Standard Chartered Bank Zimbabwe (SCBZ) is the latest entrant into the custodial services business, joining seasoned players such as Barclays Bank and Stanbic Bank Zimbabwe.
In an exclusive interview with businessdigest this week, Owen Bandama, SCBZ head of investors and intermediaries service, said whilst the bank had launched the new division, it was not new to running custody operations as it has been offering the same services 15 years ago before the business was transferred to Stanbic.
“The exit of Barclays from the African market provided a unique opportunity for the Standard Chartered Group to expand its footprint with an ability to offer safe custody services to clients as opposed to using third party custody providers,” Bandama said.
Barclays Plc exited the custody business in Africa and proposed to dispose of its Zimbabwean operation to the Standard Chartered Group.
The transfer of assets was effected in the rest of the African markets, except Zimbabwe where SCBZ decided on an organic launch of the business. The bank has been offering the product on the local market since June 2011.
Safe custody services are facilities where investors such as pension funds, unit trust companies, broker dealers, asset managers and other institutional investors lodge their financial assets such as bonds, shares, treasury bills, title deeds for safe keeping with the custodian.
Under a safe custody arrangement, the assets of the investor are uniquely registered in the name of the investor and clearly segregated from the bank’s assets.
Bandama said international best practices in investment management dictated the segregation of the roles of an asset or fund manager, the custodian, the stockbroker and fund administrators.
“Under such a scenario, investor protection is enhanced as client assets are held and safeguarded by an independent third party — these assets can be registered in either the client’s name or under a nominee name, but held in safe custody by an entity other than the fund manager or the fund administrator,” he said.
Custodians have the specialist skills and systems that provide means to efficient and effective operations. Because they serve a large number of customers, custodians have means to develop cost effective systems and processes through economies of scale. Custodians also provide independent checks with both client and broker prior to trade settlements and this segregation of roles allows asset/fund managers to focus on core business of investment advisory.
Custodians provide independent portfolio reporting of all trades and corporate actions such as dividend payments, rights issues and share splits. By keeping track of events, they achieve faster collection of income from investments — both interest and dividends are collected on due date which can be quickly channelled for reinvestment so that the client will not lose value.
Timely exposure of errors as reconciliations are performed daily on cash accounts and monthly on securities accounts.
“At a country level, the availability of a custody service gives confidence to foreign investors as the appointment of a custodian is the norm in developed markets,” said Bandama.