EMIR

Segregation of assets in accounts that bear the name of the owner is one of the unstoppable regulatory and commercial trends of our time. While custodian banks have invested considerable resources in the development of ingenious arguments against segregation, one third party lender is pleasantly surprised to find concerns about asset safety are increasing the attractions of its business model.

In the world of capital markets, the public spotlight has predominantly fallen on pre-trade and trade analysis. The media focusses its attention on the price of shares, the movement of currencies, the possibility of changes to interest rates and the fundamentals of markets, as well as corporate news.

The £126 million fine levied by the UK Financial Conduct Authority (FCA) on BNY Mellon in April for breaches of the rules on the safekeeping of client assets was the latest in a series of similar sanctions.  The fine was the eighteenth penalty levied in four years on UK financial institutions for breaches of the UK’s custody rules (or “CASS”) regime, apparently highlighting a widespread industry problem.

The prolonged transatlantic battle over the mutual recognition of central counterparty clearing houses (CCPs) reflects deep differences over the costs of resolving a failing CCP. And asset managers may find that their share of those costs is on the rise.

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