Code of Corporate Conduct proposed by the
bution of earnings. Federal Securities Markets Commission in
They were made possible by the improvement 2002. The remaining inefficiencies of the corpo-
of realization and protection of shareholder rate actions infrastructure are caused by its frag-
rights, better disclosure of corporate informa- mented state.
tion, higher level of corporate governance and In these circumstances the leading domestic
improving of the legal environment. custodians play an important role of a “shock-
Armed with a “toolbox” of corporate actions absorber” for foreign and local investors, taking
offered by mature markets, Russian companies the responsibility for collection, verification and
are implementing them in practice, demonstrat- consolidation of data related to corporate
ing a rapid pace of corporate transformation events and their timely reporting to clients, as
despite imperfect legislation and regulation, well as for proxy voting, income payment and
shortcomings in the securities market infra- tax withholding and reclaiming.
structure, lack of expertise, automation and The sources of corporate events information
market-wide standards. range from specialized on-line databases to
Some issuers are still unmotivated to pay regional press to news releases of issuers.
attention to the requirements of their minority Further improvement of the shareholder rights
shareholders. Shareholder rights abuses still protection infrastructure will become possible
remain the most serious problem. Although the after the emerging of the Central Securities
situation has markedly improved in the last Depository (CSD) in Russia.
years, techniques like capital dilution, stripping The fully-functional CSD will speed up disclo-
of strategic assets; abuse of pre-emptive right; sure of beneficial owners, unify communication
manipulation of board and shareholders’ deci- channels used by registrars and custodians,
sions; forcing out of minority shareholders, are possibly centralize income payments and act as
still common and have become even more a common source of reliable corporate actions
sophisticated. information (at least for actively traded shares).
This requires close attention of a custodian to
corporate actions involving securities from a
“risk group” and makes monitoring of the gen-
eral market situation for such cases a necessity.
Nevertheless, the general market environment Stepan Tomlianovich currently holds the position
is developing in a positive direction. of the Head of ROSBANK Custody Division. He
Russian regulation protecting shareholder joined ROSBANK in 1998 after over two years
rights is quite adequate; although the problems with UNEXIM Bank as the Head of Custody.
with its enforcement still exist. Stepan is a member of the Board of Directors of
Competition among registrars and custodians The National Registry Company as well as a mem-
provides for more efficient distribution of corpo- ber of the committee for organizational and legal
rate information, while corporations increasing- support of PARTAD.
A-Z of sub-custody
Amagerbanken
About the Company: Amagerbanken was established in 1903 as a local-based bank on the island of
Amager. In 1981 the Bank established branches outside the island of Amager. Amagerbanken has devel-
oped into a regional bank providing services that make the Bank a full-service commercial bank and one
of the larger banks in Denmark. Today, the Bank includes 26 branches, 13 on the island of Amager, 10 in
the rest of Copenhagen, two in Aarhus and one in Odense.
Banca Intesa
About the Company: Banca Intesa is the major Italian Banking Group
resulting from the merging (completed in 2003) of three important players in Italy’s banking system:
Banco Ambrosiano Veneto, Cariplo, Banca Commerciale Italiana.
Please find following relevant Financial Highlights:
- customers :11 million
- branches: 3, 681
- market capitalization: Euro 26 bn
Key Sub custody Services: Banca Intesa is one of Italy’s leading custodian with more than Eur 600 billion
in assets held under custody, for more than 500 Institutional Clients
Core services include:
i. Clearing and Settlement
ii. Automatic Securities Lending
iii. Corporate Actions and Income
iv. Proxy Voting
v. Tax Services
vi. Tailored account structures solutions
vii. Targeted and customised Market News and Information
viii. Value added services: sophisticated Internet tools, special reports on corporate events, income, com-
panies meetings
Banca Intesa offers innovative, powerful and flexible solutions on the top of traditional custody products
to foreign and domestic institutional customers.
Remote trading Banca Intesa is uniquely qualified in Italy to meet the needs of brokers/dealers worldwide,
as a specialized provider of customized clearing solutions for remote traders accessing all the Italian
equities, bonds and derivatives markets
Value added sub custody services - securities lending, tailored taxation solutions, market intelligence high
level service
Banca Intesa has recently developed the following services: Coupon stripping, Bulk Trades, Tri - Party
Agreement for remote trading
Citco
About the Company: Citco Bank is a recognized world leader in
custody and fund trading for financial institutions and fund of
funds, offering unrivalled expertise in the execution, settlement and custody of funds from strategic cen-
tres in The Netherlands, Switzerland, Curacao, Ireland, the Bahamas, Cayman Islands and Italy. Citco
Bank provides an integrated service platform across banking and custody tailored to the needs of banks,
financial institutions and funds of funds.
Key Sub custody Services: Citco Bank’s custody services cover the entire trading, clearing, settlement and
custody life-cycle: locating funds, placing subscriptions/redemptions, completing paperwork and register-
ing funds, addressing corporate actions, providing monthly statements of
holdings and NAVs and sending out all documents.More importantly, either directly or through its long-
term relationships with major third party banks and prime brokers, Citco Bank can provide
clients with all the bridge, margin or leverage credit they require.
Value added sub custody services
Total sub custody assets (Europe): USD $ 150bn
Names of markets in Europe where you provide sub custody services: Strategic centres include
The Netherlands, Switzerland, Ireland and Italy.
Credit Rating:
Number of Sub custody Clients (Europe): Over 25,000 funds.
Global Custody Assets:
Target clients: Financial institutions and fund of funds
Citigroup
About the Company: Citigroup Global Transaction Services pro-
vides corporations, financial institutions and public sector entities with access to Citigroup’s full range of
cash management, trade, securities and funds capabilities along with an on-the-ground presence and in-
depth knowledge of more than 100 local markets.
Key Sub custody Services: Instruction repair and processing, pre-matching, alleged trade management,
settlement and clearing, cash management, foreign exchange, detailed transaction reporting, corporate
actions, income, tax reclamation and proxy voting
Value added sub custody services: Fails coverage, on-exchange services, general clearing member servic-
es, collateral management, collateralised financing, derivatives clearing, direct member services
Total sub custody assets (Europe): $1.2 Trillion
Names of markets in Europe where you provide sub custody services: Austria, Belgium, France, Germany,
Greece, Italy, Netherlands, Portugal, Spain, Switzerland, UK, Ireland, Hungary, Czech Republic, Slovakia
and Poland
Credit Rating: AA
Number of Sub custody Clients (Europe): 300+
Global Custody Assets: $400bn
Target clients: Broker dealers, banks, fund managers, insurance companies, global custodians and infra-
structures
DnB NOR
About the Company: DnB NOR is the largest domestic bank in Norway
and the largest participant in the Norwegian financial market. DnB
NOR Securities Services is the leading provider of Custody, Clearing and Remote membership Services in
Norway and act as registrar for approximately 60% of Norwegian Companies registered at the Norwegian
CSD (VPS). In addition, DnB NOR provides a wide range of value added services to both foreign and
domestic clients.
Key Sub custody Services: Within the Securities Services area, DnB NOR Bank offers global custody serv-
ices, remote brokerage services, securities lending, derivatives clearing, clearing and settlement of Nordic
securities, and company registrar services.
Value added sub custody services: DnB NOR Bank also provides brokerage services for Nordic securities,
FX and Money Market trading, Cash Account Services, and MIS reporting
Total sub custody assets (Europe): December 2005: NOK1.116 bn
Names of markets in Europe where you provide sub custody services: All Nordic markets through a
Nordic Alliance with Swedbank in Sweden, OKO bank in Finland and Amagerbanken in Denmark
Credit Rating: Standard & Poors: Long Term Rating A+; Short Term Rating A-1. Moody's: Long Term
Rating Aa3; Short Term Rating P-1
Number of Sub custody Clients (Europe): More than 220,000 domestic and foreign clients.
Target clients: Global Custodians, Universal banks, Investment Banks
Handelsbanken
About the Company: Handelsbanken (est 1871) is a universal bank that has provided institutional custody
services in Sweden since 1983. Since then, Handelsbanken has developed a Nordic concept, which allows
for the same high level of service throughout the Nordics.
Key Sub custody Services: Offers specialised and tailor-made custody services in Denmark, Finland,
Norway and Sweden to institutional clients.
Key services: Clearing and settlement of equities, bonds and derivatives, clearing agent services for
remote members, safekeeping of securities, trustee operations, Baltic custody via Finland also in EUR in
Estonia, cross-border settlement via APK’s E-link in Finland
Value added sub custody services: Value-added services: Complete corporate actions services, outstand-
ing proxy voting services, securities lending - automatic and strategic borrowing, netting services, tax
services, Nordic-i – Handelsbanken’s new web tool, tri-party solutions, MIS reporting (and other tailor-
made reporting). Handelsbanken uses the same systems and routines in all countries, though adapted to
the local market practices. Reporting and communications are harmonised in one single format.
Total sub custody assets (Europe): $1.2 Trillion
Names of markets in Europe where you provide sub custody services: Austria, Belgium, France, Germany,
Greece, Italy, Netherlands, Portugal, Spain, Switzerland, UK, Ireland, Hungary, Czech Republic, Slovakia
and Poland Credit Rating: AA Number of Sub custody Clients (Europe): 300+
Global Custody Assets: $400bn Target clients: Broker dealers, banks, fund managers, insurance com-
panies, global custodians and infrastructures
Nordea
About the Company: Nordea has a prominent presence in all the four
Nordic markets: Denmark, Finland, Norway and Sweden. Nordea is the leading provider of custody
services in the Nordic region by market share. Key Sub custody Services: Automated settlement
(STP), Safekeeping, Corporate actions and income collection, Tax services, Proxy voting, Extensive
reporting, Netting of on-exchange trades, Remote membership services, Dedicated client service
teams, Comprehensive product sheets, Market information by: monthly newsletter, ad-hoc news-
flashes, Custody Portal
Value added sub custody services: Broker-custody, Cash management, Issuer services, incl. paying
agent services for warrant issuers, Prime brokerage, Securities borrowing & lending services
Total sub custody assets (Europe): January 2006: EUR 549.5bn under custody
Names of markets in Europe where you provide sub custody services: Denmark, Finland, Norway,
Sweden and the Baltic countries.
Credit Rating: Moody's Short: P-1 Long: Aa3; Standard & Poor's Short: A-1+ Long: AA-;
Fitch Short: F1+ Long: AA-
Number of Sub custody Clients (Europe): Not disclosed
Global Custody Assets: December 2005: EUR168.3bn
Target clients: Global custodians, banks, broker dealers. In the recent years, Nordea has actively
offered a Nordic sub custody service for clients wishing to use a regional provider.
RZB
About the Company: RZB-Austria (Raiffeisen Zentralbank Oesterreich AG) is the central institution of the
Austrian Raiffeisen Banking Group (RBG). RBG represents approximately a quarter of all domestic bank-
ing business and comprises the country's largest banking network with nearly 2,300 offices and more
than 23,000 employees. The Austrian Raiffeisen Banking Group consists of Raiffeisen Banks on the local
level, Regional Raiffeisen Banks on the provincial level and RZB as central institution. RZB Austria is a
wholesale bank and only serves institutional clients.
Our main services besides securities services business are: corporate finance, export and trade finance,
cash management, asset management.
Key Sub custody Services: Custody services have been offered for more than 25 years to institutional
clients for settlement and safekeeping of Austrian securities. The recent decision – 3 years ago – to set-up
custody services within the CEE network and the investments in infrastructure, product development and
staff performed over the last years underline our commitment to the custody business and its long-term
nature. Today, RZB is offering regional custody in 18 markets in the Central and Eastern European
Region. The market value of assets under custody as of 28th February 2006 amounts to EUR 207.7bn.
RZB Group is offering an integrated & sophisticated custody solutions-package that includes cash man-
agement, treasury and foreign exchange, full range of safekeeping and settlement services, overall per-
formance measurement and reporting with compliance, and a number of value-added services (e.g. con-
tractual dividend, contractual tax reclamation, securities lending).
Value added sub custody services: Two years ago we introduced e.Custody, a state of the art internet
reporting tool. Just recently we again set new standards and provide our clients with an additional value
added: RZB implemented a new corporate action notification tool (CAN). The notification of a corporate
action, which RZB receives from its sub custodians (MT 564 IN), is automatically processed into CAN.
RZB’s corporate actions department is editing this information (e.g. changing instruction deadlines).
Within 15 minutes after the receipt of the notification all information is processed. e.Custody gives our
clients the possibility of an online access to their custody accounts. This means that our clients receive a
proactive and highly professional information tool, enabling them to trace their business more effectively.
SEB
About the Company: The SEB Group is a North European financial group for 400,000 corporate cus-
tomers and institutions, and 5 million private customers. SEB has local presence in the Nordic and Baltic
countries, Germany, Poland and the Ukraine. Approximately half of SEB's customers use the internet for
their banking transactions. On 31 December 2005, the Group's total assets amounted to SEK 1,890bn
while its assets under management totalled SEK 1,118bn. The Group is represented in some 20 countries
around the world and has a staff of about 20,000. Read more about SEB at http://www.sebgroup.com
Key Sub custody Services: Settlement & safekeeping, clearing service for remote members of Nordic
Exchanges, corporate Action services, tax services, global securities lending
Value added sub custody services: Reporting and Market Information Services, like: monthly consolidat-
ed MIS report for all Nordic markets, real-time online services covering all four Nordic markets, threshold
Alert Report, uninstructed Balance Report (Corp Actions), query tracking system
and a number of client specific reports and services
Total sub custody assets (Europe): SEK 2,1 Trillion (USD 300 BN)
Names of markets in Europe where you provide sub custody services: Denmark, Estonia, Finland,
Germany, Latvia, Lithuania, Norway, Sweden, Ukraine
Credit Rating: Moody’s Outlook Stable, Standard & Poor’s Outlook positive, Fitch Outlook stable
Number of Sub custody Clients (Europe): 312
Global Custody Assets: SEK 2,4 trillion (USD 320 BN)
Target clients: Broker dealers, banks, global custodian, ICSD's and hedge funds
Societe Generale
About the Company: Société Générale Securities Services currently ranks 3rd among securities custodians
in Europe, and 10th worldwide with EUR 2,000 billion* in assets held. Through its subsidiary Euro-VL,
Société Générale Securities Services provides valuations for 4,184 funds* representing assets of EUR 380
billion*. Fimat, another Société Générale Securities Services subsidiary, acts as broker for 5.3% of the
clearing of international listed derivatives transactions on the major markets for which Fimat is a mem-
ber. Société Générale Securities Services ranks among the European leaders in stock option management,
serving more than 480,000 beneficiaries.
Key Sub custody Services: Société Générale Securities Services offers a full range of securities services in:
i. Execution, clearing, delivery and settlement ii. Securities back-office outsourcing services iii. custody,
trustee, fund and portfolio administration iv. employee share plan management
Value added sub custody services: In order to facilitate the business of our clients, SGSS has implement-
ed a wide set of value added services covering: integrated multi-instruments brokerage / custody services
in partnership with Fimat, treasury and foreign exchange execution, ADRs – local depository agent servic-
es, securities lending and borrowing.
Total sub custody assets (Europe): Not disclosable
Names of markets in Europe where you provide sub custody services: France, Germany, Greece, Poland,
Spain
Credit Rating: The group ‘s financial strengths are recognised by rating Agencies (AA- by Standard &
Poor’s and Fitch, and Aa2 by Moody’s. SGSS quality of service is recognised by Fitch : CU2+ in global
custody and TR2+ for trustee and depository functions.
Number of Sub custody Clients (Europe): Not disclosable
Global Custody Assets: Including Unicredit (pro forma) EURO 2 000 billions
Target clients: Non resident financial intermediaries
Key Services: -
Free Custody Account Opening
Stepan Safekeeping of Dematerialized Securities
Tomlianovich Full Corporate Actions Support, including AGMs/EGMs participation
Settlement of OTC Trades in Registrars
STEPAN TOMLIANOVICH, HEAD OF ROS- DCC, NDC and Gazprom Settlement
BANK CUSTODY DIVISION Safekeeping of Loans Collateral
Settlement on DVP or “near-DVP” basis
STEPAN TOMLIANOVICH CURRENTLY Custody Services for mutual and pension funds (“Specialized
HOLDS THE POSITION OF THE HEAD OF
ROSBANK CUSTODY DIVISION. HE JOINED Depository”)
ROSBANK IN 1998 AFTER OVER TWO Safekeeping of Securities Certificates
YEARS WITH UNEXIM BANK AS THE HEAD Customized Reporting
OF CUSTODY. STEPAN IS A MEMBER OF Tax Reclaims
THE BOARD OF DIRECTORS OF THE Rosbank’s Custody Division supports custody services for the follow-
NATIONAL REGISTRY COMPANY AS WELL ing instruments:
AS A MEMBER OF THE COMMITTEE FOR Russian Government and MinFin Bonds, Municipal Bonds,
ORGANIZATIONAL AND LEGAL SUPPORT OF Corporate Bonds, Equities, ADRs/GDRs, Promissory Notes and other
PARTAD, A SELF-REGULATORY ORGANISA- “irregular” securities, Euroclear/Clearstream & DTC Settled Foreign
TION OF REGISTRARS AND CUSTODIANS. Securities, CIS Securities (Kazakhstan, Uzbekistan, Azerbaijan)
MR.TOMLIANOVICH IS A WELL-KNOWN
EXPERT OF THE RUSSIAN SECURITIES
MARKET AND THE AUTHOR OF MANY PUB- Key Contacts: Stepan Tomlianovich - Head of Custody
LICATIONS ON TOPICAL ISSUES RELATED Division Bank Address: 11 Masha Poryvaeva Str.,
TO DOMESTIC AND INTERNATIONAL
DEVELOPMENTS. OVER LAST 10 YEARS P.O. Box 208, Moscow 107078, Russian Federation
STEPAN HAS BEEN ACTIVELY INVOLVED IN Tel: +7 (495) 725 05 95 / Fax: +7 (495) 725 05 11
A NUMBER OF MARKET WIDE INITIATIVES. E-mail: [email protected]
www.rosbank.ru/en/
C
Cash correspondents Credit risk
Banks (or similar institutions) used to The risk that a counterparty will not
make or receive payments. settle an obligation for full value,
either when due or at any time there-
U
Cash deposit risk after. Credit risk includes replacement
The credit risk associated with the cost risk, principal risk and cash
holding of funds with an intermediary deposit risk.
for the purpose of settling securities
SG
transactions. Cross-border settlement
Settlement that takes place in a
Central securities depository (or CSD) country other than the country in
An institution for holding securities which one trade counterparty or both
TL
which enables securities transactions are located.
to be processed by means of book
entries. Physical securities may be Custodian
immobilised by the depository or An entity, often a bank, that safe-
securities may be dematerialised (so keeps and administers securities for
OO
that they exist only as electronic its customers and that may provide
records). various other services, including
clearance and settlement, cash man-
Certificate agement, foreign exchange and secu-
DS
The document which evidences the rities lending.
undertakings of an issuer of a securi-
ty or financial instrument. Custody risk
The risk of loss of securities held in
YS
Clearance custody occasioned by the insolvency,
The term "clearance" has two mean- negligence or fraudulent action of the
ings in the securities markets. It may custodian or of a sub-custodian.
mean the process of calculating the
A
mutual obligations of market partici- Custody services
pants, usually on a net basis, for the Processing securities trades, keeping
exchange of securities and money. It financial assets safe and servicing
may also signify the process of trans- the associated portfolios
R
ferring securities on the settlement
date, and in this sense the term "clear- Daylight credit
ing system" is sometimes used to refer Credit extended for a period of less
to securities settlement systems. than one business day; in a credit
Y
transfer system with end-of-day final
Clearing system settlement, daylight credit is tacitly
A mechanism for the calculation of extended by a receiving participant
mutual positions within a group of which accepts and acts on a payment
participants to facilitate the settle- order, even though it will not receive
Agent bank ment of their obligations on a net final funds until the end of the busi-
A custodian that provides custody basis. ness day.
services for securities traded and set-
tled in the country in which it is Collateral Default
located to trade counterparties and An asset or third-party commitment Failure to complete a funds or securi-
settlement intermediaries. that is accepted by the collateral ties transfer according to its terms for
taker to secure an obligation of the reasons that are not technical or tem-
Beneficial ownership collateral provider vis-à-vis the col- porary, usually as a result of bank-
Entitlement to receive some or all of lateral taker. ruptcy. Default is usually distin-
the benefits of ownership of a security guished from a "failed transaction".
or financial instrument (e.g. income, Confirmation
voting rights, power to transfer). The process by which a market partic- Delivery
Beneficial ownership is usually distin- ipant notifies its customers of the Final transfer of a security or finan-
guished from "legal ownership" of a details of a trade and allows the cus- cial instrument.
security or financial instrument. tomer to positively affirm or question
the trade. Depository receipt
Book-entry system An instrument issued in one country
An accounting system that permits Counterparty that establishes an entitlement to a
the electronic transfer of securities One party to a trade. security held in custody in another
without the movement of certificates. country.
ESCMG 2006 FINAL ML3 13/4/06 7:27 pm Page 34
Generally, pre-matching does not bind of the borrower's settlement obliga- unable to meet their obligations when
counterparties as matching can do. tions. due.
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