The Bank of New York (BNY) and Mellon have begun work in earnest on the integration of the two custody businesses, including the division of the top jobs. Unlike the very top of the merging banks, where the initial deal included a commitment by Bank of New York CEO Tom Renyi to hand over to Bob Kelly, his opposite number at Mellon, the “asset servicing” business will be co-led by two old colleagues from Boston Safe: Jim Palermo, currently CEO of the asset-servicing group at Mellon in Boston, and Tim Keaney, the London-based head of BNY in Europe.
The two men will share management responsibility for the merged Bank of New York-Mellon custody businesses. The reason, they say, is the geographic and operational size and complexity of creating a global custodian with $17.4 trillion in assets under custody, but disinterested observers will wonder about the long term stability of such an arrangement.
Palermo and Keaney head a joint BNY-Mellon asset servicing integration group, with Fred Ricciardi (Bank of New York) and Dan Smith (Mellon) as integration heads and leaders of a so-called Asset Servicing Integration Office.
Between them, they have already reported to the Merger Integration Committee (MIC) headed by Bob Kelly (CEO and Chairman of Mellon Financial) and Gerald Hassell (President of The Bank of New York) on how Palermo and Keaney wish to structure the merged entities and who they believe should run the various new business divisions.
There will be six businesses lines – US Funds Services, US Asset Services, Europe, Middle East and Africa (EMEA) Asset Services, Asia Asset Services, Canada Asset Services (CIBC Mellon) and Eagle Investment Systems – with a single operating and service model and P&L.
US.Funds Services will support fund managers, banks, insurance companies, UITs and ETFs, while US Asset Services will support pension funds, endowments, foundations, health care institutions and middle- and back-office outsourcing. In Europe and Asia, the distinction does not arise.
Palermo will lead the business lines in North America, plus securities lending and Eagle Investment Systems, and assume finance and administrative responsibilities, such as strategic planning, risk and compliance.
Keaney will lead the business lines outside North America and have ultimate responsibility for product management, global and securities operations, technology and integration.
At the next level down, the following individuals will report to Palermo:
US Funds Services: Pat Curtin of the Bank of New YorkUS Asset Services: Vince Sands of MellonSecurities Lending: Tom Ford of the Bank of New YorkDeputy Securities Lending: Kathy Rulong of MellonCanada Asset Services (CIBC Mellon): Tom MacMillan of MellonEagle Investment Systems: Lou Maiuri of MellonChief Administrative Officer (CAO): George Gilmer of MellonDeputy CAO: Regi Meredith-Carpeni of the Bank of New YorkChief Financial Officer (CFO): Mike McFadden of he Bank of New York, who will also report directly to the finance group.
And the following individuals will report to Tim Keaney:
Europe, Middle East & Africa Asset Services: Nadine Chakar of MellonAsia Asset Services: Chong Jin Leow of the Bank of New YorkProduct Management: Gunjan Kedia of MellonSecurities Operations (Securities & Income Settlement, CorporateActions, Network Management): Richard Genin of the Bank of New YorkGlobal Operations (Fund Accounting, Transfer Agency,Analytics Operations and Data Management): Andy Bell of the Bank of New York
Asset Servicing Technology will also report to Tim Keaney, but the job has yet to be allocated.
Nobody will take up their new jobs until the merger is finalized, probably in July, and the two banks will continue to operate and sell themselves and their services independently until then.
Foreign exchange – always a valuable source of spoils in a custody bank – will be merged with the global markets businesses. This will disappoint anybody counting on foreign exchange revenues for their personal remuneration.
The hedge fund administration services of the two banks – built on the DPM business acquired by Mellon and the IFA business acquired by Bank of New York – are being grouped into a company-wide hedge fund servicing group. It is not yet clear who it will report to.
The future of the various third party alliances agreed by the two banks when they were independent – such as that between Bank of New York and ING, and the joint venture bank formed by ABN Amro and Mellon – has yet to be worked out with the third parties, and for now they will continue to report to their existing CEOs and boards.