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One year on from the demise of Opes Prime and the subsequent culling of its equity finance business, ANZ Custodian Services has made efforts to strengthen its offerings by recruiting talent from competitors, rationalising its client base and carrying out due diligence on its systems. Following an internal review of its dealings with the disgraced stockbroker, an immediate move by ANZ was to cull its equity finance business, which provided the collateral used by Opes to issue margin loans to its clients but retained bank ownership of this collateral when the broker failed, leaving many investors with nothing.
The review, which was completed in August 2008, concluded that the management of ANZ Custodian Services did not fully understand the risks associated with the business, which peaked in August 2007 at $2 billion dollars. “The challenges became quite public. We had to respond,” said David McWilliams, head of business development with the custodian. The bank wanted to see its custody business tightened up “so that some of the failings attributed to Opes weren’t going to repeat,” said Lachlan Allardice, head of sales and account management with ANZ Custodian Services.
Following the review, the custodian began a remediation process that assessed its people, clients and risk processes. While securities lending and custody contracts were maintained, ANZ Custodian Services, in effect, went to ground as it focused on improving its weaknesses. The ANZ audit team undertook an assessment of the custodian’s operational processes, and the securities lending business was scaled-down as the number of counterparties was reduced and some clients were lost. “We had to take stock of that business and work closely with market and credit risk partners to make sure they were comfortable,” Allardice said.
Planned investments in systems were brought forward. Following the exits of six executives and managers, including institutional boss Peter Hodgson, chief risk officer David Stephen and the former head of securities lending, a succession of hires occurred. The most recent appointment, Kate Coumans, who now heads the securities lending business, was recruited from the Tokyo office of State Street Global Markets. Other senior appointments have been drawn from rival National Custodian Services (NCS).
The new head of custodian services, Geoff O’Callaghan, in addition to Allardice and senior account manager Michael Brand were hired from NCS’ neighbouring Bourke Street office in Melbourne. Elsewhere in the business, Blair Gardner joined from UBS as head of asset services, and Members Equity Bank lost Paul Manning, who joined ANZ as head of investment administration. McWilliams was hired from the Bank of New York. The custodian’s new head of operations, Terry Glover, and head of reconciliations, Adrian Pawar, were both promoted to these posts.
