The European mutual funds industry could save $340 million a year, or 250 million Euros, if it were to streamline its trading, settlement and cross-border custody systems, according to a report by Deloitte & Touche.
And with Basel II standards coming into effect next year, transfer agents and distributors would be able to reduce the required amount of capital on hand by 20% if processes were automated.
The report focused on Luxembourg and Ireland, the two major back-office providers in Europe. It found that with fund companies using transfer agents in Luxembourg and Dublin and securities depositories in France and Germany, there are no standards for automation and, thus, most trades and their settlement are inputted by hand.
“This study, for the first time, quantifies efficiency gains through streamlined processes of cross-border investment funds,” said Philippe Seyll, head of investment funds services at Clearstream, a securities depository that is a subsidiary of the Deutsche Borse and that released the Deloitte report.