T2S does not support account segregation, says State Street

The TARGET2-Securities (T2S) initiative does not support segregation of accounts according to a State Street’s managing director.

Speaking at the SWIFT Business Forum in London, Swen Werner suggested that the ECB-led initiative may not support end-to-end segregation, which could cause issues for custodians.

“T2S is unfortunately not debated enough in the market,” he said. “As a market we have invested over €1 billion in its infrastructure. But the system fundamentally was not designed to support an end-to-end segregation of accounts at CSD level.

“What if tomorrow you come across 1,000 custodians wishing to open 1,000 accounts at CSD level? Under the technical specifications, would this actually be possible? And in some cases, it may not be.

“The technical specifications of it worry me slightly.”

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.

Several industry commentators have since expressed concerns over the costs of implementation, despite the long-term benefits.

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.