HSBC has launched a US Direct Custody and Clearing offering, increasing its direct custody network and internalising the chain of custody for clients investing in to the US.
The service is designed to offer clients increased levels of asset safety for HSBC’s global institutional investor clients. The bank now provides global custody to 39 markets through its own affiliates, and to 89 markets in total.
Through the new US offering, HSBC intends to reduce counterparty and operating risk while improving transparency.
John Van Verre, global head of custody and treasury at HSBC Securities Services, named two main drivers for the launch: an increased client focus on asset protection and the benefits of having a custodian that can control operations end-to-end; and the changes to strict liability coming in under various regulations.
He said: “Controlling the end-to-end process gives us a better ability to manage that strict liability that follows on from the regulations, and aligns our external client demands with our internal operational risk process.”
“Clients are putting a focus on which percentage of their assets a custodian can manage through its own network.”
The service means HSBC will be able to manage more than 50 percent of its clients’ assets through its own internal proprietary networks, while over 80 percent can be managed through these networks and international central securities depositories, combined.
Van Verre also pointed to the trend of emerging markets increasing cross-border investments, including into the US, citing wealth accumulation in some Asian and Middle Eastern countries, combined with a relaxation of local regulations as potential reasons behind the shift.
He said: “HSBC is well positioned in those regions, and we have an enormous client base there, but part of the cross-border investment flows in to the US, so by having a custody capability in the US we can strengthen our proposition to clients based in emerging markets.”
Thierry Roland, HSBC’s CEO of global banking and markets in the Americas, echoed this sentiment, saying: “The US is currently the largest contributor of outbound revenue to HSBC’s network.”
“With this launch, we are strengthening our proposition to clients domiciled outside the US. We see a particularly strong opportunity in working with investors from emerging markets, where our network is unrivalled and where appetite for US assets is significant.”
According to Van Verre, creating an internal solution for key markets is a part of HSBC’s wider strategy, allowing the custodian bank to internalise a larger percentage of client assets.
He said: “If you are missing the largest market in the world, strategically that is not the best position to be in. We need the US in our network.”
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