Assessment of links between securities settlement systems and updating assessment of securities settlement systems
At its meeting on 20 May 1999, the ECB's Governing Council approved a list of links between securities settlement systems (SSSs) that can be used for the transfer of foreign collateral in the Eurosystem's monetary policy and intraday credit operations. Furthermore, the Governing Council updated the operational conditions for the use of eligible SSSs in the settlement of collateral used in Eurosystem credit operations.
1. Assessment of links to be used by the Eurosystem
The Governing Council concluded that 26 links comply with ECB standards and are thus eligible for the cross-border use of collateral used in Eurosystem monetary policy and ESCB intraday credit operations (see Table 1). These links will be eligible only on a free-of-payment (FOP) basis. When using a link deemed to be eligible by the Eurosystem, the relevant SSSs should allow the links to provide any information required by the lending NCB.
Further assessment of other links is in progress and other links may be eligible in the near future, as soon as their assessment has been completed. The Governing Council intends regularly to publish a list of links that comply with ECB standards.
Table 1: Eligible links to be used by the Eurosystem
|Links established by investor SSS||to issuer SSS|
|Euroclear (Belgium)||NBB SSS (Belgium) Cedel (Luxembourg) DBC (Germany) OeKB (Austria) VP (Denmark) CGO (United Kingdom)|
|DBC (Germany)||Sicovam (France) Necigef (the Netherlands) OeKB (Austria) APK (Finland)|
|Sicovam SA (France)||DBC (Germany) Necigef (the Netherlands) Monte Titoli (Italy) OeKB (Austria)|
|Cedel (Luxembourg)||Euroclear (Belgium) CGO (United Kingdom) DBC (Germany)|
|Necigef (The Netherlands)||Sicovam (France) DBC (Germany) OeKB (Austria)|
|OeKB (Austria)||Euroclear (Belgium) DBC (Germany) Sicovam (France) Monte Titoli (Italy) Necigef (the Netherlands)|
|APK (Finland)||DBC (Germany)|
Some specific recommendations have been given to some SSSs in order to increase the safety of the links. These recommendations were related to the following issues:
- automated network procedures should be used when dealing with a high volume of cross-border transactions in order to reduce communication risks;
- additional measures should be implemented in order to reduce the risk that NCBs might face in the event that: (i) there is a time lag between the settlement finality of the issuer SSS and that of the investor SSS; (ii) there is an indirect link, via a third party, in parallel with the direct link; (iii) there are triangular transactions (i.e. involving more than two SSSs).
The Governing Council has evaluated the Eurolink model developed by the European Central Securities Depositories Association (ECSDA). It was concluded that this model generally complies with ECSB standards, provided that recommendations similar to those above are followed. The Governing Council also made clear that each link established according to this model or otherwise will be assessed separately on its own merits.
The Governing Council is currently discussing the possibility of allowing an NCB to have remote access to a foreign SSS; a decision can be expected in autumn.
2. Update of the assessment of SSSs
The SSSs have made substantial efforts to enhance their level of compliance with the standards and, as a result, the preconditions attached to their use have been reduced in many cases. At this stage, it should be noted that the requirements of the central banks depend on whether they make use of a pooling system or repurchase agreements for the settlement of Eurosystem credit operations. In those countries in which pooling systems are in place, it is not necessary to use delivery versus payment (DVP) facilities to fill the pool of pre-deposited assets. In such systems securities are delivered by way of a batch process and a real-time free-of-payment facility is only needed under exceptional circumstances. Nevertheless, the SSSs of these countries offer DVP facilities (real-time or not) for market operations.
In this respect, as shown in Table 2, there are now five SSSs (Sicovam SA-RGV, Necigef, Siteme, Interbolsa and APK/RM system) in the euro area that can be used without preconditions, compared with one SSS in July 1998. In addition, ten other SSSs have improved their level of compliance substantially and the operational conditions have been improved for the counterparties.
Table 2: Operational conditions for the use of eligible SSSs in the euro area (as of January 1999)
|Country||SSS to assess||ELIGIBILITY|
|Belgium||NBB Clearing system CIK Euroclear||DVP until 4.15 p.m., then on a free-of-payment basis. DVP or free-of-payment basis with pre-deposited securities after 4 p.m. Free delivery basis and with pre-deposited securities after 4 p.m.|
|Germany||DBC||Free delivery basis or DVP through RTS until 4.30 p.m. and then on free delivery basis.|
|Spain||CADE SCLV, Espaclear SCL Barcelona SCL Bilbao SCL Valencia||Free of payment basis. For these five SSSs only with pre-deposited securities for intraday requirements.|
|France||Sicovam SA RGV||DVP or free-of-payment basis.|
|Ireland||CBISSO NTMA||Free delivery basis. Free delivery basis.|
|Italy||LDT CAT Monte Titoli||Not for intraday requirements. Free delivery basis. Free delivery basis.|
|Luxembourg||Cedel||Free delivery basis.|
|Netherlands||Necigef||DVP or on a free delivery basis.|
|Austria||OEKB system||DVP or free-of-payment basis and with pre-deposited securities after 5 p.m.|
|Portugal||Siteme Interbolsa||DVP or free-of-payment basis. DVP or free-of-payment basis.|
|Finland||APK/OM system APK/RM system||With pre-deposited securities. DVP or free-of-payment basis.|
Table 3: Operational conditions for the use of eligible SSSs in the European Union, but outside the euro area (as of January 1999)
|Country||SSS to assess||ELIGIBILITY|
|Denmark||VP||DVP until 3 p.m. or on a free delivery basis.|
|Greece||BOGS||DVP or free-of-payment basis and with pre-deposited securities after 4 p.m.|
|Sweden||VPC system||DVP or free-of-payment basis.|
|United Kingdom||CGO CMO CREST||Free delivery basis and with pre-deposited securities after 3.45 p.m. Free delivery basis and only with pre-deposited securities after 5.45 p.m. Free delivery basis and only with pre-deposited securities after 4 p.m.|