Ecofin to say ‘yes’ to ECB settlement plan

European Union finance ministers are expected to support the European Central Bank (ECB)’s plans to launch a feasibility study for a new securities settlement system when they meet on Tuesday (27 February).

But Ecofin, the grouping of finance ministers, will ask the ECB to clarify its plans for the governance of the new system. It will also ask the ECB to demonstrate conclusively the cost-effectiveness of its proposals.

In July of last year the ECB announced that it was studying whether or not to set up a cross-border securities settlement system dubbed Target 2 Securities (T2S) with the aim of cutting dramatically the cost of settling deals in listed shares and bonds.

Creating T2S is supposed to accelerate the cross-border integration of the EU’s clearing and settlement structures, the pipes through which cash flows in payment for securities.

The ECB has stressed that T2S would be a narrow settlement platform and would not be designed to compete directly with the highly profitable custody functions now provided by central securities depositories and agent banks such as BNP-Paribas and Citicorp.

The ECB also sees T2S as complementary to efforts by Charlie McCreevy, the European internal market commissioner, to improve the efficiency of EU clearing systems. The ECB has been hoping to move the T2S proposal forward next month. Critics have been questioning whether the central bank has the legal power to launch T2S, how users would be able to influence its future development and whether a public sector body should in principle provide even this limited settlement service.

European Union finance ministers are expected to support the European Central Bank (ECB)’s plans to launch a feasibility study for a new securities settlement system when they meet on Tuesday (27 February).