Citibank has been appointed custodian for Prudential Assurance Malaysia this week, providing settlement and clearing services for the insurer's life and investment-linked funds in Malaysia. At Prudential's request, the amount of assets under custody has not been disclosed.
Anthony Galliano, Citibank's Worldwide Securities Services head in Asia, sees the new mandate as an extension of the relationship between the two institutions. Apart from being a part of Citibank's investor base, Prudential also has been using the bank's electronic banking and cash payment products, such as 'paylink' and 'lockbox', for fund transfer since 1993. Prudential did not use a custodian bank in Malaysia before Citibank.
"This appointment is exactly what we wanted. Prudential is a company that we see as one of the top investors worldwide controlling a large share of the custody wallet globally. It is becoming a local name in a lot of countries. And we want to be able to serve our global customers locally, especially when they go into a market and set up shops for local business. We want to be their local bank, servicing them in every market they go to," Galliano says.
Despite the fact the bank's assets under custody in Malaysia have jumped 81% over the past 20 months, Galliano says the market is "pretty quiet these days" because of the capital control measures in place.
"There are several factors for the growth. One is we've been gaining market share steadily in Asia. On a global level, our custody business in London and New York also is gaining share so we are seeing more business from overseas going into Asian countries. On top of that, we're also gaining business locally from institutional investors and various public sectors," he says, adding that he expects the valuation of the ringgit will be re-examined next year.
According to Citibank, it is the only custodian with a purpose-built direct interface system to the Malaysian Central Depository, allowing automatic electronic transfer of instructions and confirmation of transactions to the depository. But it is understood HSBC and Standard Chartered are also nearing completion of a similar system.
A direct interface system with the central depository would enable custodians to process high volume transactions with minimal manual intervention, enhancing their straight-through processing rate while decreasing custodians' sensitivity to the volume of trading, making the requirement for skilled labour more stable even when the transaction volume fluctuates wildly.
Citibank Worldwide Securities Services, with 2,500 clients globally, has $4 trillion in assets under custody, $250 billion of which is in Asia, including Japan, Australia and New Zealand.