Bank Of New York Upgrades Extranet Tool For Custody Clients

NEW YORK--Bank of New York has upgraded its browser-based information tool for institutional clients of its $4.2 trillion master trust and custody business. The upgrade to the product, Inform, is yet another sign that custodial banks are using technology-based services to compete for business of investment managers.

The system was first developed in 1995, and was made available to clients at the end of 1996, says Kurt Woetzel, senior vice president. Inform was "introduced in house to automate the circulation of accounting documents. That's where we first cut our teeth in browser-based delivery in large-scale environments. By the time we delivered it to our customers, we had the expertise and the scale in our infrastructure."

The idea of service is becoming more important as a handful of global banks dominate the master trust and master custody functions.

Along with Chase Manhattan and State Street, BofNY is one of three major banks with more than $4 trillion in custodial assets. While several other large banks compete in this business, the three top banks are distancing themselves from the pack, as processing scale becomes more important for an efficient operation.

Competitive pressures in the custody business are forcing custodian banks to seek huge economies of scale, which spreads their transaction processing tools over a larger customer base.

This drive for scale helps these banks fund the technology investments needed to stay competitive, but it has already forced out some global players. For example, last month Morgan Stanley sold its custody operations to Chase Manhattan.

"We're looking to win shelf space," Woetzel says. "The goal here is find a way to get the investment manager's business by providing service, and the nature of the business requires large technology investments," Woestzel says. "The more value I give an investment manager, the more I get him to integrate my service into his investment decisions."

Master custody and master trust are essentially record-keeping functions for institutional investors and pension plan sponsors of their securities holdings. Trustee and custodian banks also settle securities transactions and move cash among accounts.

Woetzel says the statements delivered via Inform can be customized for each client. "The investor may only want to see the equities he purchased last month or only those holdings he has in a certain industry.

Large customers can view their records via a private T1 or 56kbaud line, Woetzel says. "We're putting in private lines because the World Wide Web is still unreliable. In the custody business, you're contractually obligated to provide timely and accurate information."

Inform was written using languages such as C, Java, Micro soft SQL and the Common Gateway Interface, and the bank recommends that its clients view it with either version 3.0 or higher for industry standard browsers such as Netscape Navigator and Microsoft Internet Explorer.

The architecture supporting the system is run on a combination of operating systems and server applications including Sun Microsystems' Solaris, Microsoft's Windows NT Server, Netscape's Web Server and Sybase's System 11 relational database as a file management system.