International central securities depository Euroclear today announced its intention to offer clients the choice between Euro settlement in both commercial bank and central bank money.
The depository said the option being assessed is to connect to the European Central Bank’s Target2Securities (T2S) ecosystem, the European settlement platform which offers centralised settlement in central bank money across all European securities markets. Such a move would assist financial institutions in managing their risk, increasing efficiency and liquidity, and help to foster more attractive European capital markets.
As an integrated settlement model for Europe, T2S has aimed to reduce European fragmentation and make securities settlement more efficient. Euroclear’s ESES CSDs (Belgium, France, Nederland) joined T2S in 2016.
Analysts say Euroclear Bank, by providing access to both central and commercial bank money, would advance this objective by creating a single pool of collateral liquidity across multiple currencies and market jurisdictions. The ability to optimise liquidity in a cost efficient manner – whilst also benefiting from exceptional service levels in collateral management, asset servicing and asset protection – has become an increasing market requirement.
This market initiative is aligned to the European Commission’s vision for a Capital Market Union that seeks to mobilise capital and fostering new financing opportunities for economic growth in Europe.
“Providing direct access to central bank money through Euroclear Bank is aligned to the EU’s long standing policy objective of developing a more liquid and efficient financial market infrastructure environment,” said Lieve Mostrey, Euroclear Group CEO. “Our initiative will benefit investors and issuers alike, and contribute to more robust capital markets.”