Opportunity to centralise private banking services in one single location: Luxembourg

 

The issue

Our client, a Luxembourg private bank, member of a large international private banking group, asked us to help them write a strategic paper on the possibility of centralising the order book and  custody services of the whole private banking group in one single location: Luxembourg.

The client wanted PwC to rely on their cross-competency workforce so as to analyse the operational, tax and regulatory aspects of such centralisation. Moreover, this strategic study had to take into account the future implementation of the MiFID directive.

Our approach

Step 1: conduct workshops with the client's top management and their dealing room team to define details:

• The scope of services to be offered by the Luxembourg entity;
• The operational capacity of this entity;
• A high level "to be" model of the functional architecture.

Step 2: collect figures from all entities within the group, e.g. volumes of orders by type of instruments, turnover, brokers, execution venues, level of straight through processing (STP) from the front office to the back office, order routing systems in place, connectivity, etc.

Step 3: benchmark these figures against those of  the industry and calculate the level of investment needed for such a project in terms of IT, change management and human resources.

The outcome

A strategic paper showing:

• A "to be" high level functional architecture
• A tax and regulatory study
• A business plan
• A risk analysis

Key client benefits

This study proved that there were no showstoppers in terms of tax or regulatory aspects for the project and that the investment needed for this centralised order execution and custody platform showed a positive ROI in a short timeframe. As a result, our client could position its Luxembourg private bank as a centre of excellence for carrying orders for an entire private banking group.

Additionally, PwC helped the client identify new type of services that could be rendered to the entire group thanks to this new structure, e.g. securities lending