Euroclear tentatively proposes new Irish CSD

By Joe Parsons

Euroclear has cautiously proposed establishing a new central securities depository (CSD) in Ireland, with the option to explore other post-Brexit avenues.

A new white paper from Euroclear has set out the framework of a new Irish CSD to be operational in March 2019.

The new CSD, to be called Euroclear Ireland, has already been approved in principal by Euroclear’s board and Euroclear UK & Ireland, but it is subject to a number of internal and external dependencies, including the outcome of Brexit.

Euroclear said in the white paper pre-authorisation talks have begun and are at an early stage with the Central Bank of Ireland (CBoI).

Brexit has caused considerable headaches in Ireland over securities settlement, due to the fact that Irish securities are settled by Euroclear’s UK platform, CREST. Yet the EU’s CSD Regulation demands trades to be settled in EU-authorised CSDs.

A disruption to securities settlement would be highly damaging to capital markets in Ireland.

“We believe establishing Euroclear Ireland in Dublin should enable Euroclear to continue to support settlement of Irish corporate securities after the UK leaves the European Union,” it said in the white paper.

Furthermore the establishment of an Irish CSD will also bring the country into the pan-European securities settlement platform, TARGET2 Securities (T2S), giving it a number of operational advantages.

However, with Brexit talks still ongoing, and more specifically, talks over the Irish border still at no end, Euroclear has said it will reserve the right to explore an alternative.

“It is important to stress that, while Euroclear has made a decision in principle to seek to establish a new CSD in Ireland, the continued uncertainty over the precise nature of the UK’s relationship with the EU after March 2019 means that it is still possible that other solutions, delivered to different timelines, might also be appropriate for Ireland,” Euroclear added.

The white paper predicts a “hard Brexit”, in which the UK would not be able to provide euro central bank money settlement. Furthermore while there have been discussions of equivalency, Euroclear believes it “does not off sufficient certainty to be relied upon.” 

A consultation on the new CSD is due to begin in the second quarter of this year.