Delays are damaging faith in T2S, says Societe Generale

Continuous changes to the implementation timeline of Target2-Securities (T2S) are causing increased uncertainty around the project, according to an industry expert.

Speaking to Global Custodian, Societe Generale T2S product director Hugh Palmer suggested that previous delays to the migration calendar may have an effect on the success of the project.

“The delays we have seen already pose the question of whether there will be further delays which brings down the level of faith in the project.”

“The overall implementation calendar has grown by six months and because the end of the process is now further away, a level of uncertainty has been introduced as to whether it will run smoothly.”

Initially proposed by the ECB in 2006, T2S was designed to create a single European settlement platform.

Its original objectives included harmonising settlement rules, increasing settlement safety and efficiency as well as reducing costs.

The project has generated controversy with reports indicating that the total cost of implementation may hit the €1 billion mark.

Palmer also suggested the desired 15 cents maximum settlement cost outlined under T2S could be in jeopardy.

“There is further uncertainty created by the settlement cost which was pitched as a key benefit when T2S was proposed.

“How long will that price level remain valid? Will the ECB feel the need to break even and reposition the settlement cost?

“These all suggest a risk in terms of payback on T2S compared to investment.”

Several industry commentators have also expressed doubt over the costs of implementation.

In February Clearstream chairman Jeffrey Tessler told Global Custodian that proposed savings outlined under T2S would be harder to achieve than initially thought.

T2S programme director at JP Morgan Alex Dockx also suggested that the costs associated with the project were unsustainable.

Societe Generale’s Palmer also believes that various changes need to be made prior to the next wave of implementation.

“The first waves told us that not only do we need to communicate internally as well as externally with our clients, but our clients also need to communicate with their counterparts,” he added.

“As we have seen from the post migration issues there is also a need for clients to communicate their revised SSIs to make sure everyone has updated data to use following the migration.”