ESBG Comments on ESCB–CESR Public Statement on Clearing and Settlement

22 September 2005

The European Savings Banks Group (ESBG) issued its response to the ESCB–CESR Public Statement on Clearing and Settlement. The ESBG recommends strongly that ESCB–CESR remove custodian banks from the scope of the Standards. Any decision to the contrary can only be based on well documented evidence that custodian banks create systemic or other risk that is not addressed adequately by existing or planned banking legislation.

No evidence has been produced to document the existence of potential risks in the clearing and settlement activities of custodian banks that are not already covered by banking regulation and supervision. Also, the original justification of significant “internalization“ activities or the granting of substantial amounts of credit, either intraday or overnight now seems unfounded, as documented in the ESCB–CESR Summary of Interviews with Custodians dated 30 March 2005.

The ESBG believes that EU banking legislation and banking regulation under Basel II is and should remain the only reference for banking prudential regulation to prevent double regulation.

Under all circumstances, custodian banks should be excluded explicitly from the provisions of Standards that overlap with existing or planned banking legislation.

Finally, the ESBG urges that the whole Standards process is put on ice until such time as the Commission’s intentions concerning securities clearing and settlement are clear.

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