What is "The Association of Global Custodians"?

[Hannah Bell]

What are "custody services"?

I'm interested because of the membership...


THE ASSOCIATION OF GLOBAL CUSTODIANS

The Bank of New York
Brown Brothers Harriman
The Chase Manhattan Bank
Citibank, N.A.
Deutsche Bank AG
Investors Bank & Trust Company
Mellon Trust/Boston Safe Deposit5. Trust Company
The Northern Trust Company
State Street Bank and Trust Company

Counsel to the Association: Baker & McKenzie

March 15, 2001

Annette Knief
Financial Services Manager
National Association of Insurance Commissioners
2301 McGee Street Suite 800 Kansas City, Missouri


Dear Ms. Knief:

Proposed Amendment to Section 2.BÍ151 of the Model Regulation on the Use of Clearing Corporations and Federal Reserve Book-entry System By Insurance

This letter is submitted on behalf of the Association of Global Custodians ("Association"), an informal group of nine banks that are major providers of global custody services to U.S. institutional investors.

The Association appreciates the opportunity to comment on the proposed amendment to SectionÌÙ ■ V ^f the Model Ret3ulati°n and apologizes for submittingthis letter after the March 7 comment deadline. Because of the importance of this matter to the major custody banks, we respectfully request that our comments nonetheless be considered.

Summary

The Association urges that the NAIC withdraw the proposed amendment. We believe that the proposal is inconsistent with the role of a bank custodian and would do little to protect policy holders against the misappropriation of insurance company assets. Moreover, if implemented, the proposal would impose significant costs and burdens on custodian banks...


http://www.theagc.com/Comment.Letters/NAIC/2001.03.15.Knief.NAIC.Letter.pdf.

[leftstreet]

1. Interesting

pg 7

We respectfully suggest, however, that the solution to these problems lies in increasing the resources of state insurance commissioners and in imposing stronger internal control requirements on small insurers, not in attempting to require that bank custodians assume industry-wide oversight responsibilities for their clients.

Sounds like 'Leave us alone!' to me.

Strange association.

[Triana]

2. ???

:wtf:

Is this like the trilateral commission of Wall Street?

[DrDebug]

3. It's a self created association of banksters

I came across their $50 trillion hedgefund "Buttonwood International Group" a couple of years ago.

It was really strange, because IT DID NOT EXIST and was a vapor company listed at address which belonged to a company offering virtual office services...

[Hannah Bell]

4. ah, more weirdness! i'm assuming "custody services" might be something like investing $

for rich folks, but i wonder if there's someone on du who knows more precisely.

[anigbrowl]

10. Renting an address is not that unusual

Buttonwood International Group isn't a hedge fund, it's just a consultancy which helps international companies set up custodian arrangements. It's an obscure branch of banking but there isn't anything suspicious about it; when you think about it, someone has to keep track of all that stuff (notes of ownership and so on). There are banks that do the same thing in every large financial center.

[anigbrowl]

5. Vault for stocks, bonds etc.

Literally, they keep custody of original documents etc. for corporations, insurance funds etc., which might have millions of share certificates. http://en.wikipedia.org/wiki/Custodian_bank

The letter is just saying they didn't want to be in the position of both providing custodian services and trying to monitor their customers' activities on behalf of regulators. This looks entirely reasonable to me. It would be like asking a bank to draw up a new statement for each customer each day.

Edit to add that it would be more appropriate for insurance companies to report that stuff directly to insurance commissioners, then for the commissioners to push that job onto the custodian banks (who would have no way of knowing what was suspicious or not and would end up having to report everything continuously).

[leftstreet]

6. But then why did they ask for tighter control on small insurers?

If they held all the documents, etc.

:shrug:

[anigbrowl]

8. If you read the whole letter...

it's because there had been an insurance fraud previously. Regulators were suggesting that the custodian banks should monitor the holdings of insurance cos. etc. to prevent such a fraud occurring again, and the custodians are arguing that it's the regulators' job to watch the insurance companies closely, not that of the banks which provide a service to those companies. It's not that different from the regular banks grumbling about the new requirements after the patriot act, which require them to report cash transactions of more than $5000 (which a lot of people feel is rather intrusive).

[leftstreet]

9. ah

Good example - patriot act and local banks

Thanks

[Hannah Bell]

7. Thank you for the information.

A "custodian bank", or simply custodian, is a financial institution responsible for safeguarding a firm's or individual's financial assets.

1. to hold in safekeeping assets such as equities and bonds,
2. arrange settlement of any purchases and sales of such securities,
3. collect information on and income from such assets (dividends in the case of equities and interest in the case of bonds),
4. provide information on the underlying companies and their annual general meetings,
5. manage cash transactions,
6. perform foreign exchange transactions where required
7. provide regular reporting on all their activities to their clients.

Custodian banks are often referred to as global custodians if they hold assets for their clients in multiple jurisdictions around the world, using their own local branches or other local custodian banks in each market to hold accounts for their underlying clients. Assets held in such a manner are typically owned by pension funds.

The following companies offer custodian bank services:

Bank of New York Mellon
Goldman Sachs
HSBC
JPMorgan Chase
Northern Trust
RBC Dexia
Union Bank of California
Standard Bank