Custodians and administrators are preparing to be challenged by competitors and regulators in 2012. SIMON MUMME reports.

Custodians will compete fiercely in 2012 as investors seek better services and cost savings, the Australian Custodial Services Association (ACSA) says.

Superannuation funds, investment managers and insurance funds seek to offer their clients a broader range of services while increasing operational efficiency, says Pierre Jond, managing director of BNP Securities Services in Australia and New Zealand and current chair of ACSA.

“More than ever, custodians face the twin pressures of continual innovation and investment in technology while remaining high competitive on costs,” Jond says.

“Large Australian investors are demanding an ever broader array of custody, administration and trading solutions.”

New US regulation could make custody more costly and complex, Jond says. The Foreign Account Tax Compliance Act (FATCA), which will enable the US government to gather tax from citizens holding offshore accounts with foreign financial institutions, may result in “dire consequences” for custodians, he says. ACSA will present custodians’ concerns to Australian financial regulators, the Australian Tax Office and Treasury, Jond says.

Market share among Australian custodians remains largely unchanged, according to ACSA. NAB Asset Servicing maintains its incumbency as the largest custodian in Australia (see figure 1). J.P Morgan Worldwide Securities Services still holds the most assets from offshore investors (see figure 2) and State Street Global Services is the largest administrator among custodians in Australia (see figure 3).