T2S community: the people behind the project

Jean-Michel Godeffroy, chairman of the T2S Programme Board

The Governing Council of the ECB decided that T2S would be run and managed by the Eurosystem. Today, I would like to present the organisational structure used by the Eurosystem in the context of T2S. My objective is not only to be transparent for external stakeholders, but also to bring to light the hard work done by many colleagues within the Eurosystem, whose contribution to T2S is crucial, but perhaps not widely visible.

The Eurosystem is composed of the ECB and 16 national central banks. Like the US Federal Reserve, the Eurosystem follows a specialisation model. Instead of all central banks doing everything (fully-fledged decentralisation) or the central body (ECB or Federal Reserve Board) performing all tasks with relevance for the system (centralised model), the objective of the specialisation model is to find a solution whereby system tasks are distributed fairly throughout the system and allocated to those central banks which are best equipped to fulfil the system’s objectives.

In the case of T2S, the Governing Council has been able to build on the very positive experience of TARGET2, the Eurosystem’s single platform for cash transactions that went live in 2007. TARGET2 was developed by the “3CB” team, composed of the Deutsche Bundesbank, Banque de France and Banca d’Italia, under the supervision of the 3CB project manager, Vincent Bonnier. As we all know, TARGET2 has been a huge success, with the project being delivered on time and within budget, providing users with a significantly enhanced service for their cash management. Vincent Bonnier has subsequently been chosen as the project manager for T2S. Given that T2S is a much more complex project than TARGET2, the development team has been expanded to also include the Banco de España. T2S can now benefit from what has become the “4CB” team.

The ECB is by no means absent from the picture and plays the crucial role of “captain of the Eurosystem team”, as was the case in the development of TARGET2. Marc Bayle is the T2S programme manager at the ECB, fulfilling a similar role to that of Dieter Becker in the case of TARGET2. The work of the ECB’s team consists of the overall management and coordination of the project, as well as the provision of support to the work of the T2S Advisory Group and the Programme Board. But it also includes more technical matters such as compiling the user requirements, designing the operational framework, testing and migration strategies, maintaining relations with central securities depositories (CSDs) and users, providing advice on all legal issues and preparing the contractual agreements.

The ECB plays the crucial role of the "captain of the Eurosystem team".

In this way, the 4CB and ECB teams have specialised in areas where they have a comparative advantage; yet all the entities work together to form a cohesive whole. Although T2S is not run as a separate entity within the Eurosystem, it nevertheless looks like a company that has two main subsidiaries. The 4CB is one of the subsidiaries. This subsidiary has 200 staff working in four different “factories” (the four central banks), each of which specialises in producing different components of the end product. The ECB is the second subsidiary, with its own factory and 58 persons working on T2S. I should add that these figures only take into account colleagues who work full time on T2S. To provide a complete picture, staff members that provide support to the T2S project, for example in the human resources department, should be included in this figure.

The Governing Council is the “company’s” highest decision-making body. But it also has many other responsibilities, including a primary responsibility for monetary policy. Therefore, even though the governors are following the project very closely, the amount of time they may devote to it is clearly limited.

The T2S Programme Board manages the project on a daily basis and prepares strategic and policy decisions for the Governing Council.

The Governing Council therefore created the T2S Programme Board to act as the executive body to manage the project on a daily basis and to prepare strategic and policy decisions. The Programme Board plays a role similar to that of a corporate management board, while the Governing Council acts, to some extent, like a supervisory board. As chairman of the T2S Programme Board, I have to say that I appreciate the different backgrounds, experience and perspectives of the other members and enjoy the lively debates that often follow. I feel that such open discussions can only be beneficial for the project.

The T2S Programme Board and the relationships with the 4CB and Governing Council constitute what we call the “internal governance” of the project. The “external governance” comes from the future direct users of the T2S system: central banks and CSDs, as well as custodian banks, central clearing counterparties and other intermediaries. These various stakeholders are brought together in the form of the T2S Advisory Group, made up of a total of 80 representatives of the above groups. I cannot emphasise enough how useful the work of the Advisory Group has been and will continue to be in the future. It ensures that T2S is not a bureaucratic endeavour, but instead a project which brings a lot to the European securities market. There is a large consensus that the Advisory Group should continue to exist, at least until the completion of the project in 2013.

Some issues require bilateral discussions with a specific group of stakeholders. This is the case now for the discussion and negotiation of the Framework Agreement with the CSDs that are planning to participate in T2S. To negotiate the agreement, a “CSD Contact Group”, composed of the CEOs of the CSDs, has been established. The CSD Contact Group will be supported by two sub-structures, tackling legal and business issues respectively.

I cannot emphasise enough how useful the work of the Advisory Group has been and will continue to be in the future.

I am conscious that part of the reason why we named our newsletter “T2S OnLine” was because we were planning to publish it only on the T2S website and not to print it. However: second issue, second exception! We made an exception for our first issue and printed it for SIBOS. This issue has been printed for Euro Finance Week, which is taking place in Frankfurt from 16th to 20th November. The ECB’s T2S team will be present at one of the stands at the event and will be happy to answer any questions you may have about the project.

As usual, this issue of T2S OnLine includes an update on the project status and the main decisions that have been made by the T2S Programme Board. It also includes an interview with 4CB project manager, Vincent Bonnier, and an article on the T2S programme plan. Lastly, “Bayle’s view” gives you a flavour of the interesting discussions that lie ahead with regard to the pricing of T2S services.