european custody market guide 2010

8/14/2019 European Custody Market Guide 2010

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10 - UK, ROW$20 - Americas

15 - EMEAEuropean Custody Market Guide 2010

EuropeExamined

EuroCustody Survey Plus: Country-by-country guide, CEE focus, legislation,unbundled services


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1

Investor Services Journal | European Custody Market Guide 2010

Since the last European Custody MarketGuide the fnancial world has encounteredthe most momentous 12 months in moderntimes. That some o the biggest fnancial insti-tutions no longer exist - or exist independent-ly is only the beginning. Every institutionalplayer connected with the custody industry -

rom benefcial owners and private investorsto service providers and exchanges will havebeen challenged by declining and volatile glob-al markets and will have had to address certaininvestment paradigms that until recently mighthave been assumed as certain.

Losses incurred by this decline have not beenubiquitous, however. The hedge unds markethas seen some winners through well-timedtactics, and indeed some o the biggest pension

unds have been increasing their allocationsinto the alternative space o ten as part o along-term strategy.

Similarly, the pension unds sector in Europehas pockets o relative success, and this sectorsemergence as the source o money lending hasbeen intriguing.

Innovations have also defned the landscape.Exchange traded unds have exploded among

institutional investors. New multi-lateral trad-ing acilities have ragmented the Europeantrading landscape, with challenging implica-tions or clearing and settlement. The lines be-

tween mainstream and alternative unds havebeen urther blurred, demanding an ever-wid-ening and agile service rom custodian bankssa ekeeping the assets.

A new terminology has also developed amidthe turmoil. Operational risk has broken outo the lexicon o middle and back o fce com-

pliance to becoming a widely discussed andscrutinised concept. Stability has become themost popular word or banks to market theirservices.

European regulators and institutional inves-tors alike have increased the pressure to addressthese buzzwords. In this market guide, MichelleCarroll o Kinetic Partners explores the disclo-sure requirements demanded o a custodian.Our exclusive EuCu survey also uncovers thegrowing concern among institutional investorsto understand the working o their service pro-vider, as well as key insights into the requency and size o new custody mandates. We also ea-ture ascinating and timely insights rom guestauthors into Europes emerging region - romRussia and the Ukraine to the Baltic countries- as well as the growing demands or the besttechnology. As banks restructure, markets gain

confdence and legislation currently in dra torm solidifes, a new chapter has begun. n

Ben Roberts, Editor

Market Overview

European Custody Market Guide 2010


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Contents

European Custody Market Guide 2010

Features4 ISJs EuCu Custody Survey

8 Europe at a Glance

Legislation14 IFRS 7 and the disclosure debate

Fund Services

16 Bundle Theory - Fund Services

Technology 20 The Technology Challenge, by Robert

Mattsson Axen, Nordea

Markets22 Eastern Wisdom, by SEB

26 Russia Market Player: Sberbank

28 Key Company profles

Supplement editor:

Ben Roberts([email protected])

Senior account manager: Trish De La Grange([email protected])

Account managers:Tarik Rekiouak([email protected])

Business developmentmanagers:

James Olweny([email protected])

Mark Needham([email protected])

Commercial director:Jon Hewson([email protected])

Senior web developer: Peter Ainsworth([email protected])

Operations manager:Sue Whittle([email protected])

CEO:Mark Latham([email protected])

2i Media16-17 Little Portland Street London W1W 8BPT: +44 (0) 20 7299 7700F: +44 (0) 20 7636 6044W: www.ISJtv.com

2009 2i MediaAll rights reserved.No part o this publication maybe reproduced, in whole or inpart, without prior writtenpermission rom the publishers.

ISSN 1744-151X. Printed in the UKby Pensord Press.


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Our many years of experience and our high technical standards provide a rm foundationfor your securities businesses. With a great deal of exibility, we ful ll your own particularneeds and also look after special wishes. If you want to know more about our compre-hensive securities service (brokerage, custody, clearing services) in Austria and Centraland Eastern Europe, please contact us at [email protected]

Let us take care of theprecious things in your life.

You are in good hands with our custody service.

www.erstegroup.com


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4


European Custody Survey 2009

1. Which o the ollowing custody services or technologies do you provideto your clients?

16.7% Post trade services (eg, clearing)15.8% Sub custody14.2% Core custody8.3% Client reporting8.1% Securities lending8.0% Cash management 6.4% Other6.2% Fund administration6.1% Trans er agency/accounting5.9% Fee billing4.3% Collateral management

2. Please estimate the total value o mandates you have won per quarteror the last year.

EuCu Survey

Investor Services Journal invited the major custodian banks to give eedback as to the servicesthey o er, the changing needs o their clients and how the di cult market circumstances

generally has a ected their business. For ull results go to ISJ.tv/eucu09

Post-trade services such as clearing and sub-custody were the most common serviceso ered by the institutions, ollowed by core custody. The graph shows the proportions oreach ervice based on the statistics o i they only o ered one (ie, the most common occurringservices), though typically, most respondents o ered multiple services (eg, sub-custody and

und administration). One respondent added that their clearing o ering extended to remotemembers.

This answer received a mixed set o results, which underlines the competitiveness o theindustry along with the uneven market landscape. One respondent claimed that the averagemandate won between the third and ourth quarter o 2008 increased rom EUR6 million toEUR8 million. This dropped back to EUR7 million in the next quarter, with only EUR2 billionso ar in the second quarter o 2009 when the survey was sent. Another reported that amandate value o EUR300 million in the third quarter leapt to EUR1.8 billion ad was up toEUR3.5 billion or the beginning o 2009. But another had mandates o around EUR20 million

or the third quarter o 2008, adding: The value o port olios were very low due to clientsport olio liquidation and low market ratio.


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Since inception in 2005, Kinetic Partners has earned a reputation amongst investors as providing

highly specialised audit professionals, supplying trustworthy assurance. Operating as oneseamless, global team with high personal standards, we are fully committed to our responsibilityto investors and to the asset management industry as a whole.We believe a valuable audit requires a personal, senior and hands on approach by a small,focused team, that will present an unbiased and independent approach to the betterment of investors but who is also willing to work with other service providers to reach solutions.Kinetic Partners is one global audit team with offices in London, Dublin, Grand Cayman,New York and Geneva providing services to various investment vehicles, onshore and offshore,ranging from private equity partnerships, credit funds, to long/short equity SPCs. An integratedteam, we remove any need to transfer audit results from one geographical team to another, thuslimiting the chances of last minute issues or missed filing deadlines and will remain responsible

for your fund audit until its completion.Kinetic Partners provides a full range of audit and assurance, consulting, tax, technology, forensic,corporate recovery and corporate finance services to the asset management industry.

www .kinetic-partners.com

Trusted assuranceA global professional services boutique focused exclusively on the asset management industry

Michelle Carrollt: +44 20 7862 0845

+353 1 475 0520e: [email protected] Walkert: +1 345 623 9905e: [email protected]

Philip Briggst: +44 20 7862 0827e: [email protected] Griggst: +44 20 7862 0843e: [email protected]

We are proud of our professionalism, skepticism, technicalknow how, understanding of the industry and our reliability.You will benefit from Kinetic Partners as your funds auditor,knowing that your trust is well placed; we look forward tobuilding a strong partnership with you


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6


EuCu Survey

3. Has this number o mandates increasedor decreased rom the previous year?

Increased (66%)Unchanged (33%)

4. Has the average size o the mandates increased ordecreased rom the previous year?

UnchangedIncreased

5. Please rank what you perceive to be the level o importance oreach issue or your client? (1 high importance to 6 no importance)

Operational riskRegulatory compliance

Transparency of operations Transparency of cost

Corporate actions

1 2 3 4 5 657.3 0 14.2 28.5 0 017.2 32.9 15.1 34.8 0 0

0.8% 42.8 14.7 13.2 28.5 012.1 28.5 16.3 0 42.8 00 17.6 15.6 35.2 14.5 17.1

Overall, two-thirds o the respondents sawan increase in the number o mandates they

had won in the last year. This could be becauseclients such as pension unds might seek toreallocate their assets and the emphasis o their investments, and so conduct request orproposals.

Two-thirds o respondents also ound thatthe average size o the mandates was roughly unchanged compared with the same period theprevious year (ie, Q3 and 4 in 2008; Q1 and2 2009). This may seem surprising given thebackground pressures on pension und assetsover the last year that has led to todays debateconcerning bene cial owners access to theproceeds rom cash collateral pools in the US

This question produced perhaps the most intriguing results. Operational risk was perceivedas a highly important concern among the clients o the custodians, with more than hal givingit the top ranking. Regulatory compliance was deemed the next most pressing, with almost50% choosing 1 or 2 or importance. By contrast, all respondents ranked port olio reevaluation

as a matter o little importance compared to the other topics o discussion. In the middle, thetransparency o cost was deemed a concern or many, though more than 40% believed it lessnecessary. Corporate actions was almost evenly weighed in importance.


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7


EuCu Survey

1 2 3 4 5 612.5 15.8 6.1 17.2 28.9 19.50.2 0 35 29.2 32.4 3.236 14.5 15.2 17.2 14.5 2.61.7 32 48.9 15.6 1.5 0.352.6 31.9 17.4 0.1 0 015.9 0 0 0 0 84.1

6. Which o these scenarios do you think would have the most signifcant e ect on custody and secyurities services this year ? (1 high importanceto 6 little or no importance)

New/More MTFsFurther short selling bans

Increased reg. on alt. fundsIncreased requirements on reporting

Market stability Global solution for transfer agency

7. An increased number o pension unds in the last year are seeking anunbundled service where, or example, their provider o core custodyis separate rom their agent lender or collateral manager. Have youperceived an increase in enquiries or unbundled services?

YesUnchangedDecreased

8. Are you expanding into new markets this year?

Custodians believed that market stability is the key actor to the rest o the year withhal giving it the highest importance ranking. The increased regulation o alternative undswould be the next issue infuential on the custody market. These responses were likely havebeen given soon a ter the already-contentious dra t directive rom the European Commissionthat will restrict the operations o hedge unds in Europe unless they comply to certainleverage and administrative standards. Certainly US pension unds have been staunch intheir allocation to alternative assets during the nancial crisis, with unds such as CalPERShinting that it may increase its allocation in some areas, such as private equity. The eedback

on the importance o a global tran er agency o ering was curiously split between extremes;this could be infuenced by the emphasis each custodian has on this service.

In extension to the importance or theclient o the transparency o what they arepaying or, hal o custodians reported thatthere has been an increase in the amount o conversations they are having regarding theunbundling o services.

All respondents replied in the negative. Some might have expanded their network enoughor the time being; some might be reneging on previous plans. Probably most commonly,

custodians are seeking to consolidate and secure existing relationships until more stablemarket conditions occur, and so are shelving expansion plans in the meantime. n

NO


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8


Market Overview

Austria remains a vital sub-custody

gateway or US and Europeanbanks to gain access to central and EasternEurope. Though some market players hadincreasingly seen more tra c coming theother way rom diversi ying und clientsin Czech Republic looking or exposure intomore developed markets the pressures onthe region as a result o the withdrawal o

oreign investment greatly reduced this. Thethree signi cant players in sub-custody areErste Bank, Rai eisen and Bank Austria/UniCredit. Erste Group AG has around 50%o the market share or assets under custody,with the other two banks commandingaround 60% based on transactions as they have clients based on the broker-dealercommunity.

By mid last year Erste had bought up 10banks in the CEE region. Alexander Schlei er,

head o custody at the bank, told ISJ atthe time: We see that there is a demand,clients are using the banks we acquired orseveral securities services, we developed the

custody services in these new countries, wesee interest and demands rom our existingclients, a lot o RFPs asking what we cano er in these markets.

The CEE banks we bought up were moreor less retail banks, so we have a strong retailbase o domestic clients investing in thehome market but also abroad and using theErste Group or securities services. This iscurrently one o the big projects, to urtherdevelop the custody service they o er todomestic clients and to oreign clients andthis is how we as an Austrian based company expanded our regional approach.

The expansion in this way has becomemore prominent, as there is growingconsensus that the niche providers servinga single market will have ound, and willcontinue to nd, the environment di cultin attracting mandates.

Bank Austria/UniCredit is the biggestcustodian or international brokers, and hasrelationships with global custodians such asBNY Mellon. The legislative system in the

Austria

Europe examinedA guide to the major custodymarkets across the continent and an update on the eventsover the past year


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9


Market Overview

country is very similar to Germany.

Austria has one o the mosttechnologically advanced central securitiesdepositaries in the world, and the lowmarket risks and high settlement rate as key elements o its growing reputation.

For investors, the special purpose vehiclesallow a saving in capital gains tax (CGT)whereby a CGT payment I only made uponthe distribtuon o the und, so capital can

be built up over time. Any external bankwanting to set up an SPV in the country require a license

Market wisdom: The biggest problem or the Austrian

market is its small size. There is a lot o stock at critical mass that is under the radar.Gunter Schnaitt

Statistically speaking: RZB: Number o asset management companies: 4Number o unds: 469Asset under custody: EUR38.2 billion.

BeneluxBelgium, the Netherlands andLuxembourg have great variety betweenthem in terms o pension und history, undtypes, investment outlooks and service.

In the Netherlands, pension undare overseen by a board o trustees, a

duciary manager and a custodian. Aduciary manager will hire and re the

asset managers, sculpt the tactical assetallocation and help the trustees who haveultimate responsibility or the und de nea strategy. They will also hire the custodian,

which can give an independent view whileproviding core and ancilliary custodialservices.

How pension unds are valued, and therequency o valuation, has been one o the

most signi cant events in the Dutch marketin what has been called the New FinancialFramework. Asset/liability ratios be ore werecalculated as i the interest rate was xed at4%. Now, the Dutch National Bank demandsthat asset/liability calculation is based on thereal interest rates which had dropped at the

end o 2008 - with a pension und alteringits exposures in accordance. Thus, a greaterbalance was struck between the asset sideand the liability side.

More requent adjustments to port oliocalculation continue to shorten theinvestment outlook or many pension unds.

In recent months, Dutch pension undshave been hit by sharp declines in their

unding ratios. As a result most o the unds

regulated by the De Nederlansche Bank hadto submit a proposal that stipulated theirplans or recovery.

According to statistics at Bureau Bosch,the biggest pension unds have been hitthe hardest. The ABP unds nding leveldeclined by 50% rom 140% to 90%.

The DNB usually requires a three-yearinvestment plan when unds drop below105% unded. This has been extended basedon the economic circumstances.

In Belgium, there are three pillars o pensions: the state plan, the corporate planand the private plan and the country isdominated by the rst and third pillars. Agovernment pension plan is more generousin Belgium than a lot o markets, and thereare tax breaks or private plans, meaning thecorporate plans are playing catch up.

Luxembourg has an expertise ordomiciling unds. It has been morethan two years since the legal dra t orspecialised investment unds that replaced


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10


Market Overview

the undertakings or collective investmentlegislation. SIFs have a looser regulatory structure and attractive tax regime.Domiciled unds, plus insurance andreinsurance unds are putting their assetsin custody accounts, according to OlivierScherrer at BNP Paribas. SIFs also provideaccess to unds o hedge unds, privateequity and real estate. The country has alsoseen an increase in ETFs launches.

Market wisdom:

Domiciled unds as well as insurance andreinsurance unds are putting their assets inLuxembourg custody accounts... the lightlyregulated SIFs allow qualifed investors awide investment policy Olivier Scherrer,BNP Paribas

Statistically speaking:

BNP Paribas assets under custody:Belgium 9%, Netherlands 7%,

Luxembourg, 84%(Source: BNP Paribas)

The French market has plenti ulopportunities or custodians, and inparticularly strong and varied in theinsurance and private equity markets.

For the non-resident market, thedominant player remains BNP Paribas. Inthe domestic market, BNP Paribas is joinedby Societe Generale Securities Services andCaceis, the und administrator.

In the domestic market, large insurance

companies such as Axa o ten managetheir in-house reserves. This can includeli e insurance policies, which allow retailinvestors to buy securities or shares o unds

in a wrapper that is tax e cient. Thesecompanies - whether purely French orpart o a oreign parent, such as Allianz there ore need custodians or the accountingand administration.

These insurance companies also promotethe asset management services to thirdparties such as pension plans or und o

unds managers. There are also, o course,the traditional asset management companiessuch as Credit Agricole Asset Managementand independent asset management

companies that have between ve and 15billion such as Metropole Gestion wherepeople buy shares o these unds but also amandate to these rms or managing assets.

The third strand o asset managementis private equity. Some o the largestinternational private equity rms havea subsidiary in France, such as 3i andBlackstone, and these rms are managingFrench domiciled private equity unds and

they have been growing very quickly and thisbusiness is very large.

The ourth type o management is realestate. Such companies, like the insurance

rms have been are setting up their ownasset management companies to manage thereal estate assets they have in their books.

Market wisdom:

What is interesting in the French market is that, contrary to maybe all Europeanmarkets, its dominated by services providedby banks that are originally French Sebastien Danloy, SGSS

Despite the pressures on the Irisheconomy, the country remains a home ormany custodian banks and domiciled unds,including hedge unds. The country services

France

Ireland


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11


Market Overview

approximately one-third o the worldshedge und assets, and is a strong advocate o the UCITS model.

There is a signi cant business in custody or both Irish-domiciled unds and non-

Irish unds based in centres such as Caymanand Bermuda. The bundled custody servicehas as strong tradition in Ireland becauseit is a more institutional market place thanother domiciles. Ireland has also witnessedthe increase in hedge unds seeking tolaunch UCITS products in the market, as

much or the opportunity to gain assetsunder management as a drive or greatercompliance with regulatory scrutiny.

The best news is that with signi cantachievement over the last 20 years theregulatory environment in Ireland hasan enviable reputation when it comes tointernational best practise. An acknowledgedopen and transparent tax regime, Irelandis the only international location o

signi cance not to be included in the many lists o o shore jurisdictions.

Funds o unds - particularly undso hedge unds, have seen signi cantredemptions rom institutional investors andhigh net worth clients, principally due toliquidity issues.

Dublin has been a key recipient in thegrowth in the European ETF industry, whichreached EUR91.228 billion in assets undermanagement at the end o 2008, accordingto data rom Lyxor Asset Management.

Market wisdom:

Even during the market meltdown o 2008, investors worldwide poured more than

USD260 billion into ETFs. To date, Irelandhas been the domicile o choice or crossborder ETFs in Europe - Andy O Callaghan,PricewaterhouseCoopers

Statistically speaking:

Total unds administered in Ireland

Q3 2008: 10,899Q4 2008: 10,855Q1 2009: 10,704 (Source: Central Bank

and Financial Services Authority and IFIA)

Declines in the nal payout in state-unded TFR schemes has encouraged moreItalian workers to move rom a governmentpension to those invested in market-based

unds. At the same time, the nancial allouthas wiped an estimated EUR300 billion o o the balance sheets o these unds. Thechoice between a state and private scheme iscurrently irreversible a contentious issuethat has slid down the list o priorities o theItalian authorities in the last year.

A minority o workers moved intothe market-based unds scheme, thoughthe market losses were still signi cant.Further, some say that more people - andtheir companies in turn - need to ocus ontopping up their retirement with privateschemes and escape the traditional mindseto a su cient state-based scheme.

But the mutual unds industry remainscurtailed by uneven regulation. Fundsdomiciled in Italy are taxed daily basedon their net asset value; unds domiciledelsewhere are only taxed when theholding is sold, putting the domestic undsat a disadvantage, and the daily tax has twoe ects: rstly, reporting per ormance thatalready actors in the tax o ten gives them alower return compared to those domiciledelsewhere. Per ormance pressures hascaused a lot o consolidation in the undsmarket.

Italy


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12


Market Overview

Market wisdom:

There was a lot o emphasis on the newpension und industry in Italy when it waslaunched a ter the 1993 re orm, but it didnt really take o because o the mindset o the population. Ste ano Catanzaro, BNPParibas

The Nordic market is starting to pick upin the downturn. For custodians, transactionvolumes declined a ter an October 2008 peakthough are now returning to pre-September2008 levels. In Norway the short selling banis still in place. Danske Bank in Denmarkhas a securities lending operation though

ew banks have the acilities to engage withthe banks repo or share buy-back deals,according to sources. The increase in thecost o collateral is adding costs to custody charges overall. Equities, particularly large cap, have been avoured by many institutional investors over more alternativeproducts.

In January 2009 our nancial services andsecurities bodies the Federation o FinnishFinancial Services, the Danish Securities

Dealers Association, the NorwegianSecurities Dealers Association and theSwedish Securities Dealers Association -created a joint organisation called the NordicSecurities Association. The body attemptsto harmonise regulation across the region.In the same month, Euroclear Nederland(NEC) and Finnish Central SecuritiesDepository (APK) terminated the linkbetween the two countries.

Greater liquidity and trading volumehas been introducted to the markets

ollowing the establishment o new MTFs

and Burgundy a plat orm owned by a consortium o 12 Nordic banks haspotential to boost the market.

Banks such as the Swedish rm SEBcontinue to expand into the Baltic regionand Russia. At the end o 2008 the bank had660 o ces.

Market wisdom:

In sub-custody, 2009 money will bespent primarily on mandatory investments

ollowing the reshaping o the Nordic

markets that ollows the re-shaping o the nordic markets that ollows rom theimplementation o central counterpartyclearing Ul Noren, SEB

Despite the inroads into the securitiesservices market by banks such as SEB, Russia

remains a challenge or oreign investors.Just a ew banks, such as ING, act as sub-custodians or the global players, thoughlocal players such as Rosbank and VTB aregaining market share.

Perhaps most signi cantly, the country still lacks a central securities depository one characteristic that tends to dividedeveloped and emerging markets. Despitetalk since 1998, and a new provisional dateset or 2013, it is di cult to see the twomain depositories in the country DCCand the NDC will be joined with a moreinternationally riendly partner. No CSD stillputs a premium on trading, with assets heldin the name o the sub-custodian with theirregistrars.

The lack o set regulation or corporateactions remains another stumbling block. A

company is requently only obliged to pay dividends within the calendar year, ratherthan the typical Western standard o 30

Russia

Nordic region


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days. The market also still lacks a delivery-versus-payment mechanism, though somecustodians make individual deals with theirsub-custodians.

Market wisdom:

Foreign players dont have enoughunderstanding o the local market becausetraditionally they have only catered or theglobal book Rami Bourgi, SGSS

The Spanish custody market is dominatedby Banco Santander, BBVA, BNP Paribasand Citi, with additional service innovations

rom RBC Dexia, although or the majority o oreign players the country still representsa tough nut to crack. Unless you are aSpanish bank, or have more than a certain

number o people in the market or adeveloped retail branch, options are ew,though there are no restrictions i you are aglobal custodian holding Spanish assets orclients domiciled elsewhere.

Pension pooling where a large multi-national brings together all its individualcountry and regional pensions within asingle und to bene t rom the economy o scale is not yet a signi cant part o theSpanish custody landscape.

The Bolsas y Mercados Espaoles,Sociedad Holding de Mercados y SistemasFinancieros, S.A, or BME, the holdingcompany that has integrated the stockexchanges, AIAF xed income market,derivatives market and the countrysclearing and settlement systems, includingIBERCLEAR, is the largest market in the

world or corporate debt trading volume,at EUR2.4 trillion, and the third largeststock exchange in Europe, according to the

Spain

Market Overview


companys overview or 2008.

Market wisdom:

In the ace o a ar-reaching liquiditycrunch, the stock exchanges have emergedas a clear liquidity benchmark and a model o reliability and transparency

Antonio Zoido, chairman and CEO, BMEn


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14


Legislation

As we currently all lurch our way throughnalising und nancial statements,there are patterns developing regardingdisclosure. Making the appropriate amounto disclosure has never been so keenly elt. Iam a an o the principals guidance sup-ported (ever decreasingly) by the Interna-tional Financial Reporting Standards (IFRS).But one mans interpretation o materialrisk is not necessarily anothers and this iswhere animated debate can come to borderon being a marked waste o precious time,where there is a lack o common direction as

to what appropriate disclosure means.Speci cally I want to discuss the qualita-tive disclosures required under IFRS 7 andthe implications or custodians. Twelvemonths ago, who would have thoughtabout custodian risk and IFRS 7 in the samecontext. But today, post Lehman Brothers,post Mado , post Weavering, we are - or atleast we should be - thinking about whatdisclosure we should be making regardingall und third party providers albeit, I dontthink that IFRS 7 was ever written with theintention o disclosing exposures to thirdparty providers.

In August 2005, the International Ac-counting Standards Board (IASB) issuedIFRS 7 Financial Instruments: Disclosuresto be applied to investment unds or an-nual periods commencing on or a ter 1stJanuary, 2007. No one at that time thoughtthis meant that the standard would apply toexposure to prime brokers. The evolution o

unds disclosure shows how the interpreta-tion o the unds risks has moved. Con-centration risk was supposed to be aboutgeographies or instruments, not globaltrading in rastructure.

In und nancial statements today, notonly are there realms o data regardingspeci c nancial instruments under IFRS 7but there is also notes regarding the prime

broker relationship and the custodian rela-tionship.Paragraph 31 o IFRS 7 states that:An entity shall disclose in ormation that

enables users o its nancial statements toevaluate the nature and extent o risks aris-ing rom nancial instruments to which theentity is exposed at the reporting date.

It goes on to say that narration o howthat risk has been managed is also required.And thus, where two years ago there may have been only minor mention o third party contractors, todays accounts provide a much

uller picture o the relationship as a risk to

IFRS 7 and the disclosure debate

Twelve months ago,who would have thought about custodian risk andIFRS 7 in the samecontext

Michelle Carroll at Kinetic Partners analyses the progression o disclosure

regulation and what it means or custodians


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15


Legislation

be managed, not as a provider o services tothe und.Although generally, third party contrac-

tors have been reluctant to disclose detailso remuneration or service level agreements,the fip side is that in this more litigiousenvironment, a lack o appropriate disclo-sure can be an extremely high risk and costly omission. Particularly or those custodianstaking on dual roles, say acting as trustee orprime broker.

As an example, I have not seen any undnancial statements which disclose all the

sub-custodians or how the risks o the use o the sub-custodian are managed. But shouldwe be asking ourselves, why not? Im notadvocating disclosure o sub-custodian rela-tionships but what I am advocating is that, i the worse case scenario were to present itsel

and litigation were on the horizon, I want toknow I have robust support in place behindmy decision not to disclose.

To make good, sensible disclosure, I thinkthe ollowing helps bring things back tograss roots. None o this is rocket science,but with everybody re-writing disclosureswith their own agenda in hand, I think thissimple guidance makes sure that everyoneunderstands what is required.

The appropriate amount o disclosure is abalance o :

1. providing use ul in ormation to theusers o the nancial statements,

2. meeting the relevant accountingstandards (in both letter and spirit),

3. not putting the und at a disadvan-tage by disclosing too much, but,

4. at the same time, not exposing theund i there were to be litigation by

disclosing too little.

There is an opportunity to use thisdiscussion o IFRS 7 disclosure as a way o uncovering how com ortable directorsand management are with their providersand the service level agreements (SLAs) orcontracts they have in place. Directors are

responsible or providing use ul in orma-tion in the unds nancial statements and i they have a third party provider unwillingto assist with this disclosure, maybe urtherinterrogation is required to ensure that thebest interests o the investor are being met.Maybe these debates are not entirely withoutmerit a ter all. n

I the worst casescenario were topresent itsel , andlitigation were on thehorizon, I want to knowI have robust support inplace behind my deci-sion not to disclose

About The Author Michelle CarrollExpertise Audit & assurance

Career summary Be ore joining Ki-netic Partners, Michelleworked or Pricewater-houseCoopers (PwC)in Sydney and London, specialising in assurancereporting within theinvestment management

industry in both countries. She has gained globalexperience working in IM markets in Luxembourg,Monaco and Bermuda. While at PwC she ocused on Corporate Governance, specifcally controlsassurance reporting to support the growingmarket demand or urther transparency over third party providers. Michelles specialist skills

include risk management and auditing o investment unds, including reporting under s404 o the Sarbanes Oxley Act.t: +44 20 7862 0845e: [email protected]


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Serv ice Styles

The desire to o er the maximumnumber o und services to a client has kept alove the market debatesurrounding the price and value o bundled, or unbundled, custody.Anthony Harrington gets market insight.

Bundle theory - fund services

The drive towards cost control and valueor money by und managers in allsectors, rom the pension unds to mutual

unds and even the hedge und sector,has been sharpened the losses sustainedthrough the downturn. In a buoyantmarket there is less immediate concernabout the loss o one or two points; in a

alling market, every penny counts. Thishas intensi ed the debate around bundledversus unbundled services rom suppliers.

Chris Adams, global product head,alternative unds at BNP Paribas, hasresponsibility or all the banks serviceo erings to hedge unds. He argues thatthe bundling/unbundling argument has adegree o complexity to it. The old adagethat it is easier to sell seven products to oneclient than one product to seven clients is o

course as true in this space as in any other.But the more services a client takes rom anew service provider, the more the executionrisk involved in delivering those services,particularly in the transition period romone service provider to another, increases.

In particular, with some o the largeoutsourcing deals we have seen in the last

ve or so years, the execution risk is massive.For large multi national clients with multiasset classes, and with signi cant numberso people involved, the level o consumptiono management attention, IT time, oversightand governance is huge, he says.


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This provides an important context,he suggests, to the natural desire o service providers to deliver the maximumpossible port olio o services to clients.

The issue is, how do you get to this pointrom start up? Some o the big deals inthe industry are still in the process o migrating services ve years into thiskind o all-in contract, and that is notcom ortable or anyone involved, he says.

Trying to transact a transitiono this magnitude to a completebundled o ering in one big bangmoment is phenomenally di cult.

He adds that another de ning contextto the debate is that there are very ewasset managers who wake up in themorning and say to themselves, Wow,I am really looking orward to workingwith my service provider today!.

In the real world the client wants theservice provider to be essentially invisibleas the service level agreement is achieved100% o the time, and or the job to simply get done at a reasonable price. However,since clients always have a change agendao one sort or another, there are alwaysongoing meetings with service providers.

The problem with the unbundled besto breed approach, he suggests, is thatit is sel evident that rom the clientsstandpoint, interacting with seven serviceproviders is much more complex and has

much more o a management overheadassociated with it, than dealing with oneprovider. Moreover, identi ying the sourceo an error can be vastly more complexwhen there are multiple service providers.

Another point, he says, is that otherthings being equal, clients will get a betterprice or each service with a bundled set o services. Moreover, there are some servicesthat will just not be on the table unless theclient has taken a bundle o services. In BNPParibass case, this might be maintainingthe shareholder register, or example. Weknow what we need to receive to make an

Some o the big

deals in theindustry are

still in theprocess o migrating services fve years into this kind o

all-in contractChris Adams,BNP Paribas

Service Styles

acceptable return, based on the cost and therisk o delivering particular services andthere are some that are just not economicalin and o themselves as sole services, he says.

Bank o New York Mellon (BNY Mellon)provides tailored services or hedge undand prime brokers, nancial institutions andpension unds. Sta an Ahlner, who headsup the BNY Mellons global collateral team,says that people have been taking a hardlook at bundling both rom the client and

rom the service providers perspective.

In particular, what is driving thisis that the traditional assumptionthat pro table activities would pay

or less pro table activities is havingto be rethought as a consequence o changed market circumstances, he says.Declines in pro tability o traditionally pro table areas have caused serviceproviders pro tability models to alter.

Daron Pearce, head o UK and Irelandat BNY Mellon Asset Servicing says thatwhat investment managers are looking or

rom supplier relationships is simplicity and control. We can simpli y their


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Service Styles

arrangements and structures and maketheir lives easier. However, we should notpretend that operational matters are always

top o their agenda, he says. Pearce arguesthat it is per ectly possible to provide eetransparency in a bundled arrangement.

We quite o ten have bundledarrangements but very transparent, unitised

ee arrangements. Even where you havedynamic drivers or costs, such as transactionvolumes and reporting requencies, you canstill get a very clear sense o the chargingstructure in a bundled service, he says.

BNY Mellon has a broad, sophisticatedasset servicing product capability, and notwo clients will take exactly the same mix o services, so even in a bundled arrangementthere is a lot o tailoring, he points out.

Mark Westwell, senior vice presidentand head o customer management inthe UK or State Street, says investmentmanagers want the bill they receive atthe end o the month to be relevant andcompatible with the service they receiveand with the types o ees that theirpeer groups are paying in the market.

One o the big changes we are seeing isthe move rom segregated unds to pooledvehicle port olios. Where unds used toinvest directly into the markets, they arenow moving to buying units in pooledvehicles and this changes the nature o the

service provision, he says. Traditionally State Street would have earned part o its ees rom custody provision, but that

alls away in a pooled investment, sothe pricing dynamic has to change.

Similarly, State Street and other providersare seeing much more o a move by investment managers to OTC derivativestrading. Many o the historic ee structuresin place did not refect the right pricing orthis new approach, he says. As growth inOTC derivatives increases, there is muchmore demand or collateral managementservices, and that in turn changes the

dynamics o the price agreement betweenservice provider and client. We have alsoseen a considerable growth in passive

hedging strategies by pension unds to covertheir global equity investment exposure,since their liabilities are in Sterling, he adds.At the same time, there has been a very sustained growth in interest in per ormancemeasurement and risk management services.

How does all this fow back to servicepricing? Clearly some o the traditionalpricing approaches are no longer asappropriate as they were, he says.

Every service provider with an interestin developing their own business willnaturally look at their relationship withevery client rom the standpoint o thatclients impact on the providers P&L. So i whole tranches o ees drop away because

o changes in the clients investment model,the providers costs will increase and somedi cult conversations will have to take placeto ensure that the relationship returns to asuitable level o pro tability or the provider.

While clients have a natural interestin nding the lowest ee structure that iscompatible with the standard o servicethat they are seeking, it is a oolishmanager indeed who diverts energy intotrying to cut the suppliers revenue tothe bone. This is an industry that needssophisticated support and that does notcome ree, bundled or unbundled. n

Where unds used toinvest directly into themarkets, they are nowmoving to buy units inpooled vehicles

Mark Westwall,State Street


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Custody services witha broader horizon Are you looking for a single point of entry to the Nordic and Baltic region? Or do youhave your eyes set on a specic local market? Nordea is the leading Nordic custodian and the only truly Nordic player with well-established banks in Finland, Denmark, Sweden and Norway as well as a strong presence in the Baltic countries.

A dedicated relationship manager supported by a specialist team will always be able to offer you a winning combination of regional competence and local insight. Our size, experienceand connections with key players make us a sustainable provider in the evolving Nordic and Baltic securities markets.

To capitalise on our expertise, please contactMs. Anne-Lise Kristiansen, tel +47 2248 6238, email: [email protected],Ms. Nina Groth, tel +45 3333 6124, email: [email protected] or

Mr. Teemu Pihlatie, tel +358 9 165 51008, email: [email protected].

Making it possiblenordea.com

N o r d e a

B a n

k


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Technology challenge

There are a number o challenges or thecustody business which put pressureon one o the most vital parts o our way o per orming and serving as custodians:our technology. The world is changingat a very high pace. This puts pressureon all custodians to urther develop theirtechnological and in rastructural capabilities.

Evolving market We see a world where new MTFs pop-up

with new technology and the old regulatedexchanges are switching their tradingplat orms to new ones. On the CSD level wesee plans to switch, develop and change thein rastructure. T2S is reality in just a coupleo years, and in at least Sweden and Finlandwe will join Euroclears Single Plat orm. Wesee that CCPs are entering the new marketslike the Nordics. And clearly, i SWIFTsnew XML standard messaging and ormat

ISO20022 will pick up speed these newsolutions will de nitely a ect the securitiesindustry in the uture. We also see a greaterservice demand rom our clients, togetherwith regulators, requiring more in ormationand reporting. Simultaneously there is apressure to lower the price or the servicesdelivered. Last but not least, we shouldnever lose track o all necessary controls and

processes that need to be in place in order tokeep the operational risks to a minimum.All in all, as custodians sit in the

middle o all this, it requires technologiesthat are up to the task. Custodiansneed systems that are prepared tosurvive in an ever-changing world.

Generally custodians use in-house builtsystems that have been developed duringa number o years, including masses o knowledge and unctionality, and to a greatextent they are very e cient with low cost.

But o ten these systems are developedin a world that evolves in a airly stable

New Architecture

Amid wider trading innovations, custodians must also ensure they havethe best systems, writes Robert Mattsson Axen o Nordea


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ashion. The world we see now is where you would like to use the important

components and eatures (stable,e cient and with low running cost)with new appended eatures. These newattributes are speed and fexibility.

In summary we already know that therewill be changes, but not in more detail whatthe changes will be. There ore it is importantthat a custodian has considered and solvedthe ollowing characteristics regardingtechnology in the next coming years:

Connectivity With a number o changes in the world

around us, custodians need to ensurethat they have good connectivity andintegration possibilities both externally butalso internally. SWIFT is usually the maincommunication channel or custodians, butin order to adapt to both the in rastructuralchanges and the demands rom clientsas well as other stakeholders, custodiansneed to have plat orms that o er otherintegration possibilities at the same time.

Flexibility Integration is a key part, but also

fexibility in the system. You need systemsthat can adopt to a changing environment,where probably your internal processesand procedures need to change and thetechnology has to support that. Your clientsand also the regulators will require new typeo in ormation and reports. Depending on your clients this could vary and the systemsneed to be fexible to cope with this.

Speed

Speed in the custody world is not thesame thing as or ront o ce. For us thereare two areas where speed is importantand where our systems need to supportour business with. First, it is how ast weas a custodian can adapt to a new businessenvironment and the requirements onour business. Second, it is how ast we ascustodian could nd potential problemsand resolve them. This is what we require o

our systems ie changes can be implementedquickly and that the systems support ourpersonnel to nd and sort out open issues.

The custodians already have a systemlike this in place or have technology providers delivering this type o solutionto a relative low cost will be the winnersin the years to come. A very importantissue regarding technology in the coming years is how you manage to get to a ITcost structure that could adapt to thenew changes and challenges - ie, how you could move rom a normally high

xed IT cost to a variable cost base.

In general, the custodians and technology providers that succeed to be on top o thein rastructural changes and challenges willde nitely have a more pleasant journey. n

New Architecture

About The Author Robert Mattsson Axen has 20 years experi-ence in fnancial services. He has worked in positions in product development and client relations or banks, broker dealers and service providers. Prior to joining Nordea he wasresponsible or OMX Front O fce productsworldwide.

Custodians need systems that are prepared tosurvive in an ever-changing world


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Central & Eastern Europe

Ukraine

SEB examines the investment environment o a number o Central & Eastern European markets and assesses their potential as custodyservice markets

SEB is a major European provider o

Custody Services with a strong grip o the our Nordic Markets (Denmark, Finland,Norway and Sweden) and has established apresence in the Baltic custody arena since2000. The bank enjoys a dominating marketshare in Lithuania and between 35% and40% market share in Estonia and Latvia,

ollowing several major mandate wins thelast two years. In 2006 SEB establishedCustody Services in Ukraine where rapidgrowth has taken SEB to a top- our positionin the market and the latest addition in theCEE is Russia where SEB started up in 2008.SEB is among the six largest providers o sub-custody services also in the Russianmarket. This growth in all ve CEE marketswe service is primarily coming rom theneed o the clients to have a model where aregional assimilation o services, expecting

the service levels and level o commitmentin the CEE to mirror those o the NordicsFrom a custody perspective, all three

Baltic markets are small with a marketcap ar less than EUR15 billion.

The major in rastructure investmentsin the three Baltic markets was taken inconnection with OMXs acquisitions o theexchanges and central securities depositories(CSD) and no major investment has beenmade in in rastructure lately. The markets

unction well and international investorswill easily eel themselves as home here as inany developed Western European market.

We see a lack o consistent regulatory

environment, an absence o assetservicing guidelines, very strict andcumbersome documentary needs,lack o a DVP-environment, obstaclesrelating to currency regulation andthe comparably instable politicalenvironment. Paired with a somewhatun clear attitude towards internationalinvestor protection, the challenges aremani old and not solved over night.

In Ukraine, the expected consolidationo the exchanges and trading plat orms isslow but consolidation o trading volumeshave already happened to a great extent.The creation o a CSD with real CSD

eatures is very good news and key to the

market. SEB, together with ING, Citi andUnicredit, has established a orum or bestmarket practice and nourishes high hopes

or this orum to make a di erence inintroducing urther internationally acceptedmechanisms into this interesting market.

We expect the Ukrainian marketto add more oreign suppliers to thepamphlet and that a consolidation willonly happen once the market has reachedmore o its ull potential. SEB has a very experienced, passionate and energetic teamin Kiev that in many areas nare drivingthe market although the banks history

Eastern wisdom


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26/3624


Central and Eastern Europe

in Ukraine is comparatively short.

SEB started Russian sub-custody inSt Petersburg in August 2008. SEB is a

ull service provider and we have putsubstantial ocus into building superiorAsset Servicing capabilities as:

Corporate governance issuesare still a concern

Non-contractual, manual, time-consuming and labour-intensive

No single source o in ormation(issuers, de acto CSDs,data-vendors, mass media)

Dividends can be paid annually and quarterly

No pay date, no ex date principles(payment period is in place)

Record date determines entitlements No automated electronic data eed Claims o entitlement is not supported

by market in rastructure

An equally important actor has beento cater or an organisation that to anunusually great extent ocus to mitigatethe major market risks. In order to do that,a major study pre-opening identi ed and

outlined ways to mitigate the ollowing risks:

Absence o a CSD Absence o a oreign nominee concept Manual registration process and wide

geographical distribution o registrars No centralised source o corporate

actions in ormation No true DVP, o shore

settlements in USD No xed settlement date or equities Delays in dividend payments Proxy Voting no split bulletins Tax Exemption/Reclaim processes

A lot o the international ocus the past6-7 months have been on the economy

in the CEE states and the degree o problems they are running into in trhemidst o this unprecedented crisis.

The problems in Central and EasternEurope will not be easily resolved,despite bail-outs rom the IMF and

others. CEE is the region o the worldthat has been hit hardest by the globalcredit crisis and recession. One majorreason is that or a relatively long time,

economic growth was based on creditexpansion and borrowing in oreigncurrencies. A continued credit crunch mainly due to contraction o nancingchannels rom the West will haveincreasingly adverse e ects on investmentsand consumption. The economicdownturn will thus be pronounced during2009, especially so in the three BalticMarkets and Ukraine. These our marketsare countries characterised by largeexternal imbalances. They have very large nancing needs, a ter o tenexplosive credit growth. The shareo total borrowing denominated in

oreign currencies is very high.Standing outside this gloomy picture iscommodity producer Russia. The regionslargest economy entered the current crisiswith sizeable budget and current accountsurpluses, which will turn into de cits this year due to lower energy prices. Russia, too,experienced a rapid build-up in private debt,but oreign loans represent a reasonable 30per cent o total borrowing. The bankingsystem is backed by the governmentsstrong nancial resources, but smallerprivately owned banks are under pressureand some o them may not survive. more.

Economics in ocus

Russia


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Central and Eastern Europe

Because o the acute crisis, Central and

Eastern Europe need various orms o help rom the IMF, EU and individualWestern European countries to sustaintheir nancial systems. The G20 meeting inearly April mani ested a desire to provideexpanded aid to vulnerable economies viathe IMF and other channels. The nancialsystemic risk has decreased. The regionseconomies will remain sensitive to shi tsin general risk appetite in the nancial

markets as well as continued downgradesin the credit ratings on their borrowing.

The recession in the Baltic countrieswill be very deep and lengthy. Theglobal outlook has darkened and theircompetitiveness has weakened urther.Currency depreciations elsewhere in Centraland Eastern Europe, as well as in Sweden which is an important market or Estonia are squeezing exports. Meanwhile theBaltic governments are continuing theirpain ul austerity policies; in Estonia andLatvia urther scal tightening measuresare on the way. The Baltics are combatingeconomic imbalances by means o pay and price cuts, or internal devaluation.

Certain leading indicators have admittedly shown clear signs o stabilisation inrecent months. This is mainly true o

household optimism. In manu acturing,however, indicators have continued theirslide and remain at record-low levels.

This means that no economic recovery isimminent, although GDP declines will slowduring the second hal o 2009. We expectEstonias GDP to all by 12% this year and2.3% in 2010. Latvias economic slide will bein the same range: 14 and 3%, respectively.Lithuanias downturn will be 9 and 3.5%.These economic collapses are a reactionto previous overheating, which was drivenby exploding credit and property markets,most accentuated in Latvia and Estonia.

Because o the drastic downturn in domesticdemand, the two undamental imbalances inthe Baltic economies large current accountde cits and high wage-driven infation will ease. This trend has already made someheadway, especially in Estonia. Currentaccount de cits, which stood at 9-13% o GDP in the Baltics last year, are rapidly ontheir way down. The main reason is thatimports are now alling more than exports.

Our main scenario is still that internaldevaluation will continue and that theBaltic currency pegs will hold up. This isbased on the assumption that the countrieswill continue to receive international(IMF, EU and individual EU countries)support or their xed exchange rates. The

IMF is expected to accept a 2009 budgetde cit in Latvia o up to 7% o GDP,somewhat larger than the 5% maximumit had stipulated earlier; this requirementhad been set as Latvias policy responsewhen the country received a large bail-outloan package rom the IMF, the EU andindividual EU countries late in 2008.

A ter being temporarily suspended,the loan programme can thus resume. Aspart o this compromise, the governmentwill implement urther large budgetcuts. Lithuania, too, is increasingly inneed o an IMF/EU bail-out. n

The regions economieswill remain sensitiveto shi ts in general risk appetite in the fnan-cial markets, as well ascontinued downgradesin the credit ratings ontheir borrowing

A bit more on the Baltics


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Market Player Profle

Sberbank o Russia is aunique enterprisein many senses.We have got ahistory we aredeservedly proud

o , a great credit o trustworthiness romour customers and the society as a whole,a power ul in rastructure and client base,quali ed and experienced sta . The scaleo operations o Sberbank makes it one

o the biggest banks in Europe. This is thebasis that enables our uture growth anddevelopment, along with possibilities andpotential or Sberbanks urther success ulevolution, linked mainly with its strongcompetitive position in the Russian market.

Sberbank Custody Services Department hasbeen active since the introduction o this typeo services appeared in the Russian Federationin 1997. We are one o the largest bankingcustodians in terms o volumes o assetsunder custody and the number o customersserved. We o er to our clients - both residentsand non-residents o the Russian Federation- a ull suite o custody services or Russianand oreign securities. Rendering custody services to our clients, we use individualapproach and high quality products,including value added services, and more.

We graduate our tari policy at a maximumlevel, taking into consideration prime costo operations on accounts o our customers.One o our main eatures is that due to thesize and shareholder structure (almost 60%o Sberbanks shareholder capital belongsto the State) we carry a so called social

unction, and o er retail custody servicesall over the country, across 11 time zones.

In ormation: Sberbank Custody Services clients can

physically deliver instructions and receivereports in more than 900 Sberbank branches

(out o more than 20,000 outlets) romKaliningrad region to the Far East.

As o 1st May 2009 SberbankCustody Services attends to morethan 257,000 custody accounts.

We split tari s or custody servicesrendered to legal entities and individuals. Inour business we never practiced averaged orgeneralized tari s such as fat ee or complexcustody per monthly, quarterly or annualservices. Our credo is: every customer paysonly or those services which were rendered

to. We understand that i we choose a complexcustody tari structure, it brings additionalcomplexity in determining cost o operations

ul lled, as well as in automating the processo calculation and invoicing to our clients.

Nevertheless, when we choose between thenotions labour-intensiveness and quality o services, our choice remains quality. Thequality and transparency in servicing ourcustomers is one o the main tasks we ace.

I we look at Sberbanks tari s or custody services we see the varied approach towardsestablishing ees or di erent types o operations. For example, or operations thatchange the balance on customers depotaccount, there are eight various tari s,depending on type o operation ul lled:internal trans er; change o position resultingtrades at organised securities market; roll out

o securities rom custody; delivery versuspayment operation; operation on exchange o Sberbanks promissory notes; encumberingo promissory notes or settlement;encumbering o securities on creditagreements; ul llment o steady instructions.

Our invoices contain detailed descriptionso clients operations and ees due inaccordance with custody tari s. Whennecessary, on customer request, we prepare

ully detailed invoices ree o charge. Itrefects all the operations or every day during the period o the main invoice.

As a separate expense item we provide to

Russian market player: Sberbank


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Company Profle

Erste Group

Erste Group was ounded in 1819 as therst Austrian savings bank (Erste oester-

reichische Spar-Casse). In 1997, ErsteGroup went public with a strategy to expandits retail business into Central and EasternEurope. Erste Groups customer base hasgrown through numerous acquisitionsand organic growth rom 600,000 to 17.2million, o which 16.2 million clients arecitizens o the European Union and bene t

rom the stable EU regulatory ramework.

Having always ocused on retail and SMEbusiness, today Erste Group is one o the largest nancial services providers inCentral and Eastern Europe in terms o clients and total assets.

Erste Group o ers a ull range o securitiesservices to its large domestic and interna-tional institutional customer base. Thisincludes custody services, corporate action,income and in ormation services, stock ex-change clearing services, tax reclaim, proxy voting, etc.

Looking or a rst class custody provider inAustria, Czech Republic, Slovakia, Hungary,Romania, Croatia or Serbia you should

Profle Alexander Schlei er

Alexander Schlei er has been Head o Custody

& Network Management since January 2003.He joined Erste Group in 1994 (which was at that time GiroCredit Bank AG) and started toworkin the custody services unit. From 1998 onAlexander Schlei er held various manage-ment roleswithin securities back o fce operations, ismember o various market working groupsand nowpromoting the sale o the Austrian and CEEcustody business o whole Erste Bank Group.

contact:Alexander Schlei er,Head o Custody ServicesEmail: Alexander.schlei [email protected]. + 435010015146

Gertrud Hadrany, Relationship ManagementEmail: [email protected]


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Company Profle

The Trusted Provider of Global solutions in Custody, Corporate Actions and WealthManagement In ormation Mosaic (IM) was established in

1997 and today leads the market or corporateactions and custody solutions to the invest-ment services industry.IM was ounded 11 years ago to address theneeds o investment services organisationsseeking to support their clients global invest-ment business rom a single, consolidatedplat orm. The company is headquartered inDublin, Ireland and serves its European, Asianand North American customers rom its o ces

in Luxembourg, London, Singapore, New Yorkand Boston. IM brings to market new low costo ownership technology solutions or globalcorporate actions and custody processing thatscale. IM has built up a signi cant client baseo the largest global and domestic custodians,sovereign wealth unds and large asset manag-ers. Six o the top ten global custodians nowuse IM solutions globally.

Products:In ormation Mosaic has invested consistently in product development since inception onmodern scalable technologies. Among In or-mation Mosaics products are:cama - is a global, end-to-end, corporate ac-tions solution, is a three-time winner o B.I.S.S.Researchs best overall plat orm award andwinner o the 2008 corporate action system.

converg-e - is an investment accounting andcustody system designed or todays globalinvestment services business. converg-esinherent multi-currency design lets you oper-ate your business and service your clients any-where in the world rom a single, web enabledplat orm.

Our Services:In ormation Mosaic provides a range o ser-vices to clients on a global basis, including ourSAS 70 compliant ASP services. By utilising ourown hosting acilities and industry recognised

Profle John ByrneJohn Byrne has over 20 years experi-ence in the IT industry, co- oundingone o Irelands frst university campuscompanies in 1985 directly a tergraduating as an electronic engineer.

He helped build-up this Company to be a European leaderin its feld in the power automation sector and success ullysold out o this business in 1995. He ounded In ormationMosaic in 1997 to develop Internet applications in theCapital Markets sector.

hosting partners, together with ISO17799aligned security procedures and ITIL/ISO20000 aligned service delivery processes, wehave created a blended ASP o ering or all outproducts, which can support all phases o theimplementation li ecycle, to a ull productionoperation.

O fces:EMEA Director o sales Grace ODonnellIn ormation MosaicStyne House,Upper Hatch Street, Dublin 2,IrelandT: +353 1 241 5200 F: +353 1 241 5201E: godonnell@in ormationmosaic.comUS: Kevin CullenE: kcullen@in ormationmosaic.comT: +1 646 495 5350UK: Elaine MullanE: emullan@in ormationmosaic.comT: +1 44 207 477 65 74Singapore: Deirdre JenningsE: djennings@in ormationmosaic.comT: +65 6829 7638Luxembourg: Alain LeyderE: aleyder@in ormationmosaic.com

T: +352 26 25 7770

In ormation Mosaic


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Company profle

Kinetic Partners is a global pro essional

services boutique ocused exclusively on theasset management industry.

We provide a ull range o audit andassurance, tax, consulting, orensic,corporate recovery and corporate nanceservices. Operating as one seamless teamand structuring our business around clientneeds, we are well positioned to provideinnovative solutions to the entire assetmanagement industry.

We advise over 750 clients, including many o the worlds largest hedge unds andtraditional asset managers. Established in2005, Kinetic Partners now operates out o London, Dublin, Grand Cayman, New Yorkand Geneva.

Our unique ocus makes us less susceptibleto conficts o interest and enables us todeploy highly experienced pro essionals ina targeted, e cient yet fexible manner. Aglobal rm, we operate as a seamless teamwith a single point o contact or clients,reacting rapidly while avoiding duplicationo e ort.

For our experienced project leaders, quality o service delivery is paramount, ensuringthat only appropriate personnel are de-ployed and that communication is empha-

sized. This has been recognised through ouraward or Best Consulting Firm in Irelandand Cayman.

Our multi-disciplinary team o senior pro-essionals is drawn rom regulators, nancial

institutions and major pro essional servicesrms around the world. It consists o experts

in all aspects o und operations anddistressed situations, including:

n Regulatory consulting and compliancen Stock Exchange Listing and corporate

nance advicen Audit and accountingn Tax advicen Operational risk and governancen Forensic accounting and investigationn Litigation support and expert witnessn Liquidation/restructuring

For urther in ormation visitwww.kinetic-partners.com

Iveagh Court, Floor 5, Block D,Harcourt Road, Dublin 2, Ireland

t: 353 1 475 0520 : 353 1 475 0376w: www.kinetic-partners.come: in [email protected]

Kinetic Partners


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Nordea is the leading nancial services

group in the Nordic and Baltic region andoperates through three business areas:Nordic Banking, Private Banking andInstitutional & International Banking.

Nordea is the leading custody servicesprovider in the region. Nordea provides highquality, tailor-made custody services orlocal and oreign investors dealing withNordic and Baltic securities.

Due to the unique history o being ormedrom our established banks, Nordea is the

only Nordic custody provider with stronglocal presence and expertise in all ourmarkets. Nordea combines Nordic compe-tence with local expertise, and has provenability to deliver high quality services thatmeet both clients and each local markets

requirements.

Nordea is the clear market leader in theregion with more than EUR420 billion inassets under custody and almost 27 millioncleared transactions in 2008. We have thelargest market share in the Nordic region aswell as the largest client base o all Nordicplayers, which provides clear evidence o capabilities to deliver high-quality servicesacross the markets.

Leading Nordic custodian:

Critical mass and resources available Deep local experience and active in-

volvement in each Nordic market Complete operational capabilities and

best- t systems developed in eachNordic market

Proven ability to deliver high-quality service in all Nordic markets

Excellent connections with key playersin all Nordic Markets

Extensive product and service o ering Your single point o entry to the wholeNordic region

Contact:Nina GrothHead o Sub-custody and ClearingTel: +45 3333 6124E-mail: [email protected]

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SEB

SEB is a leading provider o custody services

in the Nordic region as well as Central andEastern Europe. SEB is committed to cus-tody and clearing processes or the wholesalemarket and holds securities worth over EUR360 billion in more that 75 markets. We o era ull range o custody services, includingclearing and settlement, corporate actionand in ormation services, securities lend-ing and services to remote members o theNordic and Baltic stock exchanges.

Key ServicesSEB acts as sub-custodian in 10 markets- Denmark, Estonia, Finland, Germany,Latvia, Lithuania, Norway, Sweden, Russiaand Ukraine. SEB constantly reviews oppor-tunities to expand its Northern and EasternEuropean service o ering. The regionalmodel covers all sub-custody markets withone contract, the use o one single country adopted IT system in the Nordic markets aswell as the web based tool C&I Online pro-viding real time access to securities and cashtransactions and port olio in ormation.

A Client Relationship Manager, with thesupport o local client service teams, is incontrol o every client relationship. Theprime elds o service provision are:

a) Post Trade Settlement and ClearingServices, including the Remote MembershipAgent role, Tri-Party Remote MembershipServices, GCM Services and OTC Settle-ments.b) Asset Servicing, including Corporate Ac-tions, Voting, Income and Tax Services.c) Reporting: The use o one system acrossthe region gives a consistency in the SWIFTreporting that is unsurpassed in the region.SEB also supports alternative communica-tion to SWIFT and more than 1 milliontransactions per year are now handled viaMQS communication. Use o various le

solutions are also increasingly sought orand SEB supports as o now ve di erentsolutions in this eld. The MIS report isdistributed as one le or the our Nordicmarkets and the C&I Online tool is used by nearly 20 percent o our client base, provid-

ing an additional sa eguard or reconcilia-tions, alternative instruction processing andcontingency use.d) A quickly growing role as InternationalPaying Agent across the region in addition toa registrar role where applicable.

SEB processes around 27,000,000 settlements yearly on behal o its sub-custody clientbase and has Assets under Custody o SEK1.7 trillion or this client segment.

Other key contacts:Gran Fors,Global Head o Custody Servicesgoran. [email protected] +4687635304Kenneth Draegert Nielsen, Global [email protected]+4687635822

Johan Furugrd, Global CRM johan. [email protected] +4687635179Eric Molander, Global [email protected] +4687635448Yvonne Siljel , Global CRM yvonne.siljelo @seb.se +4687635477Tamara Kokic, Global CRM - Complianceand [email protected] +46-8-7635828

Group Address: [email protected] Locations: Denmark, Estonia,Finland, Germany, Latvia, Lithuania,Norway, Sweden, Russia and Ukraine.

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WITH AN INTERNATIONAL SERVICE PLATFORM.

WE STAND BY YOU

FROM MILAN TO HONG KONG,

As well as the tools we provide for our clients, we have the structures to support their international

development every step of the way. In fact, our organisation is our strength. Our centres of expertise

are distributed throughout the world via international platforms. No matter which country my clients

are based in, I can offer them a complete range of services that best meets their expectations.

Massimo Cotella, CEO, SGSS S.p.A. www.sg-securities-services.com

european custody market guide 2010

Documents