“The objective of T2S was to create an integrated infrastructure which would support capital markets on a European scale. Until now, the securities landscape in Europe has been characterised by numerous securities settlement systems, divergent laws governing securities depositories and different rules for post-trade processes. This is highly inefficient, increases risks and leads to a significant waste of resources. T2S has started a process that will change this completely. T2S will in fact bring numerous benefits, including the following:
· Processing costs for cross-border transactions will decrease drastically.
· It will foster safety and financial stability by settling securities directly in central bank money.
· It will allow for economies of scale without requiring that securities depositories be merged. In the T2S model, securities depositories are the gateways through which market participants can access securities in T2S. Securities depositories will maintain all other functions such as their notary role, asset servicing and services for issuers.
· T2S will facilitate collateral management for market participants as it will make it easy to transfer collateral across borders. This is a key feature because demand for collateral has increased since the financial crisis, owing to both market conditions and new regulation.
I would like to spend a few moments on the governance structure of T2S as I believe that it is one of the reasons for the success of the project.
If I were to show you the T2S governance chart, you would probably describe it using the word “complex”. I would tend to agree that a four-level governance structure with hundreds of institutions involved is complex. However, it has proven its effectiveness in resolving difficult matters in a swift and efficient manner, keeping in mind the common goal of ensuring the timely and successful launch of T2S.
On the regulatory side, remarkable progress has also been made with the adoption of the CSD Regulation. This new piece of EU legislation complements the operational integration provided by T2S and gives further momentum to the post-trade harmonisation efforts. It has removed a number of the barriers to reaching a fully integrated market and is thus very much welcome.
The next step forward will be the CMU, for which we have high expectations. If well designed and thoroughly implemented, CMU could bring significant benefits to the EU. T2S and the implementation of the CSD Regulation have already removed a number of the market infrastructure barriers. CMU has the potential to remove the remaining ones. Beyond market infrastructures, the aim of CMU should be to integrate financial markets in such a way that investors and issuers of financial instruments have equal access to these markets, under equal conditions. Similarly to the harmonisation agenda surrounding the development of T2S, CMU will require both market-led efforts towards greater harmonisation and legislative action to dismantle key cross-border barriers in a wide range of areas. This will help set the right framework conditions for these markets to develop and integrate. In fact, TARGET2 and T2S show that genuine integration, rather than mere coordination, is essential to have well-functioning markets which can fully play their role in supporting the economy.”
Full speech
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