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Custody TOM - Mizuho Securities

Case Study

The Client

Mizuho Financial Group (MHFG) is a leading financial institution, providing  five core services: Banking, Securities, Trust, Asset Management and Research & Consulting.

Mizuho Securities, the Securities Division of MHFG, is pro-actively undertaking global structural reforms to improve company performance via cross-entity synergies.


These reforms are being managed by the Global Target Operating Model Committee (GTOM), led by Deputy President Atsushi Takahashi and its Secretary General Ken Utsunomiya.


A key component of the structural reforms was a review of Mizuho Securities’ Global Custody business, to ensure a rationalized Custody footprint, cost optimization and higher service levels.


Mizuho Securities uses a high number of Custodian Agents globally to support its Fixed Income and Equity businesses, covering a wide range of services.


With annual volumes and costs increasing year-on-year, Mizuho Securities confirmed its goal to deliver an optimal Custodian operating model, with several underlying objectives:

1.    Reduced Custodian Cost Base - By consolidation of Custodian services and spend, to achieve cost economies of scale, both for Mizuho and its clients

2.   Improved Service Levels - Via rationalization to a smaller number of Custodian Agents, to gain higher, standardized service levels and scalability for Mizuho and its client base via process automation, improved reporting and service timeliness

3.   Bespoke Business Support - Tailored support of bespoke Mizuho business and service requests, including more complex Japanese market requirements

The Challenge

At time of engagement, Mizuho Securities Custodian Agent cost base covered London, New York, Hong Kong and Tokyo business entities.  

Multiple current state challenges faced Mizuho Securities:

1. Independent Entity Operating Models - Historically each business entity had developed their own custodian relationships, with independent custodian operating models, service levels and fee schedules

2. Limited Cross-Entity Synergies - Limited cross-entity service standardization or cost savings were being gained. Duplicative custodian services also existed, covering different entities.

3. Legacy Custodian Relationships - Many Custodians were deemed legacy, historical relationships, with outdated service terms and fee schedules

4. Limited Management Information - There was insufficient management information available for Custodian services and fee schedules, meaning cross-Custodian comparisons were not possible

The Engagement

Driven by Tonic's expertise and our long-term partnership with Mizuho, Tonic was engaged to lead Mizuho's Custody Health Check & Target Operating Model (TOM) program.


Tonic created a three-step approach to accelerate the definition and delivery of Mizuho’s TOM, as described in the visual below.

Tonic assembled a dedicated team of its specialists, with deep expertise in Custody Fixed Income and Equity business lines.

Tonic would initially focus on Stages 1 & 2, covering the Health Check Analysis and TOM Definition.


For the Health Check Analysis, Tonic performed extensive, accelerated analysis of Mizuho Securities existing Global Custody Business, focused on current Custodian costs and contracts, as well as service scope, levels and capabilities.


Tonic’s experts leveraged invoice data mining techniques to rapidly identify and quantify Mizuho Securities’ Custody spend across business units.

On completion of the Health Check Analysis, Tonic produced both a detailed view of Mizuho's current state and multiple Custodian strategy options. These options were tailored to Mizuho's objectives to reduce costs, improve service levels and gain bespoke service support.


In parallel, Tonic proposed that the current Custodian footprint was rationalized via a reduced shortlist, which formed the scope for a Custodian RFI. The purpose of the RFI was to assess the shortlisted Custodian Agents in detail, including low-level service capabilities and pricing.


Within the RFI, Tonic created a bespoke Custody Questionnaire, which each shortlisted Custodian was asked to respond to within a limited timescale. Once received, focused workshops were held between Tonic’s specialists to ensure that Tonic could score each Custodian’s service capabilities in detail.


In parallel, our specialists built a bespoke Custody Cost Calculator that allowed for detailed what-if cost scenario forecasting across the different Custodians.


Finally, Tonic performed a holistic review of Mizuho’s Custody operating model, to identify process inefficiencies and further opportunities for automation and risk improvements.

The Outcome

To conclude the initial engagement, Tonic delivered a Management Report to Senior Management at Mizuho Securities.

The report included a series recommendations linked to Mizuho’s initial objectives, as shown below:

Reduced Custodian Cost Base

1.    Our TOM recommendations generated cost savings of approximately 100% of total incumbent Custody spend, via the renegotiation of key rate cards

2.    Additional cost reduction opportunities in the region of 70% were proposed, which would be achieved by porting existing Custody business to alternative providers, for Equity and Fixed Income products


Improved Service Levels

1.    Our RFI produced a quantitative and qualitative scored assessment of current and potential Custody Agents, identifying future target improvements for service delivery

2.   Tonic produced a Custodian TOM roadmap, outlining Mizuho TOM improvements covering increased process automation, reduced operational risk and improved client service levels. Cost-benefit analysis for each TOM option was produced.


Bespoke Business Support

1.    Bespoke Mizuho requirements, especially for the Tokyo entity and its Japanese clients, were forensically analysed within the Health Check analysis and formed a key input to the scored Custody RFI

Mizuho Feedback

Ken Utsunomiya, Joint Head of Operations Group at Mizuho Securities, produced the followed feedback:


It was the first time in Mizuho Securities’ history that we performed a deep-dive analysis of our global Custodian footprint. As such, it was not an easy task, including an intensive collection of all necessary data from the regional entities as a starting point.  
However, despite the fact that no-one from Tonic was on site (due to Covid-19 restrictions), Tonic applied their domain expertise, as well as high communication and analysis skills, to perform a forensic analysis of our global Custodian footprint.  
Once Tonic had understood our current state, they created a bespoke Custodian strategy for us. In turn, they led exploratory communications with a shortlist of Custodians on behalf of Mizuho.  
Tonic then shared multiple, tailored Custodian target operating model options with us, with commercial and service model benefits far beyond our expectations. This was a really strong outcome for Mizuho. 
In addition, we appreciated Tonic’s flexibility and agility throughout this project, quickly adjusting to changes in scope and schedule.
Overall Mizuho really appreciate Tonic’s professionalism, as well as their achievement of challenging deliverables and key benefits.  
We look forward to continuing our partnership with Tonic going forwards. 

Please contact us on info@thetonicconsultancy.com for more information about our Tonic services, including our Custody TOM and related services.

Check out our Custody TOM service post here.

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