BlackRock’s move to switch custodians for its US$1 trillion custody business, to J.P. Morgan from State Street, may change the face of the securities services business in Asia in 2017. However, the change may not be a lot in some markets.

Both J.P. Morgan and State Street use almost the same set of sub-custodians to service their global asset manager clients, like BlackRock, in Asia.

As one of the biggest asset managers in Asia, BlackRock accounts for a substantial portion of the region’s custody and securities services business.

Although BlackRock has switched global custodians, chances are its custody accounts will continue to be serviced by the same set of sub-custodians at J.P. Morgan who serviced them at State Street, at least in some of the major Asian markets.

In China, for example, both J.P. Morgan and State Street use HSBC as their sub-custodian in the A-share market. In Indonesia, both global custodians use Deutsche Bank as their sub-custodian. In Japan, they both use Mizuho Bank as their sub-custodian.

In other markets, J.P. Morgan and State Street uses different custodians which means there will be switching of the BlackRock accounts.

In Hong Kong, J.P Morgan uses its own sub-custody unit, while State Street uses Standard Chartered. In Korea, J.P. Morgan uses Standard Chartered while State Street uses Deutsche Bank. In Malaysia, J.P. Morgan uses BNP Paribas while State Street uses Deutsche Bank. In Singapore, J.P. Morgan uses DBS while State Street uses Citi and UOB.

The switching of the US$1 trillion in BlackRock assets is expected to take about two years and will push J.P. Morgan to be the second biggest custodian in the world, with US$20 trillion in AUM, next to BNY Mellon, with US$28 trillion AUM.

Photo courtesy of BlackRock.