Making custody global

Robert Binney

Robert Binney notes the global custody industry continues to grow with the rise of both international investing and emerging markets

When Robert Binney moved back to the London branch of Chase Manhattan Bank in the late 1980s, there were two areas it specialized in in Europe: foreign exchange and custody. Previously he was stationed in Japan for five years as a country manager, and prior to that he ran its Asia-Pacific merchant banking business. So when he moved back to London, he was asked to manage the custody division, despite his lack of prior experience. “When they offered me the opportunity I said ‘I don’t know anything about it,’ but they said ‘that doesn’t matter, we need professional management’,” Binney recalls.

Binney, in fact, inherited the business from Colin Grimsey, a fellow Global Custodian legend and arguably one of the founders of global custody. “I first got to know about it because in Japan, Chase Tokyo was the custodian for Chase’s global custody business, so we had about $15 billion worth of assets in our vault, looking after institutional investors in Japanese bonds and equities,” he explains. “So that was my only knowledge of custody when I came back to London.”

Between 1989 and 1991 Binney served as the senior executive for Infoserv, Chase’s transaction banking business for the EMEA region, where it brought together trade, custody, securities and cash management. During his years of running the business, Chase became one of the fastest growing and largest global custodians. “The business I inherited had some very good international fund management clients, and some very good insurance company clients and some major pension fund clients. What we did was to beef up our expansion across Europe and the Middle East. So we were very successful in onboarding sovereign wealth funds run by all the major countries in the Middle East,” Binney says. He was also greatly helped by the former Ramy Bourgi, who was at the helm of the Middle East franchise at the time.

As well as building the Middle East investment franchise, he also targeted offshore fund services, something that was new to U.K. and U.S. banks at the time. These funds included SICAVs and unit trust funds, particularly in Dublin and Luxembourg. Chase got into the business very early, and with all of its operations it achieved growth of around 30% per annum during the mid-’90s. “I think I started with a 25% market share and by the time of the merger with Chemical came along, which prompted me to leave, we had a 33% market share in the European global custody market,” he says.

In 1996, Chemical Bank acquired Chase for around $10 billion to create the largest U.S. financial institution. At that point, the new management did not see a place for Binney, and he left in 1996 and ended up working for Citi in Europe. “The logic for that was at that time Citi was a second tier player; it had a very good broker-dealer business but very little of what would be called international investment business, and they very much wanted to grow that,” he says.

Binney was set with the huge task of building that business into a dominant global force, and between 1996 and 2005 it grew significantly. Its key to success was in the form of outsourcing, which became a popular theme when large international fund managers chose custodians to run their middle- and back-office operations for them. During his time at the bank, he was also appointed head of FI (financial institution) client development for its global transaction business, before announcing his retirement in October 2005.

In his view, transaction banking has become a more significant and positive business in the banking sphere, much more so than investment banking. “Even though Citi prides itself in being very strong in investment banking, towards the end of my time in the early 2000s, the value of the transaction banking franchise was highly regarded by senior management because its stock market value was so much higher than the investment bank, with low capital needs and non-volatile earnings.”

Despite his retirement from the bank, Binney is still involved in the financial services industry, currently serving as a non-executive director for Citi’s trustee/fiduciary services, and heading his own consultancy firm, which he has run for five years. “I now look at the custody business from the outside-in perspective, rather than inside to out. I think it is a great business because it continues to grow with international investment. Banks have begun to see how good a revenue stream cash and transaction banking can be,” he says.

His message for the future is focused on international investment, despite this time of economic uncertainty. “The world is becoming more international, so I think even if you are a Chinese private sector individual, some portions of your savings are going to be in international markets. I personally think the rise of emerging markets will continue to grow, and with this, global custody will continue to grow.”