If Greece defaults – as many think it will – are your assets safe or will they slip through your grip faster than greased lightning?

Read on for a discussion of the risks of holding assets in Greece, Portugal, Ireland, Italy, and Spain, and what you can do to protect your fund from unnecessary additional risk.

The development of the Global Custody industry beyond the financial crisis of 2008/9 and into 2011 has seen an increased emphasis on risk minimisation and asset safety, together with increased monitoring of the global custody providers. The Madoff scandal highlighted the issues around the lack of transparency for investors in pooled vehicles and reinforced the need for separating functions such as asset management from administration and custody. For global custodians there has been a dramatic increase in regulatory pressure, both in the US (Frank Dodd) and EU (AIFMD, UCITS IV).

Following several high profile thefts from private registries of carbon credit markets in Europe, the European Commission suspended most of its Emissions Trading Schemes in the EU. Over $40m of carbon credits have been stolen from registries in the Czech Rep., Austria, Germany and Romania during the last few months. These hacking attacks and thefts are seriously undermining the fledgling carbon trading market and fueling a black market for the right to pollute.

In the wake of the global financial crisis, Tier 1 and 2 banks and brokers have, or are reviewing, their procedures for monitoring risk across their global sub-custodian network, being sub-custodians and central securities depositories (CSDs). In the past, some global network management groups have relied heavily in their sub-custodian risk monitoring on input from industry surveys, passive web conferencing or sub-custodian relationship and sales visits to complete their operational reviews which has its obvious weaknesses. The banks and brokers now want to verify this themselves.

The New Year is always a good time to look forward – but with optimism? What is the future for the custody industry?

Of course, we don’t know the future but there are some interesting drivers for 2011 and beyond and they are not all pulling in the same direction.