Presentations given at the ERC general meeting held in Paris - ICMA

Opening &Update on recent developmentsGodfried De Vidts, Chairman of the ERCEuropean Repo CouncilGeneral MeetingAnnex 1Euroclear, Paris13 March 2008

Changes in the ERC Council• Monte dei Paschi di Siena S.p.A. leaving the ERCCouncil• Caja de Ahorros y Pensiones de Barcelona (LaCaixa) joining the ERC Council• The ERC Council composed of 62 members

Recent market events/issues• Turmoil in the markets• Internal discussion at ERC• Meeting with the ECB• EC Commission reaction

Repo market update• Repo representation on the Board of ICMA Ltd.• ERC decision re: Euro GC Baskets for CCP use• Repo recommendations re: legal agreement &negative interest rate transactions – on the web• GMRA opinions available free of charge tomembers only.• Gilt repo code – revision to be publishedshortly, BoE to present at the next Councilmeeting

ContactsThank you, Ladies and GentlemenContacts and information:http://www.icmagroup.org/about1/international1.htmlerc@icmagroup.org

GMRA –Overview oflegal opinionsMarch 13, 2008Christian HellmundAssociate Counsel, ICMA, ZurichAnnex 2

Combined legal opinionseeking/updating exercise 2008• Agreement between ICMA, ISLA, SIFMA andSLRC subscriber group to combine opinions onthe GMRA and securities lending agreements(GMSLA/GESLA/OSLA)• Agreement in particular:• Format of the combined opinions• Funding of the combined opinions• Counterparty coverage of combined opinions andjurisdictions• Review of combined opinions• Timing• Management of the combined opinion updateexercise

Combined legal opinionseeking/updating exercise 2008• Format of the combined opinionCore opinionrelating toGMRA/GMSLA/GESLA/OSLAAppendix 1relating to GMRAAppendix 2relating to GMSLA/GESLA/OSLACore opinionrelating toGMRA/GMSLA/GESLA/OSLAAppendix 1+ =relating to GMRAGMRA opinionAvailable free of charge toICMA/SIFMA membersCore opinionrelating toGMRA/GMSLA/GESLA/OSLA+Appendix 2= GMSLA/GESLA/OSLArelating to GMSLA/opinionGESLA/OSLAAvailable on subscription

Combined legal opinionseeking/updating exercise 2008• Funding of combined opinions• GMRA opinions• 29 joint opinions funded by ICMA and SIFMA• 34 opinions funded by ICMA alone• GMSLA/GESLA/OSLA opinions• funded by the SLRC subscriber group

Combined legal opinionseeking/updating exercise 2008• Counterparty coverage of combined opinions tothe GMRA and the GMSLA/GESLA/OSLA• Companies, banks and securities dealers in alljurisdictions• Hedge funds, mutual funds and insurancecompanies in the major European jurisdictions• Central/national bank of the jurisdiction• European Central Bank (German opinion)• GMSLA/GESLA/OSLA counterparty coverage moreextensive in certain jurisdictions• Jurisdictions• 56 combined opinions

Combined legal opinionseeking/updating exercise 2008• Review of combined opinions – Freshfields• Timing – Combined opinions to beupdated by March 31, 2008• Management of combined opinionseeking/updating exercise - ICMA

GMRA opinionsAvailable opinions• Legal opinions on the GMRA currently available for 61 jurisdictions• Recently published opinions – Anguilla, Croatia, Dubai, Iceland, India andIsraelNew opinions• United Arab Emirates (except Abu Dhabi and Dubai): opinions ordered• Oman and Qatar: opinions proposedRequest from ERC committee to establish whether clean legal opinions canbe obtained• BulgariaLegal developments monitored• Russia, Romania, Malaysia• GMRA opinions available on ICMA’s website at:https://www.icmagroup.org/market_practice/legal1/GMRA_Legal_opinions.html

GMRA opinions - worldwideAvailable opinionsOpinions orderedRequest from ERC committee to establish whetherclean legal opinions can be obtainedMonitoring of legal developments

GMRA opinions (1)proposedorderedavailable√√√√√√√√√√√√√√√√√√√Austria4Dubai20Denmark19Czech Republic18Cyprus17Croatia16China15Cayman Islands14Canada13√Bulgaria12British Virgin Islands11Brazil10Bermuda9Belgium8Barbados7Bahrain6Bahamas5Australia3Anguilla2Abu Dhabi1StatusJurisdictionNo.proposedorderedavailable√√√√√√√√√√√√√√√√√√√Austria4Dubai20Denmark19Czech Republic18Cyprus17Croatia16China15Cayman Islands14Canada13√Bulgaria12British Virgin Islands11Brazil10Bermuda9Belgium8Barbados7Bahrain6Bahamas5Australia3Anguilla2Abu Dhabi1StatusJurisdictionNo.proposedorderedavailable√√√√√√√√√√√√√√√√√√√Status√France24Lithuania40Latvia39Kuwait38Jersey37Japan36Italy35Israel34Ireland33Indonesia32India31Iceland30Hungary29Hong Kong28Guernsey27Greece26Germany25Finland23Estonia22England21JurisdictionNo.proposedorderedavailable√√√√√√√√√√√√√√√√√√√Status√France24Lithuania40Latvia39Kuwait38Jersey37Japan36Italy35Israel34Ireland33Indonesia32India31Iceland30Hungary29Hong Kong28Guernsey27Greece26Germany25Finland23Estonia22England21JurisdictionNo.

GMRA opinions (2)No.4142434245464748495051525354555657585960JurisdictionLuxembourgMalaysiaMaltaMexicoNetherlandsNetherlands AntillesNew ZealandNorwayOmanPhilippinesPolandPortugalQatarRomaniaRussiaSaudi ArabiaScotlandSingaporeSlovakiaSloveniaStatusavailable ordered proposed√√√√√√√√√√√√√√√√√√√√No.61626264656667686970JurisdictionSouth AfricaSouth KoreaSpainSwedenSwitzerlandTaiwanThailandTurkeyUnited ArabEmirates (excl. AbuDhabi and Dubai)USAStatusavailable√√√√√√√√√ordered√proposed

GMRAMoving ForwardA SIFMA viewMark AustenManaging DirectorSIFMAGeneral Meeting of ICMAEuropean Repo CouncilMarch 13, 2008Annex 3

GMRA and legal opinions Global Master Repo Agreement (GMRA) was developed tofacilitate repo trading globally and is administered by SIFMA andICMA Global Master Securities Lending Agreement (GMSLA) wasdeveloped to facilitate securities lending globally and administeredby ISLA and LIBA Legal opinions commissioned on behalf of members by theassociations to ensure the provisions of the GMRA and GMSLA areenforceable with foreign counterparties in foreign jurisdictions October 2007: Members of these four associations agreed tocombine the separate opinions into a single opinion This will further global integration and save costs for Memberswhich are the primary benefits of the GMRA/GMSLA

SIFMA Approach in Asia SIFMA encourages adoption of GMRA internationally as globalstandard as this facilitates repo trading with counterparties; and thedevelopment of domestic repo markets and their opening tointernational players SIFMA in Asia: INDIA: November 2007 India Repo Forum & Training Course, Mumbai CHINA: July 2006 Repo Forum & Training Course, Shanghai, China;March 2007 Repo and Securities Lending Seminar in Guilin, China(Also GMRA and GMSLA now translated into Mandarin) HONG KONG: 2006 Hong Kong Repo Forum & Training Courseconference; 2007 Development of Hong Kong Annex with HKMA forthe GMRA KOREA: plans for similar Repo Forum and Training event in 2009;Formation of Korean Working Group and provision of advice to Koreanregulator to develop market; Comparative analysis of local Korean repoagreement with GMRA, to encourage wider GMRA adoption

Further Expansion of GMRA Legal Opinions Legal opinion process encourages greater international use ofGMRA which facilitates a global standard and foreign access todomestic markets 29 February 2008: initial discussion between Members on furtherexpansion of legal opinions: Interest in adding both further jurisdictions (16 new, including in MiddleEast)… …and further counterparties (eg, fuller coverage of investment funds,sovereign wealth funds) Plus confirmation that local legal entities are covered by the genericterms for counterparties (eg, ‘investment firms’ are ‘securities dealers’)

Current Approach Members want both more jurisdictions and counterparties GMRA opinions paid out of association (ICMA and SIFMA) budgetsand therefore Members’ generic dues Allows for incremental expansion of the GMRA legal opinions But limits those Members that want to go further, faster(and which help to promote GMRA as global standard)

More flexible approach possible?Some initial thoughts: Every opinion included in the industry process saves € £ $ forMembers as otherwise need to purchase themselves Potential to offer more and to be more responsive and flexible toMember needs by moving to subscription basis for expansion toother jurisdictions and counterparties Members could obtain opinions in line with business needs when theywant them and potentially more quickly than at present Conflict between expansion and association budget constraints wouldbe reduced/eliminated User pays principle is more equitable than current model Flexible approach allows for faster spread of the GMRA into developingmarkets Sensitivity to other Associations’ funding models

Next Steps Finish ‘gaps analysis’ – to show which Member jurisdiction andcounterparty requests not already covered by the GMRA opinions Seek Members’ feedback including JOC/SLRC Legal Members ERC SIFMA US funding division SIFMA Asia funding division Finalise paper setting out Member requests and options for fundingthose requests Seek approval for funding proposals for next round of opinions fromERC, SIFMA US Funding Division; SIFMA Asia Funding Division

Agent Lender Disclosure updateDavid RuleChief ExecutiveISLAdavid.rule@isla.co.uk0207 743 9314Annex 4

ALDFSA paper: December 2007• Background of Basel 2 implementation• By Jan 2010, borrowers must receive underlying principal exposureson trade date where possible and at latest business day followingsettlement date• In interim periodAt least monthly disclosureChoice of methods for estimating intra-month principal-levelexposures on basis of agent-level exposures

ALDEuropean ALD model: process and timetable• Capco appointed to manage project reporting to ISLA Board• Consultative paper by early-April; agreed model, with any serviceproviders selected, by end-May• ALD working group to support Capco; borrowers (Cater Allen, CreditSuisse, Deutsche, Fortis, Goldman, Lehman, Merrill, Morgan Stanley,Nomura, RBS, UBS); 8 lenders (AIG, BGI, BNP Paribas, Dresdner,HSBC, JP Morgan, M&G/Prudential, Northern and State Street).• Eric Lepore (Deutsche) from European Repo Committee• ICMA also represented (Nathalie Aubry) and financial contribution

ALDPermanent ALD model: issuesShape of model• Replicate US model as far as possible: file formats,DTCC identification system based on pseudo tax IDs,vendor solutions• DTCC prefer to licence to European hub because cannotrely on OFAC self certification by firms without a USpresence (parent, branch, subsidiary)• Need to select European hub

ALDPermanent ALD model: issues• Repo/reverse repoNot included in US; to be included in EuropeBorrowers need to calculate Basel 2 capitalIncludes repo (ie bond borrow under GMRA) and, moresignificantly reverse repo (eg cash reinvestment vs tripartycollateral)Agent lenders concerned about scale of project if extendedbeyond securities financing business eg manage client cashon pooled basis for cash reinvestment plus money funds etcPossible phasing of project

ALDPermanent ALD model: issuesTriparty reporting• 2 models discussed• Model 1: Agent lenders report collateral breakdown(by ISIN) to borrowers by underlying principal usinginput from triparty agents• Model 2: Agent lenders report exposure valuescollateralised by triparty (provider, account and set)to borrowers by underlying principal; borrowersobtain collateral breakdown (by ISIN) from tripartyagent• Decision: allow either based on bilateral agreement

ALDPermanent ALD model: issuesTiming of file transferNew categories for EU entity types• Mapped into netting opinion categoriesCredit approval process• Same as US ALDReconciliation of contract compare to ALD fileFlag for legal agreement used eg GMRA, OSLA

T2S Status and perspectiveMarc BayleProgramme manager - T2S ProjectERC, Paris, 13 March 2008Annex 5

T2S - part of European landscapeT2S is a key contributor to the Lisbon agendaESCB consolidation ofInfrastructure…MIFIDRemoval ofGiovanninibarriersCode ofconductESCB-CESR…on integratedsecurities market forEurope.

List of content1. What is T2S ?2. Where are we ?3. Next steps32

Current situation ofthe market infrastructure in EuropeComplexity of the interaction for securities settlement in CeBMListingTradingCCPClearingCCPClearingCCPClearingSettl.Settl.CashSettl.Settl.CashSettl.CashSettl.TARGET2NCBIssuerIssuerCSD(Custody)InvestorCSD(custody)InvestorCSD(Custody)InvestorCSD(Custody)NCBNCB Back-OfficeNCBNCB Back-OfficeBank &BrokerNCB Back-OfficeBank &BrokerBank &BrokerInvestorInvestorInvestor

Eurosystem visionSimplification of the cash and securities settlement infrastructurewith a single collateral management systemListingTradingCCPClearingCCPClearingCCPClearingT2STARGET2IssuerIssuerCSD(Custody)InvestorCSD(Custody)InvestorCSD(Custody)InvestorCSD(Custody)NCBCCBM2NCBNCBBank &BrokerBank &BrokerBank &BrokerInvestorInvestorInvestor

T2S is key in the consolidation of the European market…Cash settlementmarket infrastructureCentral banks’collateralmanagement systemComplementaritiesSecuritiessettlement marketinfrastructure… while preserving the business relationshipsof central banks and CSDs withtheir counterparts and customers

Interaction of the services provided bythe EurosystemComplementarities T2S – CCBM2 – TARGET2• TARGET2 / T2S– Injection of liquidity at the start of the settlement day– Transfer of liquidity between the two services during the settlement day– Automatic return of liquidity to TARGET2 at the end of the settlement day• CCBM2 – T2S– Provision of information on collateral value of eligible securities and close linksto support auto-collateralisation in T2S– Information about making use of auto-collateralisation in T2S• TARGET2 / T2S / CCBM2– Provision of securities for collateralisation of monetary policy operations and intradaycredit• Eligibility-check and calculation of collateral value in CCBM2• Making available securities to NCBs in T2S• Increase of credit line or provision of liquidity in TARGET2– Return/substitution of securities used for collateralisation purposes

Connecting Central Bank accountsto T2S (euro and non-euro)EurosystemTARGET2PaymentsModule(EURO)InterfaceInterfacenon-euroRTGS systemT2S

T2S - A cooperationbetween CSDs and NCBsSECURITIESVALIDATION and MATCHINGCENTRAL CENTRALBANKMONEYBANKMONEYTARGET2CENTRAL CENTRAL BANKMONEYBANKMONEYCSD ACSD A ACCOUNTSOPTIMISATIONofSETTLEMENTNCB A ACCOUNTSNCB A ACCOUNTSNCB ACSD BCSD B ACCOUNTSSETTLEMENTandREALIGNMENTNCB B ACCOUNTSNCB B ACCOUNTSNCB BCSD CCSD C ACCOUNTSNCB C ACCOUNTSCENTRAL CENTRALBANKMONEY BANKNCB AMONEYACCOUNTSNCB A ACCOUNTSNCB CT2SOther RTGS

The T2S process flow – matching & settlement1. Settlement instructions “captured” areprocessed in the Validation component,2. according to the rules and restrictionsstored in the Static Data3. Once validated, instructions arematched in the Matching component.4. Instructions may be maintained.5. Matched transactions are checked fortheir settlement eligibility6. Once eligible, instructions areprioritised in the Sequencingcomponent, and…7. processed, in RTGS mode, for the finalsettlement.8. In the case of failed settlement,transactions are moved to theRecycling and Optimisationcomponents.9. In some lifecycle stages, reporting tothe instructing entities is required.10. T2S parties may query the system atany time.Lifecycle Management and Matching12ValidationStatic DataSettlementUnmatchedinstructionsMatchedinstructions3 4InstructionsMatchingMaintenance8Recycling &OptimisationSecuritiesaccountsEligibility5EligibleinstructionsProvisioning& Booking7Interface9ReportManagement10QueriesManagementSequencingDedicatedcash accounts6

List of content1. What is T2S ?2. Where are we ?3. Next steps40

T2S governance: Current structureECB Governing CouncilExecutive BoardPSSC72 persons62 institutionsInformation Sessionswith all StakeholdersAdvisoryGroup14 Users 14 CSDs14 NCBsObserversNational UserGroups123 persons33 institutionsCoordinationGroupTG1Scope andscheduleTG2LifecyclemanagementTG3SettlementfunctionalityTG4Static dataTG5InterfacesTG6Non-functional• 188 experts coming from 77 institutions• All CSDs settling in euro participate• 33 custodian banks

Future Governance of T2S• Current T2S governance arrangement remains largelyunchanged for the Specification Phase, i.e. until end 2009.• Continuation of the AG (with its three constituencies) whomay establish sub-groups.• Support of T2S and participation in the future governance gohand in hand.• Other governance options will be studied during theSpecification Phase, including the establishment of a separatelegal entity.

How does T2S impact CSDs?• CSDs are the gateways to T2S.• Shifts resources away from commoditised settlement to areas that willdetermine competitiveness in the future.• May wish to invest on services related to securities issued in otherCSDs to remain competitive. May involve alliances with institutionswhich currently have this expertise.• A common settlement process and direct connectivity facilitate theirability to serve international customers on the securities they issue.• Lowers running costs, adaptation costs and income levels are subject tomore competition.A key for change lies in thosewho are most affected by the change.

How does T2S impact market users?• Fosters competition among CSDs for better services at a lowersettlement price.• Reduces intermediary costs by providing the possibility for directtechnical access to the settlement platform.• Reduces collateral needs and costs.• Helps to optimise treasury management through a consolidated accessto securities and central bank money.• Reduces back-office costs thanks to harmonised access to multipleCSDs and harmonised settlement procedures.• Facilitates cross-border business with easier and cheaper cross-CSDsettlement.Market users and end-investors will benefit from T2S.

How does T2S facilitatecompetition in custody?What options do I have to hold my “Nokias” in T2S?1. With the local custodian (or a European custodian) like today.2. With my local CSD if it processes corporate events in Nokias.3. With NCSD Finland (multi-direct participation)In all three cases, I may channel all settlement instructions toT2S using the same proceduresA single settlement process provides more choice on custodyby reducing switching costs / scale considerations.

What is the economic logic?SettlementT2S Volume-based More commoditised Closer to central bank expertise Benefits from achieving a singlepool of liquidity/collateral Settlement fees not the largestchunk of total costs, butcross-border fees can besubstantially reducedScaleCustody/Corporate eventsCSDs Value-based More innovation / calls forharmonisation Less central bank involvement (inparticular for equities) Large cost-saving opportunities With T2S more choice on place ofcustody (home CSD, issuingCSD, custodian)Competition

Harmonisation issuesT2S acts as a strong catalyst complementing and acceleratingharmonisation initiatives (Giovannini barriers)• Single process schedule and settlement deadlines for all markets• T2S will adopt ISO standards as the communication protocol• End of day fails management period, handling of repo transactions• Binding matching with hold and release mechanism• Single cash settlement model as part of T2S• Threshold for partial settlement and recycling of failedtransaction• Harmonised procedures for collateral transfer to NCBs(CCBM2)47

List of content1. What is T2S ?2. Where are we ?3. Next steps48

Where are we?The T2S timelineFeasibilitystudyUser requirements phaseSpecificationphaseJuly 2006Launch ofthe conceptMarch/April 2007T2S feasibleGovernance forUser RequirementsapprovedDecember 2007 Early 2008Launch Public Decision onConsultation on GovernanceUser Requirements; for specification phase;Feedback expected investigate legal andby 2 April 2008 contractual frameworksSummer 2008Decision onfinal UserRequirementsand go aheadDevelopment phase Migration and testing phase Operational phase2009 2010/20112013

T2S – The main challenges1. Consulting the financial market on (deadline: 2 nd April)– the T2S User Requirements (the URD)– methodology on economic impact analysis2. To design an effective governance structure3. To present an economic impact analysisAll developments and progress are posted on the ECBT2S Web-page

Concluding with 5 big wins1. Making cross-border settlement fees as inexpensiveas domestic fees2. Reducing users´ collateral/liquidity needs3. Harmonising settlement to make Europe a trueSingle Market4. Create new opportunities for competition5. In time, market users would only need an account atone CSD to settle any transactions in securitieswithin T2S

THANK YOU52

Project updateDirk BullmannEuropean Central BankERC Annual General MeetingParis, 13 March 2008Annex 653

Table of contentsI. CCBM2: objectives and principlesII.III.IV.The dialogue with the marketThe CCBM2 User RequirementsTriangle for efficient liquiditymanagement: TARGET2, T2S and CCBM2V. CCBM2 project time table54

I. CCBM2: Objectivesand principles55

The currentsituationToday’s situation in the field of Eurosystem collateral management:Eurosystem collateral management is technically decentralisedwith the specific CCBM arrangement at Eurosystem levelfor cross-border use.Domestic level: Across the euro area there exist different conditions(procedures, communication interfaces, level of automation)Cross-border level: In CCBM, thereare up to five players (andrelated procedures) involvedDomestic/cross-border level: Differentconditions for cross-border (CCBM)and domestic transfers (in terms ofexecution time, timing and costs)Country ANCB AStep1: Requestfor creditCounterpartyStep 2: CCBM messageStep 5: ReceiptStep 6:Release ofcreditCountry BNCB BStep 3:MatchingCSDCustodianStep 4:ConfirmationStep 3: Delivery ofcollateralStep 2: TransferinstructionsCCBM: cross-border level56

The decision to developCCBM2The current CCBM is the mainchannel for cross-border use ofcollateral in Eurosystem creditoperations1999€ 162,659 mio2007€ 557,920 mioCollateraltransferredvia CCBMGiven the drawbacks in terms of harmonization andefficiency, the Governing Council of the ECB decided inMarch 2007 to review existing collateral managementprocedures and to create a new collateral managementsystem for the Eurosystem, called CCBM2CCBM2 will offer a harmonised and efficient solution facilitatingthe interaction of counterparties acting as collateral providerswith the Eurosystem57

What it will bring!Consolidation:- Single platform for domestic and cross-border use of collateral (while CCBMcovers cross-border only); Eurosystem participation is of voluntary nature- Centralised IT solution while preserving decentralised businessrelations between NCBs and counterparties (access to credit)Harmonisation:- Harmonised service level for all eligible assets (marketable assets and creditclaims), covering existing collateral legal techniques (pledge and repo)- Harmonised interface with counterparties- Harmonised fee structure for CCBM2 servicesEfficiency:- Lower costs for consolidated solution which will be based on existing centralbank systems (such as the one jointly operated by NBB/DNB)- Adoption of real-time and straight-through-processing- Interfaced with TARGET2 and TARGET2-Securities (CCBM2 project is beingconducted in parallel with the TARGET2-Securities project)58

II. The dialogue withthe market59

Initial market consultation (summer2007)In order to optimally integrate market needs, CCBM2 is developed inclose cooperation with market participantsIn April 2007, the Eurosystem launched an initial market consultationon the CCBM2 principles; the feedback received from the marketwould contribute to the definition of the CCBM2 User RequirementsAll respondents welcomedthe Eurosystem initiativeto develop CCBM2;feedback received was verypositivePrinciple 6Pirnciple 5Principle 4Principle 3Principle 2Principle 1Market agreement on the CCBM2 principles0% 20% 40% 60% 80% 100%AgreementAgreement withremarksAgreement withamendmentsDisagreementValuable remarks/requests were voiced through the marketconsultation; see http://www.ecb.europa.eu/ecb/cons/html/ccbm2.en.html60

2nd market consultation (just launched!)The CCBM2 User Requirements have been drafted on the basis of:the guiding principles of CCBM2 (on which the first marketconsultation took place)the feedback received from the marketOn 25 February, the draft CCBM2 User Requirements weresubmitted for market consultation:http://www.ecb.europa.eu/ecb/cons/html/ccbm2-2.en.htmlYou are invited to comment, make suggestions and raise queries.Closing date for this second consultation phase is 5 May 2008.The User Requirements will then be reviewed where appropriateand finalized by summer 200861

III. The CCBM2User Requirements62

CCBM2 User RequirementsMessage router (mandatory)• Handles communication with external parties and other modules• Supports different communication networks (SWIFTNet, secure internet)Securities Module• Mobilisation /demobilisation ofmarketable assets(domestic /cross-border)• Related custodyservicesCredit claimsmodule• Recording andmobilisationof credit claims(domestic andcross-border)Credit & Collateral Module• Management of counterparties’ collateral positions• Assigns each counterparty a single global position• Pooling/earmarking• Optional functionality (e.g. credit freezing,interaction with external CMS, auto-collateralisation)Collateral position= value of assetsmobilisedCredit position= outstandingcredit operations63

CCBM2 User RequirementsMost of the specific issues raised by the market in the initialconsultation have been addressed in the User Requirements:Use of collateral for purposes other than Eurosystem creditoperations (e.g. guarantees to CCPs)Pooling of collateral provided by entities belonging to a groupIntegration with other existing market solutions: ICSDs’ collateral management systems in particularTriparty collateral management services in general(Issue is currently analysed further based on joint letter from ERC, Euroclear andClearstream: see htp://www.ecb.europa.eu/paym/coll/coll/ccbm2/pdf/CCBM2_Letter_18Dec2007.pdf )Harmonization of collateralisation techniques(Eurosystem strongly supports work led by the European Commission on theharmonisation of national market practices)Inclusion of a contingency module dealing with non-euro collateralRemoval of the repatriation requirement(Issue is currently analysed further outside CCBM2 scope)64

IV. Triangle for efficient liquiditymanagement: TARGET2,T2S and CCBM265

Triangle for efficient liquiditymanagementConsolidation of IT infrastructure…RTGSMinimum reservemanagement,Standing facilities, etcCentral banks’collateralmanagementSecurities settlement… while preserving the business relationships of central banks and CSDs with theircounterparts and customers66

Triangle for efficient liquiditymanagementInteraction of the services provided by theEurosystemProvision ofeuro Central Bank MoneyInformation to facilitateauto-collateralisationAdjustment of credit linesMobilisation of securitiesfor collateralisation purposes67

V. CCBM2project time table68

Moving forwardWork on the User Requirements will be finalized by summer 2008,based on which the User Detailed Functional Specifications willbe established.In 2008, also the CCBM2 project time table will have to be finalised2007 2008 2009 2010 2011 2012 20139 Nov. 2007(End of migrationMay 2008)Go-livewith T2Sor even beforeGo-livein2013The Eurosystem will continue the fruitful dialogue with the marketon the CCBM2 project69

Please comment on the CCBM2 User Requirements(deadline 5 May 2008)Thank you!70

The Commission’spolicy response to theFinancial TurmoilFabrizio PLANTAICMA’s Repo CouncilParis, 13 March 2008Annex 7Disclaimer: This presentation reflects only the views of its author. It may not be taken to represent any view, express orimplied, on the part of the European Commission.

Financial Markets Developments• Uncertainty about global economicsituation and outlook• Real-economy implications• Status of the European economy andforecasts• Consequences for European Banks• Gaps revealed by the international financialsystem.72

The Ecofin Roadmap• Credit Market Turbulence– Transparency– Valuation standards– Prudential framework, risk management andsupervision– Market functioning• Crisis Management• Lamfalussy Review73

Transparency• Industry commitment:– Guidelines on public Disclosures– Industry Market Data Report– Investor Information Initiatives74

Valuation Standards• Ensure consistent and transparentapplication of current accounting rules on2007 financial statements• GPPC paper on determining Fair Value ofFinancial Instruments under IFRS• Necessary accounting adjustments• No need to over-react75

Prudential Framework, riskmanagement and supervision• Concentration Risk (Large exposures)• Treatment of hybrid capital instruments,• Technical changes to the CRD• Banks’ liquidity requirements• Improvement of risk managementstandards by non-bank investors76

Market Functioning• Role of credit rating agency• Incentive structures and implication of theoriginate and distribute model• Responsible lending• Non-organised debt markets77

Crisis Management• Common principles for crisis managementand sign an extended EU wide MoU• Specific voluntary co-operationagreements• Common framework for assessing a crisis• Crisis simulation exercises78

Review tools for crisisprevention, management andresolution• Ensure availability of relevant tools• Streamlining the process of State aid rules• Possible extensions of Winding-Up Directive• Revision of the Financial CollateralArrangements and Settlement Finality Directives• Ensure efficiency of Deposit GuaranteeSchemes• Early warning mechanisms79

Lamfalussy Review• Streghten the Level 3 Committees• Reinforce application of Level 3 measures• Different reporting requirements• Convergence of supervisory powers• Improve cooperation between supervisors• Operation of colleges of supervisors• Financial support to Level 3 committees80

Thank you for your attention!Fabrizio PlantaEuropean CommissionInternal Market and Services DGTel: +32 2 29 86379Email: fabrizio.planta@ec.europa.eu

European RepoCouncil14 thEuropeanERC General Meetingrepo marketsurveyParis, 13 th March 2008Annex 8December2007

European Repo Council14 th European repo market surveySurvey overview• Outstanding value of contracts at close on12 th December 2007• 68 responses from 62 groups• Respondents headquartered in 14European countries, US, Japan

European Repo Council14 th European repo market surveyHeadline numbers• December 2007 EUR 6,382 billion• June 2007 EUR 6,775 billion• December 2006 EUR 6,430 billion• June 2006 EUR 6,019 billion• December 2005 EUR 5,883 billion• June 2005 EUR 5,319 billion• December 2004 EUR 5,000 billion• June 2004 EUR 4,561 billion• December 2003 EUR 3,788 billion• June 2003 EUR 4,050 billion• December 2002 EUR 3,377 billion• June 2002 EUR 3,305 billion• December 2001 EUR 2,298 billion• June 2001 EUR 1,863 billion

European Repo Council14 th European repo market survey8,0007,0006,0005,0004,0003,0002,0001,0000Jun-01Oct-01Feb-02Jun-02Oct-02Feb-03Jun-03Oct-03Feb-04Jun-04Oct-04Feb-05Jun-05Oct-05Feb-06Jun-06Oct-06Feb-07Jun-07Oct-07

European Repo Council14 th European repo market surveyOrganic growth• 59 respondents in last 3 surveys• year-on-year = -11.7%• H1 = -0.2%• H2 = -11.5%

European Repo Council14 th European repo market surveyCounterparty analysisATS21.2%Direct45.4%Broker24.3%Triparty9.1%

European Repo Council14 th European repo market surveyCounterparty analysis100%90%80%70%60%50%40%30%20%10%0%ATSBrokerTripartyDirectDec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07

European Repo Council14 th European repo market surveyGeographical analysisNoneurozone28.5%Anonymous10.3%Domestic34.7%Eurozone26.2%

European Repo Council14 th European repo market surveyGeographical analysis100%90%80%70%60%50%40%30%20%10%0%Anon.NoneuroEuroDomesticDec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07

European Repo Council14 th European repo market surveyATS geographical analysis (1)nonanonymousATS21.7%anonymousATS78.3%

European Repo Council14 th European repo market surveyATS geographical analysis (2)extra EUR1.7%cross EUR43.1%domestic40.9%intra EUR13.7%

European Repo Council14 th European repo market surveyCurrency analysisUSD11.7%other8.0%GBP15.5%EUR64.8%

European Repo Council14 th European repo market surveyCurrency analysis100%90%80%70%60%50%40%30%20%10%0%otherUSDGBPEURDec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07

European Repo Council14 th European repo market surveyCurrency analysisMain surveyTripartyotherUSD 8.0%11.7%USD18.2%other2.1%GBP15.5%EUR64.8%GBP17.0%EUR62.7%

European Repo Council14 th European repo market surveyCurrency analysisMain surveyATSotherUSD 8.0%11.7%GBP8.3%other7.4%GBP15.5%EUR64.8%EUR84.3%

European Repo Council14 th European repo market surveyCollateral analysisJapan2.9%US2.3%etc13.4%DE25.4%UK16.2%other EUR8.5%BE2.9% ES4.9%FR9.8%IT13.6%

European Repo Council14 th European repo market surveyCollateral analysis100%90%80%70%60%50%40%30%20%10%0%otherother EUUKFRITDEDec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07

European Repo Council14 th European repo market surveyCollateral analysisMain surveyTripartyother EU18.2%other17.7%DE25.0%IT13.5%other46.4%DE12.3% IT3.4%FR7.4%UK9.1%UK16.0%FR9.7%other EU21.4%

European Repo Council14 th European repo market surveyCollateral analysisother EU18.7%EU govis81.3%

European Repo Council14 th European repo market surveyCollateral analysis100%95%90%85%80%75%70%65%60%55%50%other EUEU govisDec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07

European Repo Council14 th European repo market surveyCollateral analysisMain surveyTripartyother EU18.7%other EU55.8%EU govis44.2%EU govis81.3%

European Repo Council14 th European repo market surveyCollateral analysisMain surveyvoice-brokerother EU18.7%other14.2%EU govis81.3%govis85.8%

European Repo Council14 th European repo market surveyMaturity analysis25.0%20.0%15.0%14.4%16.9%23.5%19.8%10.0%7.1% 5.9%2.7%5.0%5.8%4.1%0.0%1D1W1M3M6M12M+12Mfd-fdopen

European Repo Council14 th European repo market surveyMaturity analysis100%90%80%70%60%50%40%30%20%10%0%openfdfd+6M6M3M1M1W1DDec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07

European Repo Council14 th European repo market surveyMaturity analysis30%25%20%15%10%5%1D1W1M3M6M+6Mfdfdopen0%Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07

European Repo Council14 th European repo market surveyMaturity analysis35%30%maintriparty25%20%15%10%5%0%1D 1W 1M 3M 6M +6M fd-fd open

European Repo Council14 th European repo market surveyMaturity analysis90%80%70%mainATS60%50%40%30%20%10%0%1D 1W 1M 3M 6M +6M fd-fd open

European Repo Council14 th European repo market surveyMaturity analysis50%45%40%35%30%25%mainvoice broker20%15%10%5%0%1D 1W 1M 3M 6M +6M fd-fd open

European Repo Council14 th European repo market surveyMaturity analysis90%80%70%ATSvoice broker60%50%40%30%20%10%0%1D 1W 1M 3M 6M +6M fd-fd open

European Repo Council14 th European repo market surveyRate analysisfloating13.3%open4.5%fixed82.2%

European Repo Council14 th European repo market surveyRate analysis100%95%90%85%80%75%70%65%60%55%50%openfloating ratefixed rateDec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07

European Repo Council14 th European repo market surveyProduct analysislending20.4%repo79.6%

European Repo Council14 th European repo market surveyDate of next survey11 th June 2008

Collateral ManagementInitiatives at SWIFTMichel KeulemansB/D and Pre-Settlement ServicesMarch, 2008 – ParisAnnex 9Slide

SWIFT 30+ years in secure messaging service Leader in security, resilience and interoperability Present in 200+ countries, 8100+ customers Daily average of 14 million financial msgs Providing access to 150+ Market Infrastructuresin the payments and securities area Cooperative of the financial industrySlide

SWIFT’s view:Positioning of SWIFT offering in investment life cycleTradingSettlement / AssetsServicesAssetclassActivitiesPre-TradeTradePost-TradeSettlementPayment /Cash MngtFXReportingCorporateActionsTreasuryoperationsRef DataRegulatoryCollateralMgntL & BReposProxy VotingPrimeBrokerageEquitiesFixed IncomeCommoditiesFX &Money MarketDerivativesThis is a weak spot butnot a concern for nowThere are real opportunitiesThere are real opportunities andtime to market is criticalWe are strong herewith no immediate concernsSlide

Classical Repo TradeSWIFT’s current messaging offeringMT505MT 541/543MT503MT 541/543MT 515/518MT202/210MT54xAdditionally, Cat 5Statement messagesMT 541/543MT 541/543MT 545/547Slide

Collateral ManagementHow does it add value to your business? Value drivers for Collateral management– Credit Risk mitigation (to protect against credit default loss)– Reduction of Operational Risk– Manage the cost of credit/economic capital– Increase business opportunities– expanding current trading business– creating the possibility to enter more exoticproducts– allowing to trade longer term products with diversecounterparties, within entire ”rating spectrum”– Benefit from more competitive prices– …Slide

Collateral ManagementOptimisation of Assets & LiquidityAdvocacy towards cross-product margining & creation of one,common collateral poolATSRepoTri--partyCCPRepoExchangeATSMMColl. Manager/TraderCentral BankMoneyMarketsTradingDeskRe-use frommarginingCustomer base&marketsFunds/HF/Clients CMOthersSlide

Collateral ManagementOptimisation of Assets & Liquidity Increasing demand of funding & financing multi-assetcollateral pools : Optimisation of current & futurecollateral position for trading purposes & liquidityprovision– Ongoing discussions for “umbrella agreement”– Challenge of increasing the internal & externalcollateral efficiency Automation &StandardisationSlide

Bilateral model: Communication needsSWIFT’s current messaging offeringMARGIN CALLSRESPONSECOLLATERAL ADMINSlide

Bi-lateral model: Communication needsSWIFT’s current messaging offering Margin calls:– inform the cp of collateral to be posted/to bereturned– negotiate the collateral Disputes:– propose collateral– approve the proposed collateral– communicate the settlement details– communicate disagreement– reconcile the positions Substitution:– propose or request substitution of collateral Settlement:– instruct agent to deliver/receive the collateralMT 503 Collateral ClaimMT 504 Collateral ProposalMT 507 Collateral Status and Processing adviceMT 507 Collateral Status and Processing AdviceMT 506 Collateral and Exposure StatementMT 505 Collateral SubstitutionSlide

Triparty model: Communication needsSWIFT’s current messaging offeringMT527 – Triparty CollateralInstructionMT558 - Triparty CollateralStatus & Processing AdviceMT569 - Collateral & ExposureStatementSlide

SWIFT Pre-Settlement ProjectsContact details Banu Apers– +32/(0)2.655.3744– Banu.Apers@swift.com Michel Keulemans– +32/(0)2.655.4096– Michel.Keulemans@swift.comSlide

nswersSlide