Looking at the securities services landscape over the past decade or so, there has clearly been consolidation at the global custody level and in the majority of individual markets. How has Deutsche Bank decided on its strategy of focusing on a national/regional approach?
Where we pride ourselves is on local market connectivity and on our people on the ground with the ability to help clients navigate a complex landscape. In the 33 markets where we offer local custody, we have often played an important role in helping open up markets. Over the years we have helped a number of markets move from physical to automated processes. As capital markets evolve, we see our role as facilitating that evolution, understanding what works in the local environment and enabling clients as they spread their activities across geographies. We’ve stayed pretty true to that.
So how does not offering global custody allow you to allocate your resources more effectively?
Clarity of purpose is important to us. We are hugely committed to the local custody business; we are in 33 countries globally with very diverse clients, including global custodians, asset managers, and brokers. We sold our global custody business many years ago. We’d much rather continue focusing at a local level than try to make an entry into the current global custody environment where players are strong, but investing significant sums to remain so. It’s just not something our clients are asking us to get into.
What about local clients investing abroad?
It depends what their requirements are. For example, a domestic fund services business in an Asian market may be looking to expand to another market in the region. We may well be able to offer an appropriate solution. But a large US manager looking for global custody services, that’s not Deutsche Bank. We could offer to support them with a multi‑market solution, but not a global custody solution. Our clients are very comfortable with the limits we’ve set to our remit.
Have common endeavours served the industry well? Are there areas where common endeavour is now called for?
Let me give you two examples of that. One is TARGET2-Securities (T2S): a multi-year project that has allowed Deutsche Bank to innovate in the face of unprecedented change in the custody space. It’s one of those programmes where the whole industry came together: custodians, clients, market infrastructures and regulators. We all worked together to make it happen. Another good example is the European Post-Trade Forum, which is trying to bring the industry together and look at transactions end to end. So as we get to grips with CSDR, EMIR, MIFID II and the plethora of regulatory and infrastructural changes happening in Europe, we want to make sure we’re approaching them in a consistent way.
What do clients want out of all this? They want simplicity, transparency, and costs to come down in a harmonised environment. They don’t want differing settlement and buy-in cycles and penalties. There the industry is making some in‑roads.
Where I’d say we haven’t made much improvement – and where some of the biggest risk in the business remains – is corporate actions. We’ve all talked about it for a long time. At least the Post Trade Forum is a step in the right direction.