Canadian expertise, global strength

Rob Ferguson, CIBC Mellon’s chief capital markets officer, reflects on the origins of the JV and how this has combined Canadian expertise with global strength in technology and service innovation.

Joint ventures are often short-term business collaborations for a project or specific purpose, but CIBC Mellon has thrived for 25 years despite being 50:50 owned by two banks based in two different countries. What makes your JV special?    

In 2021, CIBC Mellon is celebrating its twenty-fifth year of delivering asset servicing in the Canadian marketplace. Founded in 1996, CIBC Mellon is 50:50 jointly owned by The Bank of New York Mellon (BNY Mellon) and Canadian Imperial Bank of Commerce (CIBC). 

For a quarter century, CIBC Mellon has continued to recognise the importance of our business to the smooth operation of Canada’s capital markets and we have continued to grow with our clients. I joined this company in 1996 from a securities lending technology provider and I would agree that the enterprise has been remarkably resilient and sustainable. The central thesis of the CIBC Mellon joint venture is actually a remarkably simple idea: local expertise, global capability.  

CIBC Mellon launched with $100 million in assets under administration amid a crowded Canadian field. Over this period, we have won, acquired, lifted out or out-competed an array of market players to become a market leader with more than CAD $2.3 trillion in assets under administration. We’ve evolved our business, added new solutions, grown into new segments, but the “best of both worlds” thesis that lies at our core — local Canadian expertise, combined with global technology and capabilities — remains true a quarter century later. 

What were the drivers for forming the JV? With the business changing, do the parents bring different things to the table?  

If I rewind to 1996, two Canadian market participants had complementary challenges. Mellon Bank had sophisticated and powerful custody technology, but very limited presence in Canada. There were a lot of providers in Canada back then, 10 or 15 of them, and while Mellon had a great brand in the US and other markets they weren’t making inroads in Canada.  

CIBC, conversely, had teams with strong understanding of the local Canadian market and enjoyed the client trust accorded to one of Canada’s “big five” banks. They were a narrow business line, however, and they didn’t have the scale or market capitalisation to make the enormous investment into technology that custody and securities finance required. CIBC had expertise: traders that understood our securities finance markets; operational experts who understood the needs of Canadian institutional investors.   

Both companies looked at their core strengths, assessed their gaps and decided they were better together. The two joined forces to form CIBC Mellon. Twenty-five years later, the asset servicing and securities finance industries have transformed enormously through innovation, they have weathered market disruptions and expanded to provide a growing array of services as clients seek to access scale and new capabilities.    

Some of our growth is certainly rooted in Canada’s own strong global brand. Market participants continue to take confidence from Canada’s stable financial sector and the country remains an investment destination of choice for many global financial institutions. Canada maintains one of the few remaining triple-A ratings for sovereign debt and continues to attract global investors with its robust market infrastructure, efficient settlement mechanisms and effective regulatory environment. 

Global investors into Canada and Canadian financial institutions can look to CIBC Mellon to provide outstanding service, dependable execution and knowledgeable insights to help them navigate the complexities of the Canadian marketplace. 

Can you share some of the key milestones, challenges you have overcome, and lessons learnt along the way — the current pandemic, the 2008 market crisis, for example?  

From an array of challenges, up to and including today’s global pandemic, CIBC Mellon has remained resilient. As one of our clients wryly observed, amid challenges one should always “reserve the right to get smarter along the way”. This theme of continuous improvement has helped CIBC Mellon to position itself to mitigate risks and prepare for future challenges. As a Canadian asset servicing leader, we have spent a quarter century establishing a strong foundation. 

Over the years, CIBC Mellon also navigated a number of potential disruptions — for example, the 2010 G20 Summit in Toronto temporarily rendered CIBC Mellon’s headquarters inaccessible, major winter storms have disrupted transport links and prevented employees from reaching offices in cities across Canada, while in 2017 a flood made CIBC Mellon’s largest office unusable for a full week. These challenging events, together with regular annual drills, table top exercises and a robust approach to business continuity, all helped to prepare CIBC Mellon and its employees for rapid business continuity response.  

Business leaders across the joint venture have also worked to refine CIBC Mellon’s operations — for example, exiting the issuer services business while expanding our unitholder recordkeeping capability.   

On a more positive note, CIBC Mellon and BNY Mellon merged their securities lending activities in 2013, creating one of the world’s largest securities lending programmes with offices in Toronto, New York, Pittsburgh, London and Hong Kong. As a leading global lending agent, BNY Mellon has the resources to design securities lending solutions to help support organisations pursuing incremental revenue.  

I think this was a good example of how we have evolved as a global enterprise. This merger made BNY Mellon’s global markets expertise available to CIBC Mellon clients, providing new opportunities for incremental revenue in markets around the world while simultaneously making CIBC Mellon’s deep expertise in the Canadian market available to BNY Mellon clients and providing the potential for improved returns on Canadian securities. Again, this represents the best of both worlds.  

Last year, 2020, was a year of unprecedented change, with industry stakeholders forced to stay connected even while remaining apart amid the coronavirus pandemic. As Canada and the rest of the world recover from this pandemic and its economic impact, we continue to assess how best to support our clients. We’ve earned a lot of positive recognition regarding our operational performance through the pandemic. That will be particularly important as clients assess their providers and operating models going forward.

How are client requirements changing? In which direction are they taking you as a service provider?  

We expect a continued focus on technology innovation and automation across industry participants. We believe the remote pandemic-driven environment has accelerated long-term trends related to digitisation, remote working, and the streamlining of operating models as organisations concentrate on the areas where they can deliver most core value to clients. At the same time, they are looking to outsource non-core activities to providers that can offer the necessary scale, technology and expertise to deliver success. 

Global investors and market participants in Canada continue to focus on new technology and modern architecture as securities lending continues to evolve. The market will inevitably be reshaped by regulation, as much as by pure demand and supply forces. Market participants are looking for specific assets to address their changing regulatory requirements. 

I think our global enterprise has also seen clients looking for more integrated capabilities across our parent companies — bringing in global data solutions, or local market correspondent banking for example, and helping clients access markets.   

So there will be a heavy focus on technology?  

The application of technology to automate securities financing transactions has been an ongoing development in the marketplace. Participants are looking for more automation, greater transparency in investment activities, and flexible and timely access to data — all responding to a rapid rise in complexity in regulation and market practice.   

The impact of greater automation and technological innovation is consistent with a number of broader themes: more efficient, effective and transparent investment operations, and ultimately for clients. From the first straight-through processing to today’s data-driven investment operations, these themes have been running for decades, although I do think the pandemic-driven remote environment has accelerated them further.  

You must be one of the longer-serving employees. Are there any other names or long-serving team members that have been along for the journey?  

I’m proud to be one of the dozen or so ‘day one’ employees who are still with the company. We have a lot of people who have very long tenures with CIBC Mellon. It’s not uncommon to see 10,15, 25 years of service.   

It is no surprise that my long-time colleague James Slater, one of the two CIBC employees charged with founding the joint venture in 1996, today leads global client coverage for BNY Mellon, the world’s largest asset servicing provider. In his 24 years with BNY Mellon and CIBC Mellon, he has held leadership roles in securities finance, liquidity and segregation, product and business solutions. James’ longstanding position in our joint venture is illustrative of our global commitment to improving outcomes for our clients in Canada and around the world. 

What messages do you have for SFT readers as you look to the future of the JV? 

Long term predictions are often difficult, but a number of themes are likely to remain consistent as we look ahead to the next 25 years. These are a commitment to technology, continuous improvement, innovation and, of course, ongoing effort by the CIBC Mellon team to strengthen relationships and build solutions that will bring the best of both worlds to clients: local expertise, global capabilities. Our employees put clients at the centre of all that we do and continue to act with diligence, commitment and care in delivering solutions. We are all excited to support our clients for the next 25 years.

This article was published in www.securitiesfinancetimes.com