BNY Mellon Launches CSD in Europe - Analyst Blog

By Zacks | January 08, 2013 AAA

The Bank of New York Mellon Corporation (BK) has launched a new Issuer Central Securities Depository (CSD) unit in Europe after receiving the regulatory approval. The CSD unit is aimed at providing the market participants with better trading facilities.

BNY Mellon's CSD unit, incorporated as a non-banking subsidiary, will be headquartered in Belgium and regulated by the National Bank of Belgium. The unit will provide issuer, settlement and safekeeping services for all the market participants of Europe as well as the worldwide markets. Currently, the company does offer such services to its European clientele; however, on an individual basis.

The establishment of the CSD unit will assist the company in consolidating its operations in the European region. The move follows BNY Mellon's launch of clearing operations for the customers in Ireland almost a year and a half ago. The unit will be spearheaded by a veteran BNY Mellon executive - Chris Prior-Willeard.

The reason behind the launch of the CSD unit is the changing regulatory landscape, which aims at making the securities market more secure as well as efficient. For BNY Mellon - a bank holding company and one of the world's leading financial institutions - this is an excellent opportunity to enhance investment services.

By establishing the separate CSD unit, in response to the regulatory changes (mainly centered on issuance and settlement services), BNY Mellon expects to offer a plethora of integrated services that would allow market participants to accommodate the new requirements mandated by the European Market Infrastructure Regulation (EMIR) and various other regulatory authorities. Moreover, this unit will connect the European CSD market with the rest of the world and facilitate easy transferability across the globe.

We believe that the CSD wing will be beneficial to both BNY Mellon and the market participants. For the company, it would bring an opportunity to enhance its operations and boost the top-line growth, whereas for the latter, this would mean smoother trading and reduced risks.

Currently, BNY Mellon retains its Zacks #3 Rank, which translates to a short-term Hold rating. However, other stocks in the same sector namely AllianceBernstein Holding L.P. (AB) and Heartland Financial USA Inc. (HTLF) carry a Zacks #1 Rank (Strong Buy).

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