NeMa: Custodians driving change in capital markets
28 November 2016 London
Image: Shutterstock
Custodians will be at the centre of driving change in the capital markets in Africa, according to the keynote speaker at NeMa Africa in London.
Rajesh Ramsundhar, head of investors services for South Africa at Standard Bank suggested that the role of custodians in the capital markets has been gradually developing, and that in the future they will play a much larger role in driving change.
Looking back 20 years, Ramsundhar said that between 1997 and 2006, custodians were on the receiving end of change, getting to grips with “the basics of custody services” such as settling and paying dividends on time. Custodians weren’t actively involved in driving change, they simply reacted to it.
From 2006 to 2010, Ramsundhar said, custodians acted as enablers of change, with the focus shifting from pure settlement and safekeeping to how they could provide different products on the portfolio.
They became more active in participating in the markets, and in discussions about how to bring about change, rather than simply reacting.
Ramsundhar said: “We needed to be more than custody to service our customers and honestly to satisfy the funds within our business.”
From 2010 to the 2016, custodians in Africa have further evolved to actively initiate change and improving in “relevance and contribution”.
This, Ramsundhar argued, is partly driven by regulatory needs, client requirements, and increased emphasis on managing risk in the markets and diversifying business into new product capabilities.
For example, securities lending in Nigeria as a process that “custodian banks have initiated into the market”, first floating the concept with the regulators and institutional investors, and ultimately leading to the implementation of new regulation and the development of the new market.
He also cited pension reform projects, saying: “It’s been quite a long journey trying to convince the market to move towards independent asset management and custody.”
Custodian banks have been active in lobbying these changes, and have made significant progress.
In the future, custodians will only become more active in developing capital markets in Africa, as growth increases and clients and investors require more diversity.
The domestic markets are growing, Ramsundhar said, and conventional products will not be sufficient. “You need diversity,” he said.
He went on to suggest that, in order to better influence change in the market, more collaboration is required between players.
The custodian business will no longer be driven by client needs, he argued. Rather, “they need to anticipate the needs of clients”, use that as a basis to drive change, and move “more into a trusted partner role”.
Rajesh Ramsundhar, head of investors services for South Africa at Standard Bank suggested that the role of custodians in the capital markets has been gradually developing, and that in the future they will play a much larger role in driving change.
Looking back 20 years, Ramsundhar said that between 1997 and 2006, custodians were on the receiving end of change, getting to grips with “the basics of custody services” such as settling and paying dividends on time. Custodians weren’t actively involved in driving change, they simply reacted to it.
From 2006 to 2010, Ramsundhar said, custodians acted as enablers of change, with the focus shifting from pure settlement and safekeeping to how they could provide different products on the portfolio.
They became more active in participating in the markets, and in discussions about how to bring about change, rather than simply reacting.
Ramsundhar said: “We needed to be more than custody to service our customers and honestly to satisfy the funds within our business.”
From 2010 to the 2016, custodians in Africa have further evolved to actively initiate change and improving in “relevance and contribution”.
This, Ramsundhar argued, is partly driven by regulatory needs, client requirements, and increased emphasis on managing risk in the markets and diversifying business into new product capabilities.
For example, securities lending in Nigeria as a process that “custodian banks have initiated into the market”, first floating the concept with the regulators and institutional investors, and ultimately leading to the implementation of new regulation and the development of the new market.
He also cited pension reform projects, saying: “It’s been quite a long journey trying to convince the market to move towards independent asset management and custody.”
Custodian banks have been active in lobbying these changes, and have made significant progress.
In the future, custodians will only become more active in developing capital markets in Africa, as growth increases and clients and investors require more diversity.
The domestic markets are growing, Ramsundhar said, and conventional products will not be sufficient. “You need diversity,” he said.
He went on to suggest that, in order to better influence change in the market, more collaboration is required between players.
The custodian business will no longer be driven by client needs, he argued. Rather, “they need to anticipate the needs of clients”, use that as a basis to drive change, and move “more into a trusted partner role”.
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