Custodian and central banks don’t expect to be heavily affected by Europe’s incoming settlement platform, TARGET2 Securities (T2S), according to a joint survey by GFT and the International Capital Market Association (ICMA) European Repo Council.
The industry-wide survey found 75% agreed or strongly agreed they were aware of the implications of T2S, while 90% agreed that it would have some impact on their organization. However, respondents who perceived T2S as having less impact included central banks and custodians.
Despite this, the majority of respondents believed they will benefit from T2S, especially amongst operations staff and funding staff. Furthermore, 77% believe T2S will result in a greater pool of collateral and increased liquidity across the industry, 66% believe in greater triparty interoperability and 51% foresee a a decrease in the number of agent banks.
“Areas seeing benefits in T2S include operations and cash management, likely a result of the opportunity to simplify settlement and funding mechanisms by reducing the custodian bank network,” says Emily Cates, specialist in operational processing, GFT.
Respondents also believed that trading repos will gain added benefits such as increased liquidity and collateral, however there are reservations.
“We do wonder if T2S represents a missed opportunity for repo for it will not improve repo end leg settlement nor lifecycle events,” adds Godfried De Vidts, chairman, ICMA European Repo Council.
Custodians Not Worried Over T2S, Finds Survey
Custodian and central banks don’t expect to be heavily affected by Europe’s incoming settlement platform, TARGET2 Securities (T2S), according to a joint survey by GFT and the International Capital Market Association (ICMA) European Repo Council.