Fighting talk from State Street

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Fighting talk from State Street

Leading custody banks are squaring up to provide the entire back-office and middle-office functions of fund managers, leaving them to focus more closely on investment. But outsourcing is not growing as fast as many had hoped. Now State Street is bad-mouthing its main rivals, Bank of New York and JPMorgan, saying they have held the whole market back by mismanaging their first deals.

IN PUBLIC STATEMENTS, if not always in private, bankers are normally quite a polite bunch. So what does Tom McCrossan of State Street put on his breakfast cereal?

Whatever it is, he is highly critical about his rivals' outsourcing ventures. "I think we can be pretty confident in suggesting that many of the outsourcing deals have been lacklustre in their success," says the State Street executive vice-president. "I'm not saying anything out of turn here. I think the market perception is one of problems and troubling situations that have occurred."

In the rarified world of investor services - where just three banks dominate - this is a stinging attack. Nor does McCrossan stop here. He says that it is precisely the problems for competitors such as Bank of New York and JPMorgan that are blocking the market as a whole. "Their lack of success has held the market back from diving into this new outsourcing arena," he says.

Faced with such direct criticism, its targets have react quite differently. JPMorgan Investor Services declines to comment, not wishing to get involved in tit-for-tat mud-slinging. Bank of New York, though, feels compelled to answer back.

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