KAS BANK and Deutsche WertpapierService Bank (dwpbank) have signed a memorandum of understanding (MoU) for a partnership regarding wholesale and retail services.
The common goal of the partnership is to develop a pan-European securities processing platform to deliver cross border synergies and economies of scale in transaction banking. This will result from combining the core competences of both niche providers, specifically KAS BANKs expertise in the wholesale securities services market in the Netherlands and dwpbanks expertise in the German securities services market. Through the partnership, KAS BANK will get market entrance in the German wholesale market through dwpbank and will offer dwpbank and its retail and wholesale clients a range of custody and other value added services that address the associated governance issues and the ever-greater degree of European harmonization in the infrastructure market.
Specifically, the partnership will have a threefold effect: firstly, it will establish a retail securities platform first in the Netherlands and later elsewhere in Europe. Secondly, KAS BANK has about 40 securities services professionals in Wiesbaden, Germany and wants to grow in this market through this collaboration. KAS BANK will be able to leverage dwpbanks securities processing capabilities for retail accounts, where they currently serve 1600 retail institutions. Thirdly, dwpbank will set up a branch in Amsterdam to service international clients. Operations and IT, including the processing of securities instructions, will therefore be transferred from KAS BANK to dwpbank and the partnership will see KAS BANK outsource securities services functions such as clearing, settlement, custody and corporate actions as well as related employees (160 employees), who will become employees of dwpbank in Amsterdam. During the subsequent transition period, dwpbank and KAS BANK will develop WP2, the current securities processing platform of dwpbank in Germany, as a core platform to support this business. Furthermore this pan-European platform will form the basis of servicing future Dutch and European clients.
A joint statement from KAS BANK and dwpbank said both parties anticipate cost benefits and quality improvements for about 50 banks and other financial institutions in the Netherlands, which could profit from a bundled securities processing platform for their ca. five million securities accounts.
It is our intrinsic knowledge (in securities processing) they wanted to acquire, Kris Wulteputte, chief risk officer at KAS BANK, who is tasked with implementing the partnership programme, told Global Custodian. Scale is an issue for us, we have a good system and infrastructure but it would be good to have more scale.
The joint statement from both providers said that by establishing this new platform, KAS BANK and dwpbank will support banks and other financial institutions search for wider-reaching economies of scale and quality improvements as international securities transactions grow in complexity, specifically for the whole yet fragmented European securities market. This refers not only to the processing of securities but also to the fast-growing services in the field of pension savings and back office services to Premium Pension Institutions (PPIs), the statement said.
Albert Rell, chairman of the KAS BANK Managing Board said: The partnership with dwpbank is intended to enable both parties to achieve further growth in Europe. The specialized platform is similar in design to the current, efficient system for the central processing of payment transactions in the Netherlands and other European countries. We are delighted to have teamed up with dwpbank in providing the Dutch market with this solution and to expand our services in wholesale banking in Germany together with our new partner at the same time. This move will strengthen KAS BANK‟s position on the European securities markets.
Karl-Martin im Brahm, board member of dwpbank, responsible for sales said: dwpbank has proven its ability to realize economies of scales through bundling of transaction settlement services. We would like to export this successful model together with our new partner to markets outside of Germany. Therefore Amsterdam as an established financial centre with good relationships to other Benelux countries forms an ideal point of departure for our internationalization.
The proposed partnership is expected to commence in the second quarter of 2012, subject to the usual approval of amongst others the relevant regulatory authorities and signing a binding contract. Well set up the branch initially in Amsterdam in our own buildings in the first half of the New Year, said Wulteputte. We will then create the Dutch platform in Amsterdam, which will take two to three years. This platform will be rolled out to the retail space to serve five million retail accounts.
Wulteputte concludes: The success of the outsourcing venture will be measured on costs and quality. It will reduce costs through flexibility of costs and more variable costs.
(JDC)