Kookmin to enter sub-custodian arena

The Korean financial giant is laying the groundwork to serve as a sub-custodian to global banks.
Kookmin to enter sub-custodian arena

Kookmin Bank says it is not content to remain just the biggest local custodian bank in Korea. It is ready to serve global custodians’ cross-border needs, says Lee Sangbum, head of foreign custody at KB.

The bank has approved a big, $8 million budget to develop its multi-currency accounting system, web-based services and faster straight-through processing.

Lee says that although Korean banks, like global peers, are scaling down, the bank’s senior management have made a strategic bet on custody and transaction services. As their own business has grown in this area, they have seen the benefits of a stable business, unlike trading or investment banking, where income is volatile.

“In addition, to meet cross-border custody needs KB has been reorganising its sub-custody team and its infrastructure,” says Lee. “KB will develop into the top service provider to foreign investors as well as local investors.”

In July last year KB initiated a service for alternative investments to prepare for new regulation allowing the launch of onshore hedge funds. It is also using Swift’s messaging system for payments and corporate actions.

KB knows it will have a tough time against entrenched foreign banks such as Citi, HSBC and Standard Chartered. But it says that the recent market turmoil has enabled it to entrench relationships with global custody banks and clearing houses.

In 2011, KB’s assets under custody grew year-on-year from $75.5 billion to $82.3 billion. Its local market share is big, but compared to the global banks currently dominating sub-custody for foreign investors, KB’s business is tiny, and it will be pressed to maintain its IT spend over a sustained period of time.

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