Banks could make big T2S-related savings - research

Banks could make big T2S-related savings - research

Banks and brokers could save millions of euros if they act fast to adapt their securities and cash supply chains for Target2-Securities (T2S), according to Clearstream commissioned research.

After much delay, T2S - the ECB's plan to streamline Europe's securities settlement structure - is slated to finally go live in 2015. The system promises to cut costs for cross-border settlements but, according to the Oliver Wyman study, other benefits could also flow.

The consultancy's quantitative case studies claim to show that banks could realise big capital, funding and operating savings by delayering settlement-related exposures, pooling collateral for settlement and tri-party purposes, netting more cash settlements and simplifying their operations.

A broker-dealer with EUR100 billion trading assets and liabilities across major T2S markets could save up to EUR70 million a year, Oliver Wyman's analysis suggests, while a regional bank with EUR140 billion in securities deposits across major T2S markets with a home market bias could save up to EUR30 million.

Philip Brown, head, global client relation, Clearstream, says: "As T2S will impose adaptation costs on market participants in any case, there is a window of opportunity to leverage the change to achieve the full savings potential of consolidating assets."

Last year a Clearstream and PwC study argued that T2S could help eurozone banks plug the Basel III capital shortfall they face to the tune of EUR33 billion by pooling cash accounts.

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