Leading banks have expressed their disappointment at yesterday's news that Target 2 Securities (T2S), the European Central Bank's plan to streamline Europe's securities settlement structure, has been delayed yet again.
"I was hugely disappointed by the announcement that T2S will be delayed," said Tim Keaney, chief executive of asset servicing at BNY Mellon, the world's largest custody bank. "As a global custodian, one of the challenges we face is explaining to our customers why international custody is so much more expensive in Europe, so I was very encouraged by the launch of the T2S initiative and the idea of introducing a harmonised settlement structure in Europe."
Keaney was speaking at a panel debate at the annual congress of financial messaging body Swift and his dissatisfaction was shared by his fellow panelists. "What I find concerning is the business changes involved with T2S are so colossal," said Paul Simpson, head of global transaction banking services, Bank of America Merrill Lynch. He suggested that the industry should work together on more executable stages rather than one all-inclusive deadline.
The original deadline was set for September 2014 but the delay announced yesterday could push this date back to 2015.
It was also stated that the T2S platform itself only addresses one part of the problem and will be ineffective without further harmonisation throughout the underlying environment.
"You cannot just take a block of countries and say you all need to have the same thing unless everything else is equal - such as tax," said John Coverdale, Group General Manager, head of global transaction banking, HSBC. "So there is a lot that needs to happen but the industry needs to be more positive and stop bickering over the details because standardisation itself is a good thing and a good way to reduce risk and increase efficiency."
Custodian and transaction banks such as BNY Mellon, HSBC and BoAML are one of the sectors that could benefit from the reduced settlement costs that T2S is promising, hence the frustration with the delay. Although it is likely that they will also face competition from central securities depositaries (CSDs) that could earmark the custody space as a way to compensate for any transaction-based revenue lost as a result of the introduction of T2S.