BNY Mellon Eyes T2S Payment Bank Launch

BNY Mellon will launch an in-house payment bank that will allow it to settle all T2S transactions directly with national central banks.
By Joe Parsons(2147488729)
BNY Mellon plans to launch an in-house payment bank that will allow it to settle all TARGET2-Securities (T2S) transactions directly with national central banks (NCBs), as Europe prepares for sweeping post-trade reforms.

With the incoming cross-border settlement system, T2S, BNY Mellon will act on directly connected participants’ (DCP) status, enabling it to settle over 90% of all European activity that it processes directly on TS2.

The payment bank will be directly connected with an NCB to provide payment services for securities trades on T2S in central bank money to reduce risk.

It expects to launch the payment bank by the second quarter of next year, around the same time as T2S comes into force in the Eurozone on June 22, 2015, when the first wave of CSDs migrate to the new platform.

“The payment bank allows us to settle the cash leg of a transaction in T2S. The securities leg gets settled by the direct accounts BNY Mellon will open with all the major CSD (central securities depositories) in Europe,” says Tom Casteleyn, managing director, T2S and market infrastructure, BNY Mellon.

“We will become a DCP in wave one (starts June 2015) when we will open our direct account in the Italian CSD and add on from there as per the T2S waves in Belgium, France and Spain.”

BNY Mellon already has a direct connection in Germany and the Netherlands.

Global custodians currently have to work with individual local custodians in order to gain access to local CSDs in order to settle a securities trade. However T2S is set to significantly change the post-trade environment, allowing global custodians to access any CSD in any region.

According to Casteleyn, “The DCP connection is just the way we interface with T2S. It allows us to send messages directly to T2S rather than to each individual CSD.”

BNY Mellon intends to launch its CSD on T2S in February 2017 when the final migration wave for Europe ends.