BNY Mellon Plans Further Consolidation for Custody Platforms

In an aggressive move to reign in expenses and costs, BNY Mellon is planning to further consolidate its custody platforms, as well as considering to charge higher fees for large euro deposits.

During an earnings call last Friday, senior executives for the bank highlighted plans to offset the rising cost of negative interest rates in Europe and increasing regulatory compliance costs.

“We had three custody platforms. We have consolidated that down to two. We completed that over the summer by the end of the third quarter of 2014,” says Brian Shea, vice chairman and CEO, Investment Services, BNY Mellon.

“And we’re now working on consolidating the remaining two to one and we are deep into that process that will carry us into early 2016.”

The move comes as the bank looks to reduce structural costs through insourcing, real estate and facilities actions, and a reduction of headcount.

“I think you’ll see the headcount is down about 800 for the full year. That also includes the fact that we were insourcing into our technology, our application development team,” says Todd Gibbons, chief financial officer, BNY Mellon.

In addition, it is also considering higher chargers for large ‘excess’ deposits denominated in euros.

Years of low interest rates have significantly hit profits custody banks can make from safeguarding assets. Furthermore after the European Central Bank (ECB) set negative deposit rates last year, as it is becoming more costly for them to park their money at central banks. This has prompted them to explore new business types and ways to discourage deposits in euros.

“We will have to be a little more aggressive, so the downside is if we don’t see any rate movement we will probably have to generate 20 or 25 basis points or so on the way we manage deposits,” adds Gibbons.

Last week, BNY Mellon reported its revenues in the fourth quarter of 2014 increased 2% to $3.7 billion as a result of higher asset servicing fees and custody mandates.