IT

Securities & Clearing

The European Banking Authority estimates that the European financial crisis has created the need to consolidate assets worth in the region of €100 billion. This has forced monetary authorities to rethink the environment in which banks carry out their lending activities.

 

There is a need for efficient collateral management. For this reason, the financial community requires retail and large value payment systems to evolve in favor of the development of the backed securities market. This will prevent new financial and monetary crises with global and systemic impact.

Current collateral management processes show both internal (relating to the specific business model of each market player) and external (determined by markets and platforms) inefficiencies. These are estimated to cost €4 billion per year, with 10 per cent owed to over-collateralisation i.e. the use of more guarantees than actually necessary.

The European Commission and European Central Bank want to create the optimal conditions for an efficient and transparent market to ensure the liquidity of financial products are guaranteed by securities. As such, they created MiFID I and II, EMIR, CSD Regulation and PSD. These ensure a single European market for financial instruments as they pass through the regulatory harmonisation of the four main phases of securities transactions (trading, clearing, settlement of securities and cash settlement).

The revision of Basel II and III, SEPA (an efficient system for retail payments), TARGET 2 (large value payments, CCBM (transfer and collateral management system to support the activities of payments) and finally TARGET2-Securities /T2S (a securities settlement engine integrated with the world of large value payments to provide necessary liquidity to the market), can be considered as the pillars of the European Payments System.

These all play a significant impact on the initiatives of banks, investment firms, central banks, central securities depositories and national markets. Traditionally, investment and organisational changes were dictated by each banking player. These changes were individual to each bank. This new regulatory scenario requires compulsory changes that must be implemented immediately and within an increasingly shrinking time-frame.


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