T2S framework agreement delayed due to four remaining issues

Speaking at a European Clearing and Settlement conference, Jean-Michel Godeffroy, chairman of the T2S programme board at the ECB said that the bank is still in negotiations with the central securities depositary's (CSDs) on matters relating to governance, service levels, amendments and terminations, and liability.

On governance, Godeffroy explained that the respective rights of CSDs and the Eurosystem in T2S change management still need to be outlined. For example, should this be standard outsourcing or a public task.

Service levels also need to be determined. Should the Eurosystem commit on performance bilaterally with each CSD or multilaterally with all of them, Godeffroy asked rhetorically.

Godeffroy added that the terms under which the T2S contracts can be changed also need to be established.

"Under which conditions will CSDs, non-euro national central banks and the Eurosystem be able to terminate the T2S contracts?" he questioned.

Lastly, a remaining concern still to be decided is the level of liability that the Eurosystem will assume. I.e. should the Eurosystem accept unlimited liability for gross negligence?

The Eurosystem has been negotiating a T2S contract/ framework agreement with the CSDs for more than two years. The document was expected to be agreed by the early part of this year and has now been delayed to an estimated October 2011.

Godeffroy said that due to the multiplicity of the stakeholders involved in the project, including regulators, lawyers, CSDs, and non-euro national central banks, the negotiations have taken much longer than planned.

This article first appeared on ICFA Magazine