Custodians and banks will have tough time being fully prepared for the wave of regulatory, technological and therefore cost of business changes over the next few years, says Tom Isaac, Global Head Client & Sales Management, Intermediaries Global Transactions Services at Citi.
There is an incredible range of challenges, both internally and externally for the banks and global custodians and broker dealers, said Isaac, while speaking about Getting To Grips With The Changing Demands That Global Custodians, Broker Dealers And Banks Are Asking From Their Custodian Partners at the 11th annual NEMA conference in Croatia. Everyone is talking about the regulation tsunami and understanding what it means for industry and how to respond to it from a business perspective reveal there are major issues to address.
Isaac highlighted a number of key areas that will prove very difficult for custodians and banks to respond to in a sufficiently timely manner, due to the variety of complex changes and cost structures and the infrastructure needed to comply with these issues.
There are two key issues that rise consistently for our industry, said Isaac. Do I have the capacity to cope with speed of change and do we really understand the detail of all the regulatory paperwork. The amount of paper just to understand the regulation alone consumes a lot of intellectual capacity and to understand to the level of cost consequences to infrastructural changes iv very significant. I find it very rare to find a large group of people who can sit one down and really take you through how to move trading flow from X central counterparty clearing (CCP) house to Y CCP and how the cost dynamics will change.
Citis Isaac also illustrated how the evolution of the area of post trade has not provided a significant cost dividend and while there has been a significant reduction in costs at the trading level and in some cases in clearing around Europe, the post trade cost base has gone up.
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(LB)