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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.
The custody business, which is
50 years old, had retained many accounts that were almost inactive. Since the review,
about 50 clients have been cut. This “allowed account managers to focus on
value-adding clients”, McWilliams said. “We had a huge number of legacy clients
that weren’t active, and [who] we had minimal communications with,” Allardice
added. Some attention was also paid to the custodian’s technology systems.
Reconciliation of trades was reformed so that it would be carried out across
the business, rather than within separate departments, and a new system for its
securities lending business was installed and trialled. The bank is ranked
sixth in the December 2008 Australian Custodial Services Association tables
with $64.3 billion in Australian assets under custody, and third in sub-custody
assets with $51.5 billion. Its biggest client is ING, ANZ’s retail investment
joint venture partner, for which it services $8.7 billion in assets under
custody.
