The correspondent central banking model
Further to the publication by the European Central Bank (ECB) of the report entitled "The single monetary policy in Stage Three: General documentation on ESCB monetary policy instruments and procedures" (September 1998), the ECB will publish, before the start of Stage Three, a brochure covering the main features of the correspondent central banking model (CCBM) on the Internet at http://www.ecb.europa.eu. Further details of the procedures to be applied for the cross-border use of collateral can be obtained from the national central banks.
Article 18.1 of the Statute of the ESCB requires all liquidity providing operations of the European System of Central Banks (ESCB) to be based on adequate collateral. Moreover, one of the guiding principles of Monetary Union is that counterparties should be treated equally. In seeking to apply these principles to the use of collateral, the ESCB has examined ways of ensuring that all collateral eligible for use either in monetary policy operations or to obtain intraday liquidity in TARGET is available to all market participants, regardless of where in the European Union the collateral or the participant is situated, subject to the limitations on the cross-border use of collateral indicated in the General documentation.
The work of the ESCB has clearly shown that, in the medium to long term, the market operators are developing adequate solutions for the cross-border settlement of collateral. However, in the short to medium term, there is a need for a system offering cross-border settlement which covers the entire EU and is operational from the start of Stage Three.
The ESCB has therefore designed the correspondent central banking model (CCBM) as an interim solution, in order to facilitate the cross-border use of collateral until adequate alternative market solutions are available throughout the Member States of the European Union. The CCBM will enable counterparties to use both tier one and tier two assets on a cross-border basis. The ECB has now completed testing of the procedures and finalised the legal documentation governing the relationships between the central banks.
A list of the collateral eligible for the ESCB's monetary policy operations is available on the ECB Web site. In addition, central banks of EU Member States which are not participating in the euro area from the start of Stage Three are preparing lists of the collateral against which they will extend intraday credit through TARGET. These lists can be obtained directly from the respective national central banks.
In addition to its availability on the Internet, the brochure will be distributed by each of the EU national central banks to interested parties in their respective countries. Copies will also be available from the ECB at the following address: