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“The potential impacts for the market and for Europe of this proposal are significant and we believe that it would be inappropriate at this early stage for the ECB to make a firm commitment to implement T2S”, the Association states.
ECSDA states that there is a risk that the ECB could put itself in a position where it combines the roles of a monopolistic supplier of IT-infrastructure for CSDs regarding their securities settlement services. Furthermore, the feasibility study has not sufficiently considered the wider questions of governance and accountability.
Also, the T2S project has been making a growing number of statements relating to the scope, feasibility, budget and pricing for T2S (and even its impact on European GDP) with a degree of firmness and certainty which cannot be justified at such an early stage of the proposal, the Association states. “
“It is imperative, however, that this be done in a sensible timeframe and in an atmosphere which encourages collaborative debate and expert discussion. That atmosphere will be difficult to sustain if the ECB makes a “go/no go” recommendation to the Governing Council in the timescales currently being considered.”
Responding on these complaints Jean-Michel Godeffroy, Director General Payment Systems and Market Infrastructure, laid out that “a lot of these concerns are based on the belief that the Governing Council will soon make a definitive “go/no go” decision. In fact, the Governing Council will simply be asked, if they conclude that the project is “feasible” and whether the next phase of the project should be launched”, he said. “At the end of that phase, a new evaluation of the merits of the project will be done, in particular by CSDs and their users.”
With regard to a possible conflict of interests, between the operational function and the oversight function of central banks, Mr Godeffroy recalled that central banks are public authorities and that, for us, both oversight and operation instruments can be used to meet our statutory objectives, such as the smooth functioning of payment systems. “Moreover, in the field of payment systems we have developed tools to deal with this issue, such as the need to strictly separate the oversight and operation functions in distinct units”, he said.
Mr Godeffroy finally lined out that, in a T2S context, CSDs would be under greater competitive pressure to (a) settle assets issued in other CSDs and thus (b) be ready to process corporate actions on these assets. “The ECB does not consider as a prerequisite for achieving a single point of access that every CSD follows the above mentioned path”, he said. “We are not expecting that all CSDs would be willing to do this, but we do expect that at least a few will. We simply consider that this is a business opportunity, but it is by no means an obligation.”
EASCDA letter
Response by Jean-Michel Godeffroy, Director General Payment Systems and Market Infrastructure
Market feedback to the Eurosystem proposal on governance of T2S