T2S model can’t support account segregation says ISSA

T2S could be unfit for to make use of the expected volume of segregated accounts, according to experts at NeMa.
By None

The implementation of Target2Securities (T2S) cannot be used to follow a segregated account model according to the secretary of the International Securities Services Association.

Speaking at the NeMa pre-conference summit in Dubrovnik, Urs Stähli spoke of how T2S was not designed to handle the volumes of accounts required for a segregated model.

“I remember discussions on the advisory group of T2S about these models and there accounts where a compromise was struck.”

“It was made clear that T2S could not cope with the hundreds of millions of accounts that it would take to pursue a segregated model,” said Stähli. 

Stalhi’s comments echo those made byState Street’s managing director Swen Werner suggested, in April, that the ECB-led initiative may not support end-to-end segregation, which could cause issues for custodians.

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 initiative.

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