Africa’s custodians under pressure to innovate

Standard Bank’s head of investor services suggested the role of the custodian has changed in light of increased demands.

By Paul Walsh

Africa’s custodian banks are facing growing pressure to innovate and adapt their role in response to  regulatory demands and client requirements, according to Standard Bank’s investor services head.

Speaking at NeMa Africa conference, Rajesh Ramsundhar, head of investor services for South Africa at Standard Bank,  said the custodian’s role has changed from being a recipient in the market to being an active initiator of change. 

“The contribution of custodians in the market has evolved from being an active recipient to an enabler and now custodian banks are more actively changing the market.

“A lot of this is driven by regulatory needs and changes and how they are responding from a business point of view, there are also a lot of client requirements that require changes in the market which custodians are initiating,” said Ramsundhar.

“ From a risk management perspective, there is a bigger emphasis on custodian banks managing risk in the markets.”

Ramsundhar specifically referred to the active role played by custodians in South Africa switching to a T+3 settlement cycle, as well as the launch of derivatives clearing in Kenya.

The Johnannesburg Stock Exchange (JSE) was the first market in South Africa to transition to the T+3 settlement cycle, in which all equities will now be delivered for payment in three days, replacing the previous six-day cycle (T+5) and bringing the South African market align with international best practice settlement standards.

 “Look at the recent T+3 change, custodians played an active role in enabling change in this market right from the start and even going back five to ten years, custodians were continuously involved,” said Ramsundhar.

“Another example will be derivatives clearing in Kenya where the launch was dependent on a clearing function and here it was a custodian bank that initiated the change and enabled the activation in this market.”