Risk Committee Update: October 2026

1. Enhancing Consistency and Precision in Risk Assessments

The Committee approved the introduction of a more granular scoring model for Sub-Custodian Assessments (SCAs), strengthening alignment with Global Custodian Assessments (GCAs) and supporting a more consistent approach to risk evaluation across markets.
The enhanced methodology places greater emphasis on the sophistication of reconciliation processes, including:

• International standards: Recognising the adoption of ISO 20022 over the legacy ISO 15022 messaging standard.
• Data integrity and automation: Giving greater recognition to proactive “push” data mechanisms compared with semi-automated “pull” processes.

These enhancements aim to better differentiate operational capabilities and reflect the maturity of the controls supporting global custody services.

2. South Korea: Market Accessibility and Infrastructure Reform

South Korea continues to advance reforms designed to improve accessibility for foreign investors and support its ambition to qualify for inclusion in the MSCI Developed Markets Index.

Key developments include:

• Extended FX trading: Since July 2026, KRW/USD trading has been available 24 hours a day, potentially improving access to FX liquidity and supporting more efficient settlement.
• Longer settlement windows: Extended bond settlement deadlines are intended to ease operational and liquidity constraints, particularly for international investors.
• Simplified market access: New omnibus account arrangements and greater acceptance of Legal Entity Identifiers (LEIs) aim to reduce administrative barriers, although some implementation and legal clarification work remains outstanding.
• Future settlement reform: Industry discussions on a potential move to T+1 settlement continue, with a roadmap expected in October 2026.

Despite this progress, market concentration and the implementation of outstanding reforms remain important considerations. South Korea’s 2026 MSCI review did not result in an upgrade, with further progress needed ahead of the next review.

3. Japan: Modernisation, Innovation and Settlement Efficiency

Japan’s financial market infrastructure continues to evolve, with investment in technology, settlement systems and future market capabilities.

Key developments include:

• Core system modernisation: JASDEC is progressing its new core bond settlement system, with user testing tentatively expected to begin in 2027 and go-live planned for May 2028.
• Settlement efficiency: Extended instruction cut-off times for Japanese Government Bonds have been introduced to improve alignment with market deadlines and reduce the need for manual settlement management.
• Digital innovation: JASDEC is exploring the implications of equity tokenisation, while dedicated research and innovation capabilities support the assessment of emerging technologies.
• Potential T+1 settlement: Discussions involving market infrastructure providers, regulators and market participants continue, although no formal decision or implementation timetable has been established.

These initiatives reflect a broader focus on operational resilience, global best practices and the development of more efficient and adaptable market infrastructure.

4. Czech Republic: Operational Standards and Regulatory Change

Recent assessments highlighted differences in operational practices among service providers, particularly in reconciliation escalation and proactive claims management. These differences reinforce the importance of effective exception handling, timely escalation and robust operational controls.

Other developments across the Czech market include changes affecting securities settlement, safekeeping and taxation. In particular, the application of a 21% VAT rate to certain CDCP safekeeping services is scheduled to take effect in January 2026, with potential implications for service costs and clients.

These developments underline the importance of monitoring both operational performance and regulatory changes when assessing custody providers and local market arrangements.

Looking Ahead

The themes emerging from this Risk Committee meeting are clear: greater consistency in risk assessment, continued reviews in market infrastructure, and the need to anticipate the operational implications of regulatory and technological change.

As settlement cycles evolve, automation advances and markets become more accessible to international investors, robust risk assessment must evolve alongside them. Our focus remains on identifying meaningful changes in risk, recognising improvements in operational capability and maintaining a forward-looking view of the global custody landscape.