Aurora Cuadros: "There is a need to encourage investors to participate in the market"

16 May 2022

The Corporate Director of 'Securities Services' talks to us about Cecabank's plans, the outlook for the asset management industry and the regulatory issues that still need to be addressed.

The role of the independent depositary bank continues to gain prominence. In recent years we have seen financial institutions such as the Bankia Group and its fund managers, Santa Lucía Vida y Pensiones, Bankoa and Fineco or VidaCaixa Seguros transfer their depositary activity or extend their Securities Services business relationship with Cecabank. At the end of last year, the Group had assets under custody totalling €297,682 million, 59% more than in 2020, with 89 clients. It now aims to further strengthen its portfolio and consolidate its position in the custody of cryptoassets.

El Confidencial spoke to Aurora Cuadros, Corporate Director of 'Securities Services' at Cecabank, who told us about the Group's plans for this year, the outlook for the asset management industry in Spain at the moment and the aspects that, in her opinion, still need to be addressed in terms of regulation. She also gave us a preview of what we will find at this year's Iberian Value, the annual meeting between fund managers and investors organised by this newspaper in conjunction with Cecabank.

Q. In recent years we have seen how many fund managers are separating the depositary business from trading and asset management. Is this a trend we will continue to see?

R. There are increasingly fewer depositary institutions. In 2007 there were more than 100 in Spain. Today there are fewer than 30 remaining, of which less than four are of any significant size. This is because the depositary segment is a business of scale in which specialisation and the volumes of assets under deposit have become the key factors.

Q. Relevant cases in history, such as the Madoff case, have brought the importance of asset custodianship to the fore. What are the chances today of seeing cases like this again?

R. From the depositary's point of view, it is very difficult for events like this to happen again. The figure of an independent depositary is precisely the guarantee that the actions of the fund managers will be thoroughly supervised in the ultimate interest of the shareholders of the investment vehicles. In addition, the strict regulation imposed on depositary banks provides for full segregation between their assets and those of the shareholders and deposited investment vehicles.

Q. What have the successive legislative reforms introduced in the European Union in recent years changed? Are investors now better protected?

R. Since the financial crisis of 2008, the asset management industry has been subject to regulations that help protect end-investors to avoid situations such as those that occurred during those years. MiFID II is the most visible example of this, but there are also other regulations such as EMIR, SFTR or PSDII that contribute in other ways to the improvement of market conditions and have an impact on the improvement of client protection.

With regard to depositaries, the successive versions of UCITS as well as the regulation of Alternative Investment Fund Managers have contributed to the establishment of a harmonised framework for action throughout the European Union that provides legal certainty to the shareholders of all investment vehicles of this type managed and traded in Europe. Additionally, investors also ultimately benefit from the implementation of SRD II, SFDR and Taxonomy. Not to mention CSDR and in particular the recent entry into force of the Settlement Discipline Regime.

Q. What more needs to be done?

R. We need to further encourage investor participation in the market and contribute to the development of the capital markets union. In this regard, the European Commission is currently working on the European Union's retail investor strategy, which will address the revision of several Directives, including MiFID II.

It is also necessary to make progress in the harmonisation of the key investor information document (KID) required under UCITS and PRIIP regulations, in order to simplify the documentation received by investors and to avoid duplication. In line with investor disclosure obligations, we believe that there is still some way to go in terms of adapting them to the digital age.

Finally, the completion of the regulatory framework for the crypto-asset market (MiCA) will provide legal certainty for both financial institutions and retail investors.

Q. From the perspective of your position as custodian and depositary, what is the outlook? Are there fewer irregularities now?

R. In general, and with a few exceptions, the asset management industry in Spain has been characterised by extremely high levels of robustness and security, partly due to strict regulation and the capabilities and strength of the stakeholders involved.

Q. What role is technology playing in this field? What is changing?

R. It is a new era for the global financial system, and technology must be at the forefront of responsible and sustainable banking. Custody and depositary services must have robust technology to provide maximum functionality and a quality platform while ensuring resilience to unexpected events and optimal security measures.

On the other hand, innovation is necessary for the advancement and growth of our institutions, but we must also recognise, especially in the current context, that financial innovation could have major adverse impacts if regulation, supervisory systems and corporate governance practices are deficient. The test is in the complex products that contributed to the crisis. I believe that financial innovation must keep pace with the market, in an orderly and committed manner, following transparency guidelines and having as its ultimate goal to serve and protect clients' interests.

For this reason, at Cecabank we have designed, in tandem with the implementation of our Strategic Plan, an ambitious Technology Plan which, thanks to a significant financial investment, will enable us to consolidate and renew our technological platform.

Q. Cryptoasset custody is one of the cornerstones of Cecabank's strategy for the coming years. Is this not somewhat risky given the high volatility and speculation involved in this asset?

R. As a custodian and depositary bank, we cannot refrain from exploring the possibility of becoming a custodian of cryptoassets, not just cryptocurrencies. Given that this is a completely new world and that there is still no stable regulation in this field, all the steps we are taking are geared towards equipping ourselves with the capabilities that will enable us to offer custody services for this new type of assets while maintaining the trust that our clients place in us. In other words, the day we start offering this service, we will do so with the security that we have designed the most robust operational networks on the market.

Q. Iberian Value, the annual event between fund managers and investors organised by El Confidencial in conjunction with Cecabank, will be held on 31 May. What can you tell us in advance about this event? What are the investment trends that will be floated to investors?

R. The instability generated on the one hand by the pandemic, which as we are seeing has unbalanced global production chains, and on the other by the invasion of Ukraine, are generating investment opportunities that in recent years did not seem so obvious. From a more structural and long-term perspective, the trend will focus mainly on impact investing and the possibilities that regulation will generate in terms of ESG investment (which operate with environmental, social and governance criteria).

Q. To conclude, let's talk about Cecabank. Profit after tax stood at €69.2 million in 2021, the best figure since 2017 and 27.3% more than in 2020. What explains this result? Which area has generated the most revenue for the bank?

R. Cecabank continues to grow. We have consolidated our position as a Spanish wholesale bank specialising in securities, treasury management and payment services. We are the benchmark in 'Securities Services', namely, in post trading services for marketable securities and financial instruments such as depositary, registry, custody, clearing and settlement services. We have demonstrated in-depth knowledge and growing specialisation in custody and depositary services. Revenues from these lines have increased by 45%.

Q. How many assets are you currently managing and what is your target for this year?

R. At the end of last year, Cecabank had assets under custody totalling €297,682 million, 59% more than in 2020, with 89 clients, including banks, savings banks, cooperatives, insurance companies and investment services companies, among others; and deposited equity in excess of €213,600 million from 42 CII and pension fund managers, venture capital firms and voluntary contribution pension schemes, six more than in 2020.

In addition, throughout 2021 we have strengthened our customer base and our portfolio of services, which has allowed us to continue to create value for the market. New clients have been added or existing clients such as Bankia Group and its fund managers, Santa Lucía Vida y Pensiones, Bankoa and Fineco, Novo Banco (integration within Abanca) or VidaCaixa Seguros, among others, have extended their Securities Services business relationship with Cecabank. The results for 2021 allow us to continue to guarantee a high level of satisfaction and quality for our clients.

Q. In recent years Cecabank has won contracts with CaixaBank, Bankia, Kutxabank and, more recently, Dunas Capital. What is the goal now? Do you have any other contracts in the pipeline?

R. We have a new Strategic Plan in which both initiatives and opportunities have been identified, which would contribute to the growth in customer relationships and the provision of value-added services for the development of the 'Securities Services' business.

Q. What is the outlook for 2022?

R. For the current year we strive to maintain stable growth taking into account the coronavirus crisis and the war in Ukraine.

Q. At the moment your focus is mainly on Spain, are you planning to redirect it towards international business?

R. We see opportunities for growth in Portugal and in supporting our Spanish clients in international projects in our role as custodian bank.

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