The global custody product was christened by a Chase Manhattan manager in late-1974. The underlying services delivered by Chase were not new: several banks had provided settlement and safekeeping services on an international basis for many years. However, these activities were typically provided free-of-charge - and the functions therefore starved of resources - as part of investment management or other activities.  So it is generally accepted that global custody as a product in its own right was born in 1974.

At the outset, the key driver was a change to United States pensions law. The 1974 Employee Retirement Income Security Act ("ERISA") came to the Statute books, forcing US pension plan sponsors to segregate investment management and custody of the underlying assets. Such segregation is now established as a legal or regulatory requirement, or simply good business practice, around the world.

Chase had developed the product for a single US-based institutional investor to support investment in 15 countries of investment around the world. Other banks (from the 'money centre' of New York City and elsewhere) soon developed comparable product offerings.

With global custody as a stand-alone product, a chasm soon emerged between those providers who were committed to invest in staff, systems and product development - and those who soon fell by the wayside. has monitored the industy since 1999 and can supply data on mergers and acquisitions, together with those firms who have simply "left the building". Those firms who have invested well have produced a comfortable stream of fee income - from custody fees levied, foreign exchange margin income and net interest income. In times of trouble, this line of business has been a key contributor of liquidity to the banks and non-bank financial institutions who comprise the leading custodians of the world.

Service providers - both large and small - act for clients in many countries worldwide, handling assets across approximately 100 countries of investment. The range of services is ever more sophisticated. Measured by the value of assets held under custody, it is a multi-trillion dollar industry.

Key drivers in the growth of global custody over the years include:
  • in the 1970s, the introduction of floating exchange rates and - towards the end of the decade - lifting of exchange controls in many major economies resulted in rapid development of the market for international debt instruments
  • in the 1980s, professional traders became prominent players and the practice of arbitrage increased
  • also in the 1980s, a rise in specialist fund managers running dedicated portfolios of foreign equities
  • through the last two decades, the opening up of markets in Eastern Europe and a gradual increase in investment in equities and in cross-border investments.
The recent high growth rate is expected to continue, driven by a combination of global trends:
  • investors' growing appetite for cross-border assets, for emerging and exotic markets and for a wider range of financial instruments
  • investment managers' and banks' increasing use of global custodians to replace their own networks of local custodians
  • in many countries, the state retreating from its role of primary pension provider, causing citizens to invest in defined contribution pensions and mutual funds in record numbers - with custody banks serving the pension funds and mutual funds, their money managers and the banks acting for high net worth individuals.
So, while young, global custody is an industry with vibrant prospects.