The European Banking Federation has gone on record supporting the European Commissions plan to regulate central securities depositories.
A CSD is an essential post-trading infrastructure, EBF said in a statement. Traditionally, every country had a CSD, but with a significant increase in cross-border investment activities, the EBF believes that the future legislation under consideration by the European Commission should be instrumental in creating a harmonized EU framework for CSDs to operate in a safe and efficient manner.
The EBF says that a clear and common definition of a CSD across the EU would be that of an institution that provides and performs the core services of registration, central safekeeping and central settlement and is, at the same time, an operator of a securities settlement system (SSS), which allows for the transfer of securities.
The EBF continued to say CSDs are important for the stability and efficiency of the market in trading securities. Considering that CSDs are the cornerstone of the securities holding system for paper-based as well as dematerialized securities, and given their systemic importance, the federation is calling for them to be safe, sound and efficient, the organization said.
Guido Ravoet, Secretary General of the EBF, said CSDs will face new competition in the context of TARGET2-Securities, but said it is crucial to maintain CSDs which he said performed well during the financial crisis. But, he added, We believe that a future legislation should contribute to clarifying the role of CSDs in European financial markets with more competition between CSDs.
Ravoet continued, Clearly, CSDs will have to reshape if they are to meet the challenge of the T2S initiative and benefit from the future EU legislation. But there should be clear rules in order to avoid that the costs of adaptation will prevent user-banks from passing on savings to the end investors for the settlement services. The T2S initiative will not be worthwhile if CSDs are not able to reshape.