The European Central Bank (ECB) is to enable the use of triparty services for cross-border collateral pledges to national central banks.
This will help to overcome collateral fragmentation and improve risk management and operational processing.
The ECB changes will improve access to Eurosystem liquidity by enabling the allocation of ECB-eligible collateral issued or held in third countries to national central banks on a cross-border basis.
Triparty agents like Clearstream will then be in a position to offer all Eurosystem participants triparty collateral pledge services that were so far only in use for domestic transactions. The cross-border triparty collateral management services will be introduced under the Correspondent Central Banking Model (CCBM) and will be provided by both Clearstream’s international central securities depository (ICSD) and its central securities depository (CSD) in Germany.
Stefan Lepp, Clearstream executive board member in charge of global securities financing, says: “Thanks to these changes of the European Central Bank, customers participating in Eurosystem tender offers and auctions can benefit from automated triparty allocation by Clearstream to their home central banks. This means that Eurozone customers can manage their exposures from a single collateral pool at Clearstream, thereby meeting all their EUR liquidity requirements in both central and commercial bank money via our integrated collateral management environment, the Global Liquidity Hub.”
Under the triparty cross-border model, customers in a direct relationship with the ECB can use Cleastream’s full suite of triparty services to pledge ECB eligible collateral to their national central bank. In other words, all Eurosystem participants can use their ECB-eligible assets held at Clearstream to collateralise central bank exposures in real-time and obtain intraday liquidity in TARGET2, the Eurosystem payment settlement system.
The Deutsche Bundesbank or the Banque centrale du Luxembourg act as the corresponding central bank on behalf of other national central bank’s for Clearstream’s German CSD and its ICSD respectively.
Clearstream has assessed settlement links to 13 markets for both its ICSD (Clearstream Banking Luxembourg) and CSD (Clearstream Banking Frankfurt).
Triparty collateral management services enable counterparties to optimise the collateral used in credit operations and for covering exposures such as repo, securities lending, central bank credit, secured loans and over-the-counter (OTC) exposures.