BNP Paribas to launch US custody service for institutionals
GLOBAL – BNP Paribas Securities Services is to launch a local custody service in the US at a time when new regulations related to the Dodd Frank Act are creating a “whole range of opportunities” for custodians.
According to BNP Paribas’ custodian branch, the new local offering will provide post-trade services to multinational banks, brokers and institutional investors.
Patrick Colle, chief executive at BNP Paribas Securities Services, told IPE the move was the result of a review launched two years ago.
“The strategy we defined two years ago came up when we decided to become a truly global custodian and not just French, European or international,” he said.
“Launching the US business was in some ways the last step before becoming truly global.”
Colle also pointed out that BNP Paribas Securities Services’ clients were traditionally global investors, with large US portfolios.
He said the new service would lessen the company’s reliance on external sub-custodians and increase the amount of client assets held entirely within BNP Paribas, since the group will serve as sub-custodian in some markets.
“This has additional benefits in the current regulatory environment, where increasing emphasis is put on end-to-end operational control,” Colle added.
“We simply needed to add that component to our global offering and to reinforce our global custody competitive advantage.
“Extending our sub-custody capabilities to include the US means we will become the local custodian for more than 90% of our clients’ global assets.”
However, Colle stressed that division’s strategy was not to compete directly with other custodians already well established in the US, but rather to ensure that its existing clients elsewhere around the globe would be able to access to the US custodian market.
Colle conceded that new regulation coming out of Brussels and Washington – such as the EMIR and Dodd Frank – could lead to more constraints and costs in terms of capital charges, but he argued that they also presented opportunities for the overall custodian model.
“When it comes to the OTC derivatives clearing market, which is a direct consequence of Dodd Frank in the US and EMIR in Europe, the real issue relates to the complexity around collateral management,” he said.
“First, buy-side clients such as pension funds will need to identify where the collateral is and whether this collateral is eligible or not to comply with the margin requirements of CCPs.
“Additionally, the buy-side will have to transfer these collaterals to CCPs. This naturally creates a movement for outsourcing collateral management to a custodian, which is a big opportunity for us.”