The European Central Bank is confident that Europe’s central securities depositories (CSDs) will support its TARGET2-Securities settlement initiative, following the detailed proposal issued last Friday.
“Downsizing by the CSDs is good for the efficiency of Europe’s financial markets, but it’s not easy for the CSDs themselves. It is logical that they have been hesitant. But in the end we think they will support T2S because it will allow them to serve their clients better,” Jean-Michel Godeffroy, director general, payment systems and market infrastructure, ECB, told theTRADEnews.com.
Following an extensive consultation period on TARGET2-Securities (T2S), the ECB’s proposed centralised settlement platform for all European securities transactions, CSDs have been given six weeks to decide whether to participate. Godeffroy confirmed that the Governing Council of the ECB will take a definitive decision on the future of T2S in July or August. The views of the CSDs, requested by July 4, will play an important role in this decision.
The ECB’s proposal contains information requested by CSDs including: an economic impact analysis for T2S; detailed user requirements; a legal assessment of T2S including proposed contractual agreements with CSDs; an outline of T2S’s contribution to harmonisation of clearing and settlement in Europe; and a description of T2S’s governance structure for the impending specification phase.
“We will apply the same governance model for the next phase of the T2S project because it has served the project well so far,” said Godeffroy. “A joint shareholding in T2S between the Eurosystem and the CSDs has been discussed, but is off the agenda for the time being. After the specification phase, which will take around a year, we will have to decide whether to establish a new legal structure or continue to run T2S from within the Eurosystem.”
The ECB initially proposed T2S as a means of realising the European Commission’s vision of a single integrated securities market for financial services as part of its Lisbon agenda.