SIBOS 2014, Boston -- SEB, a leading corporate and investment bank in the Nordic countries, is focusing to regain market share in the large tier 1 segment as it seeks to maintain leadership in the domestic global custody business in the region.

The bank is strong in the tier 2 and tier 3 segments, but admits its product today is not good enough for the large tier 1 segment clients.

To achieve this objective, SEB is partnering with Brown Brothers Harriman in which the former is insourcing its technology and operational needs in global custody for its domestic, outbound custody business. It is a commercial relationship, not a joint venture or a partnership, in which the outbound global custody requirements of its domestic institutional investment and fund management clients will be met by a combination of existing SEB infrastructure and the technology and operational services supplied by Brown Brothers, the global custodian and mutual fund administrator.

" For many years, we struggled to find an equation to the fact that we are a small bank, who wants to be in the global custody business," says Gustaf Unger, head of asset servicing, transaction banking at SEB. "We are not willing and we do not think it is the right strategy to invest on our own given our sub-scale size. So our solution is to engage Brown Brothers and use their custody platform and do everything else on our own."

In choosing Brown Brothers, Unger, who assumed his position in January this year, says they are not competing in SEB's home turf. In turn, he adds SEB will not compete in the markets that Brown Brothers is present.

Unger also focuses to significantly improve their position in Denmark and Norway, where he says SEB does not have fair market share and to support its financial institutions strategy because global custody is an important sticky business.

In terms of margin compression, Unger notes the price pressure in global custody is manageable, but too tough on the sub-custody side. However, he believes pricing will go up going forward as risk increased and the capital requirements go up.

Unger says SEB derives additional revenues from collateral management, but the sheer amount of the revenue pool is not big enough for the market players. Also making contribution to the revenue is securities lending in view of more market activity as the Nordic stock exchange has been booming during the past 2-1/2 years.