Q: From 1 December 2000, the custody division of ABN Amro has taken away the regional dimension from the business, focusing instead on client management and product lines. Why such a move?
A: First of all you have to understand that our sub-custody business is basically looked after by ABN Amro, which has domestic business in eight Asian countries. On the global custody side, we have ABN Amro Mellon, which is a joint venture between Mellon Financial Corporation and ABN Amro formed in 1998. I am CEO of ABN Amro Mellon and in charge of both domestic and global custody.
In the custody business, two things are very important: they are client management and having the perfect products. But at the moment we have a third, regional dimension. Between the three of them we always have discussions about who should get the available resources, revenue and things like that, which complicates the decision-making process. Therefore we have decided to take out the regional dimension from January next year so that every decision will be made from headquarters. This means from next year we will have two dimensions instead of three, with emphasis on product lines and client relationship management.
Q: What other organizational changes are you making?
A: We are going through a major restructuring at the moment because our new chairman wants to create three relatively independent parts in the organization. They are wholesale banking, consumer banking and asset management and private banking. The purpose of this restructuring is to allow the different divisions to make more flexible decisions in their own area instead of for the whole bank
Q: We are seeing skyrocketing information technology costs, more and more central depositories offering traditional sub-custodial services, and the move towards T+1, which, in theory, could allow investors to bypass sub-custodians altogether. With factors like these, are sub-custodians in danger of becoming irrelevant?
A: Yes, but I think that will take a number of years. As local custodians, there are other services they can offer when basic services such as clearing and settlement are offered by somebody else. That's why they have to have good products to meet their clients' needs. And when the product's lifecycle ends you have to be able to come up with something new. So it's important that you have the ability to foresee what the market may need in three or four years time. On the other hand, I believe there will always be investors who'd prefer to use local custodians. At the moment, there's no doubt that basic services are going out of our shops. But more value-added businesses are coming in. For those who can provide value-added services they will continue to thrive.
Q: What are some of the value-added services sub-custodians should provide?
A: First of all they have to meet their clients' reporting requirements. They can give market information, do tax reclaim, corporate actions. They're value-added services and I can't see CSDs (central securities depositories) taking over them in the next two or three years.
Q: What are your plans for Asia?
A: We want to expand the business that we have from the custody perspective; I'm talking about domestic custody. We're looking at opportunities for growing the business organically, but if there are acquisition opportunities, we will look at those as well. From a global custody perspective we would like to service multinational companies such as the mandate we won for 3M, the Minnesota Mining company, where we have to combine all their custody information and create consolidated reporting for the 3M board. Secondly, since there is a stream of money coming from our Asia Pacific operations as well as being invested in Europe and the US, we think there are institutional investors that would like to work with ABN Mellon joint ventures for global custody service.
Q: Where are you looking for opportunities on the domestic side?
A: For the domestic side there are two main categories as clients. First, the global custodians that have portfolios in Asia Pacific. Secondly, there is a domestic market as well, like the wealthy individuals, local pension funds, insurance companies, that have a domestic portfolio.