Depositories criticise access termination rules

Securities depository association warns that automatically terminating access during resolution process could be damaging.
By Paul Walsh
Central securities depositories (CSDs) should not automatically terminate access when a participating firm enters resolution according to the European Central Securities Depositories Association (ECSDA).

The suggestion from the ECSDA comes as part of a response to draft Financial Stability Board (FSB) guidance on access to CSDs for affected firms.

ECSDA recommends that access to the CSD for firms in resolution should not be stopped automatically. Instead some vital CSD services should continue to be provided where the firm still meets minimum obligations.

It has also called for a balance to be struck between the need to preserve CSD safety and alternatively, access by the firm in resolution to critical CSD services to the resolution process.

Part of the initial FSB publication outlined that providers of critical services should take appropriate steps to consider and plan for the interaction between the resolution regimes.

ECSDA has suggested that certain definitions put forward in the FSB guidance can be further improved particularly under what the FSB calls “critical services.”

The association is insisting that such services should be determined by the resolution authority and may differ from one firm to another.

Clarification of critical services, according to ECSDA, is crucial to avoid inconsistencies between the recovery plans of CSDs and their participants.

ECSDA has also called for more explicit distinction between provisions applying to all infrastructures and those for particular types of infrastructures specifically the rules and legal arrangements of CCPs in comparison to those of CSDs.