Yandraduth Googoolye: Developing the custody market in Mauritius
Address by Mr Yandraduth Googoolye, First Deputy Governor of the Bank of Mauritius, at
the official launching of HSBC Global Custody Services, Port Louis, 12 April 2012.
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Good morning to you all.
It gives me great pleasure to be present this morning at the launching of the HSBC Global
Custody Services. This is yet another initiative of HSBC towards broadening the range of
services that it offers to its customers. I have been given to understand that with this
proposition, the bank, with the intrinsic support of its parent Group, aims at increasing the
size of the custody market in the Mauritian jurisdiction. "HSBC Security Services" hopes to
create a hub for tapping of both developed and emerging markets in over a network of
90 countries worldwide, including 25 African states.
It is a known fact that the custodian industry has been dominated by a handful of largest
banks worldwide, and HSBC has, in this regard, secured a privileged position among these
big players. No doubt, your bank can view its track record in the global custodian industry
with immense pride today.
Having been ranked number one globally for its Global Custody Product in the Global
Custodian 2011, your bank has been top rated in 8 out of 10 categories as published recently
in the magazine. This outstanding performance clearly demonstrates your commitment to
deliver a market leading product and maintain the position of number one service provider by
the industry. While looking at the history of HSBC Group in Mauritius as far back as in the
year 1859, it is remembered with pride and nostalgia of the assistance provided by the bank
in the financing of railway construction in 1864. And today, it is acknowledged that HSBC
Bank is moving on the fast track, bringing new life and strength to our banking sector.
Role of a custodian bank
The traditional responsibility of a custodian bank has been the holding and safe keeping of
the various assets of either institutional or individual investors. These assets included stocks
and bonds. While having its origins from the physical safekeeping of share certificates,
custody has now been transformed into a technology-intensive information processing
business. With the globalization of capital markets, more specialization is coming along with
the constant growth of cross-border investment and collective investment schemes. Global
custodians are therefore able to capture cross-border custody business without incurring
substantial set-up costs and on-going fixed costs.
There is no doubt that the global custodian model is most appealing to institutional investors
and asset managers, and rightly so, HSBC is well-placed to serve this industry by capitalizing
on its network of branches across the globe and by leveraging effectively on its worldwide
resources with local expertise. HSBC Bank is creating a one-stop shop service by providing
from its globally connected business, whether for fund accounting, valuation, global custody
and transfer, foreign currency exchange, cash management, or securities lending. In
addition, the proposition of HSBC Bank incorporates the creation of a central flow of data on
the current status of assets which would enable the owner of the assets to easily obtain
documentation that provides information about the holdings that he has entrusted to the
bank.
Supervisory issues relating to provision of custody services
As is the case for any financial product, there are a number of risks associated in the delivery
of custody services. These risks can be broadly, classified into operational, financial and
legal risks. Focus is therefore being laid on financial risk management, capital adequacy, and
operational risk mitigation. While it is viewed that there might not be any systemic
implications which emanate directly from custody services, vigilance is nonetheless required
on the part of financial institutions and supervisory authorities alike, since cross-border
investment flows might have an impact on domestic financial system stability.
In the aftermath of the global crisis which has been of unprecedented magnitude, banks have
been called to become leaner and fitter. Alongside, the job of regulators has become even
more complex given their mandate to maintain soundness and stability of the financial
system. Presently, the Bank of Mauritius is engaged in constantly upgrading its prudential
and supervisory norms to keep pace with international best practices in the regulation and
supervision of financial institutions falling under its purview. The recent financial crisis bears
witness to the fact that a mere slackening of vigilance can give rise to devastative snowball
effects. As supervisor, we do maintain that prudential and supervisory norms have to be
constantly revamped to chase up and keep pace with financial innovation. And in the wake of
the rapid integration of financial markets, there is a dire need for refinement in early warning
system tools that can further enhance the supervisory framework. Concurrently, the
upholding of the basic principles of sound corporate governance remain crucial for
withstanding speculative appetites and curbing excessive market volatility. And so much so,
as banking per se requires the fundamental ingredient of instilling trust and confidence.
Supervisors and authorities responsible for financial stability are presently contemplating the
best options for strengthening of the risk sensitivity of the prudential framework, in the
expectation of the emergence of a new financial architecture. One area remains that in the
best interest of one and all, there should be increased trust-based cooperation between the
financial service provider and the oversight authority. This basic ingredient is no doubt key to
a continued successful development of an efficient and secure market infrastructure that
meets the fast-changing needs of our financial sector. Mutual cooperation can but benefit our
financial system. While HSBC Bank is engaged in marketing its custodian service provider
role, our economy shall certainly gain in the process - our jurisdiction is projected in the
global business arena as a credible International Financial Centre. Allow me to congratulate
this initiative of HSBC Group and convey my best wishes to the Management and staff of
HSBC Bank (Mauritius) Limited.
I thank you for your attention.