Direct gateway to CEE
28 Oct 2022
Raiffeisen Bank International’s head of Global Investor Services Christian Geberth and head of GIS sales and relationship management Bettina Janoschek talk to Bob Currie about the group’s innovation mindset, competitive dynamics in CEE regional custody, and how the Russia-Ukraine situation is shaping daily business
Image: Raiffeisen
Raiffeisen Bank has a longstanding presence in Central and Eastern Europe (CEE) that has grown since the 1980s, building on its retail, corporate, and investment banking coverage to offer a wide portfolio of investor services to a network of more than 15 CEE and Commonwealth of Independent States (CIS) markets.
For its Global Investor Services (GIS) division, this journey has demanded constant reinvention as financial services markets have matured, the requirements of international and domestic investors have evolved, and advances in technology and business practice have created new ways of supporting multi-market execution and post-trade services.
Stepping into the role of GIS division head at the beginning of 2022, Christian Geberth is responsible for overseeing the next steps in the team’s development journey. He brings to the position more than 10 years’ experience as Raiffeisen’s department head of corporate banking, alongside research and analytical skills honed through his PhD in innovation management and his subsequent industry career.
He is open about the fact that he comes to GIS with a fresh set of eyes, not as a custody specialist but with strong expertise in technology, digitisation, and solutions development. This, he says, provides an effective complement to the many years of securities services expertise already established within the GIS team. His strategy will offer continuity with the approach adopted by GIS’s previous division head, Harald Kreuzmair, delivering what Geberth calls an “end-to-end value chain focus” which embraces execution to post-trade — including electronic
sales trading, direct market access (DMA), algorithmic trading, and smart order routing, along with associated clearing, settlement, custody, and fund services across Austria and the CEE region.
Importantly, this programme will also deliver a business ownership structure that integrates technology and operations requirements centrally into GIS’ delivery strategy. “Until this year, product development and delivery, operations and IT for GIS all sat in different parts of the bank,” says Geberth.
“Our ongoing programme of organisational restructuring will remove this separation, creating a triangular structure that applies the same key performance indicators (KPIs) and a common Agile project management methodology across each of these service components.”
Direct access model
In managing this transition, GIS is not setting off from a standing start. In 2014, RBI conducted a major review of the operational framework and internal governance that it had in place to support securities services delivery in CEE. In doing so, it took a significant step away from the custody model that it previously employed — which was also applied by its main regional custody competitors — by establishing a direct link to the central securities depository (CSD) in 10 CEE markets. Russia was added to this direct access model when a direct link to the National Securities Depository, Russia’s CSD, was established in 2020.
To support this direct access model operationally, Raiffeisen also centralised its operations support for its direct-access markets through a team in the Raiffeisen Service Centre, a majority-owned Raiffeisen subsidiary located in Vienna. For GIS, this has delivered important efficiency benefits, enabling platform upgrades to be managed centrally via the Vienna hub, for example, rather than rolling out platform upgrades for direct-access markets on a market-by-market basis across the region.
In turn, for GIS clients, this approach supports access to Austria and the largest CEE markets via a single access point, enabling firms to standardise their legal and operational frameworks, simplify their network management requirements, and reduce some of the risks and operational overheads associated with operating in a multi-market environment.
For remote or lower-volume markets where it does not offer direct access, GIS continues to offer securities services via a traditional sub-custody model using a local subsidiary — as it does in Macedonia, Montenegro, Serbia, Bosnia and Herzegovina, and Ukraine — or through a local partner bank.
“Through this structure, we stand as the gateway to the east for international investors through our regional custody product,” observes Janoschek. “We also provide a link to the west for domestic institutional investors in CEE and CIS markets.” She notes that both of these lines of business have continued to expand over the past 24 months — and, significantly, GIS has never closed or suspended any markets in its regional network. “It is important for our clients that they can rely on service continuity and the resilience of our model, even under testing conditions,” says Janoschek. With a direct access model in place, GIS does not rely on Raiffeisen having a local banking presence in its largest CEE markets.
Custody clients have received uninterrupted service in the Bulgarian market, for example, despite RBI’s decision to sell its experience so far in fronting GIS since early 2022. “It has been quite a ride,” he responds. “In managing this transformation, we have defined the vision for the group and its strategic priorities. It has been important to adapt the staff mindset, since the collaboration culture now works slightly differently with the integration of business, operations and IT responsibilities within GIS, with a common set of KPIs.” Geopolitical developments have not been kind to the implementation schedule. Russia’s invasion of Ukraine on 24 February has substantially disrupted this programme, not to mention Raiffeisen’s business activities in Russia and Ukraine. On top of this, Geberth reminds us that these developments have all taken place in the shadow cast by the COVID-19 pandemic. “A calm attitude is essential in managing this situation,” says Geberth. “It is important to respond appropriately, given the major economic consequences but also the human resources implications, recognising that we have a large workforce in the CIS region, with close to 9000 employees working for Raiffeisen in Russia and approximately 7000 in Ukraine.” In March, RBI’s chief executive Johann Strobl issued a public statement indicating that this “unprecedented situation” had prompted RBI to reassess its position in Russia. “We are assessing all strategic options for the future of Raiffeisenbank Russia, up to and including a carefully managed exit from Raiffeisenbank in
Russia,” he said.
Strobl confirmed that RBI and its subsidiary banks would continue to operate in compliance with local and international sanction laws and changing financial market requirements, and in line with the bank’s code of conduct. He emphasised that RBI’s subsidiary banks are self-funded, well-capitalised, and have insignificant cross-border exposure to Russia.
Bettina Janoschek explains that the GIS team is working closely with its local staff in the Russian market to evaluate sanctions placed on Russia and to fulfil its duty of care to clients in line with these requirements. The bank’s local representatives, led by GIS’ head of Russia Evgenia Klimova, are in regular dialogue with financial authorities and the market infrastructure, including the Russian central bank, as securities market regulator, and with the National Settlement Depository, where RBI is a direct settlement member.
More broadly, Janoschek observes that there has long been a strong spirit of cooperation between sub-custodian banks in the Russian market, and this collaborative spirit has persisted during the recent crisis in trying to find effective solutions on behalf of cross-border and domestic investors.
For RBI’s Ukraine service, GIS’s head of Ukraine Bohdana Yefremova is now overseeing the service remotely, supported by colleagues on the ground in the Kyiv office. However, Raiffeisen’s coverage in Ukraine extends well beyond securities services and also includes a large retail banking presence, which continues to provide banking services in many parts of the country.
Regional evolution
Reflecting on the longer term evolution of CEE securities services markets, Janoschek observes that domestic institutional investors in the major CEE markets are becoming more sophisticated in their investment strategies. In earlier days, these institutional investors — typically local pension and insurance funds — focused primarily on investing in their domestic markets, particularly in government debt and the most liquid equities. Subsequently, these institutional investors are looking to raise their cross-border allocations, and this has driven greater activity through RBI’s global custody services in larger CEE markets.
Institutional and retail investor demand has also fuelled the growth of collective investment funds markets in CEE, with domestic institutions exploring investment options with local and international asset managers through mutual funds and segregated mandates. Again, Raiffeisen aims to stand at the centre of this activity, serving as a gateway for domestic institutional investors to the rest of the world, and supporting the growth of the local collective investment funds market through its fund administration and transfer agency solution. GIS is the largest fund broker in Austria, offering straight-through access to an extensive universe of more than 25,000 funds worldwide, with more than 97 per cent of fund transactions using straight-through processing.
Cultivating an innovation mindset
In building for the future, Raiffeisen has launched a series of parallel strategy streams, focused on product innovation, client experience, and process automation, which concentrate on finding more efficient ways of delivering solutions to the client.
This includes enhancements to RBI’s Global Investor Gate, its user interface for securities services products that offers app and web-based access with full application programming interface connectivity.
Alongside these channels, Raiffeisen is focused on identifying wider opportunities for group collaboration, seeking to leverage the benefits of new technology and customer solutions across the bank, and to take advantage of the scale benefits that these can offer across the enterprise.
More broadly, GIS will continue to invest in its technology stack and its data architecture. In promoting innovation, GIS has established a sandbox through which it can evaluate investment in fintech and solutions development.
This includes opportunities for applying distributed ledger technology (DLT) to complement its technology architecture.
“Although these projects are broadly in an ‘exploration phase’, we identify potential for integrating DLT selectively into our existing systems and books of record,” says Geberth.
Beyond its innovation strategy, a wider question for GIS is how the competitive landscape in regional custody and clearing will evolve in times ahead. In May, Societe Generale completed the sale of its Russian subsidiary Rosbank, along with its Russian insurance subsidiaries, to Interros Capital — founded by Russian oligarch Vladimir Potanin — with SG Group estimating a net loss of €3.2 billion on its income statement from the sale of these assets.
There has also been speculation that Citi is in negotiation with Russia-based Expobank regarding the potential sale of some of its bank operations within the Russian market. If this includes its securities services operations, this may significantly reduce the contribution of Citi’s CEE and CIS revenue stream to its global securities services turnover.
For Raiffeisen, as we know, the official position is that it continues to review strategic options for the future of its Russian subsidiary. But, for Janoschek, the key point is that Austria and CEE are home markets for GIS and the region will continue to be the centrepoint for its future growth, supporting the needs of both international and domestic asset owners and financial intermediaries.
“Domestic institutional investors will play a central role in driving our future, recognising that cross-border investment flows may wax and wane, but these domestic investors will be ever present in the region as they diversify their investment exposures across a widening range of asset classes and investment destinations,” she concludes.
For its Global Investor Services (GIS) division, this journey has demanded constant reinvention as financial services markets have matured, the requirements of international and domestic investors have evolved, and advances in technology and business practice have created new ways of supporting multi-market execution and post-trade services.
Stepping into the role of GIS division head at the beginning of 2022, Christian Geberth is responsible for overseeing the next steps in the team’s development journey. He brings to the position more than 10 years’ experience as Raiffeisen’s department head of corporate banking, alongside research and analytical skills honed through his PhD in innovation management and his subsequent industry career.
He is open about the fact that he comes to GIS with a fresh set of eyes, not as a custody specialist but with strong expertise in technology, digitisation, and solutions development. This, he says, provides an effective complement to the many years of securities services expertise already established within the GIS team. His strategy will offer continuity with the approach adopted by GIS’s previous division head, Harald Kreuzmair, delivering what Geberth calls an “end-to-end value chain focus” which embraces execution to post-trade — including electronic
sales trading, direct market access (DMA), algorithmic trading, and smart order routing, along with associated clearing, settlement, custody, and fund services across Austria and the CEE region.
Importantly, this programme will also deliver a business ownership structure that integrates technology and operations requirements centrally into GIS’ delivery strategy. “Until this year, product development and delivery, operations and IT for GIS all sat in different parts of the bank,” says Geberth.
“Our ongoing programme of organisational restructuring will remove this separation, creating a triangular structure that applies the same key performance indicators (KPIs) and a common Agile project management methodology across each of these service components.”
Direct access model
In managing this transition, GIS is not setting off from a standing start. In 2014, RBI conducted a major review of the operational framework and internal governance that it had in place to support securities services delivery in CEE. In doing so, it took a significant step away from the custody model that it previously employed — which was also applied by its main regional custody competitors — by establishing a direct link to the central securities depository (CSD) in 10 CEE markets. Russia was added to this direct access model when a direct link to the National Securities Depository, Russia’s CSD, was established in 2020.
To support this direct access model operationally, Raiffeisen also centralised its operations support for its direct-access markets through a team in the Raiffeisen Service Centre, a majority-owned Raiffeisen subsidiary located in Vienna. For GIS, this has delivered important efficiency benefits, enabling platform upgrades to be managed centrally via the Vienna hub, for example, rather than rolling out platform upgrades for direct-access markets on a market-by-market basis across the region.
In turn, for GIS clients, this approach supports access to Austria and the largest CEE markets via a single access point, enabling firms to standardise their legal and operational frameworks, simplify their network management requirements, and reduce some of the risks and operational overheads associated with operating in a multi-market environment.
For remote or lower-volume markets where it does not offer direct access, GIS continues to offer securities services via a traditional sub-custody model using a local subsidiary — as it does in Macedonia, Montenegro, Serbia, Bosnia and Herzegovina, and Ukraine — or through a local partner bank.
“Through this structure, we stand as the gateway to the east for international investors through our regional custody product,” observes Janoschek. “We also provide a link to the west for domestic institutional investors in CEE and CIS markets.” She notes that both of these lines of business have continued to expand over the past 24 months — and, significantly, GIS has never closed or suspended any markets in its regional network. “It is important for our clients that they can rely on service continuity and the resilience of our model, even under testing conditions,” says Janoschek. With a direct access model in place, GIS does not rely on Raiffeisen having a local banking presence in its largest CEE markets.
Custody clients have received uninterrupted service in the Bulgarian market, for example, despite RBI’s decision to sell its experience so far in fronting GIS since early 2022. “It has been quite a ride,” he responds. “In managing this transformation, we have defined the vision for the group and its strategic priorities. It has been important to adapt the staff mindset, since the collaboration culture now works slightly differently with the integration of business, operations and IT responsibilities within GIS, with a common set of KPIs.” Geopolitical developments have not been kind to the implementation schedule. Russia’s invasion of Ukraine on 24 February has substantially disrupted this programme, not to mention Raiffeisen’s business activities in Russia and Ukraine. On top of this, Geberth reminds us that these developments have all taken place in the shadow cast by the COVID-19 pandemic. “A calm attitude is essential in managing this situation,” says Geberth. “It is important to respond appropriately, given the major economic consequences but also the human resources implications, recognising that we have a large workforce in the CIS region, with close to 9000 employees working for Raiffeisen in Russia and approximately 7000 in Ukraine.” In March, RBI’s chief executive Johann Strobl issued a public statement indicating that this “unprecedented situation” had prompted RBI to reassess its position in Russia. “We are assessing all strategic options for the future of Raiffeisenbank Russia, up to and including a carefully managed exit from Raiffeisenbank in
Russia,” he said.
Strobl confirmed that RBI and its subsidiary banks would continue to operate in compliance with local and international sanction laws and changing financial market requirements, and in line with the bank’s code of conduct. He emphasised that RBI’s subsidiary banks are self-funded, well-capitalised, and have insignificant cross-border exposure to Russia.
Bettina Janoschek explains that the GIS team is working closely with its local staff in the Russian market to evaluate sanctions placed on Russia and to fulfil its duty of care to clients in line with these requirements. The bank’s local representatives, led by GIS’ head of Russia Evgenia Klimova, are in regular dialogue with financial authorities and the market infrastructure, including the Russian central bank, as securities market regulator, and with the National Settlement Depository, where RBI is a direct settlement member.
More broadly, Janoschek observes that there has long been a strong spirit of cooperation between sub-custodian banks in the Russian market, and this collaborative spirit has persisted during the recent crisis in trying to find effective solutions on behalf of cross-border and domestic investors.
For RBI’s Ukraine service, GIS’s head of Ukraine Bohdana Yefremova is now overseeing the service remotely, supported by colleagues on the ground in the Kyiv office. However, Raiffeisen’s coverage in Ukraine extends well beyond securities services and also includes a large retail banking presence, which continues to provide banking services in many parts of the country.
Regional evolution
Reflecting on the longer term evolution of CEE securities services markets, Janoschek observes that domestic institutional investors in the major CEE markets are becoming more sophisticated in their investment strategies. In earlier days, these institutional investors — typically local pension and insurance funds — focused primarily on investing in their domestic markets, particularly in government debt and the most liquid equities. Subsequently, these institutional investors are looking to raise their cross-border allocations, and this has driven greater activity through RBI’s global custody services in larger CEE markets.
Institutional and retail investor demand has also fuelled the growth of collective investment funds markets in CEE, with domestic institutions exploring investment options with local and international asset managers through mutual funds and segregated mandates. Again, Raiffeisen aims to stand at the centre of this activity, serving as a gateway for domestic institutional investors to the rest of the world, and supporting the growth of the local collective investment funds market through its fund administration and transfer agency solution. GIS is the largest fund broker in Austria, offering straight-through access to an extensive universe of more than 25,000 funds worldwide, with more than 97 per cent of fund transactions using straight-through processing.
Cultivating an innovation mindset
In building for the future, Raiffeisen has launched a series of parallel strategy streams, focused on product innovation, client experience, and process automation, which concentrate on finding more efficient ways of delivering solutions to the client.
This includes enhancements to RBI’s Global Investor Gate, its user interface for securities services products that offers app and web-based access with full application programming interface connectivity.
Alongside these channels, Raiffeisen is focused on identifying wider opportunities for group collaboration, seeking to leverage the benefits of new technology and customer solutions across the bank, and to take advantage of the scale benefits that these can offer across the enterprise.
More broadly, GIS will continue to invest in its technology stack and its data architecture. In promoting innovation, GIS has established a sandbox through which it can evaluate investment in fintech and solutions development.
This includes opportunities for applying distributed ledger technology (DLT) to complement its technology architecture.
“Although these projects are broadly in an ‘exploration phase’, we identify potential for integrating DLT selectively into our existing systems and books of record,” says Geberth.
Beyond its innovation strategy, a wider question for GIS is how the competitive landscape in regional custody and clearing will evolve in times ahead. In May, Societe Generale completed the sale of its Russian subsidiary Rosbank, along with its Russian insurance subsidiaries, to Interros Capital — founded by Russian oligarch Vladimir Potanin — with SG Group estimating a net loss of €3.2 billion on its income statement from the sale of these assets.
There has also been speculation that Citi is in negotiation with Russia-based Expobank regarding the potential sale of some of its bank operations within the Russian market. If this includes its securities services operations, this may significantly reduce the contribution of Citi’s CEE and CIS revenue stream to its global securities services turnover.
For Raiffeisen, as we know, the official position is that it continues to review strategic options for the future of its Russian subsidiary. But, for Janoschek, the key point is that Austria and CEE are home markets for GIS and the region will continue to be the centrepoint for its future growth, supporting the needs of both international and domestic asset owners and financial intermediaries.
“Domestic institutional investors will play a central role in driving our future, recognising that cross-border investment flows may wax and wane, but these domestic investors will be ever present in the region as they diversify their investment exposures across a widening range of asset classes and investment destinations,” she concludes.
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