T2S legal architecture

T2S presents a further challenge in the form of creating an appropriate legal framework for its design and operation. It will operate under the existing legislative and regulatory framework with two distinct legal dimensions: (I) the internal Eurosystem-related legal framework and, (II) the external contractual framework with the central securities depositories (CSDs) and the non-euro area central banks.

(I) The main legal instrument concerning T2S will be the T2S Guideline, a legal act that is internal to the Eurosystem and addressed to the euro area central banks.The T2S Guideline will represent the culmination of the previous decisions of the Governing Council of the ECB, in particular that of 17 July 2008 to launch the T2S project and that of 19 March 2009 on the establishment of the T2S Programme Board.

The T2S Guideline will set out fundamental rules concerning the governance of T2S, which comprises three levels.

The T2S Guideline will set out fundamental rules concerning the governance of T2S, which comprises three levels. On the first level of governance, ultimate decision-making in relation to T2S is vested in the Governing Council, which assumes overall responsibility for T2S and, under Article 8 of the Statute of the European System of Central banks and of the ECB, is the ultimate decision-maker for the whole Eurosystem.On the second level of governance, the T2S Programme Board was established as a streamlined management body of T2S, preparing decisions of the Governing Council, and taking decisions on its behalf in a limited number of instances. Finally, the third level of governance is composed of the four national central banks (4CB) that will develop and operate T2S. The T2S Guideline will further specify the roles and responsibilities of the T2S Programme Board and of the 4CB, and their interrelationship, as well as basic procedures concerning the management of T2S and its fundamental principles.

Additional details concerning the relationship between the Programme Board and the 4CB, in particular procedural and technical aspects, will be contained in the Level 2/Level 3 Agreement. Both legal acts are under preparation with the aim of being finalised by the end of this year.

The external legal relationship with the CSDs will be governed by contracts between the Eurosystem and the CSDs that will be fully harmonised (known as the Framework Agreement).

(II) The external legal relationship with the CSDs will be governed by contracts between the Eurosystem and the CSDs that will be fully harmonised (known as the Framework Agreement). Pursuant to the Memorandum of Understanding of 16 July 2009, the Task Force on T2S Contractual Issues will have the task of facilitating the drafting of the Framework Agreement, which will be negotiated between the Programme Board and the CSDs.

Finally, the Programme Board will negotiate currency-participation agreements with the non-euro area central banks concerning terms and conditions for the use of currencies other than the euro in T2S. Non-euro currencies are also eligible for use in T2S, provided that the central banks or other authorities responsible for such currencies enter into an appropriate currency agreement with the Eurosystem, upon approval of the Governing Council.