Standing strong
01 Nov 2023
SEB’s Ann Magnusson talks to Lucy Carter about the bank’s past, present and future
Image: SEB
SEB is a leading custody provider in the Nordic region and beyond, and the bank has become well-known for its active engagement with sustainability initiatives and its forward-thinking approach. Ann Magnusson, head of institutional banking, shares insights into how the bank has maintained its success over the years, and offers a glance at what the future might hold.
A steady focus
“We are very focused on the Nordics,” Magnusson says, giving one reason that the company has remained a strong presence in the custody provider space. In a larger market where competition is often global custody providers, SEB’s sustained focus on a single region has helped it differentiate itself from alternative providers.
“We have also been strategically focused on post-trade,” she adds, “and we have grown our sub-custody business quite a lot over the years. We also have a very strong custody offering for the buy-side community, where we offer everything from global custody to collateral management and clearing.”
While there are still others active in the market, Magnusson notes that “competition from local banks has dropped” due to the cost and scale demanded of custody providers. “You have to have a strong strategy and an interest in being part of this business, because it requires some kind of constant investment.”
“It’s a little like the foundation of a house,” she analogises; “you need to focus on the foundation to stay relevant”, continually providing clients with high-quality products. That house is also built on trust, an essential element of the custody business. “Working with a corporate in the custody environment, they have their core activity and financial services support that. But with financial institutions, you’re safeguarding their core activity,” Magnusson explains. “That trust element has to be there, and you need to have transparency.”
Staying alert
Trust is “even more important” in light of the increased cyber threats facing the financial industry. These constantly evolving dangers “impact the way you communicate, the questions you ask, the focus on due diligence and the way you outsource,” Magnusson says. Outsourcing is also under scrutiny, particularly following recently released guidelines in Europe. “We’re not scared to use partnerships, but we need to understand what we’re actually getting. We perform lots of due diligence on any providers that we work with.”
In order to keep its clients’ assets safe, SEB is “using new technology to try and spot unexpected activities,” Magnusson explains, “and we’re increasingly using AI in financial crime prevention activities.”
It can’t be ignored, however, that “the weakest link is probably the people” when it comes to cybersecurity. Remaining mindful of this, SEB “is continuously trying to educate our staff to spot behavioural changes or questions. People have to have the right education and understanding of what could potentially be a risk.”
A digital future?
As new asset classes break into the mainstream, custody providers must keep up to ensure they can provide the services that the market demands. When it comes to digital assets, one of the most prominent emerging asset classes, “we’re dipping our toes into the water”, Magnusson says. She emphasises the importance of truly understanding digital assets before jumping into them; “it’s still very costly, and so far the use cases have been thin. Like many banks, SEB is very conservative and careful.”
The industry still has “a lot of regulation that we’re waiting on”, and while the asset class is still finding its feet, reputational risks are rife. Assets like digital currencies can therefore “create a lot of hassle”, Magnusson explains — along with hefty costs.
This is partly down to legal fees, which Magnusson reflects have risen since digital assets emerged on the scene. “A few years ago, some of the legal firms were doing pro bono work because everyone wanted to understand how this all worked. Now, it’s quite costly.”
That being said, SEB isn’t ignoring digital assets; “you need to be engaged in one shape or form, and no one wants to be left at the station,” Magnusson affirms. Earlier this year, the bank worked with Crédit Agricole Corporate & Investment Bank to launch so|bond, a blockchain-based digital bond issuance platform. “I strongly believe in blockchain technology,” Magnusson says. “People believe in it. They like the transparency, and I think we all understand that it could completely change the way we work.”
However, due to the complexity of the technology she notes that “every time something more tangible and easy to understand comes along, everyone turns away from it.” Robotics were the first to divert attention from blockchain, “and now everyone’s turning to AI and APIs.”
“I think we will come back to blockchain,” she predicts, “but we need to find a good, scalable business case that’s not just trying to replace a solution that already exists and is working well.” Overhauling adequate systems for the sake of new technology is a problem across the industry, she observes, citing some banks’ replacement of Swift structures with APIs as an example. “If the system is there and it works well, why change it?”
When it comes to digital assets, “there’s a balance of being in the forefront and waiting to see what happens,” Magnusson says. “We’re testing things out, and also looking at what others are doing.” From clients’ perspectives, although there’s an interest from the sell-side, “the buy-side community isn’t yet really asking for digital asset solutions,” she shares, “so I don’t think we’ve found the right business case yet. We need to find a new way of working with new technology to find the benefits; that’s what’s going to drive the journey.”
Keeping it green
The Nordic region is often held up as a role model for sustainable development initiatives, and Magnusson agrees that “we are ahead as a region in our awareness of how important and urgent it is for us to take action in the sustainability area. There’s a lot of engagement from the community and from investors.” She highlights SEB as an early actor, even by Nordic standards; “we launched the first green bond with the World Bank in 2008,” and the bank hasn’t slowed its pace since.
“We work with our balance sheet to see how we can transform it, and we try to find solutions where the investor community works closer to the corporate community and the producers,” Magnusson explains. In doing so, the bank hopes to “secure and increase engagement” with sustainability.
SEB is looking at new measures around sustainability, and is keeping up with developing priorities; water, biodiversity and energy are current focus points for the bank, with specialists employed in each division.
Beyond internal initiatives, group effort is key when it comes to the green transition, Magnusson says. It will come at a huge cost, and “we, as a bank, are not able to fund it on our own. We need to work as a community.” One way that SEB is working to encourage that collaborative mentality is through its advisory work, helping other companies to understand how they should look at their investment choices and what they need to do to meet changing requirements and regulations. “Working with education, encouraging people to understand the importance of us being active in the green transition, is something that we are proud to engage in.”
In some regions, it can be harder to get clients on side. “In the US, in some states that are very much dependent on the old — coal and oil, for example — sustainability attempts and actions are questioned. We try to be as transparent as we can and help, but this is, of course, an issue.”
Magnusson suggests that we are in a “second wave of greenwashing,” where the complexities of an investment’s sustainability credentials have made it more difficult to simply label a product as ‘green’. “We need to be more careful with how we express ourselves so we don’t say something that isn’t true,” she urges. SEB is looking closely at its early investments on the balance sheet, trying to shift investments from brown to green, and recognises the importance of correct and accurate labelling in such a crucial sector.
The path ahead
SEB has several AI initiatives on the go, Magnusson reveals. “Lately, the bank announced two projects looking at virtual assistants, using generative AI technology in the compliance and client services spaces.” While these projects may be internally focused to start with — “you need to have compliance, transparency and understanding and trust of the technology and its source” — Magnusson says she “wouldn’t be surprised if we tried to scale these in other areas of the bank,” provided they’re successful.
The bank is also continuing to develop SEB Embedded, a new business unit spun out of the bank’s innovation studio SEBx to provide embedded and integrated financial services in clients’ standard product offerings. “This is something that I think will grow over time,” Magnusson predicts, allowing clients to “work with financial services in a new, more accessible way.”
SEB is a bank that tries to stay ahead of the competition, Magnusson says. “We’ve been around since 1856. To stay so long in the business, you need to be innovative; especially nowadays. I’m proud that we’re standing up so strongly in such a tough environment.”
There are other areas that the bank is working on — APIs, further developments in the digital space — but Magnusson emphasises the fact that SEB’s focus remains on the client, “seeing where they’re heading and what we can do with them.” Looking further ahead, it’s difficult to predict exactly where the bank will go next. With the new technology being developed and adopted across the industry, even the near future could produce “things that we haven’t even thought of,” Magnusson concludes.
A steady focus
“We are very focused on the Nordics,” Magnusson says, giving one reason that the company has remained a strong presence in the custody provider space. In a larger market where competition is often global custody providers, SEB’s sustained focus on a single region has helped it differentiate itself from alternative providers.
“We have also been strategically focused on post-trade,” she adds, “and we have grown our sub-custody business quite a lot over the years. We also have a very strong custody offering for the buy-side community, where we offer everything from global custody to collateral management and clearing.”
While there are still others active in the market, Magnusson notes that “competition from local banks has dropped” due to the cost and scale demanded of custody providers. “You have to have a strong strategy and an interest in being part of this business, because it requires some kind of constant investment.”
“It’s a little like the foundation of a house,” she analogises; “you need to focus on the foundation to stay relevant”, continually providing clients with high-quality products. That house is also built on trust, an essential element of the custody business. “Working with a corporate in the custody environment, they have their core activity and financial services support that. But with financial institutions, you’re safeguarding their core activity,” Magnusson explains. “That trust element has to be there, and you need to have transparency.”
Staying alert
Trust is “even more important” in light of the increased cyber threats facing the financial industry. These constantly evolving dangers “impact the way you communicate, the questions you ask, the focus on due diligence and the way you outsource,” Magnusson says. Outsourcing is also under scrutiny, particularly following recently released guidelines in Europe. “We’re not scared to use partnerships, but we need to understand what we’re actually getting. We perform lots of due diligence on any providers that we work with.”
In order to keep its clients’ assets safe, SEB is “using new technology to try and spot unexpected activities,” Magnusson explains, “and we’re increasingly using AI in financial crime prevention activities.”
It can’t be ignored, however, that “the weakest link is probably the people” when it comes to cybersecurity. Remaining mindful of this, SEB “is continuously trying to educate our staff to spot behavioural changes or questions. People have to have the right education and understanding of what could potentially be a risk.”
A digital future?
As new asset classes break into the mainstream, custody providers must keep up to ensure they can provide the services that the market demands. When it comes to digital assets, one of the most prominent emerging asset classes, “we’re dipping our toes into the water”, Magnusson says. She emphasises the importance of truly understanding digital assets before jumping into them; “it’s still very costly, and so far the use cases have been thin. Like many banks, SEB is very conservative and careful.”
The industry still has “a lot of regulation that we’re waiting on”, and while the asset class is still finding its feet, reputational risks are rife. Assets like digital currencies can therefore “create a lot of hassle”, Magnusson explains — along with hefty costs.
This is partly down to legal fees, which Magnusson reflects have risen since digital assets emerged on the scene. “A few years ago, some of the legal firms were doing pro bono work because everyone wanted to understand how this all worked. Now, it’s quite costly.”
That being said, SEB isn’t ignoring digital assets; “you need to be engaged in one shape or form, and no one wants to be left at the station,” Magnusson affirms. Earlier this year, the bank worked with Crédit Agricole Corporate & Investment Bank to launch so|bond, a blockchain-based digital bond issuance platform. “I strongly believe in blockchain technology,” Magnusson says. “People believe in it. They like the transparency, and I think we all understand that it could completely change the way we work.”
However, due to the complexity of the technology she notes that “every time something more tangible and easy to understand comes along, everyone turns away from it.” Robotics were the first to divert attention from blockchain, “and now everyone’s turning to AI and APIs.”
“I think we will come back to blockchain,” she predicts, “but we need to find a good, scalable business case that’s not just trying to replace a solution that already exists and is working well.” Overhauling adequate systems for the sake of new technology is a problem across the industry, she observes, citing some banks’ replacement of Swift structures with APIs as an example. “If the system is there and it works well, why change it?”
When it comes to digital assets, “there’s a balance of being in the forefront and waiting to see what happens,” Magnusson says. “We’re testing things out, and also looking at what others are doing.” From clients’ perspectives, although there’s an interest from the sell-side, “the buy-side community isn’t yet really asking for digital asset solutions,” she shares, “so I don’t think we’ve found the right business case yet. We need to find a new way of working with new technology to find the benefits; that’s what’s going to drive the journey.”
Keeping it green
The Nordic region is often held up as a role model for sustainable development initiatives, and Magnusson agrees that “we are ahead as a region in our awareness of how important and urgent it is for us to take action in the sustainability area. There’s a lot of engagement from the community and from investors.” She highlights SEB as an early actor, even by Nordic standards; “we launched the first green bond with the World Bank in 2008,” and the bank hasn’t slowed its pace since.
“We work with our balance sheet to see how we can transform it, and we try to find solutions where the investor community works closer to the corporate community and the producers,” Magnusson explains. In doing so, the bank hopes to “secure and increase engagement” with sustainability.
SEB is looking at new measures around sustainability, and is keeping up with developing priorities; water, biodiversity and energy are current focus points for the bank, with specialists employed in each division.
Beyond internal initiatives, group effort is key when it comes to the green transition, Magnusson says. It will come at a huge cost, and “we, as a bank, are not able to fund it on our own. We need to work as a community.” One way that SEB is working to encourage that collaborative mentality is through its advisory work, helping other companies to understand how they should look at their investment choices and what they need to do to meet changing requirements and regulations. “Working with education, encouraging people to understand the importance of us being active in the green transition, is something that we are proud to engage in.”
In some regions, it can be harder to get clients on side. “In the US, in some states that are very much dependent on the old — coal and oil, for example — sustainability attempts and actions are questioned. We try to be as transparent as we can and help, but this is, of course, an issue.”
Magnusson suggests that we are in a “second wave of greenwashing,” where the complexities of an investment’s sustainability credentials have made it more difficult to simply label a product as ‘green’. “We need to be more careful with how we express ourselves so we don’t say something that isn’t true,” she urges. SEB is looking closely at its early investments on the balance sheet, trying to shift investments from brown to green, and recognises the importance of correct and accurate labelling in such a crucial sector.
The path ahead
SEB has several AI initiatives on the go, Magnusson reveals. “Lately, the bank announced two projects looking at virtual assistants, using generative AI technology in the compliance and client services spaces.” While these projects may be internally focused to start with — “you need to have compliance, transparency and understanding and trust of the technology and its source” — Magnusson says she “wouldn’t be surprised if we tried to scale these in other areas of the bank,” provided they’re successful.
The bank is also continuing to develop SEB Embedded, a new business unit spun out of the bank’s innovation studio SEBx to provide embedded and integrated financial services in clients’ standard product offerings. “This is something that I think will grow over time,” Magnusson predicts, allowing clients to “work with financial services in a new, more accessible way.”
SEB is a bank that tries to stay ahead of the competition, Magnusson says. “We’ve been around since 1856. To stay so long in the business, you need to be innovative; especially nowadays. I’m proud that we’re standing up so strongly in such a tough environment.”
There are other areas that the bank is working on — APIs, further developments in the digital space — but Magnusson emphasises the fact that SEB’s focus remains on the client, “seeing where they’re heading and what we can do with them.” Looking further ahead, it’s difficult to predict exactly where the bank will go next. With the new technology being developed and adopted across the industry, even the near future could produce “things that we haven’t even thought of,” Magnusson concludes.
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