Global custodian Northern Trust has been granted a banking licence in Australia, after clients including the Future Fund expressed a preference for contracting with a locally regulated entity.
The head of what can now be called the bank’s Melbourne ‘branch’, Paul Cutts, also flagged a longer-term ambition to provide master custody-style services to Australian superannuation funds – an ambition that if fulfilled, would herald the first new entrant to the market in many years.
Cutts says the banking licence will allow the Melbourne branch to directly accept transaction instructions from its local clients, and paved the way for all Australian investment accounting to be performed from the office, even though operational activities would continue to be performed in offshore centres such as Bangalore and Chicago. Melbourne can now also be home to designated account managers, whom Cutts says are authorised to interface on a daily basis with clients and process their instructions.
Headcount in Northern Trust’s Melbourne branch is
forecast to be 17 by year-end. Northern Trust recorded a rare loss in the third
quarter of 2008, thanks to a number of one-off charges including US$105.4
million to support securities lending clients whose collateral declined thanks
to extreme illiquidity of the credit markets in which Northern Trust had
invested their cash. Several clients including the University of Washington
and the BP Pension Funds sued to recoup losses. Northern Trust is yet to offer
securities lending services in Australia.