Subcustodians have provided much needed stability during the pandemic. Global Finance recognizes the best from around the globe.
As global investment expands with new investment products and participants, subcustodians are invaluable partners in facilitating this growth by providing global clients a comprehensive suite of services to handle a range of post-trade and other needs. This is the 19th year Global Finance recognizes the World’s Best Subcustodian Banks, across seven regions and 82 countries, for service capability that goes beyond the safekeeping of securities, trade settlement and cash management, to include fund administration, proxy and corporate actions, tax reconciliation, investment analytic and reporting services, foreign exchange and securities lending.
As the Covid-19 pandemic unfolded, subcustodians provided a source of stability, with many clients expanding their relationships for additional services. Additionally, with deep knowledge of local practices, constraints and regulations, subcustodians serve as valuable advocates in their respective countries to advance more-efficient markets and provide insight that can contribute to more-favorable tax and regulatory policies.
Finally, because these institutions operate in an industry with exceedingly thin margins, economies of scale and breadth of service are critical. Therefore, the ability to quickly serve new asset classes provides a chance to gain market share, and the evolution and acceleration of digital assets represent an enormous opportunity.
Although there is more progress to be made, the US Office of the Comptroller of the Currency bolstered the custody market with its July 2020 decision to let US banks and thrifts custody digital assets, in response to the increasing confidence they have gained among banks and investors.
In selecting the institutions that reliably provide the best services in 82 countries and seven geographic regions, Global Finance’s editorial board considered market research, input from expert sources and entry information from the banks themselves. Criteria included customer service, competitive pricing, smooth handling of exception items, technology platforms, post-settlement operations, business continuity plans and knowledge of local markets, regulations and practices.
Standard Bank Group
Standard Bank Group is the largest African banking group by assets, which were 2.5 trillion South African rands ($176.7 billion) on December 31, 2020. Covid-19 placed considerable strain on the corporate clients of this heavily African-focused organization, particularly in South Africa.
The group boasts the largest subcustody network in sub-Saharan Africa, with more than 6 trillion rands in assets under custody (AUC) as of December 31, 2020. Besides its presence in South Africa, the bank has a direct presence in Angola, Botswana, Côte d’Ivoire, Democratic Republic of the Congo, Eswatini, Ethiopia, Ghana, Kenya, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Nigeria, South Sudan, Uganda, Tanzania, Zambia and Zimbabwe.
Standard Bank’s strong capital position, business continuity plans and deployment of technology enabled a fast response to the pandemic’s effects and saw the group providing substantial support to employees and communities throughout.
The bank’s development of a hub platform allows for just one legal agreement and operational contact for clients operating across multiple markets, as well as local service and account management capabilities. The resulting efficiencies enable competitive pricing and a high level of customer service. The group also piloted a real-time dashboard for its clients and global custodian partners in 2020.
In the diverse Asia Pacific region, custodian banks are discovering they can differentiate their brands according to local needs. This is the case with Standard Chartered (StanChart), which is leveraging its deep historical roots in the region to cater to local market requirements and establish itself as a key service differentiator within the typically homogenized custodian business. StanChart is the country winner in Hong Kong, Malaysia, Pakistan, the Philippines and Vietnam.
The bank successfully moved custodian services into its Financial Markets silo in 2020 under its Financing and Securities Services umbrella. The change enhanced StanChart’s ability to leverage product adjacencies and provide full end-to-end service across execution, settlement and financing.
In meeting the challenges posed by the pandemic, StanChart worked closely with local regulators. Key standouts included driving moves to allow proxy instructions electronically in Singapore and electronic signatures in Indonesia, and to relax notarization requirements in South Korea.
Overall volume growth of assets in the broad custodial sector—including assets under custody and under trust—rose an impressive 32% year-on-year in 2020.
CENTRAL AND EASTERN EUROPE
UniCredit continues its winning streak in Central and Eastern Europe, taking Global Finance’s regional award for the 12th consecutive time. The bank’s particular strengths lie in Croatia, where it had a 27% market share as of Q4 2020; Bosnia and Herzegovina, where it has 24%; and Bulgaria, where it has 19.4% (both as of Q3 2020). In addition, its subcustody capabilities in Bosnia and Herzegovina, Bulgaria, the Czech Republic, Hungary, Serbia and Slovenia also won UniCredit country awards this year. UniCredit has a presence in Romania and Slovakia, too. The region has long been the heart of the group’s offering, comprising full-scale universal banks promising strong financial stability and market presence.
UniCredit’s overarching goal of providing a bespoke, boutique service with the strength of a much larger group has helped it maintain focus throughout a challenging year. During that year, it achieved fast and seamless adaptation to business as usual following the onset of pandemic-related restrictions across its markets; and it showed an ability to accommodate procedural efficiencies for clients in unprecedented circumstances via its local expertise and digital transformation, particularly on faster payments.
Citi retains its status as the World’s Best Subcustodian Bank in Latin America by refining and expanding the capabilities of its proprietary custody system. Covid-19 proved to be an opportunity to not only increase market share as some Citi clients outsourced more functions, but also improve services and industry protocols such as allowing virtual annual meetings in Argentina, Colombia and Peru. In Argentina, Citi streamlined its system by making US dollar transactions, reducing transaction times and providing a more seamless securities-settlement process. Citi advocates for initiatives that will improve securities settlement and expand proxy capabilities with e-voting for its Latin American clients. The bank also prioritized a smoother client-onboarding experience and made it more efficient with its adoption of DocuSign eSignature for custody agreements in Argentina and Brazil. The bank is an advocate on tax-related issues for foreign investors and continues to work with regulators to establish a standardized environment for tax withholding and reporting for foreign investors across Latin American. Citi retained its Best Subcustodian Bank status in Argentina, Colombia, Mexico and Peru, with Citi Brazil a new winner for 2021.
Standard Chartered is our winner for Best Subcustodian Bank in the Middle East, as well as the country winner in Bahrain, Jordan and Oman. The bank has improved its operations and service capabilities via a strategic reorganization in 2020 that merged its Securities Services and Financial Markets divisions to form Financing and Securities Services to leverage its resources and expertise to improve client service from execution to settlement, and to provide additional post-settlement and financing services. This commitment enhanced Standard Chartered’s ability to cater to local clients and improved customer service. The bank implemented flexible signature and delivery methods and initiated the acceptance of digital account opening documents. The bank also initiated remote due diligence meetings with clients and market authorities in Bahrain, Jordan and Oman. The bank is an active market advocate and has advanced the evolution of the subcustodian market in these jurisdictions regarding settlement protocols, delivery-versus-payment mechanisms and the movement to omnibus cash account structures. StanChart was also named the Best Subcustodian Bank in the Asia Pacific region.
BNY Mellon, our winner in both the US and all of North America, is driving efficiency and growth via product innovation, technological investment and data solutions to provide fully integrated technology-based client solutions.
Recognizing the growing crypto market, the bank launched the Digital Assets unit in February 2021 to develop the industry’s first multiasset digital custody and administration platform for both traditional and digital assets. Part of BNY Mellon’s strategy is to partner with and invest in fintechs in handling digital assets. One such fintech collaboration is with Fireblocks, a platform that allows storage, movement and issuance of cryptocurrencies. CIBC Mellon, BNY Mellon’s 50-50 joint venture with Canadian Imperial Bank of Commerce, is our country winner in Canada. Our selection recognizes CIBC Mellon’s comprehensive service capabilities and commitment to market innovation with digital asset offerings, exchange-traded digital assets and cryptocurrency funds. CIBC Mellon was named fund administrator on the world’s first retail Bitcoin and Ether ETF, and services 14 of 16 retail cryptocurrency offerings in Canada.
With a rich history in Europe, local subcustodians at BNP Paribas have developed a range of specialized services to support all client types, including enhanced tax reclaim processing, registration management for broker-dealer clients, ad hoc reporting and other services.
BNP Paribas is the country winner in Belgium, Luxembourg, the Netherlands and Switzerland. Its Securities Services team has been active for two decades and now provides local custody and settlement-related services covering all instruments. The largest custodian in the Netherlands in terms of the number of settlements and AUC, the custodian has a 30% market share. In Switzerland, the group’s Zurich branch has 129 billion Swiss francs (about $141 billion) in AUC, or about 25% of the transactions executed on the Swiss Stock Exchange.
Regulation and digitalization are driving change in the subcustody arena and both are areas of focus for the Securities Services teams. BNP Paribas also has made considerable investments in digital transformation via new client portals, application programming interfaces and multiple process enhancements using robotics, natural language generation, intelligent documentation processing and machine learning.