When the star of the cult Sixties TV show The Prisoner was not being pursued around the Welsh coastline by amorphous white blobs or grappling manfully with yet another convoluted, would-be existential conceit, Patrick McGoohan could be found securing his place in the glittering pantheon of pop culture with the now famous declaration: “I am not a number”.
A noble sentiment for sure, and one which KAS Bank’s Egon Tibboel – while not on record as a devotee of cult British television – argues is central to his bank’s continued success in the face of mounting pressure from the global custodians.
The received wisdom being peddled at this point in time is that going forward smaller European custody providers will increasingly struggle to meet the needs of a globalising and ever more sophisticated institutional client base. Unable to compete in terms of product breadth, geographic reach or technology, they will be steamrollered by the big, predominantly US players who - if they are lucky - may throw them a lifeline in the shape of a merger or partnership offer.
Tibboel cheerfully dismisses such doom-laden prognostications. “It has always been the case that the big US banks are saying only they will survive,” he says. “I joined KAS Bank 13 years ago, and even then we were being told it would only be a couple of years before we exited the business. Well, we are still here, and we are still hearing that same refrain.” He goes on: “It is all very well saying you spend $1bn (e764m) every year on technology investment, but you could question just how prudently they have planned that spend and how effectively they have implemented their systems.”
Tibboel describes KAS Bank as “a small to medium sized European player with global reach”. The bank currently has some 400 institutional clients and some E250bn in assets under custody. “We offer a highly tailored service – the feedback we get from clients is that the big players are focusing on the big clients,” he says. “When you are a client with only E200m or E1bn in assets, then we can generally offer a more personalised service than they would get from a big bank.”
The bank has just completed a restructuring which sees its commercial operations split across two new divisions. Institutional investors, headed by Tibboel himself, will focus on providing custody and investment management support services to institutional investors, investment funds and fund managers. Meanwhile Ryanne Cox will oversee the financial intermediaries division which, as the name suggests, will offer clearing, settlement, sub-custody and ancillary market services to banks, custodians, investment banks and broker-dealers, allowing them to access Euronext, Deutsche Boörse and LSE via a single Amsterdam-based platform.
“Things had perhaps become a little too unwieldy given the differing needs of the various client segments,” says Tibboel. “For financial intermediaries clearing and settlement are central, whereas on the institutional side custody and settlement are just the jumping off point to value added services such as securities lending, commission recapture, performance measurement, compliance monitoring and so on.
“Splitting the business into two divisions will allow us to better focus on clients’ needs.”
Having initially focused exclusively on Dutch institutions, in 1992 the KAS Bank opened a London branch which can now boast 30 institutional clients. “The UK is a massive market, three times the size of Netherlands, and while it is a competitive environment there are nonetheless a lot of small to medium sized pension funds that were not being adequately serviced,” he says.
“In the longer term our plan is to extend our reach across a number of other key European markets, although we are only at the research stage at this point,” says Tibboel. “It is a mistake to rush these things – you obviously have to customise your offering to meet local needs, it is not just a matter of transplanting your Dutch product to the UK or your UK product to Belgium.”
Regulatory, tax and cultural issues are one reason why a number of the larger players have expressed an interest in forging alliances with local European custody providers – indeed, KAS Bank was one of the first continental custodians to be wooed by the Bank of New York, which is currently hitched to ING Bank. As Tibboel notes, KAS Bank emerged from its short-lived union with BNY wiser if not necessarily sadder.
“Starting an alliance with a big bank is not very difficult but, along the line,everyone is looking for their own revenues, and while you can try and work together, in the end conflicts will inevitably arise over certain clients and fee or revenue splits.
“In the end you are just focusing all your attention on maintaining the alliance rather than servicing your clients.”