Three companies are vying for the mandate to handle JPMorgan Chase’s local custody business in Taiwan and Hong Kong: Citigroup, HSBC, and Standard Chartered.
Wall Street Bank, which is the third-biggest global custodian in the world, is currently choosing a different bank to assume control of the local custodian operations in Taiwan and Hong Kong.
The deal’s exact financials were not immediately revealed.
When customers access particular markets, local custody businesses handle the bookkeeping and transactions. On the other hand, global custody maintains connections with clients and uses a wide network to manage cross-border investments.
JPMorgan serves as a local custodian for client assets under custody totaling over $520 billion in the two North Asian regions.
In those two markets, the bank will keep offering global custody services.
The bank plans to finish switching over to a different bank in Taiwan and Hong Kong by the end of next year.
In addition to Taiwan and Hong Kong, JPMorgan offers local custodian services in India for clients in the Asia-Pacific area.
JPMorgan, HSBC, Citi, and Standard Chartered spokespeople all declined to comment.
The decision by JPMorgan to withdraw from local custody services in Taiwan and Hong Kong highlights the company’s change in emphasis as asset and investment flows are altered by geopolitical tensions and macroeconomic uncertainty.
Tensions between the US and China, as well as a contracting Chinese economy, kept driving up the country’s investment flight.
According to Morgan Stanley research that cited data from fund flow tracker EPFR, active long-only funds withdrew a total of $3.1 billion from China and Hong Kong equities in October, marking the third consecutive month that sales of this magnitude exceeded $3 billion.
Securities owned by investors are kept safe and secure by asset custodians. To guarantee that client accounts comply with tax and other requirements, they also oversee transactions and settlements.
Comparing local custodian services to global custody operations, the former is thought to have lower profit margins.
According to sources, JPMorgan presently offers clients in Taiwan and Hong Kong both local and global custodian services; nevertheless, the company has chosen to leave the local market as the cost-income ratio has increased in tandem with a drop in assets.
While continuing to run one of the biggest global custodian operations in the industry, the bank stopped providing local custody services for external clients in Australia in 2020.
In the third quarter of this year, JPMorgan reported a 9% year-over-year revenue gain in securities services, which includes its custody operations, with $29.7 trillion worth of customer custody assets worldwide.
