Case Study

BNY Mellon | Bolstering long-term growth in the UK

While BNY Mellon is primarily known as the world’s largest custodian bank, the institution offers services across the investment lifecycle. It is not only the world’s largest collateral manager, securities lender and issue services provider but it is also one of the top ten asset managers worldwide.

As part of the UK’s Productive Finance Working Group, BNY Mellon has been helping to develop structures to support the supply of capital to longer-term, less liquid assets in order to increase financial stability and accelerate the transition to net zero. These efforts are in line with the City of London’s Vision for Economic Growth, which highlights the need for the UK to generate higher long-term returns for savers and more investment to support growth companies, infrastructure and the wider economy.

We spoke to Ben Pott, Managing Director and EMEA Head of Public Policy and Government Affairs, about why the UK is the right place to push productive finance forward.

What do you feel are the attractive qualities of the UK market for an international financial institution like BNY Mellon?

While our headquarters are in the US, we are a global bank operating across 35 different locations worldwide. We pride ourselves on having local expertise backed by global capabilities. 

The UK in particular has always been a core location for BNY Mellon. London combines the whole ecosystem of financial services across the investment lifecycle, from pre- to post-trading services, and that serves as a strong client base for us. We also have a strong presence in other cities across the UK, including Edinburgh, Liverpool, Poole and Manchester (which is one of our six growth locations from a hiring perspective across the globe). 

 We are very reliant on access to UK talent — not just young people graduating from university but talent across all levels of experience. The UK has a huge financial services expertise we can tap into.

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Can you tell us about your work on productive finance in the UK? 

As we came out of Covid, focus turned to how we can best deploy all the capital that sits within pension funds and personal savings accounts to support the post-Covid recovery, the climate transition, and infrastructure finance. The UK is a place where thinking on this topic is evolving, with strong support from both public and private sectors to explore how to leverage capital more effectively. 

Over the past two years, BNY Mellon has been playing its part in helping to move the productive finance agenda forward. In November 2020, BNY Mellon was invited to join the Productive Finance Working Group, which was convened by the Bank of England, HM Treasury and the Financial Conduct Authority. The group’s aim was to develop practical solutions to the barriers to investing in long-term, less liquid assets. Part of that was the development of a Long-Term Asset Fund (LTAF), which aims to create a regulatory framework that better aligns with the investment objectives for financing productive assets.  

What opportunities will productive finance bring to BNY Mellon? 

Within productive finance, many different elements need to play together and we can focus specifically on the servicing side of things. A lot of the focus was on the investors, but post-trade services are as important in the investment lifecycle.

From an asset servicing perspective, we play a crucial role in the lifecycle of long-term asset funds in the productive finance arena. We can support our clients at every stage of the process whether they want to create new assets, issue an LTAF or trade those less-liquid assets; or even if investments have to be restructured. Our role can involve acting as custodian and depository provider, collateral manager and/or paying agents. 

We already have the expertise in asset servicing for illiquid assets, which can be readily deployed in the productive finance agenda.

The UK is the front and centre of where we grow our client base. We see good prospects of organic growth in new fund structures like LTAF. One of the strengths of the UK is how international it is and naturally we look to provide the products and services that meet these diverse needs. 

How can your work facilitate investment in less liquid assets? 

We are looking to provide the transaction lifecycle services to support long-term investment. Our asset servicing front to back operating model allows clients to focus on what is core to their business, such as financing the assets and managing the portfolio, while we can take care of other necessary functions though our data-centric operating model and flexible technology. All of this helps with the rollout of these new fund structures. 

In fact, for a number of the illiquid fund structures that exist today, we already provide a range of services to facilitate and support asset managers and owners in focusing on the core business of their mandate.

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