Thursday 29th January 2015
NEWS TICKER: THURSDAY, JANUARY 29TH 2015: The Federal Deposit Insurance Corporation (FDIC) issued a Financial Institution Letter yesterday encouraging supervised institutions to take a risk-based approach in assessing individual customer relationships, rather than declining to provide banking services to entire categories of customers without regard to the risks presented by an individual customer or the financial institution's ability to manage the risk. The FDIC also reinforced the agency's policies on managing customer relationships to examiners and other supervisory staff. Financial institutions that properly manage customer relationships and effectively mitigate risks are neither prohibited nor discouraged from providing services to any category of customer accounts or individual customers operating in compliance with applicable laws. FDIC examiners must provide notice in writing for any case in which an institution is directed to exit a customer relationship - US mid-market investment bank BR & Co says it will release results for the fourth quarter and full year of 2014 before the market opens on Wednesday, February 11th -.Chile’s Minister of Economy, Development and Tourism, Luis Felipe Céspedes, along with General Manager Sercotec Bernardo Troncoso, made ​​a visit to the antique del Barrio Italy yesterday to introduce new programs for productive development that will display Sercotec for entrepreneurs , micro and small businesses during 2015 - Moody's de Mexico has upgraded debt ratings to Baa1 (Global Scale, local currency) from Baa2 and to Aaa.mx (Mexico National Scale) from Aa2.mx of the following five enhanced loans to the state of Chihuahua: MXN4.5bn from Banco Interacciones (original face value) with a maturity of 20 years; MXN1.38bn from BBVA-Bancomer (original face value) with a maturity of 20 years; MXN 2.03bn from BBVA-Bancomer (original face value) with a maturity of 20 years; MXN1.72bn from BBVA-Bancomer (original face value) with a maturity of 20 years; MXN3bn from Multiva (original face value) with a maturity of 17 years (MXN1.4bn disposed of). The ratings agency also assigned debt ratings of Baa1 (Global Scale, local currency) and Aaa.mx (Mexico National Scale) to the following enhanced loans: MXN1.995bn from Banorte (original face value) with a maturity of 20 years; MXN1bn from Santander (original face value) with a maturity of 20 years. All the enhanced loans are payable through a master trust (Evercore as trustee F/0152), to which the state has pledged the flows and rights to 56.98% of its federal participation revenues. All the loans under this master trust share the cash flow and are paid on a pari passu basis. - The January monthly energy review by the EIA was released yesterday evening. Preliminary estimates of US residential energy consumption suggest that for October 2014 total energy consumption equaled 1.3 quadrillion Btu, a 2% decrease from October 2013. Electricity retail sales and electrical system energy losses accounted for 73% of residential sector total energy consumption, while natural gas accounted for 16% of residential sector total energy consumption, renewable energy accounted for 6%, and petroleum accounted for 5% - Celent has released a new report, titled, IT Spending in Banking: A North American Perspective. The report is authored by Jacob Jegher, a research director with Celent's Banking practice. North American IT spending growth is rising steadily, he says, and is expected to be 4.5% higher in 2015. Growth will drop slightly in 2016 as IT spending by North American banks reaches US$64.8 billion, an increase of 4.2%. In the report, Celent examines, analyses, and contrasts the IT spending patterns of US and Canadian banks. The firm says North American bank IT spending will grow from $59.5bn in 2014 to $62.2bn in 2015. This year, the firm adds, is shaping up to be another promising one for retail banking; significant funds are still required to move forward and maintain self-service initiatives, digital banking projects/overhauls, branch transformation initiatives, and omni-channel endeavours. Additionally, mobile banking will continue to receive significant attention as banks aim to build on existing smartphone and tablet apps. Analytics, omni-channel banking, compliance/regulatory, and IT security investments will also be priorities. Spending on corporate banking will continue to climb through new component or module-based initiatives. Midsize banks are still very much looking to compete with larger banks that have invested significant amounts over the last several years. Small business is also a growing area of interest because banks still haven't figured out how to attack this distinct and attractive market segment. "The figures point to another strong year; 2015 is poised to build on the growth experienced last year," says Jegher. – The CME Group advises that the deadline to claim a SMART Click ID for GPS and BPS will be February 6th, 2015. After this date, there will no longer be an option to login with a Legacy ID and both applications will only be accessible with a SMART Click ID. Applicants can create a SMART Click ID (if you do not have one already) or claim your Legacy ID via the GPS and BPS portals and both applications must be claimed independently prior to the deadline. The CME says that after February 6th, the GPS and BPS applications will no longer be available via the CME Portal. These applications will only be available via ‘direct’ links following direct links: https://gps.cmegroup.com; https://bps.cmegroup.com; and https://login.cmegroup.com - China’s debt build up since the global financial crisis ranks as one of the largest in recent history (in the 97th percentile of debt-to-GDP changes in a sample of 55 countries over the past 50 years) according to Goldman Sachs’ latest Global Economics Weekly research report. The bank says the development is new and is a major global macro concern for investors. Deteriorating external conditions and declining investment efficiency have contributed to the debt build-up. The research team says that while the risk is significant, its analysis exploring the aftermath of large debt build-ups over the past half-century suggests that credit booms do not always end in deep recessions or banking crises. “GDP growth typically decelerates by at least 3-4pp after credit booms, although in China’s case some slowing has already occurred. Smoothing the adjustment process is likely to require increased central government fiscal outlays and policy interest rates should remain fairly low,” says the team. They add that while Chinese policy-makers have begun to address credit issues, significant imbalances still need to be worked off and capital market system development and reforms still need to be implemented more fully -

A streamlined approach

Friday, 15 June 2012
A streamlined approach The European asset management industry has grown considerably over the last ten years. Assets under management (AUM) stood at €3trn at the end of 2001, and had reached €7.89trn by the end of the second quarter (Q2) 2011. This growth, which will support the savings and retirement of a large portion of the European population, means asset managers have an enormous responsibility to their end clients. By Ann Doherty and Brian Coughlin, JP Morgan Worldwide Securities Services (WSS). http://www.ftseglobalmarkets.com/

The European asset management industry has grown considerably over the last ten years. Assets under management (AUM) stood at €3trn at the end of 2001, and had reached €7.89trn by the end of the second quarter (Q2) 2011. This growth, which will support the savings and retirement of a large portion of the European population, means asset managers have an enormous responsibility to their end clients. By Ann Doherty and Brian Coughlin, JP Morgan Worldwide Securities Services (WSS).

It is inevitable that asset managers want to retain their investment gains by reducing uncertainty and risk from their activities as much as possible and increase straight through processing (STP) and transparency, particularly in today’s volatile environment. One way to achieve that is to use a custodian that can provide all of these benefits through a streamlined product offering to help reduce both costs and risks while keeping up with the ever-

changing regulatory environment.



The objectives of asset managers present their own challenges, particularly with a regulatory reform agenda framed by G20 commitments, which culminated in the Dodd Frank Wall Street Reform Act and the European Market Infrastructure Regulation (EMIR). Since 2008, regulation has been constantly evolving and expanding. In addition to those two regulations, investors also have to adjust to the second iteration of the Markets in Financial Instruments Directive (MiFID II), UCITs IV, AIFMD, FATCA, Basel III and Solvency II.

To understand and execute on what regulators expect from them, asset managers today look to their service provider for help with the provision of an industry-leading  global custody and securities services offering with innovative technology to meet their daily requirements; seamless execution to increase STP and reduce risk; thought leadership to help them understand how regulation and potential market events could affect them (as well as their end-clients) and provide appropriate and timely data analysis.

Inevitably, the most sophisticated asset managers want to work with a securities services provider that can provide global reach and which has sufficient resources of capital to invest in industry-leading systems and technology. That means all of their requirements are met in one place. Investors then benefit and can have confidence in the fact that whatever complexity is injected into the market, whether by unexpected market events or by regulators, their custodian will be able to manage it.

Next, asset managers want seamless execution to help them eliminate risk and costs. Recognising the important role that asset managers play in the savings and pensions industry, regulators are putting pressure on them to provide their end clients with transpar­ency and as little risk as possible.  To do that, fund managers must tighten up the chain in their post-trade activities. 

For their part, custodians have been moving into more consultative technology-driven services for years, which asset managers and other users of custodian and related securities services have greatly benefitted from. Increasingly, these users of securities services are looking to their providers to move even closer to their front office, even coming just after the trading and investment decision. 

In the past, using one firm’s investment bank to execute trades and using the same bank’s custodian arm might have raised concerns about whether this one-stop-shop provided the best execution and cost in the market. ­Regulations, particularly MiFID, have removed that uncertainty.

Finding a provider that can tick the first two boxes as well as provide the critical consultative thought leadership all asset managers look for to keep up with regulatory and market changes, isn’t easy. Asset managers look to their service providers to provide ­information about changes arising from the rapidly evolving regulatory environment, to ensure that new requirements are understood and ­prepared for. Large international firms that are present in multiple jurisdictions are best placed to have a view of regulatory changes and to adapt their services to new requirements on a global basis.

Lastly, asset managers also rely on service providers to help them provide up-to-date and transparent data ­analysis, which is a critical reporting requirement to regulators, governments, trustees and other stakeholders, and is part of their own internal risk reviews.

This means asset managers want detailed information about their ­transactions, securities held, and ­breakdown of the core characteristics of those assets. They also want this data delivered in a fast and efficient manner, which requires a strong STP framework. This presents a challenge and an opportunity for service providers as it is not an easy task pulling together different sets of data and presenting it in a format that asset managers can consume and customise.

To meet all of these requirements, a service provider has to continuously invest in technology, and have ­regu­latory experts who can quickly analyse new regulations and understand how they will fit and potentially impact existing regulations with which asset managers are already complying. This re­quires a delicate balance between investing in business enhancements and people, while maintaining required capital levels. Large global custodians with the capacity to invest in its technology and systems are more able to make these investments than smaller firms.  

Asset managers are looking to ­securities services providers to act more strategically then ever before. By using one bank for all activities following the investment decision, asset managers are recognising their ability to cut potentially weak links from their post-trade chain, and rationalise the number of providers they use. This coordinated servicing effort across a firm, usually a bank, enables the large and fully-integrated players to really understand an asset manager’s needs, requirements, product and geo­graphical expansion plans. This support across many distribution channels helps fund managers reduce cost,

outsource the risk by leveraging ­operational cap­abilities, risk management capabilities and therefore offers a much better and broader value proposition. Today, a service provider must have all the ­necessary tools in the tool box and be willing and able to use them.

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