On Monday 29 October, Deutsche Bundesbank and Clearstream Banking Frankfurt (CBF) will launch a ‘self-collateralisation’ service for the German domestic financial market, which has been developed in close collaboration with market participants. The service allows credit institutions to use additional central bank liquidity for the settlement of securities transactions without having to reserve central bank cash balances in advance, say the firms.
To do this, the Bundesbank says it will grant intraday credit against collateral as part of CBF night-time processing. Participants will be able to use the 'self-collateralisation' service to optimise the management of their central bank liquidity for the CBF night-time processing and make up for any liquidity defaults by counterparties. The new service is based on existing CBF processing methods and can be used by customers without functional adjustments.
The service will be available to credit institutions which are both CBF customers and monetary policy counterparties of the Bundesbank or which are counterparties that act as a correspondent bank for CBF customers in the cash settlement of securities trading business.
"With the self-collateralisation service, the Bundesbank is enhancing the options for providing intraday liquidity," comments Hans Georg Fabritius, member, executive board, Bundesbank. "Credit institutions can reduce the extent of advance financing for settling certain securities purchases in Clearstream's night-time processing. Self-collateralisation therefore makes an important contribution to efficient securities settlement on the financial marketplace by providing a higher level of flexibility for credit institutions' liquidity management," he continues.