Why custodian banks matter for global investments

2. Why has the issue of trust become so sensitive today, in a context marked by geopolitical instability, market volatility, and a growing number of risks?

In a highly regulated environment marked by rapid market changes, technological evolution, and the rise of digital assets, trust has become a growing concern. Clients may worry whether their custodian can continually upgrade its systems and processes, strengthen its risk and control environment, and adapt to regulatory changes.

Recent geopolitical instability has triggered market volatility, resulting in higher transaction volumes, increased operational strain for custodians, and a higher risk of settlement failures, especially in markets with shorter settlement cycles.

3. For a long time, custody remained an invisible function. What explains this historical discretion, and why is this profession coming into the spotlight today?

Custody is often considered an invisible function as it operates entirely in the background while enabling fund managers to trade, brokers to execute and settle trades, and regulators to enforce asset protection. However, regulatory shifts are pushing custody into the spotlight, and custodians are now seen as critical market infrastructure.

Custody has become a strategic component of the financial ecosystem due to its active engagement with regulators and market infrastructure intermediaries on key regulatory changes, operational risks, market volatility, accelerated settlement cycles, and the expansion of digital custody.

4. Can custody now be considered a prerequisite for any credible international investment strategy? Why?

A strong global custody network is essential for investors with exposure to international markets. Custodians assist clients with expertise in local legal systems, market infrastructure, and operational processes to comply with settlement requirements.

Custodians also provide systems, technology, and controls to ensure operational resilience and manage risks associated with global portfolios, such as time zone differences, multiple clearing systems, varying settlement cycles, FX exposure, and other market-specific practices. Investors pursuing international investment strategies therefore require a robust custody infrastructure that provides safety, compliance, risk management, and reporting to access global markets responsibly.

5. Beyond asset security, what are the new criteria by which institutional investors assess a custodian today?

The ability to meet evolving standards across regulatory compliance, new products and technology, operating models, global coverage, and operational resilience and risk management are key criteria for assessing custodians today. Custodians are evaluated on how effectively they navigate divergent and rapidly changing global regulations.

Their ability to demonstrate continuous compliance with KYC, AML, sanctions screening, and reporting requirements is now embedded within custody architectures. The capacity to handle extreme volume surges, supported by real-time reporting and global market access, is also a critical requirement for institutional investors.

6. In this changing landscape, how did Absa Mauritius design its Custody Services offering when it was launched in 2020?

Absa Bank Mauritius built its custody capabilities for institutional and high-net-worth clients, offering multi-market coverage, cross-border servicing, multi-asset class solutions, and access to market intelligence. Technology plays a key role in supporting large transaction volumes and cross-border complexity through automated settlement and corporate action processing, integrated cash and liquidity management, and faster turnaround times with enhanced transparency.

Our objective is to build trust through a strong operational risk framework, cybersecurity measures, infrastructure resilience, global AML/CFT compliance standards, and independent audits.

7. Your hub model provides access to more than 110 global markets. How does this approach meet the practical needs of funds and investors operating across multiple continents?

Our multi-market coverage model strengthens clients’ investment strategies by enabling access to multiple markets, sectors, currencies, and economic cycles. It reduces concentration risk and helps portfolios perform more consistently. We ensure seamless cross-border settlement and provide a platform that allows clients to invest anywhere, anytime, safely and efficiently.

Investors are therefore able to execute global strategies and benefit from higher growth potential through diversified exposure to global markets.

8. There is increasing talk about operational fluidity. How can technology and the integration of custody systems truly transform the day-to-day experience of asset owners and fund managers?

Without a robust, integrated platform, custodians cannot support high-volume, multi-asset, and multi-market operations. Technology has evolved to replace manual processes with fully automated workflows for trade settlement, corporate action processing, and reconciliations. Integrated platforms enable custodians to connect with central securities depositories and sub-custodians, enhancing efficiency.

Global custodians now use AI and analytics for risk and compliance monitoring, with automated workflows to detect anomalies in real time. Machine learning is increasingly applied for predictive settlement failure alerts and corporate action automation. Technology has transformed custody from a manual, fragmented back-office function into a real-time global platform offering faster and safer settlements, lower operational risk, and an improved client experience.

9. Custody also plays a key role in risk reduction. What are the main risks investors face today, and how can a custodian mitigate them?

Investors face a wide range of operational, financial, regulatory, and security risks, and custodians play a vital role in mitigating these risks. Segregation of client assets ensures securities are held separately in individual accounts, reducing the risk of misuse or misappropriation.

Operational risks are mitigated through disciplined processes, regular reconciliations, and robust risk management frameworks. Advanced cybersecurity protocols and resilient technology platforms protect investors from cyber and technology-related risks. Custodians also manage global regulatory obligations to ensure compliance with cross-border regulations and applicable KYC and AML requirements.

10. Mauritius is often presented as a trusted jurisdiction. Which elements of the local regulatory framework are particularly reassuring for international investors?

Custody services in Mauritius are regulated by the Financial Services Commission, and service providers are required to be licensed. Licensing requirements ensure custodians are vetted for governance, financial soundness, operational capability, and compliance controls.

Mauritius has embedded international anti-money laundering standards into its custodial regulatory regime, reducing the risk of illicit flows and sanctions breaches. This robust regulatory framework, combined with strong asset protection rules and AML/CFT standards, reassures global investors and positions Mauritius as a secure, well-regulated international financial services centre.

11. In your view, how should regulations evolve to support the new realities of the markets without stifling innovation?

Mauritius stands out as one of the few jurisdictions with a comprehensive digital asset custodian licensing regime, demonstrating regulatory adaptability to new asset classes. As financial systems evolve rapidly through AI, blockchain, APIs, and digital assets, regulators must remain agile and dynamic, enabling governance models that support innovation within a secure environment.

Regulatory sandboxes already play a critical role by allowing innovation to be tested under regulatory oversight. A consultative approach, with close collaboration between regulators and industry participants, is essential to ensure regulations evolve effectively.

12. “Digital assets, tokenisation, ESG, automation…” Are we witnessing a complete redefinition of custody in the years ahead?

Digital assets and tokenisation will significantly redefine custody in the years ahead, while traditional custody will continue to coexist alongside digital custody. Traditional custody will remain relevant for financial instruments such as equities, bonds, cash, and fund assets.

Digital assets exist in cryptographic form, and custodians safeguard the private keys that grant access to these assets. Mauritius has introduced a comprehensive licensing framework for digital asset custody. As digital assets such as cryptocurrencies, stablecoins, and tokenised instruments introduce new risks, custodians must develop appropriate capabilities and operating models within robust risk and control frameworks.

13. Finally, beyond technical expertise and compliance, what do you believe creates a lasting relationship of trust between a custodian and its clients?

A foundation of trust is built on transparency and consistent communication. While strong product capabilities and service delivery are important, clients ultimately remember how custodians demonstrate operational resilience and stability during periods of crisis and market volatility