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The T2S Project

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The T2S Project The T2S Project London, 2 June 2014 Marc Bayle, Director General Payments & Market Infrastructure European Central Bank 0 Table of Contents T2S – Key facts, Purpose and Benefits T2S Governance T2S Contractual liability T2S Programme Plan and Status Testing phases T2S Migration and Operations Conclusion 1 T2S – Key facts, purpose and benefits . The aim of Financial Integration in Europe is to create a single European financial market and to increase growth and prosperity of Members States by generating new investment opportunities and strengthening the EU banking sector and ensuring continuous development of the EU economy. 2 T2S – Key facts, purpose and benefits Important dates for European Financial Market Integration: 1999.Establishment 2015. Go Live of 1999. Launch of of TARGET (large- 2007. Establishment 2008. Establishment TARGET2- Euro value central bank of TARGET2 of SEPA Securities payment system) 3 Why T2S? - Fragmented Infrastructure T2S Key facts, Purpose and Benefits 4 T2S Programme T2S Key facts, Purpose and Benefits Concept: Concept 9 months Wave 2 6 months Wave 3 Wave 4 Min. 3 T2S is a technical solution28‐03‐ 16to support Central12‐ 09Securities‐16 Depositories06‐02 ‐(CSDs)17 months by providing core, borderless and neutral settlement services. ObjectiveObjective of T2S: of T2S To achieve harmonised settlement in Central Bank Money (CeBM) in euro and other eligible currencies for substantially all securities in Europe. Technical Settlement Only Integrated settlement model, BUT the CSDs participating in T2S, and the Central Banks (CB) who make their currencies available for settlement in T2S, will keep full control over the business and contractual relationships with their customers. Role of Eurosystem The Eurosystem will manage and operate the business application and the technical solution which provides the T2S Services. 3 A service offered to CSDs for settlement only T2S Key facts, Purpose and Benefits Registration of issuer Change of ownership indebtedness and investor among investors holdings Settlement Notary Function Function Entirely new concept Custody/ asset- State-of-the-art settlement servicing engine in central bank money Function Banking Function e.g. coupon payments, redemptions, stock e.g. lending and splits borrowing only in some Delivery-versus-payment (I)CSDs Settlement without borders 6 Integrated domestic and cross-border settlement T2S Key facts, Purpose and Benefits VALIDATIONVALIDATION and MATCHINGMATCHING TARGET2 CENTRAL BANK CENTRAL BANK CENTRALCENTRAL BANK BANK SECURITIES MONEY MONEY MONEY MONEY CSDCSD AA NCBCSDNCB AA A CSD A ACCOUNTS NCB A ACCOUNTS NCBNCB A ACCOUNTS NCB A OPTIMISATIONOPTIMISATION ofof SETTLEMENTSETTLEMENT CSD B NCB B CSD B ACCOUNTS SETTLEMENTSETTLEMENT NCB B ACCOUNTS NCB BB ACCOUNTSACCOUNTS CSDNCB B andand REALIGNMENTREALIGNMENT CENTRALCENTRAL BANK BANK MONEYMONEY CSD C NCBCSDNCB CC CSD C ACCOUNTS NCB C ACCOUNTS NCB C A ACCOUNTS ACCOUNTS Other RTGS Technical platform of all securities (single pool) and cash accounts to settle all securities transactions in central bank money 7 The T2S Community Key facts, Purpose and Benefits 24 CSDs (nearly 100 % of EUR settlement volume) have signed T2S Framework Agreement with the Eurosystem Danmarks Nationalbank has signed Currency Participation Agreement with the Eurosystem allowing for settlement in DKK on the platform as of 2018 T2S is an open system: more CSDs and currencies can join 8 The business continuity concept for T2S Key facts, Purpose and Benefits T2S core system architecture based on “2 regions / 4 sites” concept The four sites are fully equivalent and equipped with the same technical resources: processor, storage, network interface, software, etc. First region Second region 2 sites 2 sites 9 Table of Contents T2S – Key facts, Purpose and Benefits T2S Governance T2S Contractual liability T2S Programme Plan and Status Testing phases T2S Migration and Operations Conclusion 10 T2S Governance Who is involved? Non-euro central banks’ Governors’ ECB Governing Bodies governors/ Forum Council Central Bank boards Decision-Making T2S Non-euro Board Currencies CSD Steering Level Bodies Steering Steering Group Group (CSG) (NECSG) National User Advisory Group bodies Market advisory Group (NUG) (AG) ECB Reporting Operations Project Escalation Change Review Managers Group Managers Group CRG reporting to CSG Group (CRG) (OMG) (PMG) Technical Groups reporting to T2S Board Technical Groups 11 Involvement of the T2S Governance Full & transparent involvement Wave 2 Wave 3 Wave 4 Min. 3 28‐03‐16 12‐09‐16 06‐02‐17 months The T2S User Requirements and all technical documentation are negotiated and agreed with market participants Procedures are jointly discussed and agreed with market participants, e.g. operational procedures and information security requirements Extensive testing is preformed prior to go-live (within the Eurosystem (IAC and EAT) and later together with all stakeholders, CSDs and users (pilot and user testing). IAC --- Internal Acceptance Testing EAT --- Eurosystem Acceptance Testing 12 T2S Governance Chair: ECB senior manager + 9 members from other Eurosystem T2S Board NCBs + 1 member from a non-euro area central bank + 2 non-central bank board members (all members are appointed by the Gov. Council) Non-euro Senior managers from all non-euro NCBs that signed the Currency Currencies Participation Agreement Steering Group Governors Governors of non-euro NCBs with their currencies available in T2S. Forum Plus an equal number of members of the ECB Governing Council CEOs/ Board members of CSDs that signed the Framework CSD Steering Agreement Group + T2S Board members and up to 6 user representatives as observers “T2S Parliament” (95 participants) Advisory Participating CSDs and users in equal number Group + relevant public authorities (ECB, euro NCBs, non-euro NCBs) + observers (EU Commission, regulators, oversight, 4CBs, etc.) 13 T2S Governance T2S Board 13 members Delivery of T2S by (including ECB, the Eurosystem be Eurosystem’s NCB, Objectives ensured to occur on non-euro area CB, Composition time, within budget, non-central bank and according to managers) market needs Elaborating proposals Members represent Important for Governing the interests of the Responsibilities Principles Council decisions, T2S project and the managing the T2S Eurosystem. They are programme, reporting, supported by the T2S managing revisions project team at the with stakeholders, ECB validating 4CBs’ deliverables 14 Table of Contents T2S – Key facts, Purpose and Benefits T2S Governance T2S Contractual liability T2S Programme Plan and Status Testing phases T2S Migration and Operations Conclusion 15 T2S Contractual liability - the actors •4CB •Customers CPA L2-L3 A Eurosystem CPA NCBs CBs (T2S) FA Eurosystem CSDs NCBs (T2) •3CB •Customers CB--Central Banks NCB---National Central Bank CPA----Currency Participation Agreement 16 T2S Liability – the general principles . Principle of Liability: duty of reasonable care (incl. obligation to mitigate damages) . Extent of Liability: duties and obligations provided in the relevant agreement(s); force majeure: standard clause . Damages covered: Direct (consequential, reputational etc. explicitly excluded) . Liability for fraud – wilful misconduct: Unlimited . Liability for gross/ordinary negligence: Caps & limitations apply 17 T2S Liability – important caps and limitations . Framework Agreement (FA) . Ordinary negligence cap: EUR 30 mio/ calendar year (Eurosystem)/ 12 months’ fees (per CSD) . Gross negligence cap: EUR 500 mio/ calendar year (Eurosystem)/ 5X12 months’ fees (per CSD) . No Eurosystem liability for CSD early termination of FA . CSDs hold Eurosystem harmless from third party claims . Currency Participation Agreement (CPA) . Ordinary negligence cap: EUR 20 mio/ calendar year (Eurosystem)/ EUR 2 mio/ calendar year (CPA NCB) . Gross negligence cap: EUR 100 mio/ calendar year (Eurosystem)/ EUR 20 mio/ calendar year (CPA NCB) . Eurosystem holds CPA NCB harmless from DCA holder claims . No Eurosystem liability for early termination of CPA 18 Table of Contents T2S – Key facts, Purpose and Benefits T2S Governance T2S Contractual liability T2S Programme Plan and Status Testing phases T2S Migration and Operations Conclusion 19 The T2S Programme Plan Current status of T2S SP5 SP6 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Start Preparation Phase Finish Mon 17/07/06 Tue Specification Phase 31/07/17 Development & Testing Phase EAT User Testing Phase (SP7‐12) Migration Phase (SP14 ‐ 16) SP1 SP2 SP3 SP4 SP13 SP17 T2S Go‐ we are hereLive Software development complete 4CB have completed testing and delivered software to Eurosystem Synchronisation points (SP) Definition --- Monitoring milestones, represent the check points All Synchronisation Points (SPs) scheduled between the processes of T2S Programme and the internal have been met so far processes of the CSDs/NCBs reshaping/adaptation project plan. 20 Key milestones until go-live Current status of T2S • All T2S stakeholders (Eurosystem, central banks, CSDs, banks) to be Challenge ready in time for testing and migration to T2S SP 16.1: Ready for T2S Go-Live (22 June 2015) SP 6: Eurosystem First-wave CSDs and Ready for User Eurosystem NCBs to be Testing (1 Sept 2014) ready for migration (four Eurosystem to set up migration waves planned) User Testing environments and SP 5: Start of deliver relevant Eurosystem Acceptance Testing training material and (31 Mar 2014) testing documentation 4CB to deliver the T2S software Synchronisation points
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