GC Friday Interview: Patrick Colle, CEO of BNP Paribas Securities Services

Five years ago, BNP Paribas, the world’s fifth-largest custodian, had about half the amount of assets under custody as the fourth-largest custodian, Citi. Then in 2010, BNP Paribas Securities Services promoted Patrick Colle to CEO, and since that time, the bank has embarked on a global strategy with the goal of operating as a subcustodian in 30 countries, in order to have a presence where 95% of the world’s assets lie. Under Colle’s guidance, the bank has opened as a local custodian in markets stretching from New Zealand to Brazil to the U.S. and now operates as a subcustodian in 27 countries. Today, the bank has closed the gap on the number four spot, as BNP Paribas has around two-thirds of the assets under custody of Citi and has its sights set on continued growth. Aside from expanding its custody network, Colle has other initiatives planned for 2014, particularly in the U.S., such as launching fund administration operations and a third-party securities lending service.

How has BNP Paribas Securities Services changed since you became CEO?

PC: It’s pretty much a continuation of what we, and I, set up three years ago as the new evolved strategy for our business, which was first and foremost to make the move to become a truly global player. We were more European-centric, and we had to go the extra step to become truly global. First and foremost what we did is we reorganized ourselves three years ago in the business across four sub-business lines (asset servicing, clearing and local custody, corporate trust services, and market and financing services) that were each global in nature, i.e. with a worldwide P&L, and with each head of these four business lines having full worldwide responsibility for operations, IT, product development—everything, which was not the case before. So everything we were going to do was going to be with a global outlook. And global means available. To me, that was the precondition to then be able to implement a globalization strategy.

We must become global for two reasons. One is to be able to support our global clients wherever they go. Our clients are evolving every day now, but at the time they were mostly European clients. Now they are European and Asian and Latin American and we continue to grow in the U.S., but still with a strong predominance of European clients. When they go to Asia, when they go to the U.S., when they go to Latin America, we need to be there. We need to be able to service them across the range of their needs. And the second reason why we wanted to be global was to simply have growth engines other than just in Europe. So we wanted to have an Asia-Pacific growth engine, we wanted to have a Latin America growth engine, and we very much want to have a U.S. growth engine because the U.S. is the largest market in the world, and it happens to be growing. On top of that, we also find it to be a very rationale market where players will be sensitive to a good product at a good price from a good team; if you have those, you’ll have a fair chance in the U.S.

So that’s very much been the strategy, and it’s a strategy we have not changed over the last three years. We are in fact executing on it. Now of course, it is not a strategy we were just going to be able to execute in two or three years. We’ve come a long way and I think today, especially this year, we can really declare ourselves truly global, and in that context, completing the U.S. launch was critical to that.


In what other countries do you plan on opening as a local custodian to reach 30 markets?

PC: The 30 is not set in stone. It could be 29, it could be 31. And we constantly, almost real-time, revisit the priority order. So we have a list of roughly five or six countries that are potential candidates, and then we reassess constantly because regulation is changing, and client needs are changing. But it’s fair to say that the countries we are looking at are China, Mexico, and then to a lesser extent, we are looking at Malaysia. But I think chances are the next two countries we will focus on are China and Mexico.


Is there risk in spreading your operations too thin across the world?

PC: When you expand, as we have done and as we continue to do, you always are stretching your organization. But I would say we have by a far margin the talent for doing that. That’s why it was key to reorganize the business and give global responsibilities to those business lines because now we have the management in place and the structure in place to manage the business in a global fashion. This was not the case before. And we have an extremely deep pool of talent also considering that we have a very high stability of our staff. We have a very high level of continuity in our management in this business, which is important, because it means we have expertise. And in a way, the fact that we are opening in all of these markets creates great mobility opportunities for some of our most talented managers.

Would you say there’s anything specific about Latin America that’s causing the bank’s expansion in the region or is it more a matter of timing?

PC: It’s a combination of all of the above, interestingly. Timing is, for instance, strikingly good for Colombia because of the changes in regulation there and the growth of the market. (Colombia recently passed regulation requiring all local investors to appoint a local custodian.) The trend of launching and exporting UCITS is a huge driver of activity in Latin America and particularly in Brazil. But to the same extent, we have a small presence in Chile as well, and Chilean pension funds are buying lots of UCITS. So there’s an opportunity for us to provide, although we don’t do it with on-the-ground operations, we do it from offshore in a way, but we provide global custody services to Chilean asset managers in support of their UCITS investments. And that is a trend that is indeed developing.