Head, Market Advocacy, Securities Services, Transaction Banking
Despite the life cycle being seemingly simple it is complicated by numerous links and stages that are required and used and which often result in the higher cost of the service and the heightened possibility of risks and errors.
The point noted and discussed on the panel was that despite the risks being well documented(1), the question remained as to whether the process could be simplified for a less expensive, more aligned and overall enhanced outcome. And further, could this be done in the context of the current regulation? Post the various global health hazard’s headlined by Lehman Brothers and Madoff incidents, regulators globally were prompted to introduce various reforms (among them asset safety regimes and strict liability requirements on depositaries under UCITS V and the Alternative Investment Fund Managers Directive (AIFMD), European Market Infrastructure Regulation (EMIR) and Markets in Financial Instruments Directive II (MiFID II) and the Central Securities Depository Regulation (CSDR)) impacting securities services transactions. Hence the valid question of the ability to have an enhanced agile process within a web of global regulation.
|Figure 1: Overview of the participants in the Long Custody Chain|
Risk management - short-term thinking
Looking through the crystal ball and a proposed future state
So, what is the solution?
For custody to withstand this longer-term transformation, it must reform itself. This means firstly accepting that the custody model needs to change and that traditional services will increasingly be digitalized. Technologies such as blockchain are being implemented and assessments are being trialled in various operational lines. Once risks of the technology are clearly defined, and guarded against, it is inevitable it be unleashed onto the broader more global community. This inevitable change will happen on my watch. It is time to start to assess and consider what this means.
(1) ISSA – Inherent Risks within the Global Custody Chain
(2) See ‘Africa Regulatory Reform: The State Of Play’ Standard Chartered Paper on harmonization and regulatory reform in Africa
(3) ISSA – Inherent Risks within the Global Custody Chain
(4)Allens Linklaters – Blockchain Reaction
(5)Allens Linklaters – Blockchain Reaction
About the Author
Julia McKenny, Head, Market Advocacy, Securities Services, Transaction Banking. Julia started her career as a litigator in corporate and commercial private practice before joining the financial services industry 15 years ago. Julia has held global roles located in Singapore, Australia and London covering legal, compliance and governance. Julia is the Standard Chartered voting representative of the AGC and the Middle East and Africa Committee AGC chair. Prior to becoming the Head of Global Advocacy for the Securities Service business at Standard Chartered, Julia held the roles of Head of Legal and also Head of Compliance for the Securities Services and Corporate Agency and Trust business
Euromoney and Standard Chartered will be running a series of webinars on securities services. The next will be ‘The fight against cyber crime in financial services: how prepared are you?’ on September 26. Find out more.
This material has been prepared by Standard Chartered Bank (SCB), a firm authorised by the United Kingdom’s Prudential Regulation Authority and regulated by the United Kingdom’s Financial Conduct Authority and Prudential Regulation Authority. It is not independent research material. This material has been produced for information and discussion purposes only and does not constitute advice or an invitation or recommendation to enter into any transaction.
Some of the information appearing herein may have been obtained from public sources and while SCB believes such information to be reliable, it has not been independently verified by SCB. Information contained herein is subject to change without notice. Any opinions or views of third parties expressed in this material are those of the third parties identified, and not of SCB or its affiliates.
SCB does not provide accounting, legal, regulatory or tax advice. This material does not provide any investment advice. While all reasonable care has been taken in preparing this material, SCB and its affiliates make no representation or warranty as to its accuracy or completeness, and no responsibility or liability is accepted for any errors of fact, omission or for any opinion expressed herein. You are advised to exercise your own independent judgment (with the advice of your professional advisers as necessary) with respect to the risks and consequences of any matter contained herein. SCB and its affiliates expressly disclaim any liability and responsibility for any damage or losses you may suffer from your use of or reliance on this material.
SCB or its affiliates may not have the necessary licenses to provide services or offer products in all countries or such provision of services or offering of products may be subject to the regulatory requirements of each jurisdiction. This material is not for distribution to any person to which, or any jurisdiction in which, its distribution would be prohibited.
You may wish to refer to the incorporation details of Standard Chartered PLC, Standard Chartered Bank and their subsidiaries at http://www.standardchartered.com/en/incorporation-details.html.