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TARGET2-SECURITIES Economic Impact Analysis

TARGET2-SECURITIES Economic Impact Analysis. 28 March 2008 Jaap Mauritz. Background. An integrated platform for the settlement of securities transactions in CeBM in the Eurozone

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TARGET2-SECURITIES Economic Impact Analysis

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  1. TARGET2-SECURITIESEconomic Impact Analysis 28 March 2008 Jaap Mauritz

  2. Background • An integrated platform for the settlement of securities transactions in CeBM in the Eurozone • The model can offer advantages in terms of efficiency and cost-cutting, provided that a critical mass of CSD’s actually joins and the system can be developed at reasonable costs • For the longer term: 2013

  3. Background • CSD’s outsource the administration of securities accounts to the Eurosystem, which then manages the securities and associated cash accounts on the platform. • Dedicated cash accounts on T2S are feeded by cash accounts from T2 • At the beginning of the day both cash and securities accounts are moved to T2S • At the end of the day the money goes back into the TARGET2 payment system, and the securities return to the CSD’s • Only securities settlement, CSD’s keep the custody and notary functions

  4. Milestones • Consultation User Requirement Document (URD): • Deadline 1 April 2008 • Economic Impact Analysis Questionnaire: • Deadline 15 April 2008 • Governing Council decision: Summer 2008

  5. Economic Impact Analysis Assumptions Scenario 1 • T2S is built according to URD as under public consultation • All settlements in central bank money in the euro area CSDs are processed in T2S • Figures based on current fees and volumes for 2007

  6. Economic Impact Analysis Assumptions Scenario 1 • Complete reshaping with respect to settlement of securities • CSDs continue to offer their existing services: nothing less, nothing more (e.g. new business opportunities are not taken into account, e.g. no additional CSD links). • Customers continue to use CSD or custodians as of today • CSDs offer both direct and indirect connectivity

  7. Economic Impact Analysis Other scenario’s • Scenario 2: all European currencies and CSDs (at least GBP, DKK, CHF and SEK) are in T2S • Scenario 3: CSD-investments continue as currently planned despite T2S and minimum reshaping at CSD level. • Scenario 4: only part of the CSD traffic goes to T2S

  8. Questionnaire for T2S usersAim: determine the net impact of T2S on T2S users T2S Users to evaluate: • Settlement volume and fees for 2007 • Settlement directly with CSDs • Settlement through custodian banks • Impact on operating/running costs • Operating cost reductions in treasury processes due to T2S, including potential revenues from currently unused liquidity and collateral holdings • Operating costs related to settlement today and with T2S in the future (e.g. reduction of interfaces) • Investment cost related to settlement • Average annual investment cost 2001-2006 • Expected investment cash-flows during development phase 2007-2012

  9. Questionnaire Strict confidentiality framework • Only 3 internal ECB staff members will temporarily access individual data/information. • Data to be destroyed afterwards. • Compilation to be confirmed by independent third party, e.g. external auditor

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