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INTERVIEW
José María Méndez Álvarez-Cedrón
CEO of Cecabank
“The new standards
entail a significant
shift in the depositaries
market in Spain, and
therefore our activities
as a depositary”
What regulations have had the most impact on Cecabank’s business in 2016?
Banking activity has been most affected by all the new additions to stock
market regulations (EMIR, PRIIPS and MIFID 2, etc.) that are substantially
changing how markets operate, as well as the manner in which new financial
products can be created, and how we connect with our clients. If I had to list
the measures with the highest level of impact on Cecabank, they would be:
1.
Firstly, the review of the
Basel III
framework, being carried out by the
Basel Committee on Banking Supervision, as it could bring significant
increases to capital requirements.
2.
Secondly, the
MREL
requirement (Minimum Required Eligible Liabilities)
of the resolution directive, which introduces the need for institutions to
hold sufficient instruments to be able to absorb losses, thus avoiding the
need to use money from contributors in the event of crisis. The impact
will depend on whether this will eventually exclude corporate deposits
in the calculation of the ratio. In the medium term it could have parti-
cularly significant implications in terms of the structure of the balance
sheet, by affecting the structure of institution’s funding and the cost of
its liabilities.
3.
And the modification of
depositary obligations
stemming from the EU
Delegated Regulation and CNMV Circular has had a direct impact on
our business, given that it states the minimum elements a contract
must contain for designating a depositary, and sets out the conditions
depositaries - one of our core businesses - must perform under.
What is the function of a depositary? Why is it so important for it to
be regulated?
Essentially, a depositary has two missions: acting as an actual depositary,
and monitoring the managers.
A prominent part of its function as a depositary is custody, which involves
registering financial assets in separate accounts and carrying out reconcile-
ments with sub-custodians.
Specifically this registration process involves establishing practices to gua-
rantee operations and control in contracting. Moreover, the depositary will
be the only body authorised to make sums in the fund accounts available,
and to settle transactions agreed by the management company.
In terms of monitoring, the depositary must guarantee that the manager
processes subscriptions and redemptions in line with regulations and the
fund brochure, reporting any anomalies detected to the supervisor. The im-
portance of all these tasks justifies the regulation distinguishing separation
between managers and depositaries, and in this way avoids any conflicts of
interest that could be to the detriment of investors.
.
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