department of finance datong kuo chang april, 2005 copyright © 2003. citibank, n.a. all rights...
TRANSCRIPT
Department of Finance
Datong Kuo Chang
April, 2005
Copyright © 2003. Citibank, N.A. All rights reserved. CITIGROUP and the Umbrella Device are trademarks and service marks of Citicorp and its affiliates and are used and registered throughout the world.
Citigroup® Global Transaction Services
National Taiwan University
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Agenda
» Investment Industry Value ChainInvestment Industry Value Chain
» Who needs a custodian?
» What services do custodians provide?
› Service model (direct vs. global window)
› Sub-custodian network (proprietary vs. third-party)
» Who are the top ranking providers?
» How are they measured?
» What are the risks to the custodians?
» Taiwan Market
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TransactionProcessing
4
AssetAccumulation
1
AssetManagement
2
TransactionExecution
3
Fiduciaryand InvestorServices
7
Investment Industry Value Chain
InvestmentAccounting
5
Performance Measurement
6
Focus on the transaction processing & portfolio administration stages of the clients investment value chain
Fund managers Brokers
Custodians Custodians Custodians Trustee/ others
Pensions, Mutual funds
4
Definition of “Custody” or “Global Custody”
»First developed with the passage of the Employee Retirement Security Act of 1974 in the US => fund managers were required to segregate client assets from own assets.
»In the 90’s, the industry experienced substantial growth. Custodians also spent big money to boost their technology and efficiency.
»What started off as a complementary service has become a global scale business.
WHAT CUSTODY AIMS TO PROVIDE?
Safekeeping and protection of financial assets
Facilitating the trading of such assets
Tracking the values of portfolios
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Agenda
» Investment Industry Value Chain
»Who needs a custodian?Who needs a custodian?
» What services do custodians provide?
› Service model (direct vs. global window)
› Sub-custodian network (proprietary vs. third-party)
» Who are the top ranking providers?
» How are they measured?
» What are the risks to the custodians?
» Taiwan Market
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» Division of professional specialties
» Cross border investment activities
» Regulatory requirement
Who Needs A Custodian?
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Agenda
» Investment Industry Value Chain
» Who needs a custodian?
»What services do custodians provide?What services do custodians provide?
› Service model (direct vs. global window)
› Sub-custodian network (proprietary vs. third-party)
» Who are the top ranking providers?
» How are they measured?
» What are the risks to the custodians?
» Taiwan Market
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What Services Do Custodians Provide?
» Transaction Processing
› Clearing
› Settlement
› Cash Management
› Foreign Exchange
› Safekeeping
› Reporting
› Corporate Actions
› Securities Lending
› Tax Reclamation
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What Services Do Custodians Provide - continued
» Investment Accounting
› Net asset valuations
› Profit/ Loss
› Statement – management and regulatory
› Multi-currency accounting
› Compliance monitoring
» Performance Measurement
› Alliance with Frank Russell Company
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Service Model - Direct Custody
CLIENT
CitibankCanada
CitibankSingapore
CitibankFrance
CitibankMalaysia
CitibankHong Kong
CitibankItaly
CitibankUK
CitibankUSA
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Service Model - Direct Custody - continued
Operating Procedures :
» Direct access to local A/Cs and local service contacts
» It suits sophisticated institutional investor that
› has knowledge of the foreign markets; and
› has set up its own back-office operations to manage the multiple accounts in various markets
Benefits to Client :
» Direct access to market information
» Transaction timeliness
» Better cut-off times
» Facilitate quick turnaround of asset trading
» Readiness to customize based on local conditions
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Service Model – Global Custody Single Window Operations
AgentBank #1
Excellent Execution
Highest industry STP rates through proprietary network
Internet delivery/data warehouse
Fast inquiry resolution through global tracking system
Global Consistency
Largest global reach
Citigroup brand
Driving to a consistent customer experience
Implementing our global system set
Local Market Expertise
Recognized industry expertise, 50 global markets
Early notification of market issues
Timely market news delivery to Investors
Access to and influence with regulators
CompetitorGlobal Hub
Customer
AgentBank #1Agent
Bank #1AgentBank #1Agent
Banks
AgentBank #1Agent
Bank #1AgentBank #1Agent
Bank #1
Competitor Model
AgentBanks
AgentBank #1
CitibankGlobal Hub
Customer
Citibank
Citibank
CitibankCitibank
Citibank
Citibank
Citibank
Citibank Model
CitibankCitibank
AgentBank #1
Excellent Execution
Highest industry STP rates through proprietary network
Internet delivery/data warehouse
Fast inquiry resolution through global tracking system
Global Consistency
Largest global reach
Citigroup brand
Driving to a consistent customer experience
Implementing our global system set
Global Consistency
Largest global reach
Citigroup brand
Driving to a consistent customer experience
Implementing our global system set
Local Market Expertise
Recognized industry expertise, 50 global markets
Early notification of market issues
Timely market news delivery to Investors
Access to and influence with regulators
CompetitorGlobal Hub
Customer
AgentBank #1Agent
Bank #1AgentBank #1Agent
Banks
AgentBank #1Agent
Bank #1AgentBank #1Agent
Bank #1
Competitor Model
AgentBanks
AgentBank #1
CitibankGlobal Hub
Customer
Citibank
Citibank
CitibankCitibank
Citibank
Citibank
Citibank
Citibank Model
CitibankCitibank
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Canada
ArgentinaChile
PeruBrazil
Colombia
MexicoPuerto Rico
AmericasUnited States
Ecuador
Citigroup’s proprietary network covers 95% of Total Market Capitalization of the world
Indonesia
MalaysiaNew Zealand
AsiaAustraliaHong KongIndia
JapanKorea
Shenzhen
Taiwan
Philippines
Thailand
Singapore
EuropeAustria
Ireland
United Kingdom
Luxembourg
Jersey
Portugal
Italy
Spain
Netherlands
GermanyGreece
France
Switzerland
BelgiumFinlandSwedenNorwayDenmark
Depository Relationships
Bermuda
South Africa
Israel
Botswana
Slovenia
Croatia
Bangladesh
Bulgaria
Estonia
LatviaLithuaniaMauritius
Slovakia
Shanghai
- Proprietary- Third Party
Venezuela
CEEMEACzech RepublicEgypt
Sri Lanka
HungaryJordanMoroccoPakistanPolandRomaniaRussiaTurkey
UkraineZimbabwe
EuroclearClearstream
Costa Rica
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Benefits of Proprietary Network to the Client
» More favorable cut-off times
» Local market knowledge
» Control of services & costing
» Consistent technology
» Fast problem resolution
» Higher STP rates
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Agenda
» Investment Industry Value Chain
» Who needs a custodian?
» What services do custodians provide?
› Service model (direct vs. global window)
› Sub-custodian network (proprietary vs. third-party)
»Who are the top ranking providers?Who are the top ranking providers?
» How are they measured?
» What are the risks to the custodians?
» Taiwan Market
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Who Are The Top Ranking Providers?
» Well capitalized banks
› Citigroup
› JP Morgan Chase
› Bank of New York
› HSBC
» Specialized banks
› State Street
› Mellon Trust
› Northern Trust
› Brown Brothers Harriman
› BNP –Paribas
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Agenda
» Investment Industry Value Chain
» Who needs a custodian?
» What services do custodians provide?
› Service model (direct vs. global window)
› Sub-custodian network (proprietary vs. third-party)
» Who are the top ranking providers?
»How are they measured?How are they measured?
» What are the risks to the custodians?
» Taiwan Market
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How Are They Measured?
» Size
› Asset Under Custody (AUC)
› Transaction Volume
» Information Delivery
› Accuracy
› Speed
» Service Quality
› Advise on market/ infrastructure change
› Technology
› Flexibility in handling exception processing
› Ability to influence market/regulation change
› Competitive fees
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Citigroup Securities Services - a core business
50,000transactionsprocessed dailywith averageturnover of$60 billion
2,500 globalinvestorsand issuersserved;
70% fund managers & brokers
More than $6.6TrillionAssets Under Custody
Network spanning 70markets.
Largest proprietarynetwork with 45countries
Citigroup S&P AA-Moody’s Aa1Fitch IBCA AA+
Citibank N.A.S&P AAMoody’s Aa1
TransactionsClients Assets Network Credit
Ratings
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Agenda
» Investment Industry Value Chain
» Who needs a custodian?
» What services do custodians provide?
› Service model (direct vs. global window)
› Sub-custodian network (proprietary vs. third-party)
» Who are the top ranking providers?
» How are they measured?
»What are the risks to the custodians?What are the risks to the custodians?
» Taiwan Market
23
Agenda
» Investment Industry Value Chain
» Who needs a custodian?
» What services do custodians provide?
› Service model (direct vs. global window)
› Sub-custodian network (proprietary vs. third-party)
» Who are the top ranking providers?
» How are they measured?
» What are the risks to the custodians?
»Taiwan MarketTaiwan Market
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Characteristics of the Taiwan Market
» Regulations define both products and clients
» Taiwan is well known for tight regulatory control
» Market-induced efficiency
› Fully automated trading systems
› Tight T+1 settlement cycle
› Severe penalty on failed trade
» Restrictions minimize credit exposure
› No or very restricted financing allowed
» Continuous lobbying for deregulation
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Global Securities Services in Taiwan
» Established in 1989
» Current asset under custody: US$54 billion
» Transaction volume: 11,000 - 21,000 per month
» Client base
› Foreign Institution investors (FINI)
› Domestic investors
› Insurance companies
› Public funds – Pensions and Postal
› Securities Investment Trust Enterprise
› TAIEX listed companies which sponsor Depositary Receipts
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Citigroup as Viewed by Clients and the Market
Results for 2003/04
• Best Bank in Asia, Awards for Excellence, July 2004
• Best at Cash Management in Asia, Awards for Excellence, July 2004
• Best at Investor Services in Asia, Awards for Excellence, July 2004
• Best at Cash Management and Payments Globally, Awards for Excellence, July 2004
• Ranked 2nd Best Regional Trade Bank, Trade Finance Poll, September 2004
• Best Cross-Border Corporate Cash Management Bank in Asia (>$500 million category), June 2004
• Best Cash and Trade Finance House in Japan, April 2004
• Best Corporate/Institutional Online Cash Management Bank in Asia Pacific, September 2004
• Best Corporate/Institutional Internet Bank in China, Korea and Singapore, September 2004
• Best Overall Bank for Cash Management, April 2004
• Best Bank for Cross-Border Pooling and Netting in Asia, 2nd year in a row, April 2004
• Best Cash Management Specialist in Asia – Financial Institutions, December 2003
• Best Bank/Best Commercial Bank in Asia, December 2003
• CitiDirect® Online Banking ranks #1 Best Cash Management website (2nd consecutive year)Greenwich Associates, 2004 Cash Management Internet Benchmarking Study, May 2004
• Best Global Custodian in Asia, Unweighted, May 2004
• Best Global Custodian for Insurance Companies, Unweighted (global award), May 2004
Best in Class in Mutual Fund Administration Survey, June 2004
Best in Class in Hedge Fund Administration Survey, June 2004
Most Acclaimed Network globally – Top Rated or Commended in 95% of markets, January 2004
Top Rated in 13 countries in Asia – Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Pakistan, Philippines, Singapore, Taiwan, Thailand, December 2003
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Why Citigroup?
» One of the strongest financial services companies in the world
» Largest proprietary sub-custodian network in the world
» Most diversified product range of securities services in the world
» Commitment to the custody business
» Automation and technology
» Focus on providing value-added custody services
» Continuous improvement in service excellence
» Consistently voted best in class in independent surveys
» We are a relationship bank and view ourselvesas partners to our clients