T2S to Underpin Capital Markets Union, Says ECB’s Draghi

Europe’s new securities settlement platform, TARGET2 Securities (T2S), fill form the foundation of the Capital Markets Union (CMU), says the chief of the European Central Bank (ECB).

Four countries went live on the system last week, as Europe took the first step in harmonising cross-border processes for equities and bond trading.

Speaking at a T2S launch celebration event in Milan on Thursday, Mario Draghi, president of the ECB, hailed the successful launch of the project, despite Italy’s delay to go live until August 31.

“In my view, two main pillars support the establishment of the CMU: the twin prospects of greater risk sharing and more diverse sources of financing…. T2S will form the foundation of these two pillars, and for the establishment of the CMU,” says Draghi.

The ECB’s CMU will establish a single capital market within the Eurozone, and T2S will be central to facilitate greater integration of markets.

“Indeed, T2S will facilitate cross-border bonds and equities trading, which means that we are already making progress towards completing CMU,” Draghi adds.

“T2S has taken steps towards many of the goals in the CMU agenda, such as harmonising withholding tax procedures and resolving conflicts of law. In this sense, T2S is a demonstration of the market’s willingness to achieve deeper integration on a European scale.”

However, Draghi also noted that more legislative and regulatory action will be needed in order to to break down fragmented market infrastructure frameworks between countries.

The ECB plans to introduce rules to harmonise taxation requirements, insolvency procedures and corporate governance.