Opinion & Analysis

Just in case we still need reminding that our custodian banks are not immortal, and that a failure of one would be disruptive at best and catastrophic at worst for our investment portfolios, the US regulators announced earlier this week that three banks, including two large global custodians, needed to improve their own contingency plans and have been asked to re-submit improved plans.

Regulators are asking a lot of questions of fund managers, many of them impertinent in both senses of that word. Ostensibly, the answers will enable them to deliver greater stability in financial markets, but the absurdity of this ambition is already becoming apparent.

Fund managers have got over their anxiety about completing and submitting Form PF. Two years on from the first submissions it has become relatively routine. But the quiescent regulator may signify only that it has yet to work out what the contents of Form PF are actually saying about the state of the industry.

The identification codes needed to tag accurately the derivative instruments being traded are proving hard to manufacture, not least because the European regulator has not offered firm guidance. This accounts for much of the difficulties repositories have encountered in reconciliation.