A long-term approach – Expanding and serving a global client base

Patrick Colle, general manager at BNP Paribas Securities Services, discusses how the provider’s carefully planned expansion strategy has contributed to its expansion into the US market, how it plans to capitalise on opportunities in the European market and the solutions it will offer for custodians in 2018

What has been key to the success of your custodian business over the past year?

Patrick Colle: Our long-term approach is key to our success. 

An example of this was in 2010 when BNP Paribas took the decision to grow its local custody network as part of a carefully planned expansion strategy to help serve an increasingly global client base. Fast‑forward to 2017 and the size and scale of this network, which now counts 27 markets, has enabled us to launch our tri-party collateral management service – one of our most ambitious product launches to date. Our extensive network is the backbone of the service, helping to mobilise collateral for our clients quickly and efficiently when and where it is needed.

Another example is the long-term approach we took to the US market, which helped us secure the acquisition of Janus Henderson Investors’ middle- and back‑office operations in the US in November. This partnership makes us the first European bank that is able to administer US mutual funds. It is part of BNP Paribas’ 10-year strategic build-out of its Securities Services business in the US, which began with the launch of global and US custody in 2012.

What will be the greatest challenge facing custodians in 2018?

Patrick Colle: Helping clients manage their collateral requirements will remain at the top of the agenda for custodians in 2018. In particular, regulatory requirements such as initial margin calculation on uncleared over-the-counter (OTC) derivatives and the clearing of OTC derivatives for the buy side will create the need for new services. In this new and fast-changing landscape, the winning custodians will be those that combine these services with their existing asset and banking services, as well as those able to establish all required connectivities.

 

What is the most successful solution BNP Paribas has developed over the past year?

Patrick Colle: One of the solutions I am particularly proud of is our Smart Chaser trade matching tool, which uses artificial intelligence and predictive analysis to identify the trades that may fail and takes preventative steps. This tool enables us to identify problems before they arise and puts us one step closer to making straight-through processing a reality. This is a hugely important development for our clients – one that is truly transformative for middle-office technology.

How did clients’ needs evolve in 2017 compared with previous years?

Patrick Colle: In 2017, we saw sustainability become a core component of our clients’ investment strategies and have been developing our product offering accordingly – expanding in-house solutions to provide clients with deeper insights into their portfolios’ environmental, social and corporate governance (ESG) profiles and have also collaborated with external players such as ESG investment specialist Sycomore Asset Management to develop new ways of analysing and scoring companies against ESG factors.  

In 2018, BNP Paribas will launch ClimateSeed, a platform aiming to bring together buyers and sellers of voluntary carbon credits and provide them with a solid post-trade infrastructure to carry out their transactions and manage their investments.

 

How have regulatory changes impacted your client base, and which solutions have you adopted to address this?

Patrick Colle: We believe that technology has a huge role to play in helping the custody industry and its clients ease the workload associated with new regulations. We are investing heavily in technology and seeking partnerships with fintechs where appropriate. 

In January 2017, we partnered with fintech vendor Calypso Technology to provide investment banks with a full end-to-end post-trade service offering that integrates middle-office, back-office, clearing and custody services. This is unique in the market, as it gives our clients access to market-led technology that is continuously enhanced to meet their changing needs, particularly when it comes to regulatory requirements.

On the buy side, we are using blockchain and smart contract technology to develop a next‑generation digital fund distribution platform, which will speed up onboarding for fund buyers and asset managers, and facilitate compliance with know‑your‑customer regulations. 

We are also in the process of deploying Fortia’s Innova platform within our depositary banking business, giving our clients access to the latest in artificial intelligence and machine learning to help them monitor the compliance of their funds with local and international regulatory requirements. 

 

How has the European market –specifically France, Germany and Italy –evolved over the past 12 months?

Patrick Colle: Arguably the biggest evolution over the past 12 months has been the completion of the migration to Target2‑Securities (T2S), the pan-European settlement platform launched by the Eurosystem.

As a directly connected participant of T2S, we successfully migrated our final positions to the newly created platform on September 18 during the final wave, which saw the addition of Spain’s and the Baltic countries’ central securities depositories. This was the fifth migration wave, coming two years after the first, and brought on the remaining 15% of volumes that had been settling outside the pan‑European platform.

There is still work to be done – it is now up to the industry to increase volumes and adjust its own systems to fully integrate with T2S. This has been a hugely successful project and one that is already delivering harmonisation from a legal, regulatory and operational point of view.

 

What opportunities lie ahead in those regions, and how does BNP Paribas plan to capitalise on them?

Patrick Colle: There are huge growth opportunities across many European markets – with continued collateral and clearing challenges of new regulation presenting openings to develop and deploy new technologies to help clients. To succeed, we have three key priorities for the next year: to continue to transform our IT infrastructure and digitise our processes; to act as a connector for our clients, simplifying access to new markets; and to continue to provide, develop and promote services that support our clients’ implementation of ESG strategies. 

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