BNY Mellon will no longer buy a slice of National Australia Bank’s asset servicing division, and while NAB will offer its global custodian’s middle office and private equity admin services, it’s left open the possibility of sourcing additional products from other parties.

The executive general manager of asset servicing at NAB, Leigh Watson, said no client was currently using BNY Mellon’s middle office or private equity wares, but he expected some would take them on during this year. BNY representatives of those capabilities have been chaperoned to meetings with NAB asset servicing clients over the past 12 months.

The two firms have been partners for 14 years, with BNY Mellon providing global custody for the offshore assets of NAB’s domestic clients, and the local bank acting as BNY’s sub-custodian here.

Talk of a formal joint venture has been on and off for years, but intensified over the last 18 months as BNY sought greater participation in the booming Australian superannuation market, and NAB sought ways to remain competitive as the only remaining locally-owned custodian.

A deal for BNY Mellon to buy one-third of the asset servicing division was extremely close to being consummated, but never went ahead for reasons which have been the subject of much industry speculation. NAB’s insistence that it retain control of the cash in the custody business, and the question of who would bear integration costs of a formal JV, are both understood to have been sticking points.

Watson said that a JV would have inevitably caused disruption to clients, whereas the “product initiatives” around middle office and private equity delivered “immediate and tangible benefits”.

Continuing higher allocations to unlisted assets such as private equity underscored the importance of offering administrative solutions for them, Watson said.

Meanwhile, transparency and risk management had reappeared as top priorities for Australian financial institutions, said the head of Asia for BNY Mellon Asset Servicing, Chong Jin leow.

“This is fuelling demand for middle office-related services, such as sophisticated reporting, risk analyses and monitoring solutions, which enhance transparency and mitigate operational risk,” he said.

Watson said another advantage of not going down the joint venture path was that NAB could source additional products from any provider that it considered best-of-breed.

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