Corporate Actions Automation in Continental Europe
Despite efforts to automate corporate actions processing, most Continental European financial firms continue to have challenges processing events.
Across Continental Europe, corporate actions automation is rising in priority at banks, custodians, and asset management firms. However, most firms continue to have challenges processing events easily and accurately, according to the Celent report, .
"Continental European firms face sizable obstacles to achieving full STP of corporate actions," says Cubillas Ding, senior analyst at Celent and coauthor of the report. These include: nonstandardized data quality, disparate internal systems, fragmentation in communication of information among multiple parties in the chain, the rise in complexities associated with cross-border processing, and prohibitive costs. Continental Europe also faces specific challenges associated with continued reliance on manual activities, siloed operations for equities, and divergences in payment mechanisms at both the national and firmwide levels.
"However, emerging drivers and demands by regulators are providing an impetus for many of the obstacles to be overcome", says David Easthope, analyst at Celent and coauthor of the report. These include: an increased emphasis on corporate governance and operational risk management, staffing challenges, clearing and settlement harmonization efforts, convergence towards a single European payments zone, and the emergence of offshore destinations, where banks have the opportunity to consider a greater use of corporate actions automation.
As a result, greater attention and spending will occur in this market. Celent estimates that total spending on corporate actions solutions in 2006, both internal and external, will be just over €200 million. Currently, most banks and asset managers favor in-house development, with in-house spending accounting for 75% of total spending, though this is expected to decline to 55% by 2010. As a result, spending on third party services is expected to increase from €46 million annually to €113 million by 2010, a five year compound annual growth rate of 20%. By 2010, Celent predicts over €30 million of annual spending for corporate actions data scrubbing services.
The report is 35 pages and contains eight figures and five tables. A table of contents is available online.