A custody and treasury proposal can look complete while leaving the most important operational questions unanswered. Which entity holds the cash? Who maintains the authoritative asset record? What happens when a settlement fails or an instruction arrives through an unexpected channel? For a sovereign investor, these are governance questions as much as service-selection questions.
This guide presents an illustrative due diligence framework for institutional teams. It is not legal advice, an audit opinion or a claim that any named bank meets the criteria. The framework should be adapted by the fund’s own legal, risk, treasury and operations functions. ArabNationalBank.com does not arrange mandates, provide custody or assess a specific institution’s creditworthiness.
Use resilience as a lens, not a certification
The Basel Committee’s principles for operational resilience address banks’ ability to withstand operational disruptions and draw on governance, continuity and risk-management guidance. Their publication is useful context for asking service providers how critical activities remain available. It is not evidence that a particular provider has passed a test designed for your fund.
The questions below are this website’s editorial application of that resilience perspective. They are not presented as a verbatim regulatory checklist or a mandatory standard for every sovereign investor. Determine which obligations actually apply with qualified advisers and the relevant internal functions, then use due diligence to establish evidence for the relationship being proposed.
Define the service boundary
Begin with a written map of the proposed services. Separate custody, cash accounts, settlement, foreign exchange, reporting and any optional activities. Name the contracting entity for each service and identify where another provider participates. A proposal describing a global network should explain which parts of that network would actually be used for the fund’s assets and transactions.
Ask what is explicitly outside scope. Exclusions are not necessarily defects, but they need an owner in the operating model. If tax processing, voting, market-specific documentation or another task is not included, who will perform it? An unassigned task is more concerning than a clearly disclosed limitation that the fund has planned to manage elsewhere.
Create an evidence column
For each important requirement, record the evidence requested and the evidence received. A product statement, a sample report, a contract provision and a tested workflow offer different kinds of assurance. Do not label a requirement “confirmed” merely because it appeared in a presentation. Record the precise basis for the conclusion and any conditions that still apply.
Ask where assets and cash are recorded
Request an explanation of how the proposed arrangement records the fund’s interests and how those records relate to other participants in the service chain. Ask legal advisers to assess the relevant contractual and jurisdictional implications. Do not infer the treatment of assets in an insolvency or dispute from an ordinary dashboard display or a broad statement about safekeeping.
Cash deserves a separate analysis. Identify the legal relationship associated with each balance and distinguish available amounts from pending or restricted amounts. Determine which information is authoritative for treasury decisions and how discrepancies are reconciled. The sovereign banking operating model explains why combining everything into one headline balance can obscure important differences.
Examine settlement from instruction to confirmation
Walk through a representative investment transaction with the teams who would operate it. Establish how instructions are received, validated, approved and matched. Ask how status changes are reported and which event counts as final completion for the fund’s internal records. Use the actual service definitions rather than assuming that every party uses words such as “processed” in the same way.
Then examine an exception. Suppose the counterparty’s details do not match, an instruction misses a relevant cutoff or a necessary balance is unavailable. Who sees the problem, who decides what to do and how is the outcome recorded? A useful demonstration should include the exception path rather than showing only a transaction that succeeds without intervention.
Test authority and instruction changes
Document who may create, approve, amend and cancel instructions. Compare those rights with the fund’s formal delegations and internal control framework. Ask how a new user or changed signing authority becomes effective and how access is removed. The provider’s technical capabilities should support the authority model rather than quietly redefine it.
Changes to standing instructions deserve particular attention. Establish how the sender is authenticated, who verifies the change and whether a separate confirmation route is required by the fund’s controls. Do not let the same unverified message both request a change and provide the only contact details used to confirm it. Record the procedure before an urgent situation occurs.
Understand dependencies beyond the main provider
Ask which critical activities depend on subproviders, technology services, communication channels or market infrastructure. Determine what the primary provider controls directly and what it coordinates through others. A dependency is not automatically unacceptable, but it should be visible enough for the fund to understand the potential consequences of disruption.
Also examine the fund’s own dependencies. An alternative provider is not operationally useful if the fund cannot access it, obtain the necessary records or produce an authorized instruction when needed. Due diligence should therefore test the whole service chain, including internal approvals and data availability, rather than assigning all responsibility for continuity to the bank.
Avoid a purely document-based review
Policies and reports provide context, but a practical exercise can reveal misunderstandings between teams. Select a realistic scenario, agree the expected outcome and observe how information moves. Record limitations honestly. A test can identify issues and improve preparedness; it does not prove that every future disruption will be handled successfully.
Make reporting reconciliable
Request sample holdings, cash and transaction reports with clear dates, cutoffs and field definitions. Ask how revised information is identified and how the team can trace a reported number to underlying records. Reports should support the fund’s accounting and oversight processes, not require users to guess which version is current or what a status label means.
Determine who investigates differences between the fund’s records and the provider’s records. Establish an escalation process for unresolved items and an agreed way to record their age and significance. Do not allow a recurring discrepancy to become invisible merely because it is familiar. The objective is a controlled explanation, not superficial agreement between two summary totals.
Compare commercial terms after clarifying scope
Evaluate pricing against a consistent service inventory and a realistic activity profile. Identify recurring charges, transaction-driven charges, minimums and optional-service costs where applicable. Ask how changes in markets, asset mix or transaction volume would affect the quotation. A fee comparison is incomplete when the underlying scope and assumptions differ.
Include implementation and exit work in the discussion. Ask what data can be exported, what cooperation is provided during a transition and which outstanding obligations must be resolved. Legal review should address the actual agreement. This guide does not interpret liability limits or termination clauses, but it flags them as matters that cannot be settled by a product demonstration.
Turn findings into a decision and monitoring plan
Summarize material strengths, limitations and unanswered questions in a decision record. Identify which conditions must be met before the relationship begins and which items require ongoing review. Assign an owner and a review trigger to each important condition. Approval without a plan for unresolved matters can create uncertainty precisely when teams need a clear operating instruction.
After implementation, revisit the assumptions behind the selection. New markets, changed mandates, staff turnover and altered service arrangements can make an old assessment incomplete. Use the sovereign wealth fund banking hub as a conceptual map, but maintain institution-specific records through the fund’s own governance and information-security processes.
Conclusion: look for evidence at the handoffs
Strong due diligence connects legal scope, asset records, cash, authority, settlement, reporting and continuity. The most revealing questions often concern the handoffs between those functions. Ask who acts, what evidence confirms the result and what happens when the expected path breaks. A credible decision should show both why the arrangement fits and how its remaining limitations will be managed.
