March 04, 2007	Sunday	Safar 14, 1428

FRANKFURT, March 3: The European Central Bank’s Governing Council will decide at its next meeting how to proceed with plans for a radical overhaul of securities settlement in Europe, an ECB policymaker said in an interview.

The Target 2 Securities (T2S) project was delayed last month when European Union finance ministers said the ECB needs to make the business case for taking over settlement of stocks and bonds traded in euro currency from the private sector.

In an interview with the German newspaper Boersen-Zeitung published on Saturday, ECB Executive Board member Gertrude Tumpel-Gugerell said the Governing Council will review the feasibility study prepared by ECB staff and the management model for the project.

“The ECB will discuss at its next meeting, that means give an opinion on the feasibility study, and decide the next steps,” Tumpel-Gugerell said. The ECB next meets on Thursday.

“If the Governing Council gives the green light, the feasibility study that has been prepared in consultation with market players by experts will be presented to the public.” She said finance ministers made it clear they supported greater integration of the financial markets and more efficient development of securities settlement in Europe.

“The next step is discussion with the market players on what Target 2 Securities must provide for the customers. Here too there will be comprehensive consultation with the finance ministers,” she said.

“As a third element... we need to clarify how it will be operated in the future.” EU politicians, as well as some banks, brokerage houses and securities depositories, have questioned why the ECB should take over a private-sector business.

In a study earlier this year ECB staff estimated the central bank could develop a more efficient single securities platform to replace the roughly 20 different national systems, which would cut investors’ costs dramatically.

Staff said an integrated platform would promote securities trading in a single financial market, and that the ECB has the legal right to set up a platform. Tumpel-Gugerell disagreed that it would be a monopoly.

“On the contrary, it will make competition between the central securities depositories possible for the first time,” she said.

Participation would be voluntary but the more firms that choose to join, the greater benefits they can provide their customers because settlement costs would fall, she said.

“We will create a competition-neutral link between the accounts of central banks and the central securities depositories. There will be no monopoly because they also have other possibilities to get liquidity,” she said.

“One can also get liquidity through the inter-bank market.”

Banks want a significant say in overseeing any ECB platform.

In the interview, Tumpel-Gugerell said the operating model was still under discussion but the ECB would have a major role.

“We asked market players if they wanted to help finance the project. This was not the case. So it remains the case that the Eurosystem will take over the financing, which also means they will have responsibility for the project,” she said.

She held out as a model the Target payments system, which handles cash and cheque transfers among European banks, as a model that works well and poses no conflict for the ECB as a financial supervisor and an operator, she said.

“The concrete organisation of the project is a matter for discussion in the coming weeks. There is a clear necessity to define the content together with the market. However, there is also a clear financial responsibility,” she said.—Reuters