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Inside magazine issue 12 | Part 02 - From a regulatory perspective “T2S will consolidate settlement— the most fundamental part of the securities infrastructure value chain—across all countries in Europe. It will be a state-of-theart settlement engine offering centralized delivery-versus-payment (DvP) settlement in central bank money to the whole European market. It will be operated by the Eurosystem 1 on a cost-recovery basis, to the benefit of all users. T2S will be neutral in respect to all countries and market infrastructures and with respect to the business models adopted by all CSDs and market participants.” European Central Bank “Central bank money is the technical term used to refer to money that can only be created by a central bank. Central bank money comprises the coins and banknotes that the central bank brings into circulation as well as the sight deposits held by third parties at the central bank. The sight deposits that commercial banks hold at the central bank are used for the settlement of payment transactions.” Deutsche Bundesbank 66
Inside magazine issue 12 | Part 02 - From a regulatory perspective TARGET 2 Securities Time to settle Laurent Collet Partner Strategy, Regulatory & Corporate Finance Deloitte Christian Westerholt Director Strategy, Regulatory & Corporate Finance Deloitte Mayank Dalmia Analyst Strategy, Regulatory & Corporate Finance Deloitte T2S (TARGET 2 Securities) will connect participating national Central Securities Depositories (CSD) to allow seamless and uniform securities settlement in central bank money. What it is T2S offers many benefits to not only its direct participants, i.e., the CSDs, but also to all the clients making use of the respective CSDs. The system, which is based on central-bank-money payments, is safer and more independent than other systems as the Eurosystem is responsible for running it. Indeed, due to the composition of the Eurosystem, it is neutral with respect to all countries and stakeholders. Additionally, the running of the T2S system is not incentivized by economic motives. Rather, its goal is to create a pan-European settlement system that is comparable in its simplicity to a domestic system, in terms of cost, technical processing and efficiency. Furthermore, the present market infrastructure is highly complicated, requiring the interaction of multiple CSDs with their own sets of rules, rates and modus operandi; T2S aims to untangle this web of complexity and establish a set of universal rules and methods to apply to T2S and therefore, all participating CSDs. Not only would this lead to a significantly simpler system, but it would also lower the costs of cross-border transactions and fees. The Eurosystem is a capable, trustworthy and proven manager of T2S as it has vast experience of successfully designing and implementing pan-European financial infrastructure and institutions. Moreover, central bank money does not carry the same level of default risk as commercial bank money. It is also worth noting that the T2S platform is solely a settlement platform that deals with the respective CSDs of participating nations. Hence, the CSDs remain responsible for any legal liabilities in dealing with their clients as well as services or management of client accounts, including custody, asset servicing, corporate action processing and reporting. 1. The Eurosystem consists of the European Central Bank and the central banks of the member states within the Eurozone. 67
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Inside Triannually insights from De
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Inside magazine issue 12 | Contents
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Inside magazine issue 12 | Foreword
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Inside magazine issue 12 | Part 01
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Inside magazine issue 12 | Contacts
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