As institutions increasingly focus on streamlining their operations within markets in which they are comfortable and established, BNP Paribas Securities Services is breaking the mould, investing in innovative technologies and making itself seen and heard globally with expansion into territories such as the US
In an era when many financial institutions are consolidating in certain geographies and dialling down expenditure, BNP Paribas has been doing the opposite. It has been busy expanding its presence, not only in its main European hub, but also in areas such as the US where new opportunities have arisen – as well as making critical investments in new technology.
The custody division is no different, and is why the French bank’s Securities Services business has claimed three awards this year: overall custodian, and custodian of the year for Germany and France.
“We are operating on two sides of the investment cycle – servicing both the buy and sell sides. So when it comes to custody, it means we have a fully fledged solution, which is sustained by a network of 27 locations where we are directly connected to the market,” says Bruno Campenon, head of financial intermediaries and corporates at BNP Paribas.
“It means we give global access with a local reach, which makes a big difference with the service that is rendered to the client,” he adds.
For the buy side, this allows BNP Paribas to act as a unique provider throughout the investment chain, so if there are regulatory changes or issues that arise, the bank can handle this as a single provider.
Merger brings new growth
This expansion has attracted new business for BNP Paribas in 2018. In the US, the merger between Janus Capital Group and Henderson Group in May 2017 presented an opportunity for the bank to expand the services that it already performed for Henderson in the Asia-Pacific region, Europe and the US market.
“We acquired the Credit Suisse hedge fund administration in 2015. That allowed us to support the merger between Janus and Henderson, but it also allowed us to develop a franchise that has now become the eighth biggest fund administrator in the US,” says Campenon.
BNP Paribas’ expansions have not been restricted to the US. In mainland Europe, the bank announced in June an agreement to insource the Deutsche Bank fund administration platform for Germany and Luxembourg, gaining about $240 billion of assets under management in the process. This mandate will enable the bank to expand its capacities and expertise in both countries.
This deal follows the acquisition of Commerzbank’s Depotbank business for German-domiciled Ucits funds, institutional funds, securities funds and open-ended real estate funds in 2014. In France, the bank signed a major mandate with Carmignac, a leading asset manager, at the end of 2017.
These deals have seen BNP Paribas’ area under the curve (AUC) jump to $11 trillion in 2018, with the bank’s custody business ranking fifth behind US giants BNY Mellon, Citi, JP Morgan and State Street, and 70 million transactions settled.
“Despite our opening on the US custody market five years ago, we are extremely active compared to other US players. Our total AUC and cross-border assets – where firms are investing from their home markets to the rest of the world – have jumped, confirming our positioning in the top league as a true global player,” says Campenon.
Custody Risk Global Awards 2018
BNP Paribas Securities Services
Overall Custodian of the Year
Custodian of the Year Germany
Custodian of the Year France
The bank’s custody business is not just focused on the buy side either. As a full-service operator connected to central depositories and central counterparties, its reach also extends across the sell side. For example, BNP Paribas has developed unique outsourcing solutions for the broker-dealer community, allowing full delegation of services from back-office handling to third-party clearing, settlement and custody. Its extended credit monitoring tools allow for optimal financing and liquidity solutions.
“In Asia-Pacific we have developed leading third-party clearing services for brokers and investment banks across the region. We have rejuvenated third-party clearing, particularly in Hong Kong, Sydney and Singapore, after the global financial crisis, helping large investment banks as well as second tier broker-dealers optimise their flows and focus on their priorities. The shift from self to third-party clearing becomes the preferred solution to optimise both capital and liquidity requirements,” says Campenon.
BNP Paribas in general also made a number of investments in technology solutions in 2018. In particular, through its partnership with leading financial technology – known as fintech – company Fortia Financial, BNP Paribas Securities Services undertook to transform trustee and depository banking business, improving depository control and contractual investment compliance processes thanks to artificial intelligence, machine learning and natural language processing. The tool is currently in an advanced testing phase in France and will be rolled out from the beginning of 2019 across 16 locations covering about 10,000 funds.
Another major area the bank has moved into is tri-party collateral management, long the domain of four providers. Campenon says BNP Paribas is the first firm in 15 years to enter the space, explaining that the bank is using the latest digital technologies and its vast custody network to allow its clients to monitor their collateral needs in real time and to anticipate the allocation of their assets.
“This allows us to provide access to an untapped pool of collateral from our buy-side clients. Those positions are held in our books and are accessible via our tri-party network, making them ideal collateral pools,” he says.
In a more recent development, the bank launched a platform called ClimateSeed in November. This digital platform is connecting companies looking to offset their carbon emissions with project developers offering voluntary carbon credits. The move is part of the bank’s sustainability drive, which saw it become the first major custodian to sign the UN’s principle for responsible investments.
“We help our clients incorporate environmental, social and governmental indicators into their strategies,” says Campenon. “BNP Paribas has been investing and communicating quite widely about its engagements and has been leading the way as a green custodian. At ClimateSeed, we offer clients that are willing to offset their carbon footprints access to a pool of projects that are generating carbon credits.”