|
|
Financial integration is essential for an effective monetary union and relevant to financial stability, to which we contribute. The Eurosystem’s task of promoting well-functioning payment systems, as part of its monetary policy mandate, is also supported by financial integration. And it is not something we can take for granted: incomplete financial integration creates vulnerabilities. This is why, in the past few years, fundamental steps towards an integrated and developed capital market have been taken at European level. The banking union and the capital markets union are important initiatives which have the potential to change the structure of the euro area’s financial architecture.
A single market for capital is needed primarily because it can improve the efficiency of credit allocation, it can enhance risk-sharing and it can foster diverse sources of financing. Indeed, it would strengthen the economic resilience of Economic and Monetary Union as a whole by providing the ECB with alternative channels for transmitting monetary policy and by enabling capital markets to play a role in cushioning asymmetric shocks.
However, to facilitate the mobility and free flow of capital and financial assets across Europe, it is essential that an efficient underlying infrastructure is in place. A lot has been achieved already, but still we need to ensure that we use the market infrastructure as effectively as possible.
The large market players which have migrated to T2S have given us very positive feedback. T2S has not only harmonised the settlement of securities across Europe and brought forward post-trade harmonisation in at least nine out of the 15 Giovannini barriers, it has also optimised their liquidity and collateral management, which many regard as being the greatest benefit. We can conclude that the benefits brought by T2S are widely recognised.
The single securities settlement platform has also led to greater freedom in the mobility of securities, in particular for the purpose of collateralisation: this is true for all securities used in Europe. An example of that is “Eurobonds” (i.e. issues made mostly through the ICSDs). Since the T2S launch, both Clearstream Group and Euroclear Group have publicly announced that their group (offering both CSD and ICSD services) will give their customers the possibility to settle all securities on the T2S platform. For market participants such as central banks, this is a key benefit, providing greater collateral mobility and greater liquidity efficiency (in particular in central bank money). In Europe the ICSDs are the main issuers of so-called Eurobonds or international securities. Today, over 250,000 outstanding ISINs (20% of these ISINs are euro-denominated) are issued through the two ICSDs, with a value of roughly €9.2 trillion. From a European capital market perspective, these assets are important. They account for about 25% of all outstanding marketable assets eligible as collateral with the Eurosystem. I would like to see the announced strategy of the two groups to bring Eurobonds to be settled in T2S starting to take effect by 2018.
Central clearing is another area in which we should continue our efforts to promote European integration. Awareness has grown within the European Union of the critical importance of “where” and “how” these clearing houses operate and, as a result, these infrastructures have been under intense scrutiny recently.
Central clearing is a global financial activity, and major currencies such as the euro, US dollar and Japanese yen are traded and cleared worldwide. It is undoubtedly an important function within the global financial system, and ensures that investors can hedge their risks by accessing liquidity in multiple currencies across a variety of markets.
The euro is unique among major currencies, however, in that a significant number of systemically important classes of derivatives and securities are cleared to a large extent outside its currency area.
In concluding, I want to reiterate the need to reflect on whether recent geopolitical events require the Eurosystem to take action to ensure that we continue to adequately control the impact of offshore clearing activities on the stability of our currency.
To deepen integration and complete the Single Market, ambitious goals need to be supported by specific proposals. We stand ready to facilitate a dialogue and take action on these specific proposals.