The continued development of TARGET2-Securities (T2S) will lead to a gradual decrease of intraday liquidity, according to an industry expert.
Speaking at the Euroclear collateral conference in Brussels, Patrice Braulotte, treasurer for ECB collateral management at BNP Paribas spoke of the biggest impacts of the project.
“T2S for me is going to bring the end of what I call liquidity roles,” said Braulotte. “Now intraday liquidity means for a regulator – an intraday risk. You have to constitute a buffer of securities dedicated to this intraday liquidity risk.
“In a year’s time when all markets are migrated onto T2S, it will mean less intraday liquidity and less buffers to constitute.”
Initially proposed in 2006 by the ECB, the T2S initiative was designed to create a harmonised European settlement platform with settlement costs proposed at a maximum of 15 cents per settlement.
It was widely believed that T2S would have an impact on liquidity and collateral management once it hits full migration in February 2017.
Braulotte also suggested that further benefits from the T2S project would also be felt from a cash point of view.
“For people in the treasury [departments], T2S will mean a better cash forecast at the end of the day,” said Braulotte.
“If you are using one cash account to settle all your securities trade instead of 24 accounts, it’s better to have an aggregate view on the balance sheet at the end of the day.”
Panellists and audience members also discussed other benefits that will arise from T2S with over 45% citing improved operational efficiencies with a single point of settlement as the project’s biggest benefit.