From CCBM to CCBM2

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From CCBM to CCBM2
Amsterdam, 28 March 2008

• Richard Derksen

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Towards a consolidated collateral
management within the Eurosystem
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Why CCBM2?
Granting credit on foreign collateral

• Custody of collateral
• Domestic
• Vault
• Local CSD
• Cross border
• Direct links between different CSDs
• Foreign CSD via CCBM network of central banks

CCB
CCB
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Why CCBM2?
3 (MT540)
DNB (HCB) using ECMS
4 (MT544)
CCB
2 (transfer instructions)
CSD
1 (MT540)
5 ( )
Bank A
Custodian
CCBM - Correspondent Central Bank Model CCB -
Correspondent Central Bank HCB - Home Central
Bank
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Why CCBM2?

• Developments
• Cross border use of collateral grows faster than
  that of domestic collateral
• CCBM is used in 80 of cross-border transactions
• SSSs procedures (mainly links) for 20 of
  cross-border use but not efficient enough to
  attract volumes

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Why CCBM2?

• Costs
• Lack of standardisation
• Sometimes need for predepositing
• Not all eligible collateral is easy to deliver
  cross border
• The model is complex
• Too many messages, different per country (CSD)
• Different procedures between NCBs/CSDs

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Why CCBM2?
Step1 Request for credit
Step2 Matching
National domestic procedures
SSS A
CPY A
NCB A
Step 3 Confirmation/receipt
Step4 Release credit
Step2 transfer instruction
Step1 Request for credit
Step2 CCBM message
Step3 Matching
A common procedure with minimum harmonisation for
cross-border use (level of automation,
communication protocols)
SSS B
NCB A
NCB B
CPY A
Step4 Confirmation
Step6 Release credit
Step5 Receipt
Step3 transfer instruction
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Why CCBM2?

• Eurosystem answer CCBM2
• A better organisation of the Eurosystem
  collateral mobilisation
• Increase of efficiency internal CMS
• Address the identified drawbacks
• Efficient methods for the receipt and delivery of
  marketable and non-marketable securities, both
  cross border and domestic
• Harmonised level of service

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Eurosystem answer
NCB A
SSS A
CPY A
NCB B
NCB A
SSS A
CPY B
CCBM2 platform
Single procedure for domestic and cross-border
Harmonised procedures for counterparties
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Eurosystem answer

• In April 2007, the Eurosystem launched an Initial
  Consultation on CCBM2
• the next generation of collateral management
• 1) Six guiding principles for CCBM2
• 2) Input for the CCBM2 UR
• 3) Views on the organization of the dialogue
  between Eurosystem and market participants

All respondents welcomed the Eurosystem
initiative to develop CCBM2
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Outcome consultation
Proposed amendments

• Proposed amendments

• Principle 1
• to include that the CCBM2 should provide fully
  harmonised procedures for collateralisation of
  Eurosystem credit operations, including the
  harmonisation of country practices regarding
  cut-off times, order execution, handling of
  corporate actions, etc.
• Principle 5
• to extend the principle from the delivery of
  collateral to all movements of collateral,
  including delivery and withdrawal of collateral.

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Outcome consultation

• Proposed amendments

• Principle 6
• to add that with the CCBM2 repatriation in the
  issuer-CSD should no longer be necessary
• (ii) to include that the necessary approval
  processes for the establishment of links should
  be reasonable and acceptable from a duration
  point of view

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Outcome consultation

• From the market remarks some issues emerged, not
  addressed by the CCBM2 principles

• Use of collateral for purposes other than
  Eurosystem credit operations (e.g. guarantees to
  CCP, repo market operations)
• Pooling of collateral provided by entities
  belonging to a group
• Integration with other existing market solutions
  (e.g. ICSDs collateral management systems)
• Harmonization of collateralisation procedures
• Inclusion of a contingency module dealing with
  non-euro collateral
• Removal of the repatriation requirement

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Outcome consultation

• Other remarks concerned

• Full Eurosystem participation
• Timing of CCBM2 implementation
• Disintermediation in cross-border transaction

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CCBM2 the project and timing

• Governing Council 8 March 2007 CCBM2 to be
  based on systems such as DNBB
• Continuation of strong co-operation
• BdF and BdE join on specific issues
• 2nd version UR now in consultation Eurosystem
• Market consultation until May 5
• Governing Council July 2008 ( incl. T2S)

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Thanks you very much for your
attention. QuEstions?