Georges Elhedery Slims Down HSBC

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Good morning from Global Custody Pro! Each week, we break down the most important developments in global custody, clearing, payments, and digital assets - so you don’t have to. Let’s dive into this week’s top stories.

Table of Contents

• 🌏 Global Custody News

• 🚀 Digital Asset News

• 📊 Chart Of The Week

• 📣 Quote of the Week

• 🎧 What We’re Listening To

• 📺 What We’re Watching

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🌏 Global Custody News

• HSBC reported a record 2024 profit before tax of $32.3 billion ($34.1 billion excluding special items) and a return on tangible equity of 14.6% (16% when adjusted). It returned $26.9 billion to shareholders, split between a $0.87 per share dividend and $11 billion in share buybacks. The Securities Services business unit reported income of US$331 million up 10% YoY, as Assets under Custody grew to $10.6 trillion dollars up 9% YoY. CEO Georges Elhedery said HSBC aims for a mid-teens return on tangible equity in 2025–2027, helped by a $1.5 billion cost-reduction plan that simplifies management and cuts duplicate roles. He highlighted securities services as a leading franchise in Asia and the Middle East with strong growth potential and importance for fee-based income. The bank also plans to redeploy another $1.5 billion from low-return areas into high-growth segments like wealth management in Hong Kong and the U.K., as well as transaction banking. The restructuring is expected to cost $1.8 billion in severance and related costs by the end of 2026. CFO Pam Kaur said HSBC remains cautious about credit risk but noted its conservative loan book and limited exposure to commercial real estate problems in China and Hong Kong. HSBC expects banking net interest income of around $42 billion in 2025 and will continue to return extra capital through share buybacks, subject to market conditions and future loan demand.

• UK Chancellor Rachel Reeves confirmed plans to modernize UK financial markets by accelerating securities trade settlements to a T+1 standard by October 11, 2027, aligning the UK with leading markets like the U.S. and boosting competitiveness as part of the government's Plan for Change. The decision, supported by the Financial Conduct Authority and the Bank of England, follows recommendations from the Accelerated Settlement Technical Group and aims to reduce investor costs and risks by settling trades one day after execution instead of the current two-day standard.

• The Financial Stability Board (FSB) released a final report evaluating the impact of G20 financial regulatory reforms on securitisation, concluding that reforms like risk retention rules and Basel Committee prudential requirements have bolstered market resilience without significantly hampering economic financing. Focusing on collateralised loan obligations (CLOs) and non-agency residential mortgage-backed securities (RMBS), the report highlights improved transparency and credit quality post-2008 crisis, though it notes challenges in attributing outcomes solely to reforms amid data gaps and overlapping factors. The FSB found that while securitisation volumes dropped since the global financial crisis, alternative financing has grown, and risks have shifted from banks to non-bank entities, prompting calls for enhanced monitoring of emerging risks like synthetic risk transfers and private credit, without issuing formal policy recommendations.

• Saudi Arabia's newly published netting legislation marks a significant step toward achieving the advanced capital markets outlined in its Vision 2030 plan, said Scott O’Malia, CEO of ISDA, in opening remarks at an event hosted with Saudi Tadawul Group on Wednesday. The legislation, based on ISDA’s Model Netting Act, enables close-out netting to reduce credit risk and boost lending and trading capacity, laying the groundwork for a robust derivatives market, which O’Malia described as essential for economic growth, risk management, and competitive financial markets. While Saudi Arabia ranks among the world’s top 20 economies, its derivatives market remains small, with OTC interest rate derivatives turnover at just 0.01% of the global daily average in 2022, presenting substantial growth potential. O’Malia emphasized that alongside netting, further regulatory steps—such as defining permitted activities, disclosure standards, and risk governance—are needed to deepen liquidity and attract both domestic and foreign participation, with ISDA poised to support Saudi authorities in these efforts.

• London Stock Exchange Group (LSEG) has appointed Hiroki Tomiyasu as Head of Post Trade, Japan, and Head of Post Trade Solutions, APAC, effective February 17, to bolster its commitment to the Japanese and Asia-Pacific markets. Tomiyasu, who will report to Rohit Verma and Andrew Williams, brings extensive experience from his previous role as Managing Director and Head of FID Risk Asia at Morgan Stanley MUFG Securities, as well as positions at the Development Bank of Japan. The newly created role underscores LSEG's focus on expanding its multi-asset class offerings and enhancing risk management and operational efficiencies for clients in the region.

• The European Securities and Markets Authority (ESMA) launched a consultation on February 13, 2025, proposing amendments to the Regulatory Technical Standards (RTS) on settlement discipline under the Central Securities Depositories Regulation (CSDR), aiming to enhance settlement efficiency across the European Union. Detailed in a comprehensive paper, ESMA’s suggestions include tightening deadlines for trade allocations and confirmations, mandating electronic formats for submissions, and requiring central securities depositories (CSDs) to offer functionalities like partial settlement and auto-collateralisation, with feedback invited until April 14, 2025.

🚀 Digital Asset News

• Hong Kong's Securities and Futures Commission (SFC) unveiled a comprehensive "A-S-P-I-Re" roadmap on Wednesday, detailing 12 initiatives to bolster the city's virtual asset (VA) market. The five-pillar framework—Access, Safeguards, Products, Infrastructure, and Relationships—aims to enhance security, foster innovation, and position Hong Kong as a global VA hub. Key measures include new regulatory frameworks for over-the-counter (OTC) trading and custody services, expanded product offerings such as derivatives and staking for professional investors, and streamlined compliance to attract global liquidity while maintaining investor protection. The roadmap reflects a proactive stance to address emerging challenges in the $3 trillion VA market, emphasizing sustainable liquidity and adaptive regulation. SFC Executive Director of Intermediaries, Dr. Eric Yip, described it as a "living blueprint" designed to evolve with market needs, encouraging collaboration among regulators, institutions, and investors.

• Blockworks' Digital Asset Summit (DAS) 2025, set for March 18-20 at the Javits Center North in New York City, will bring together over 150 key figures in finance and digital assets, including Michael Saylor of MicroStrategy, Richard Teng of Binance, and Cathie Wood of ARK Invest, to discuss the future of digital assets, regulatory changes, and financial technology. The summit, targeting institutional leaders from asset managers, hedge funds, and banks, will feature keynotes and panels on topics like the macro case for crypto, digital asset ETFs, regulation, and stablecoins, with $1.2 trillion in assets under management represented at past events.

• BitGo, a leading digital asset infrastructure provider and the world’s largest independent crypto qualified custodian, launched a comprehensive over-the-counter (OTC) trading desk on Tuesday, integrating spot and derivatives trading, lending, and yield-generating products with its regulated custody services. Operating in stealth since early 2024, the platform has already processed billions in trading volume and built a lending book exceeding $150 million, catering to major asset managers. Led by former Genesis and Bridgewater executive Matt Ballensweig and OSL Group’s Stefan Von Haenisch, the 24/7 global desk supports trading across 250+ assets, offers competitive pricing from multiple liquidity sources, and provides unique access to locked token markets for venture capital and hedge fund clients.

• Binance.US, a prominent U.S.-based cryptocurrency platform, announced on February 19, 2025, the restoration of U.S. dollar (USD) deposit and withdrawal services via bank transfer (ACH) with no fees, marking a significant milestone since it operated solely as a crypto-only platform since July 2023.

📊 Chart Of The Week

📣 Quote of the Week

🎧 What We’re Listening To

📺 What We’re Watching

Crypto Order Sparks National Digital Asset Focus

A newly signed executive order aims to build a national digital asset stockpile, highlighting the strategic potential of blockchain. DeFi Technologies Inc. (US: DEFTF & CAD: DEFI.NE) stands at the forefront by offering regulated exchange traded products that simplify digital asset access. As the U.S. takes strides in crypto policy, discover how DeFi’s approach may align with this emerging infrastructure.

Explore Crypto’s Next Chapter

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