MARKET INFRASTRUCTURE

Collateral and liquidity a top priority for post-T2S era

Areas including collateral and liquidity optimisation require attention at the completion of the ECB’s T2S project in Europe, according to a Deutsche Bank whitepaper.

By Paul Walsh paul.walsh@strategic-i.com  March 20, 2017 1:03 PM GMT
Post-trade professionals must focus on the optimisation of collateral and liquidity as well as cost efficiencies upon completion of the ECB’s TARGET2-Securities (T2S) project, according to a Deutsche Bank whitepaper.

The paper states that collateral and liquidity movements are of ‘paramount importance’ due to collateral management becoming more streamlined as well as the need for collateral to meet a broader range of compliance requirements.

In a post T2S environment, the papers states, focus should also be on reducing pressure on high quality liquid assets (HQLA).

The paper points to mobilising domestic cash assets and optimising cash and collateral by having a single view of asset pools as a way of reducing pressure on HQLA.

In addition, it also suggests that implementing an optimal service model ‘which balances regulatory demands’ can return cost efficiencies through a revised operating environment.

Completion of wave four of the ECB’s T2S project in February saw around 40% of the overall volumes migrate to the platform bringing total migrated volumes to around 85%.

Since wave four migration, several industry participants have called for a refocus on how full benefits of the project can be achieved.

During the Future of Clearing and Settlement event in London earlier this month, Clearstream board member Guido Wille, spoke of how more work is required to achieve the project’s planned benefits including more efficient and cheaper cross-border settlement.

In addition, Ian Woodberry, network manager at Morgan Stanley, stated the industry was “far away” from achieving a harmonised post-trade process in Europe.

The final wave of T2S, featuring markets from Spain, Finland, Lithuania, Latvia and Estonia, is set to take place in September.