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Asia Keeping a Close Eye on Europe’s Corporate Actions Harmonisation Work, Says Standard Chartered’s Bone

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The progress that is being made in Europe with regards to harmonising corporate actions processing is being closely monitored by the markets in the Asian region, according to Nicholas Bone, director of transaction banking sales for investors and intermediaries at Standard Chartered. A lot of progress has been made in countries such as Korea, Taiwan and Japan in areas such as proxy voting standards, he added.

The corporate actions challenge is certainly something that firms in the Asian region are taking notice of, agreed panellists at CorpActions 2010. Although the investment management community in Europe may not have engaged as much in discussions about corporate actions standardisation, the same cannot be said of investment managers in Asia, for example. Justin Chapman, global head of strategic implementation for Asset Servicing at Northern Trust, explained that client requirements in the region are compelling these industry participants to get involved, much the same as the interest being displayed by the asset management community in the US.

Chapman noted that the region as a whole may be “lagging behind” the rest of the world at the moment but it is poised to learn from other countries’ missteps. In fact, there are also some areas where Asia could be seen as further ahead with regards to implementation than Europe. XBRL, for example, has gained traction in markets such as China and would likely be much more inclined to move to using it for the tagging of corporate actions source documents than Europe, where ISO is the dominant standard.

Axelle Wurmser, securities head of Swift coordination for French custodian bank BNP Paribas, also indicated that ISO is also gaining traction in the BRIC (Brazil, Russia, India, China) countries and in Japan. “They have avoided the crisis and are moving towards adopting ISO 15022 because the West has held back development of 20022,” she contended. Rather than lagging far behind in terms of standardisation, Wurmser reckons the Asian countries are instead right behind the rest of the world and that Europe has held back progress for them.

“ISO 20022 is not ready for them to adopt now and countries such as Russia and Japan were forced to adopt 15022 last year, rather than jump straight to 20022,” she said.

However, there is still a lot to be done across the diverse Asian markets, especially in the trickier areas of corporate actions, said Bone. The proxy voting challenge for custodians in the region is “immense” and the levels of risk involved are high, he told delegates. “The worst case scenario is that we are unable to offer proxy voting to some of our clients in certain markets,” he added.

Local language translation of the voting process and results adds another unwelcome layer of complexity to the process. The manual inputting of voting data, followed by potential mistranslations all adds up to a very risky procedure indeed. “Swift is not prolific enough in the Asian markets to be able to remove this problem by automating the process,” said Bone. “Trying to get data back from our clients is a real challenge.”

Some markets also do not have a standardised process for the announcement of corporate actions and the custodian community is forced to scour the press and websites for the issuer data, added Bone. “There needs to be an agreed process for these announcements at a basic level before anything further down the chain can be tackled,” he said.

However, the corporate governance aspect of proxy voting has become increasingly important in Asia, along with the rest of the world, and this is forcing change. The Asian Corporate Governance Association is beginning to lobby for the voting process to become much easier, noted Bone, and the industry is learning a lot from the successes achieved in Europe thus far.

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