Understanding the Modern Custodial Bank

Finadium
December 2014

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The custody industry has undergone a significant transformation during the past 30 years. Once there were hundreds of banks offering custodial services to asset owners and asset managers, but today a handful of very large players dominate the industry. The most significant barriers to new entrants are economies of scale, onerous government regulation, a global footprint, and access to complex technology.

The custody industry today is working to reshape itself to ensure and enhance profitability. Prior to 2008, these institutions could rely on their bread- and-butter custody businesses to deliver relatively predictable ancillary revenue streams from areas like investment of client cash, foreign exchange, and securities lending. Today there is significant scrutiny on revenue from these activities and on unbundling, which has led to a renewed focus on identifying new ways to create product differentiation.

This report is included in the Finadium Executive Briefing series, providing briefings and analysis to the asset owner and asset manager community.

This report is 19 pages with 7 exhibits.

TABLE OF CONTENTS

■ Executive Summary

■ Consolidation in the Custody Market
– Mutual Funds and Custodians

■ Core Services and Revenue Generation

■ Winners and Losers in the Custody Business
– New Business Opportunities

■ About the Author

■ About Finadium