Price spike inevitable as operating costs continue to soar

Costs set to rise for custodians, with knock on effect for pricing and clients.
By Jon Watkins

Operating costs for both global and sub custodians will continue to rise causing inevitable changes to their pricing models, according to a panel at NeMa.

Regulatory costs along with increasing client demands for data, asset servicing and protection are currently increasing cost pressures on custodians. Panelists agreed in unison that these operating costs have risen significantly through the last few years and will be unlikely to plateau just yet.

The subsequent result of this will be a price rise, according Alex Todd, EMEA head of direct custody and clearing sales and intermediaries client coverage at Citi.

“I can’t think of another industry that faced with a fundamental change in its cost base doesn’t – for commercial reasons – get forced to reflect that in its pricing.  We as an industry have been dancing round this topic for a while.

“You get an email from Apple telling you that your subs are going up, move on, accept this and there’s no debate. We accept this in any other commercial remit.

“The reality is that if sustainability and asset protection remains as important as it seems to be, then we as an industry need to accept that commercial reality.”

Asked if the regulatory pressures and subsequent costs would slow down, Ileane Sodani, head relationship development for BNY Mellon’s Asset Servicing business in Europe, the Middle East and Africa (EMEA) said there was “No hint of it slowing down and there seems to be more and more regulation coming through”.

“There is still some way to go in this and markets around the world are in different stages of the revolution,” she added.

Referencing Todd’s Apple analogy, Sodani added that it may not be as simple as increasing prices across the board, especially if you are in a RFP situation and want to win it.

“You get a phone and your core package is very cheap but where they get you is everything you put on top of it. Noone can survive on just custody so that can be stable, but it’s everything you have you build around it.

“If they want something very bespoke you have to decide if you want to provide that and they will have to pay for it.”