The importance of people, technology and balance sheet

Satvinder Singh

Competition in transaction banking, particularly securities services, has increased rapidly because other banks have recognized that it’s a great business to be in, notes Satvinder Singh

Satvinder Singh’s journey in securities services began with HSBC in 1994. As sales and relationship manager for India, he recalls explaining the highly paper-based market to investors including registration, the signing of transfer deeds and why no trade ever settled on contractual settlement date.

It was a great insight into the nascent stages of the development of the Indian capital markets, he says.

“Markets have been through that evolution where they start off as small, paper based markets, then rules and regulations change, the infrastructure changes, they become dematerialized, they bring new instruments in, and slowly they morph into a very different capital market. That’s the progression I saw in India, Indonesia and a number of other markets that I’ve had experience in over the years.”

One of the most distinct drivers for change between then and now, says Singh, was the financial crisis of 2008. “The crisis fundamentally changed our industry in a couple of ways: One, the current regulatory environment of our business is a direct by-product of it. And two, competition in transaction banking, particularly securities services, has increased rapidly because other banks have recognized that it’s a great business to be in. Transaction banking is attractive because it offers steady, fee based income, while requiring a relatively low level of capital.

“Also, because of the general slow down in the economy post 2008, clients are spoilt for choice in terms of providers, increasingly competitive pressure on fees, and the tightening of spreads. Since the crisis some transaction services providers committed verbally to their business and others have actually invested in it—Deutsche has done both.”

Shortly after Singh joined Deutsche Bank in late 2011, Global Transaction Banking was established as one of the four standalone pillars of the bank. “We went out publicly to say we are going to invest in people, technology and balance sheet,” says Singh.

Going forward, Singh says the three critical lines of Deutsche Bank’s securities services business will be operations, technology and service. “We also set out to be more horizontal, to get more of Deutsche Bank’s group clients to be our clients, and vice versa, and what we are left with is something other banks would like but don’t have, which is momentum.”

Not only has the way Deutsche Bank looks at transaction banking changed but the bank has “been open about finding solutions, whether those solutions exist within the transaction bank, like putting cash collateral and securities lending together, which used to sit in different divisions, or if its the ability to partner with our markets and investment banking colleagues to put more cross-divisional solutions together for our clients.”

Lastly, notes Singh, Deutsche Bank has collaborated with participants from across the industry. “It’s not just about collaborating in regards to utilities but about collaboration to find solutions for situations in which our capabilities are limited. The solution between Deutsche Bank, Euroclear and Northern Trust is an excellent example of how we can partner with others across the industry to deliver a practical, high quality solution to a client. In the next three to five years we expect the percentage of cross-divisional, cross-segment solutioning will increase because clients are getting more complex.”

Asset managers require the full range of services, notes Singh, hence RFPs are a lot more extensive and the way people are awarding RFP business is more complex, he says. “My view is that pre-Lehman, clients made their decisions based on service, pricing and relationship as the main criteria. Post-Lehman, another dimension has been added and clients focus on how well a provider is aligned with the changing regulatory framework. It’s also about commitment—are you actually investing in the business and how does that investment manifest itself?

“For me the defining factor now is how open we become: open in mind-set, which is reflected through collaboration, openness in terms of looking left and right for solutions, openness in terms of mobility and talent.”

Singh says this less siloed approach can also extend to solutions involving industry organizations. “ISSA (International Securities Services Association) and SWIFT and other supranational organizations play a great role in our success,” says Singh. “Could we be here today without them? The answer is no. Could we be doing today what we are doing: absolutely not. But times continue to change—are they going to change with us? The reality is that, more often than not, solving a client’s problem calls for us to work as a collective rather than try to do something by ourselves, out of the box—so I am confident that they will.”