Custody Services

How do banks benefit from using Vontobel’s Execution services and its Custody services?

Due to our size, we can secure better prices from various providers (purchasing power). This benefits our clients, who can then lower the prices they charge their end clients. As such, the costs can be reduced for the entire network. Costs for deliveries to custodians are also eliminated. Vontobel also assumes any time-consuming interest rate claims with counterparties. But all this is just a cursory glance at the monetary side of things. Costs are certainly important, but it’s not always just about cheaper prices. Other factors also make our services a cut above.

What factors are those?

Having the entire Transaction Banking unit working together on one floor in the same building is a big advantage. That includes account management, execution, deliveries, tax services, payment transactions, and the various teams in my department. It means teams can reach each other quickly and easily, which is also very helpful when it comes to identifying complex, time-sensitive issues and resolving them for our clients. The Custody department consists of three teams. We communicate with our clients via SWIFT, via e-mail, and by phone. The corporate action specialists from our global partners have a direct line to our employees who handle these types of cases every day. These people speak the same language, so their exchanges are always on an equal footing. This enables us to react quickly and minimize risks.

We are also very proud of our “Swissness” here. We set great store by rapid response times and personal service, and build trusting relationships with our contacts. This leads to goal-oriented, efficient solutions for client concerns. We maintain close relationships with our clients and use a range of key performance indicators to monitor the quality of our services, helping us improve in our day-to-day business. Our Custody services department already boasts 66 clients, and they rate our service very highly.

You deal with voluntary corporate actions, which leads me to my next question about delays. With Vontobel’s model, an additional stakeholder is added to the mix, depending on the situation, which can also cause delays. I assume this is an issue with voluntary events in particular?

There are delays (shorter deadlines for voluntary events) in certain cases. However, we keep these to a minimum to ensure our clients do not experience any major disadvantages by not going direct. We normally shorten our deadlines by two to four hours, depending on the level of complexity and size. Events with very tight response times are also notified by phone or via e-mail. We still accept instructions once a deadline has passed on a best-effort basis and contact the custodian to clarify whether these can still be executed, all at no extra cost to the client, of course. To minimize delays, a fully automated process ensures that preliminary information for corporate actions received from custodians is forwarded to our global partners’ clients immediately. We can also provide our clients with ready-made voluntary client letters on request. These are normally produced in German, English, French, or Italian, while Spanish is also available.

What about booking dividends and interest?

We try to strike the right balance between speed and quality. It helps that we have a small pool of proven custodians, so exchanges can be quick and direct. The current balance, which we believe is very reasonable, allows for an automated settlement rate of around 70 percent. In these cases, the booking and forwarding of information to our partners all takes place in a matter of seconds. In principle, it would not take much to increase our STP rate to over 80 percent. However, quality comes first here. For events with a number of clients or large sums of money, we deliberately halt the process to carry out additional checks. Time and again, our specialists find SWIFTs where the data received are found to be implausible. Clarifying matters with custodians or issuers themselves prevents erroneous booking that would lead to cancellations/rectifications. Our cancellation rate is a key metric for measuring the quality of our custodians and our own performance. If our expectations are not met, and error patterns are identified, for instance, we look for and implement specific solutions. Being able to rely on the support of our experienced employees helps a great deal. Their expertise and experience enhances the quality of our services. We compare very favorably with other banks in this regard.

What about services in the area of general meetings / exercising voting rights?

Shareholders in the Swiss market are welcome to order their documents for general meetings from us. Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 (SRD II) was brought into force to strengthen shareholder rights in Europe. Vontobel implemented this directive on schedule in September 2020 and now supplies these events in the new ISO 20022 format via MX SWIFT, or via e-mail if our partners are not yet able to process the new standard. Feedback on participation or voting instructions can be returned to us in the same way.

Banks sometimes have reservations about tackling large projects such as changing custodians. Can you understand these concerns?

Yes, of course. It’s a big step and involves an initial outlay. We have carried out dozens of onboardings in recent years. Thanks to our many years of experience and the fact that we work closely with our custodians, we have various options for these transfers. We can place instructions on the market for clients manually or via CSV file using Excel, meaning several thousand positions can be settled in just one day.

If a client requests it, we can also initiate onboarding via the custodian using BULK transfers, meaning the depository instructs itself and takes over the booking of the securities. We will also happily take over coordination if the client so desires. We have a great deal of experience in this regard, and new clients can benefit from our expertise when it comes to delivery. We also have a very experienced IT team on hand to assist with macros, etc. After their transfer has gone through, most clients are surprised by how quickly we are able to process thousands of securities. By working closely with our custodians, we can offer a highly automated service and give our clients the support they need.

Processes are becoming more complex and market requirements are growing every year. What experience do you have in this regard, and how can you offer clients added value?

Vontobel Transaction Banking Custody clients benefit from our approach and the fact we monitor the markets, identify trends, and develop tailored solutions. This means we can provide our clients with regulatory or general process adjustments in good time while maintaining a certain level of quality. We ensure this by participating in various committees, including the Swiss SPTC and the Corporate Action Expert Group. We also attend regular roundtables with other banks in which we share information on current cases, (regulatory) market changes, and general issues in the custody area. In this way, we actively participate in shaping the market and put forward our views and requirements, so we can work toward ensuring optimal framework conditions and the highest level of process security and efficiency. Thanks to our dedicated IT team, we also have the flexibility in-house to respond quickly and efficiently to new requirements and to requests from our clients.

Which services have you developed recently that clients have particularly appreciated?

We recently automated the annual reclassification process for US dividends. This cut the amount of effort required by about 80 percent, and means we get corrections to our partners several days faster.

A bigger challenge over the last two to three years has been the introduction and processing of SRD II, with its country-specific differences in data quality and the corresponding difference in the SWIFT standard.

Would it also be possible for Vontobel to outsource client custody and the operation of its Avaloq core banking system?

Right now, we do not offer this to any of our clients. With Raiffeisen Switzerland, we have shown for years that it is possible to remain highly efficient while operating two systems. We are convinced that there will be opportunities in this area in the future. If the right partner comes along (or when we find them), we will definitely evaluate whether expanding this service would make sense for the banks. We are always open to exploring and developing new ways of working together with our partners.

Does Vontobel offer any other advantages or services that banks could benefit from?

Vontobel is in the top group of issuers of structured products in Switzerland and many other European countries. The volumes involved require a high rate of automation, which currently stands at 99 percent. If your products are held for safekeeping with us, you benefit from low custody fees on the one hand and processing on a contractual basis on the other. For example, this means that a final maturity posting will be processed quickly after the closing price has been announced, and the posting confirmation will arrive before the value date. Other services, for example, in the area of tax or participation in securities lending and borrowing can also be offered.