Monitoring and benchmarking
The Custodian is a material service provider, and partner, to most clients. Robust monitoring and oversight of this key relationship is crucial and, along with regular benchmarking, can:
- minimise the risks to which it is exposed;
- ensure the current and future operating model remains efficient for both parties; and
- maximise value for money.
We analyse your custodian relationship from three angles:
1. Cost
- Fee benchmarking
- Foreign exchange (FX) benchmarking
- Interest rate benchmarking
2. Risk
- Global custodian risk assessment
- Contract review
- Cyber risk
- Quarterly peer group financial analysis
3. Operational performance
- Operational benchmarking
- Service Level Agreement (SLA) benchmarking
- Capability assessment
Fee benchmarking
We take a pragmatic approach to commercials, and we recognise that the lowest-cost solution is not always the best solution. When it comes to fee benchmarking, we encourage clients to look at the relationship holistically.
Modules that can be included in our fee benchmarking exercise include:
- Core custody and asset servicing fees
- Value-added services
- FX benchmarking
- Credit and debit interest rates
- Securities lending activity
We use an aggregated set of available portfolio and transaction level information to demonstrate how competitive the current fee arrangement is when compared against our anonymised and aggregated fee database.
The universe is a constantly expanding database. The comparable universe will contain clients of a similar size, geographic spread, and service profile to each client.
FX Benchmarking
Our interactive tool allows you to work with your custody FX data and to drilldown from overall portfolio performance to individual transaction level data. We use published benchmark data to calculate the execution costs for all custody/standing instruction FX performed by your custodian.
Interest rate benchmarking
Using daily balances extracted directly from the custodian by our Managed Service team, we can calculate credit and debit rates at the custodian. Our online interactive tool allows you to perform two checks:
- That the credit and debit interest rate arrangements are competitive with current levels available in the market
- That the credit and debit interest received/paid by you is in line with the terms agreed with the custodian.
Custodian Risk Assessments
Thomas Murray has monitored and benchmarked custodians all over the world since 1994.
Using our data-driven insights and extensive experience, we can help you with all aspects of this process, which is essential for:
- managing operational risk;
- ensuring regulatory compliance; and
- maintaining the security of your fund’s assets.
Thomas Murray has developed proprietary risk assessments of nearly all of the leading global and domestic custody banks. Unlike opinions of creditworthiness or credit ratings, our Global Custodian Assessments (GCAs) examine risk holistically and focus on the four key risks associated with custodians:
- Financial
- Operational
- Asset safety
- Asset servicing
In addition, our GCAs monitor key aspects such as:
- operational efficiency;
- regulatory compliance;
- risk management processes;
- technology capabilities
- service quality
- cyber risk; and
- environmental, social, and governance (ESG) considerations.
Need more information?
Contract review
The purpose of this review is to establish the degree to which the custodian agreement with the incumbent custodian minimises the core custodial risks (e.g., asset safety, asset servicing and operational) to which you might be exposed.
Thomas Murray is in a unique position because we have intelligence on the latest commercial and contractual terms offered by custodian banks on a global basis.
The report would highlight variances or omissions, recommending remedial action where appropriate, and commenting on its adequacy in as much as it enables you to secure the required level of service and risk minimisation from your global custodian.
Additional services
Financial analysis: Quarterly Custodian Bank Peer Group Comparison
You can request a Quarterly Custodian Bank Peer Group Comparison report that will compare the financial indicators (Tier 1 Capital Ratio, Total AuC, Liabilities, Revenue etc.) of the leading custody providers.
Once the results are published, we can arrange a quarterly call to discuss any issues or trends that we have observed from our global client base and your feedback.
Operational benchmarking
Operational Benchmarking (OpBench) is our interactive tool that allows you to benchmark your custodian’s operational performance against a universe of other Thomas Murray clients.
You can customise your own universe, whether by custodian, geography, type, or size. If you retain multiple custodians, the tool allows you to create your own service provider universe.
Thomas Murray takes data directly from the custodian and our Managed Service team ensures that the data is accurate, and that any discrepancies or outliers are interrogated with the custodian before uploading it to OpBench.
SLA benchmarking
We regularly review Service Level Agreements (“SLA”) for our global client base. These reviews provide an assessment of the existing agreements and a gap analysis, which is graded in order of significance and materiality.
The report and subsequent commentary comments on the SLA scope and completeness as a basis for operational performance reporting. The commentary will reflect TM’s experience and evaluation of other agreements for similar clients.
Capability assessment
This assessment looks at certain service aspects to identify the incumbent custodian’s capabilities in these areas, which are then compared against our view of global best market practices.
The scope can be customised to your requirements, whether that is core custodian services, middle office services or data, technology, and ability to integrate with your current or future operating environment.
Contact our experts
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