New procedures for the transfer of securities used as collateral for Eurosystem credit operations
The Governing Council of the European Central Bank has decided that relayed links between securities settlement systems (SSSs) may be used for the cross-border transfer of securities to the Eurosystem. A relayed link is a contractual and technical arrangement that allows two SSSs not directly connected to each other to transfer securities through a third SSS, which acts as an intermediary.
The cross-border transfer of securities is required for the provision of collateral for Eurosystem credit operations. Since the start of Stage Three of Economic and Monetary Union, the Eurosystem has encouraged the market to provide technical solutions for the cross-border transfer of collateral. The “Standards for the use of EU securities settlement systems in ESCB credit operations” adopted in 1998 by the then European Monetary Institute (the so-called “Eurosystem user standards”) already allow counterparties to use direct links between SSSs for the transfer of securities used as collateral for Eurosystem credit operations.
With its decision today, the Governing Council is responding to a growing demand by market organisations for the acceptance of securities transferred through relayed links.
In order to prevent the Eurosystem from being exposed to any unacceptable risks when conducting its credit operations, a relayed link between SSSs will be considered eligible only if it:
- links eligible SSSs (i.e. SSSs complying with the Eurosystem user standards);
- is already used by counterparties; and
- complies with the Eurosystem user standards.
Relayed links are thus eligible only after an assessment has been carried out to ensure that the aforementioned conditions have been met. For this purpose, a new methodology for the assessment of relayed links has been developed, taking into account the specific user requirements of the Eurosystem.
The Eurosystem would like to invite interested parties to submit requests to have relayed links assessed. Requests should be sent to the relevant national central bank.