Clearstream chairman questions T2S cost savings

Delays in T2S implementation has led to an increase in cost.  

The promised savings of millions per year through T2S will be harder to achieve than originally thought, the chairman of Clearstream has told Global Custodian.

The new European-wide settlement system has cost around €1 billion to roll out and is intended to help create a single European market, with reduced settlement costs and quicker timeframes.

The estimated savings for brokers, custodians and banks have been touted as being anywhere between €30 and €70 million.

According to Jeffrey Tessler, member of Deutsche Boerse’s executive board, who now oversees Clearstream, Eurex and Eurex Clearing, it may be difficult to achieve those early predictions.

"One of T2S's initial objectives, to reduce the cost of cross-border settlement, will be more difficult to achieve than originally thought,” he said.

"Everybody faces additional costs due to the delay."

In October 2015, Euroclear announced a six-month delay in moving its Belgian, French and Dutch CSDs to T2S citing the need for more time for a ‘safe and stable migration’. Those platforms are now on course to migrate in September this year.

As a result, Clearstream will not join the system until February 2017.

Tessler added that despite the cost savings possibly not reaching their potential right away, the benefits harmonisation through T2S could supersede those cost savings.

"When we look at the Capital Markets Union, our pipes into 55 markets worldwide are playing a significant role in developing the new market landscape."

"I am pleased and slightly surprised how well the industry has worked together to support the T2S initiative. This isn't just something that the CSD's have to pay for. Every bank needs to invest in their infrastructure."

A Deutsche Boerse study in September 2014 predicted that global custodians with €400 billion in assets under custody across major T2S markets could save up to €50 million per year.

The same research found that a regional bank with €140 billion in securities deposits across major T2S markets with a home market bias could save up to €30 million.