FINANCIAL SOLUTIONS | 26 JULY 2021

Lessons from building a custody
business during a pandemic

Absa-CIB-Author

Sabir Ballim

Head of Absa Investor Services

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Building and selling a business is a very personal journey and when you get the opportunity to reiterate on your original concept, there is something special about taking it to a whole new level. Our journey with Absa Investor Services gave us a chance to do just that.

If one considers that the business unit has tripled in the last 12 months, been recognised by the regulator as delivering one of the smoothest transactions on record and all this was achieved as the country was entering the Level 5 lockdown.

For those not familiar with Absa Investor Services, the business offers a holistic range of operational and administrative support solutions to institutional clients including asset managers, pension funds, stockbrokers, life insurers, government departments, global custodians and broker dealers. These solutions include Trustee Services, Derivatives Clearing, Investment Administration, Securities Lending, Issuance, Cash Management and Custody, Safekeeping, Settlements and Corporate Actions.

Absa Investor Services is your single point of contact for all your custody and trustee requirements and we believe this service is going to become increasingly important as cryptocurrencies and blockchain become more prevalent in the mainstream.

Whist we strategically plan for the future, it’s important to reflect on the history of what is now a consolidated Absa Investor Services.

Absa sold this business to multinational banking group Standard Chartered Bank (SCB) in 2013, before buying the custody business of Societe Generale (SocGen) in March 2020. Many of our management team who now run this business were on the other side of the deal when Absa sold.

By migrating the Absa CIB business into the acquired business, we were immediately able to gain some momentum into the business, despite the challenges that 2020 presented.

Concluding an acquisition of a new business is always fraught with different logistics and people challenges but one of our key learnings from 2013 was the importance of reassuring all our clients and colleagues. By using our experience from being on the other side of the coin, the executive leadership of Absa Investor Services were able to reassure and create a stable onboarding experience for all stakeholders including staff, clients and the regulators.

While custody services are not necessarily front-of-mind when one thinks about the financial services sector, many people would be surprised to hear that Absa Investor Services was deemed an “Essential Service” under the Level 5 lockdown, the smooth running of our operations was critical to a value chain that included the JSE and the rest of the banking network.

In 2020, consulting firm Deloitte issued a report entitled: The evolution of a core financial service“ which looked at the role of custodian and depositary banks and it highlighted the importance of this service in the coming years.

While much has been made about the Blockchain, decentralised ledgers and cryptocurrencies, there are a number of other functions that will be critical in this process. Cybersecurity and data protection are massive issues for banks and financial services businesses and without a sound custody service in place, there will be no trust between regulators and stakeholders and this will hinder industry progress.

Similarly the rise of so-called “Smart Contracts” is going to change the way that corporate actions are managed in the future.

In its November 2020 Future of Security Services” report released by consulting firm Oliver Wyman, the firm noted that digital assets were rapidly rising across the globe and becoming strategically more important in both banking and securities sectors. The firm wrote:

“We expect that only those firms able to invest heavily on their own or via partners will be able to grow in the new scenarios we have forecasted.”

Research house IBISWorld flagged that the remote working trend represents a very serious challenge for financial services businesses, due to the industry having a heavy reliance on technology. Remote workers open up organisations to cyber-security threats and this is likely to drive the adoption of new innovations to protect digital assets under management.

Absa Investor Services has recognised the role that custody services and digital assets will play in the coming years and have made the strategic decision to invest in its core service and technology offering.

As we celebrate 15 months of this business being integrated into the Absa fold, we look forward to the opportunities that the future holds for us and our clients.

Absa-CIB-Author
Sabir Ballim

Head of Absa Investor Services

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