Art Certosimo, senior executive vice-president and chief executive of BNY Mellon’s global markets business, has been on a whistle-stop tour of Asia amid a regional expansion drive.
The US custodian bank this week announced it was adding a capital markets desk in Tokyo and has just received a licence to provide investment management services in Singapore.
In an interview with FinanceAsia, New York-based Certosimo spoke about the US bank’s plans in Asia, as well as the outlook for US monetary policy and internationalisation of the renminbi.
BNY Mellon’s global markets business contributes 10%-15% of the bank's total profit and Certosimo wants to increase that in the next 2-3 years to more than 15%, with Asia forming a central part of that growth.
“In Asia, there is a large requirement [from investors] for access to US fixed-income and equity markets,” Certosimo said.
But for overall business to pickup, he is first keen for the US Federal Reserve to begin the long-awaited tapering of its quantitative easing programme and to return markets to “normal” after weeks of relative torpor.
“If the markets have no volatility it’s arguable as to whether you need a service provider [such as BNY Mellon] to give access to the markets. [Now] If you access the markets it’s the same price at 9am, same price at 1pm, same price at 5pm. It’s not helping anybody,” he said.
BNY Mellon’s clients include investment managers, sovereign wealth funds, governments, banks, hedge funds and insurance groups.
Certosimo said he has no clarity on when the Fed will begin to taper.
“We’d like to see it come, mainly to get more participants in the market, but the question is how do you do that in a way that is not horribly disruptive and my guess is [that] they are going to take their time,” he said. “I’m thinking in the next six months but which month? Your guess is as good as mine.”
Certosimo concurs with the view that the US central bank is waiting for more solid evidence that the US economy is back on track, as borne out by October’s jobs data, released last week. The data showed the economy created 204,000 jobs in October, much better than expected.
“Every market participant that I speak to is of the same opinion: ‘is it for real this time?’ Over the past five years we have had false starts – I’ve lost count. Good news, good news, bad news, bad news, good news. That pattern has shaken people’s confidence. And I think it has shaken the Fed’s confidence,” he said.
Confidence in China
Where he is more confident is on China in the wake of the third plenary session wrapped up last week.
Although details are scant, one theme to emerge from the pivotal meeting of China's leaders is the continuance of Beijing’s drive to make its markets more attractive to investors.
As such, Certosimo is optimistic that the renminbi currency will continue to be internationalised -- something he said needs to happen to support the development of the Chinese economy.
“The signals from government are that, over a period of time, it wants to see more of a free flow of the currency in and out of China. The progress it has made has been pretty good,” Certosimo said.
“Over the past two years all the words that have been used have been the right words. Actions that follow those words tend to be a little bit slower but eventually they’ll catch up. I bet over the next five years we’ll see significant progress.”
So, what with US tapering on the horizon and China’s economic reforms seemingly as vague as ever, what does this mean for the bank’s regional expansion? In short, why now?
“Everybody seems to be pulling back a little bit. There you have the reason. We have a wonderful marquee client base that needs access to capital markets and … we now have a full suite of products we can offer our clients.”
BNY Mellon's global markets team currently has 75 people in Asia, providing primarily FX trading. Adding a capital markets desk in Tokyo allows it to provide sales, dealing services in fixed-income and equities for institutional clients.
The company has added a team of nine broker-dealer and capital market specialists to its existing FX services business, which will be led by Eiichiro (Eric) Masaki, who has been appointed head of Japan capital markets sales.
Meanwhile, in Singapore, BNY Mellon’s new licence will allow it to conduct a full range of investment management activities, including research, portfolio management and sales of collective investment schemes.
“We would like to see global markets revenue double in a few years, from all products. It’s a good goal. We’ll give it a shot,” he said.
BNY Mellon, based in New York, has FX sales and trading desks in Hong Kong, Tokyo, Taipei, Seoul and Shanghai.