Banking

“They used their positions to solicit bribes,” said US Attorney General, Loretta Lynch upon the arrest of 14 FIFA officials. “They did this over and over, year after year, tournament after tournament. They were expected to uphold the rules that keep soccer honest. Instead they corrupted the business of worldwide soccer to serve their interests and enrich themselves.”

Asset managers and end investors should consider increased due diligence as to the way in which their assets are held in custody at their custodian banks following the UK Financial Conduct Authority’s (FCA) £126 million fine of BNY Mellon.

The major impact of new European directives AIFMD and UCITS V has been, and will be, an increased need for market monitoring by custodian banks. Whilst the monitoring of market stability in markets in which clients are invested has been common place in the industry, it is now a formalised regulatory inevitability.

A race to the bottom in collateral terminology refers to the potential for a downward spiral to occur in the acceptable quality of collateral to be posted at CCPs (central counterparty clearinghouses). Individual eligibility criteria at each CCP, which are operating as competitive, for profit entities, added to an anticipated collateral shortfall in the market, is resulting in very real fears of a race to the bottom taking place.

New regulations, with the introduction of new frameworks around capital, liquidity, accounting, remuneration, risk management and transparency, not to mention increased competition, are all having a big impact upon the correspondent banking landscape. It has, therefore, never been more important for banks to understand their universe of Nostro and Vostro accounts; to rationalise them in order to more efficiently and effectively manage counterparty risk and associated costs.