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Peru
Citi
“They need to improve the service” is how one client judges
the performance of Citi as a direct clearing and custody agent
in Peru. A superficial reading of the overall score in 2018 – it
is within a handful of basis points of being exactly the same as
that of a year ago – might suggest that nothing has changed at
Citi Lima in the last 12 months. In fact, one of the conspicuously
lower scoring areas of 2017 – asset servicing – has improved
considerably this year in all but one demanding detail. The score
for value, on the other hand, which was also judged to be poor
last year, has deteriorated further.
In settlement, a field where Citi always expects to excel, the
scores are outstanding. This attests to the ability of the bank to
adjust capacity to volume since 2017-18 saw considerable activity
in the Peruvian markets.
The country came close to demotion from the MSCI emerging
markets index, prompting a series of government measures to
avert that outcome, and the consequent flight of capital. The
benefits of doing so are evident in the performance of the Lima
stock exchange since 2016. Though prices have come off some-
what since the spring, Lima has had something of a bull run
since then, despite the sell-off in emerging markets throughout
2018.
If the anticipated correction actually occurs in 2019, and the
bear market in emerging stocks comes to an end, Peru might
well be one of the markets in which fund managers are over-
weight. If so, Citi is now close to owning a monopoly of the
equity clearing and custody business which will result. The
Peruvian government is hoping international sovereign fixed
income interest will expand as a result of the option to channel
it through Euroclear, which has provided a service for foreign
investors to hold and settle Peruvian bonds on its platform since
July 2017.
Peru is also a member of the integrated Latin American
market (Mercado Integrado Latinoamericano, or MILA) that
brings together the equity markets of Chile, Colombia, Mexico
and Peru, though hopes that the alliance would bolster inter-
national interest in the region by facilitating the creation of a
benchmark (S&P launched a series of four to track the perfor-
mance of the MIL a markets) and pooling liquidity have yet to
be fulfilled.
Others
Responses were also received from clients of Banco de Crédito
del Perú, the oldest and largest indigenous bank in Peru, which
also provides services in neighbouring Bolivia. The number was
too small to make definitive judgments about service quality,
but there is clearly respect for the value of its local connections
when it comes to interacting with the regulators. Scotiabank
has had a substantial presence here since 2006, when Banco
Sudamericano, in which it had a minority shareholding, was
merged with Banco Wiese Sudameris to create Scotiabank
Peru. Scotia supplies custody services in Lima and has attracted
responses to the survey in the past, but none was received this
year.
WEIGHTED AVERAGE SCORES
Citi
Market Average Global Average
Share of validated responses (%) 75% Relationship management 4.52 4.30 5.30
Client service 5.94 5.87 5.56
Account management 5.54 4.42 5.14
Asset safety 4.25 3.43 4.60
Risk management 5.45 5.26 5.50
Liquidity management 4.75 4.05 5.14
Regulation and compliance 4.71 4.92 4.84
Innovation 4.00 3.31 4.75
Asset servicing 5.80 5.64 5.52
Pricing 4.96 4.92 5.28
Technology 5.25 4.14 5.41
Cash management and FX 5.57 4.58 5.42
Total 5.12 4.55 5.23
Winter 2018
globalcustodian.com
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