Severe downward pressure on custody fees in Europe was predicted by Mark Tennant, head of global funds services (Europe) at Chase Manhattan in London, at the recent European Institutional Asset Management conference in Frankfurt.
Predicting the arrival in Europe of a single body such as DTC in the US within a few years, he said that “domestic European custody fees will trend from about four basis points down to a half of a basis point. At that stage, I do not see how any domestic suppliers will be able to stay in business.” He added it would be difficult even for the largest custodians to cope. “The only true profitability for global custody then will be coming from the emerging markets.”
“Custodians will have to go up the value chain to performance measurement, accounting, transfer agency, and so on, but we have not really started on these things yet in Europe. The outlook is pretty bleak for custodians, though it is good for customers.”