The provision of a locally available custody service in Cayman, backed by a global banking organisation, is an attractive proposition for financial intermediaries, says Dan L. Peterson.
Having so far weathered a difficult economic period, firms in the Cayman Islands are finding that, with the right sort of preparation, a flexible approach and a willingness to adapt, significant opportunities remain for businesses to grow.
In the midst of persistent difficult economic conditions, the onslaught of regulation, such as the Foreign Account Tax Compliance Act (FACTA), is also requiring banks outside of the US to grapple with new operational challenges—and added costs associated with meeting these challenges. For many banks, the combination of tougher regulatory control, added operational stress and crushing cost:income ratios means that certain services and products simply have to be withdrawn.
However, opportunities exist for banks that can successfully adjust their operating models. Those banks that have remained alert, have a commitment to innovation and can adapt to the new environment are now in the best position to increase market share.
With this in mind, it was clear that there was an opportunity for an organisation such as Deutsche Bank to add a good deal of value in the marketplace by launching a complete custody service in Cayman—an area that, it believes, will not just prove successful for the bank and its clients, but can also help Cayman establish itself as a centre of excellence for custody services on the international stage.
Client-driven service
Within the Caribbean, the new custody service is a tactical expansion of the range of products for financial intermediaries in particular— indeed, it was significant demand from these intermediaries that really drove the development of the enhanced custody offering. Most financial intermediaries—fund administrators, trust companies, family offices, law firms, accounting firms, liquidators—demand a strong service provider with global capability, so a locally available custody service in Cayman backed by a global banking organisation is an attractive proposition for them.
“While in the past finance firms have preached about asset diversification, today we are seeing a shift, as wealthy individuals, families and institutions talk more about jurisdictional diversification.”
The addition of custody and safekeeping to our Cayman product range, therefore, enables the bank to deliver a much more holistic offering, providing clients of our Cayman office with a complete suite of services. For example, through the bank’s global network, financial intermediaries can access securities settlement services in more than 100 markets. In addition, the prerequisite in today’s markets for asset owners and managers is the capability to offer comprehensive reporting tools, which must work in concert with their custody and safekeeping services— our custody offering delivers this.
Time zone
Another key operational challenge faced by clients is, often, that of differing time zones. With custody business previously being booked through other centres in Europe, a lot of executing brokers, quite understandably, didn’t want to deal with a custodian who was five or six hours away.
This is important for underlying clients of the financial intermediaries we support from Cayman. Latin America, for example, is a growth region for many of our financial intermediary clients. Trust companies setting up Cayman and British Virgin Isles (BVI) structures for their Latin American clients are increasingly looking for a high quality offshore custodian as well.
While in the past finance firms have preached about asset diversification, today we are seeing a shift, as wealthy individuals, families and institutions talk more and more about jurisdictional diversification. Having accumulated a significant volume of assets and seen that they’ve done well in terms of diversifying their portfolios, they are now asking whether it is safe to keep all theireggs in one jurisdictional basket. The recent US credit downgrading, for example, has sparked this sort of concern among treasury brokers, who are now looking for an extra layer of protection.
Cayman must be ready to make sure it is part of the jurisdictional decisions they make, and having a strong custody industry can be a key part of that.
Local access to global expertise
Understanding the needs of the local client base and what services they require is absolutely vital for any business and is certainly at the heart of Deutsche Bank’s launching a complete custody service in Cayman. In a world where jurisdictional competition is getting greater and greater, it is important for Cayman that wide-ranging, high quality services are available locally; having a strong custody element in its armoury can certainly play a part in positioning Cayman as a leading finance centre.
“While in the past finance firms have preached about asset diversification, today we are seeing a shift, as wealthy individuals, families and institutions talk more about jurisdictional diversification.”
In addition, institutional clients absolutely demand that their financial service providers have multi-jurisdictional reach. So while clients desire a locally accessible service, they also want that service to retain a global dynamic into markets such as Singapore, Sao Paulo and Mumbai, and to be backed up by an international organisation. When it comes to tier one banks, there was previously a small
number of options in Cayman for custodians that had the kind of global reputation and strong investment banking name for which high net worth individuals, families and multinational companies were looking. In that respect, Deutsche Bank’s global reputation for custody solutions can play an important role in attracting high quality custody business to the jurisdiction.
We are confident that this new custody service in Cayman is an area that can grow over the coming years and that it has the potential simultaneously to help our clients grow. The Cayman financial intermediaries we service employ many local people, and their businesses contribute a significant amount to the overall local economy. By supporting them as best we can, and providing the services they are telling us they want—such as custody—local financial intermediaries can also prosper.
Dan L. Peterson is business development manager at Deutsche Bank (Cayman) Limited. He can be contacted at: dan.peterson@db.com
Dan Peterson focuses on developing the bank’s FIM business in the Caribbean and providing senior-level strategic support to intermediary clients, drawing on the bank’s global strengths to bring appropriate, innovative solutions to the Cayman office’s captive insurance manager, trust company and fund administrator clients. With 11 years’ international banking experience, Peterson joined Deutsche Bank’s private wealth management division in 2007 and coordinated the successful launches of several key additions to Deutsche Bank’s Cayman offering, including the foreign exchange desk and custody platform.
