Trade costs

How investment banks can streamline costs

Wei Min Chin, managing director for the capital market industry in Asia Pacific at Accenture, explains why investment banks should consider outsourcing back-office operations.
Chin Wei Min
Chin Wei Min

Outsourcing has long been a way of making cost-savings, but is this suitable solution for investment banks?
Increasingly it is a viable solution, particularly for post-trade processing, which plays a vital role in client service but represents a significant fixed cost for banks. To address this problem Accenture has teamed up with Broadridge Financial Solutions to build a new model for securities processing that spreads costs across a large volume of trades from multiple institutions. This should help banks of all sizes limit the need for capital investment and rebuild their business models around more-profitable services.

Why can’t banks do this themselves?
New regulations are pushing for transparency and standardisation in post-trade processing, making it cost prohibitive for most banks to continue handling it on their own. We hired people from Societe Generale Corporate & Investment Banking for their global securities processing skills and layered that on top of our technology and global network in an effort to help banks reduce costs, which is as relevant in Asia as it is in Europe and the US.

To be sure, Accenture post-trade processing product does not replace the role of the investment bank in handling trades. It is an Accenture-owned business that provides technology and post-trade processing support that reduces costs-per-trade by leveraging collective trade volumes; optimises performance through access to real-time trade information; and helps reduce the complexity and resources required for regulatory compliance in the post-trade area.

How is it relevant in Asia?
This sort of business planning is arguably more important in Asia — where banks are rapidly expanding into different regions. They need to build their trading business sensibly. This may not be a year for mega bank M&A transactions, although we have seen some chunky transactions out of Japan — including MUFG’s plans to buy up to 75% of Thailand’s Bank of Ayudhya and Sumitomo Mitsui Financial Group’s decision in May to buy 40% of Indonesia’s Bank Tabungan Pensiunan Nasional. But we are still seeing quite a bit of expansion on the equities front. Just this year CIMB opened brokerage services in India and South Korea. As these banks look to expand, they should consider doing it in a streamlined process.

But there are regional regulatory differences in Asia, won’t that make it difficult for a third-party to outsource these services?
Such hurdles exist for a third-party or for a bank. That is one of the costs of expansion. But by offering this service to a wide spectrum of banks we’re in a better position to ultimately reduce the cost-per-trade than any individual bank outside of the top five multinational banks. Furthermore, because we are not a bank, we’re not the competition, so outsourcing post-trade processing to us doesn’t create a perceived conflict of interest.

What kind of cost savings can clients expect from this solution?
Accenture Post-Trade Processing can significantly reduce post-trade processing costs for our clients. Our solution is aimed at providing additional cost savings by helping banks avoid the need for ongoing investments in new technology and operations necessary to comply with regulatory pressures.


The responses in this article have been edited

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