ANNUAL REPORT 2008 - Polymer Bank Notes of the World

Two main channels are available for thecross-border mobilisation of collateral. Theseare the correspondent central banking model(CCBM) provided by the Eurosystem andeligible links between euro area securitiessettlement systems (SSSs).EUROSYSTEM COLLATERAL MANAGEMENTSERVICESThe CCBM has remained the main channelfor transferring cross-border collateral inEurosystem monetary policy and intraday creditoperations. It accounted for 36.7% of the totalcollateral provided to the Eurosystem in 2008.Assets held in custody through the CCBMincreased from €558 billion at the end of 2007to €713 billion at the end of 2008.The CCBM framework has been revised inorder to allow for the integration of new euroarea countries. In this connection, the CCBMAgreement with Národná banka Slovenska wassigned in the context of Slovakia joining theeuro area.Despite its success and considerable contributionto the process of financial integration, theCCBM arrangement has some drawbacks,mainly linked to the fact that it was designed asan interim solution that relies on the principleof minimum harmonisation. These drawbacks,in combination with the growing importanceof cross-border collateral, led to the GoverningCouncil’s decision of 8 March 2007 to reviewthe existing Eurosystem collateral managementhandling procedures and to create a newsingle-platform collateral management systemfor the Eurosystem, called Collateral CentralBank Management, or CCBM2. Marketparticipants were involved by means of publicconsultations and ad hoc meetings in thedefinition of the principles and user requirementsfor CCBM2.Given the positive feedback on the Eurosysteminitiative, the Governing Council decided on17 July 2008 to launch the CCBM2 project.The development and operation of CCBM2, onbehalf of the Eurosystem, was assigned to theNationale Bank van België/Banque Nationalede Belgique and De Nederlandsche Bank, witha view to implementing the system before or, atthe latest, at the same time as T2S.The objective of CCBM2 is to consolidate theEurosystem’s internal systems for collateralmanagement, thereby rendering them moreefficient. In particular, it aims, where possible,to address the drawbacks of the current set-up byoptimising the cost of mobilising collateral andby enhancing liquidity management. The scope ofCCBM2 goes beyond that of the current CCBM,as it will provide for a single set of procedureswith a harmonised level of service for thedelivery and acceptance of all eligible collateral(securities and non-marketable assets) used onboth a domestic and a cross-border basis.The participation of the euro area NCBs inCCBM2 will be voluntary, and a modularapproach will be adopted. CCBM2 will consistof several modules, only one of which – themessage router – will be compulsory for theNCBs participating in CCBM2. Through thismandatory module, standardised interactionbetween the Eurosystem and counterpartieswill be ensured. The other modules, whichdeal with the actual handling of marketable andnon-marketable assets, will remain optional. Thismodular approach gives NCBs the flexibility tochoose the CCBM2 modules that suit their ownneeds and those of their market. CCBM2 willbe able to adjust to changes in the Eurosystem’scollateral and operational framework, as wellas to adapt to market developments in a smoothand timely manner.In the current project phase, detailed specificationsfor users are being developed by the Eurosystemon the basis of the approved user requirements 6 .The Eurosystem will maintain an open dialoguewith market participants throughout thesubsequent phases of the CCBM2 project.See 6 http://www.ecb.europa.eu/press/pr/date/2008/html/pr080717_1.en.html116 ECBAnnual Report2008