ANNUAL REPORT 2008 - Polymer Bank Notes of the World

cross-CSD settlement. T2S will thus increasethe efficiency of collateral management, enableusers to optimise their financing across all EUassets and contribute to the stability of thefinancial system.In December 2007 the T2S Advisory Group 5completed the first draft version of the T2S userrequirements, which describe the features thatCSDs and financial market participants requirefrom T2S. The ECB coordinated the process andtook a major role in the drafting. On18 December 2007 the Eurosystem publishedthese draft user requirements, together with themethodology for an economic impact analysis,for public consultation.The Advisory Group finalised the userrequirements on the basis of the commentsreceived in the public consultation. On23 May 2008 the Governing Council invitedall European CSDs to join the T2S initiative,providing them with detailed information aboutthe work undertaken thus far.All euro area CSDs expressed their willingness,subject to certain conditions, to use the T2Splatform once it starts operations. In addition,the Danish CSD and Danmarks Nationalbankindicated that they wanted to use T2S for thesettlement of securities transactions denominatedin both Danish krone and euro. In addition, theCSDs of Sweden, Switzerland and the UnitedKingdom indicated their intention to participatefor euro settlement. In view of this widespreadsupport from European CSDs, the GoverningCouncil on 17 July 2008 officially launched theT2S project, with the T2S platform expected tobe in place by 2013 at the latest. The GoverningCouncil also approved the final version of theuser requirements and assigned the technicaldevelopment and operation of T2S to theDeutsche Bundesbank, the Banco de España,the Banque de France and the Banca d’Italia.As foreseen in the governance framework forthe specification phase, a new Advisory Groupwas subsequently established, consisting ofan equal number of central bank, CSD anduser representatives. It met for the first time inOctober 2008, when it created six sub-groupsto organise the T2S workstreams. Two of thesesub-groups focus on harmonisation efforts,one on “process efficiency” and another on“corporate actions”. Coordination with existingharmonisation initiatives, in particular thework undertaken by the European Commission(e.g. within the Clearing and SettlementAdvisory Monitoring Expert Group II and theLegal Certainty Group) is also ensured.Furthermore, in 2008 a change managementprocess for the T2S user requirements wasestablished, and the process of defining the T2Sgeneral functional specifications on the basis ofthe user requirements began. The ECB providedadvice to the non-euro area central banks to helpthem to decide, together with local CSDs andmarket participants, whether or not to includetheir currencies in T2S. By the end of 2008the Lithuanian CSD and Lietuvos bankas hadconfirmed that they intended to settle securitiestransactions in litas as well as euro via T2S.Furthermore, the CSDs of Bulgaria, Estoniaand Romania indicated that they intended to useT2S for the settlement of their euro transactions.The legal and contractual arrangements betweenthe participating CSDs and the Eurosystem arebeing prepared.2.3 SETTLEMENT PROCEDURES FOR COLLATERALEligible assets may be used to collateralise alltypes of Eurosystem credit operation, not onlyat the domestic level but also across nationalborders. Since the introduction of the euro,the use of cross-border collateral has growncontinuously. In December 2008 the amount ofcross-border collateral held by the Eurosystemincreased to €861 billion, from €683 billion inthe same month of the previous year. Overall,at the end of 2008 cross-border collateralrepresented 45.0% of the total collateralprovided to the Eurosystem.5 The T2S Advisory Group is composed of NCB and CSDrepresentatives as well as market participants.ECBAnnual Report2008115