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Global custodians are likely to be asked
to shoulder more of the potential liabilities from transaction services on behalf
pension funds, rather than their smaller sub-custodians, because of the “new
world order” for institutional banking. And this will be advantageous for those
custodians which do provide both global and sub-custody under the one roof,
according to Jacques-Philippe Marson, global chief executive of BNP Paribas
Securities Services. Marson, a frequent visitor to Australia due to the custodian’s
Asian expansion aspirations, says that in the new world order many financial
institutions will be substantially owned by governments and this may impact on their
reinvestment programs.

“At BNP Paribas SS, we have not cut one cent from our
investment program,” he said. “We’re managing costs as we always have, but we’re
not laying off as many people as some competitors. As conditions tightened, we
enjoyed a flight to quality and a flight to safety, especially in Europe.” The firm has also enjoyed its decision several
years ago not to provide asset management-like services to its custody clients,
such as active cash management and currency hedging. “We made a conscious
decision to not actively manage cash and were seen by the market as not being
very aggressive.

It’s now seen as the right thing to do. We’ve never sold
enhanced cash in Australia
– only the normal money market banking rate. It’s been a different approach
which has served us well.” Marson’s latest visit, last month, coincided with
the announcement that BNP would take over the previously outsourced global
custody role, from Australia,
with Citi. The Citi arrangement, inherited through BNP’s purchase of Cogent in
2002 and maintenance of the key AMP Capital client relationship, is being
transitioned with BNP’s Singapore
office opening the accounts which had previously been with Citi in Hong Kong.

The Sydney
office has a formal global custody agreement and corresponding services level
agreement with the Singapore
office. Jean-Marc Pasquet, BNP’s Sydneybased head of Asia Pacific, said having the
same platform enabled the custodian to provide a known quality service with
many benefits for clients as well as a demonstration that BNP Paribas was committed
to developing and expanding in Asia Pacific. The
firm plans to be operational in eight to 10 key centres in the region by 2013.
It opened the Singapore
office in 2007, Mumbai and Hong Kong offices last year and a joint venture in India “We see China,
Taiwan and South Korea
also as markets with strong potential for both us and our clients,” Marson
said.

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