Increased pricing pressure, cost complexities, and western regulatory initiatives may have custodians worried.
ABF: What new complexities are being thrown up by new US and EU regulations, especially in payments?
HSBC: Ian Banks, Head of HSBC Securities Services, Asia
You can look at regulatory change as a challenge or as a catalyst to help steer the ever changing and complicated world the financial markets are presenting. Regulation needs to keep pace with change but also needs to intervene when change could introduce unacceptable levels of risk into the system.
Custodians face challenges around cost not only evident in core custodial service offerings but also in value-add or peripheral services such as cash management and securities lending. This landscape consists of the correlation between increased pricing pressure and costs and to some extent the additional element of new 'western' regulatory initiatives (MiFID, SEC, ERISA, AIFM, Dodd Frank). Is there a one-solution-fits-all remedy to these market and regulatory challenges? No. Asia will face its own regulatory scrutiny but will not be passed over by the far reaching initiatives coming into affect in today’s cross border global business.
There are both positives and negatives to be drawn out of the new raft of regulations. A positive could be an enhanced common approach and a degree of consolidation that could surely only be good as a platform to drive efficiency, improve economies of scale, and therefore reduce cost of offering. On the flipside though is this consolidation actually redressing the core issue of risk and tackling transparency effectively or is it in fact simply moving or converging liquidity, risk and possibly credit issues elsewhere?
Cash payments will not be immune to what we see in the securities markets with exchange having to take place sooner i.e. no later than next day. Regulation and technological advances in the payments space is also gaining momentum. In Europe for instance, prior to the implementation of the Payment Service Directive 2007/09, this sector of the industry in the UK was largely self-regulated; no longer. It also provided the necessary legal platform for the Single Euro Payments Area (SEPA).
Could the newly introduced E-Money Directive, again in the UK, be a further game changer? Possibly as it further opens the sector to mobile phone operators for example, and combine that with the significant increase in annual sales of newer smart phones with internet connectivity how could this not drive further change in the payments sector?
Standard Chartered: Giles Elliott, Global Head of Product Management, Investors & Intermediaries
Aside from the focus on understanding underlying beneficiaries and ensuring transparent reporting – we do not see any significant impacts to our business in Asia.
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