MIP OnLine - 2019

Hello and Goodbye – changes in the composition of the Market Infrastructure Board (MIB)

September 2019

Sharing its acronym with the iconic movie series Men in Black, the Market Infrastructure Board (MIB), i.e. the management body in charge of Eurosystem initiatives in the field of market infrastructure, has seen some changes in its mandate as well as in its composition. On 31 May 2019, two weeks before the most recent spin-off of Men in Black (featuring a female agent for the first time) hit the cinemas worldwide, the Market Infrastructure Board bade farewell to some departing members – including its chairperson - and welcomed new ones. To mark the occasion, we donned our black sunglasses and set out to speak to them.

To kick off the conversation, we asked Marc Bayle de Jessé, outgoing chairperson and one of the pioneers of the MIB, to look back on his term of office and highlight the MIB’s main achievements.

“The MIB has covered its first governance cycle with great success. Besides its responsibility for the day-to-day operation – including the change management - of the existing TARGET Services, it has proven its ability to manage a multi-project setting with the successful delivery of the TARGET Instant Payment Settlement (TIPS) service and the parallel development of two other projects – the TARGET consolidation and the Eurosystem Collateral Management System (ECMS). Since its establishment, the MIB has been a high-level body capable of steering market infrastructure for Europe. Over time, it has attracted great talent and increased the diversity of its members. It is also worth pointing out that the MIB has been instrumental in making the TARGET Services the first central bank market infrastructure to deliver multi-currency central bank money, with T2S offering settlement in Danish krone and in euro. Settlement in Swedish krona will soon be available in TIPS in addition to settlement in euro.”

When asked what would be his parting words of advice to MIB members, Marc Bayle de Jessé emphasised the importance of forging ahead with the harmonisation process.

“The harmonisation and standardisation of messages and practices are essential for enabling further market infrastructure integration in Europe. In particular, the roll out of ISO20022 is a vital step that must be taken. I wish the MIB a long life and plenty of success.”

We would like to thank Marc Bayle de Jessé for his commitment to the creation of a market infrastructure for Europe and wish him the best in his new position as CEO of CLS.

We also interviewed Johannes Luef, business owner, executive consultant and board member, about his experience as an MIB member. In particular, we were curious to hear what area he was most interested in and if there is something that could be improved or changed in the future.

“It truly was an exciting period for me. I am proud and grateful to have had the privilege – alongside my distinguished MIB colleagues, highly skilled leaders and team members, and hard-working staff of the four national central banks that provide and support the TARGET Services – to define, implement and run the financial infrastructure for payment and securities settlement for all of Europe. T2S, T2, the forthcoming integration of T2/T2S, ECMS and the rising star TIPS have been the focus of my work for the last 3½ years.

We all worked very hard, giving our utmost attention to delivery and operation. Mission completed? Perhaps not. It may seem counterintuitive and difficult to identify where further improvements or changes could be made given this successful context. But let me try.

I think the MIB should consider whether it would be worthwhile investing more time and effort on strategy, market(ing) and innovation issues. Regarding TIPS, for example, the question from a strategic point of view could be how marketing and influencing behaviour could help overcome the reluctance of banking communities to use the service.

Another example is T2S, a fixed-cost business allowing little room for manoeuver to reduce costs. The strategic question, therefore, would be how to boost volumes in terms of new markets and instruments. There are definitely many other areas of innovation to be considered, including in tech, new business trends and cyber resilience. I expect, though, that these and other issues will be investigated thoroughly in the forthcoming strategic period (Vision 2020+?). And I am convinced that the financial superhighway of Europe is in the very best of hands with the MIB. I would like to wish everyone the very best for the future.”

In the coming years, the MIB has plenty of work in store. The full deployment of TIPS will be a decisive factor in the rollout of pan-European instant payment products and services based on the SEPA Instant Credit Transfer scheme. In addition, the consolidation of TARGET2 and T2S will mark a major upgrade for the TARGET2 real-time gross settlement (RTGS) services. It will also facilitate enhanced liquidity management procedures for market participants across the Eurosystem, reduce operational costs and enhance cyber security. The development of a Eurosystem Collateral Management System will establish a harmonised platform for collateral operations across the Eurosystem. Knowing what lies in store, we asked the three new members of the MIB why they decided to apply for membership.

Petra Hielkema, Director Payments and Market Infrastructures at De Nederlandsche Bank, pointed to the key role of the MIB in running and developing the TARGET Services, even more so under the new MIB mandate set out in January 2019, which established that the MIB will convene in one common composition as it no longer requires dedicated formats for its efficient functioning.

“The new common composition ensures a good overview of all services and projects, and allows the MIB to steer priorities. A good example of delivery is TIPS. TIPS was delivered in less than a year by keeping a strict focus on the need for interoperability and cross-border settlement in the instant payment space; it was a great step towards instant payments as the new normal in Europe.”

Likewise, Marc Lejoly, Head of Payments & Securities Service at the National Bank of Belgium (NBB), was attracted by the opportunity to reinforce his contribution to the EU financial market infrastructure.

“Since 2008, I’ve been contributing to the construction of T2S by actively sharing the technical expertise of a NCB CSD. It enabled me to learn a lot thanks to very fruitful interactions with all of my colleagues. The key drivers behind my active participation in the T2S project were not only the opportunity to update the NBB’s internal application for CSD management but also (and mainly) the opportunity to contribute to the creation of one important building block to support a more efficient capital markets union.

For 2 years, I’ve also been supervising the NBB team running and monitoring daily T2/TIPS operations for the Belgian financial community. When the opportunity to join the MIB arose, it seemed like the natural next step for me to take to apply and reinforce my contribution to the integration of the EU financial market infrastructures.”

Ralf Ohlhausen, owner of PayPractice and executive adviser at PPRO and Tink, two of the most prominent payment fintechs in Europe, joined the MIB as a non-central bank member. Like the other two new members, he emphasises the importance of the TARGET Services for Europe.

“The MIB is instrumental in moving Europe towards a more common infrastructure for financial services, which in turn is driving the efficiencies needed for our finance industry and our economies to stay ahead of other global regions. TARGET Services enable us to leverage synergies, which less integrated markets cannot do. Hence, I believe this gives our Member State economies an important edge and their citizens a good reason to be and stay in the European Union, which is something I am very keen to contribute to!”

Looking ahead, we asked the new members about the area they would most like to focus on and drive forward, and where they think the biggest challenges will come from in the next two years.

Marc Lejoly identified both ensuring the day-to-day operation and the evolution of the key Eurosystem applications in the securities and payments area as tasks that create a lot of appetite for action.

“On the day-to-day side, the MIB focuses on the efficiency and resilience of the core systems. It is fully in line with the in-house mindset. Local and global experiences will therefore feed off each other.

Looking forward and focusing on the evolution side, the upcoming T2/T2S consolidation project, the new ECMS pillar and the additional harmonisation challenges, i.e. common modules, tri-party models, corporate actions and billing that we are currently implementing, are adding a lot of flavour to the menu.”

For Ralf Ohlhausen, payments are the centre of attention. He lays out his vision of instant payments as the new normal across Europe for any payment situation.

“Payments are my passion and an area where some other regions have done better up to now and where we have to expand our capabilities to regain sovereignty. We must catch up and should strive to strengthen European governance in payments. In this context, TIPS has a core role to play in providing reachability and instant settlement in central bank money. We already have the building blocks required to make instant payments the new normal. Now we need banks, fintechs and retailers to cooperate and make it work. I am looking forward to the day when I can pay straight from my bank account anywhere in Europe and even worldwide without the need for any additional payment instrument.”

Although the MIB does not have to deal with any alien attacks like its namesake movie, it does face plenty of challenges. Petra Hielkema points to cyber resilience/cyber security, which is a key priority for the Eurosystem that will require continuous attention.

“With the cyber security testing and intelligence experience we have at De Nederlandsche Bank, I hope to contribute to the robustness and safety of Europe’s key market infrastructures. Safeguarding our European market infrastructures against continuously changing threats will be one of the MIB’s toughest challenges. I think however that, with the combined knowledge we have as the MIB and the national central banks we come from, it is a challenge that we can face jointly. I look forward to working with my MIB colleagues to promote safe and efficient payments in Europe.”

To be able to fulfil its mandate, it is vital that the MIB has a good governance model. Michael Power, Head of Procurement at Central Bank of Ireland and former MIB member, will continue as controller in the new MIB environment. We asked him about the importance of the role of controller as part of a good governance model.

“The classical programme/project governance structure incorporates the respective project management functions of the client and the provider and an overseeing steering group to which the project management report. Where scope and/or complexity feature strongly, there are clear governance benefits achievable through the addition of a Programme Controller role to the mix.

As the role does not have managerial authority and operates without a reporting line to either the provider or the client, the Controller is independent and thereby empowered to evaluate and/or challenge relevant aspects of the project with objectivity and impartiality.

The Controller will evaluate prudence, help to identify latent risk, and assess whether “value for money” is being achieved overall. The Controller may then endorse or challenge the project across these and related criteria. In the context of the projects under the control of the Market Infrastructure Board, the assessments of the Controller are provided to the Governing Council and grant senior governance awareness of endorsement or challenge.

The Controller role therefore provides an independent and alternative voice within its mandate and may act as a counterbalance in complex programme delivery situations. The Controller role is therefore an important component of a good governance model in large programmes of work.”

Fortunately enough, new MIB members do not need to have their former identities erased, and departing members do not have to have their memories wiped, like the agents in the eponymous movies. We are therefore confident that the new MIB, which will be chaired by the newly appointed Director General Market Infrastructure and Payments Ulrich Bindseil, has been and will continue to be a source of experience for the departing members, as well as an opportunity for new members to bring in their expertise and knowledge. We thank the outgoing and new members for sharing their insights with us and wish them the best of luck in their personal and professional futures.