EUROPE - Asset servicing bank State Street has indicated it is "looking at opportunities" to expand its European global custody business, benefiting from the fallout of the banking crisis.

Jay Hooley, chief operating officer of the Boston-based bank, told the Financial Times: "There are six to 10 subscale global custodians attached to banks.

"Given that the crisis is centred on the banking world there will be a likelihood that there will be opportunities for us to consolidate the European custody business. We are looking at opportunities at the moment." A State Street spokesperson said the bank has been saying for some time that Europe is growing faster than the US, but declined to say if it has specific targets in mind.

"I can't really see who they'd be looking at," said Richard Hogsflesh of research firm R&M Consultants. 

And other observers warned of a concentration of power developing in the industry.

Simon Thomas, chief executive of global custody ratings and data firm Thomas Murray, said bigger does not necessarily mean better and that there was too little choice already in the market. "It's rapidly becoming a bit of an oligopoly," he told IPE. There was a "super-group" of global custodians.

"I'm not questioning [Hooley's] assertion that custody is a scale business, but it doesn't necessarily follow that bigger is better."

Thomas added there was some evidence that fees would increase as funds decreased their securities lending programmes, which would affect custodians' income. And he pointed out that niche players, such as alternatives specialist Citco, also have a role to play.

Hooley was promoted to president and chief operating officer of State Street in May this year.

In October State Street, which as $14trn under custody, said it would take $2bn (E1.5bn) from the US Treasury as part of the bank bailout.