Interview with Ximo Vicent – Mediterranean Bank is a relatively new banking institution. Now, having focused on building out its infrastructure to meet its own business needs, the bank is looking to leverage this to support smaller funds domiciled in Malta.
As a local custodian, the bank is well placed to service funds that will be required to register with the AIFM Directive, and despite catering mainly to savers, Med Bank is already carving out a niche in capital markets. As Ximo Vicent (pictured), Head of Credit & Investments, confirms: “Our infrastructure is able to support both retail and institutional clients looking to access these markets.”
One of the biggest developments that the bank has been involved in is the establishment of ‘segregated segregated accounts’, in partnership with Clearstream, the clearing and settlement division of Deutsche Borse.
As Vicent explains: “These are segregated accounts, as is typical of all custodians, but most importantly they’re not omnibus accounts where the client is commingled with everybody else. Even a client with a small account – say EUR2million – can have their own segregated account where they can see their own assets in their own account in Clearstream.”
Crucially, by working directly with the ultimate custodian – Clearstream – and cutting out the global custodian middleman, Med Bank is able to save on intermediary fees. This allows it to provide a lean service to small funds and as Vicent says: “Being a fairly new entrant we can provide direct segregated accounts to these clients in Clearstream, which may not necessarily be offered by other custodians, most of whom typically only consider accounts of over EUR100million.”
This is an important development in light of the recent Lehman Brothers and MF Global incidents where clients thought their assets were being fully segregated, but in fact weren’t. All a client has to do is log on to Clearstream’s system and hey presto, they have peace of mind that their assets are being clearly segregated.
“We put ourselves in the shoes of potential clients and said ‘What would we like to see? If I can see my assets in Clearstream I don’t need to take anyone’s word for it’,” states Vicent.
The partnership with Clearstream only commenced this summer. Nevertheless, the bank is already working with a number of clients to get them signed up, focusing on those to whom Med Bank knows it can provide the right value.
Such a solution fits well with the new regulatory paradigm evolving in Europe but having a robust custodian is only part of the equation for hedge fund managers; they will also require expertise and support in areas such as leverage, access to derivatives products, which are typical of the prime brokerage domain, but which remain thin on the ground in Malta.
Aware of this, Vicent says that over the next few years “we think there is going to be a need for more prime brokerage services on the island, which we are well positioned to provide. Capital markets are part of what we do on a daily basis, so we can provide that access to the markets and things like leverage to our clients.”
There are, no doubt, added pressures and costs on custodians and banks in terms of how they operate under the Directive. Rather than get carried away, Vicent says that the bank will take its time developing its prime brokerage services, remaining vigilant on costs:
“We hope to start offering execution capabilities in the coming months, and some additional capabilities shortly thereafter. We’re only interested in ever offering the right product in the right format. We want to develop these additional services in the right manner.”