Bank Of New York Laughs Off Rumours Of A Tryst In Luxembourg

Bank of New York has laughed off market speculation that it is close to expanding its European fund administration capabilities, either by acquisition or through a joint venture with a substantial local player in Luxembourg.
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Bank of New York has laughed off market speculation that it is close to expanding its European fund administration capabilities, either by acquisition or through a joint venture with a substantial local player in Luxembourg. The giant American global custodian is reputed to be on the cusp of winning a major piece of business away from a close competitor, which suggests it has little need of local assistance. BNY has also recently completed a comprehensive refurbishment of the RUFUS fund administration and transfer agency platform it inherited as part of the RBS Trust acquisition, which suggests it may not need a platform either.

On the other hand, BNY does not have a mutual fund processing plant in the Grand Duchy: at present, any Continental European business is routed through its Brussels custody factory. So, on the basis that everybody is talking to everybody all the time, it is not unthinkable that BNY has expressed an interest in buying (or, more likely, allying, especially in the wake of the sizeable Pershing acquisition) with somebody in the Grand Duchy. The bank clearly regards alliances, as the recent deal with ING suggests, as a less risky route into a fresh clientele. The question is: who? The obvious candidate, say the rumour-mongers, is Fortis, the troubled Low Countries bancassurance group, currently wrestling with the prospect that Indosuez will sell its meaningful stake in the group to an uncongenial buyer.

Fortis has a melange of fund administration businesses in Luxembourg, ranging from its 97 per cent-owned subsidiary Banque Generale du Luxembourg (BGL), through the Fastnet joint venture with Credit Agricole Indosuez, to European Fund Administration (EFA), in which BGL has a 26 per cent stake. Having interests in three businesses competing with each other for the same clients means the Fortis mutual fund administration businesses (as opposed to hedge fund administration businesses) are certainly ripe for rationalisation. But are they for sale? The only clue is that the senior management of Fortis has committed itself to sell businesses which fail to achieve the requisite scale.

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