DCA Info session. 9 December 2014

Transcription

1 DCA Info session 9 December 2014

2 DCA Info session Peter Lagaert 9 December 2014

3 Overview T2-T2S CENTRAL BANK MONEY 3

4 Introduction Bilateral Testing Multilateral Testing wave Community Testing Migration wave Migration Testing wave Migration wave Migration wave 2 NBB-SSS + ESES Migration wave 4 BNYM CSD We are here 4

5 DCA Info session Patrick Heyvaert 9 December 2014

6 CONTENT Dedicated Cash Account Settlement Day Liquidity Connection Liquidity monitoring Static Data Billing Auto-collateralisation Testing Miscellaneous 6

7 Dedicated Cash Account - Legal DCAs: legal perimeter of TARGET2 Harmonized conditions for the opening and operation of a Dedicated Cash Account in TARGET2 Harmonized... in TARGET-BE Participation rules for PM-accounts= DCA Investment firms in TARGET2-BE No participation until now. What as DCA holder? Intraday credit Arrangement with a MFI- for coverage end of day debit position Autocollateralisation T2S condition= PM account 7

8 DEDICATED CASH ACCOUNT (DCA) 8

9 Dedicated Cash Account (DCA) DCAs in euro will be in the TARGET2 perimeter and its operational framework will apply DCAs are opened and administered by CBs, which hold the business relationship with the DCA holders Participation requirements identical to opening a TARGET2 RTGS account Managed on T2S platform DCAs will be used for T2S cash-related operations No negative balance Start and end of day balance = zero Linked to an RTGS account: main RTGS Linked to a securities account(s) 9

10 Set-up account structure for cash DCA Own DCA DCA of a settlement bank agent One or multiple DCA Own business and clients A DCA per CSD Link with RTGS account Link with securities account(s) 10

11 Set-up account structure for cash Own DCA (one or multiple) linked to own RTGS account Auto-collateralisation possible if both DCA and RTGS opened in same NCB Connection DCA via T2S GUI or VAS T2 Own DCA linked to RTGS settlement bank agent No auto-collateralisation Liquidity provided by RTGS account holder End-of-day liquidity swept back to linked RTGS account holder (main RTGS) Connection DCA via T2S GUI or VAS T2 11

12 Set-up account structure for cash DCA and linked RTGS account of settlement bank agent Legally no cash account (DCA) in T2S No auto-collateralisation No connection to T2S GUI or VAS T2 Each DCA linked to one or multiple securities account(s) 12

13 DCA numbering DCAs addressed by BIC11 plus BIC of the respective central bank In addition, the following numbering convention for DCA accounts has been developed by the Eurosystem and TARGET2 user groups: Name Format Content Purpose Account type 1 char. exactly C for cash account Helps differentiating between cash and securities accounts. Country code of the Central Bank 2 char. exactly ISO country code Helps identifying the Central Bank in the books of which the account is held. Currency code 3 char. exactly ISO currency code Helps differentiating between accounts in different currencies. Account holder 11 char. exactly BIC Identifies the holder of the account. Sub-classification of the account Up to 17 char. Free text Description provided by the account holder for the sub classification of the account. e.g. C BE EUR BICBICBICBI FOROWNOPERATIONS_

14 SETTLEMENT DAY 14

15 Settlement day Indicative Time 6:45 p.m. T2S Period Start of Day Actual Time 6:45 p.m. 7:00 p.m. T2 Period Start of Day* 7:30 p.m. 3:00 a.m. 5:00 a.m. Night-time Settlement Real-time Settlement Maintenance Window 10:00 p.m. 1:00 a.m. Night-time Settlement* Maintenance Window Night-time Settlement 6:45 a.m. Primary deadlines/ cut-offs 6:00 p.m. 6:45 p.m. Real-time Settlement End of Day 6:00 p.m. 6:45 p.m. Day trade phase End of Day* * Plus 15 min at last day of maintenance period. 15

16 Settlement day Time (CET) T2S Settlement day events/processes TARGET2 aspects 16:00 DVP cut-off DCA holders are recommended to pay 16:00 Cash restriction cut-off Release of unused cash restriction back auto-collateralisation earlier or to provide sufficient liquidity on DCA for 16:30 reimbursement; collateral relocation as last measure and penalised! 16:30 Automatic reimbursement TARGET2 intraday credit available until 18:00 Optional cash sweep (standing liquidity transfers) To facilitate liquidity management and bring liquidity on PM accounts 17:40 BATM cut-off TARGET2 unsecured MM transactions possible until 18:00 17:40 CBO cut-off 17:45 Inbound liquidity transfer cut-off Cut-off for LTs from PM accounts to DCAs Automated cash sweep 18:00 FOP cut-off All liquidity sent to main PM accounts 16

17 LIQUIDITY 17

18 Liquidity flows Cash accounts for T2S TARGET2 RTGS accounts NCB Link for EoD retransfer NCB NCB B DCAH B DCAH A 1 DCAH A Link for EoD retransfer RTGS A RTGS X Link for EoD retransfer Client ABC Uses DCA of Bank B Cash Flow DCA to T2 Cash Flow DCA to T2 RTGS Q Cash Flow ECB T2 TRANSIT ECB T2S TRANSIT Cash Flow T2 to DCA T2 to DCA Notation NCB DCAH A DCAH B Client ABC Description National Central Bank DCA holding bank A (with both cash and securities account) DCA holding bank B (provides cash for securities settlements of CSD participant, client ABC) CSD Participant using the services of Bank B Notation NCB RTGS A RTGS X RTGS Q Description National Central Bank T2 RTGS Account holder which would receive liquidity at EoD from DCAH A T2 RTGS Account holder which would receive liquidity at EoD from DCAH B RTGS account holder without T2S business 18

19 Liquidity flows 19

20 Liquidity flows DCA start with zero balance Liquidity transfer from RTGS to DCA at start of day Multiple liquidity providers Reimbursement RTGS accounts at end of night-time settlement Liquidity transfers DCA RTGS Inbound: from RTGS to DCA Outbound: from DCA to RTGS Liquidity transfers DCA DCA Internal transfers between DCA only possible if Same payment bank OR DCA linked to same RTGS 20 20

21 Liquidity flows Liquidity from Securities settlement related cash transactions DvP Corporate actions Liquidity related to auto-collateralisation with NCB End-of-day sweep Optional cash sweep Automated cash sweep from DCA to main RTGS DCA balance set to zero 21

22 Liquidity 22

23 Liquidity 23

24 Liquidity 24

25 Direction Liquidity Transfer Types of Liquidity Transfers Settlement Schedule Liquidity flows DCA related liquidity flows in a T2S settlement day 18:45 19:30 Start-of-day 19:30-3:00 Night-time Settlement period 3:00-5:00 Maintenance Window 5:00-16:00 Real time Settlement period 16:00-18:00 Real time settl. Closure Inbound L liquidity transfers (SOs) (preparation for Night-time settlement period) 1. In-/outbound liquidity transfers in all sequences (Inbound: T2 COs)* Last Cycle: 2. Predefined & standing liquidity outbound transfers 3. Multiple liquidity provider reimb. at end of the cycle No Liquidity Transfers service available 1.Continuous Real- Time Settlement 2.In-/outbound liquidity transfers 3.Predefined & standing liquidity transfer orders 1.In-/outbound liquidity transfers 2. Release cash restrictions 3. Autocol auto reimb. 4.Sweeps to T2 T2 RTGS acc to DCA 1. T2 RTGS acc to DCA 2. DCA to T2 RTGS acc 3. DCA to DCA 1. T2 RTGS acc to DCA 2. DCA to T2 RTGS acc 3. DCA to DCA 1. T2 RTGS acc to DCA 2. DCA to T2 RTGS acc 3. DCA to DCA *T2 maintenance window 10 pm 1am 25

26 Cash restrictions Blocking and reservation of cash Move an amount in a specific cash balance of DCA Available for specific purposes e.g. Settlement instruction Blocking Amount cannot be higher than cash balance Reservation Amount can be higher than cash balance Partial execution New incoming liquidity used till amount reservation reached 26

27 CONNECTION 27

28 Via T2S Interface ECB-RESTRICTED TARGET2 participant s interaction with T2S RTGS DCA + Core services + Value added services FIN MT ICM U2A A2A + Value added services GUI A2A www X IBP Indirectly connected DCA holder Directly connected DCA holder 28

29 Connection to DCA Value added services T2SInterface Optional service TARGET2 Only if own RTGS account T2SGUI Only for DCA A2A Via VAN (SIA-COLT or SWIFT) Only ISO20022 messages U2A SWIFTNet browse SIA-COLT solution 29

30 Binding declaration DCA 30

31 LIQUIDITY MONITORING 31

32 Liquidity monitoring T2S A2A only ISO20022 messages U2A via T2SGUI Information available in Real-time (queries) (U2A and A2A) Sent to DCA holder based on defined parameters or business events (reports) (only A2A) Information available on Settled amounts Cash balance Blockings and reservations 32

33 TARGET2- Adaptations in view of T2S 33

34 TARGET2- Adaptations in view of T2S Value Added Services in T2SInterface: optional service Central Bank Money DCA Legacy RTGS Conversion by TARGET2 standards VAS T2SInterface Possibility for participants to initiate pushed liquidity transfers (T2 T2S) and pulled liquidity transfers (T2S T2) via MT202- messages; Possibility for participants to initiate pulled liquidity transfers (T2S T2) via the ICM (U2A) or via LiquidityCreditTransfer messages (A2A); Translation services ISO15022 <=> ISO20022 Provision of intraday balances on DCAs via ICM 34

35 Liquidity monitoring VAS TARGET2 Core Service: Opening function Liquidity Transfer Dedicated Cash Account enabled via button. Additional Value Added Service: Participants will be provided with information about T2S DCA liquidity. Fees for Display Liquidity T2S DCAs will only be charged if this part of screen is opened. With help of marked arrow right screen links to function DISPLAY CURRENT LIQUIDITY DCA T2S. 35

36 Liquidity monitoring VAS TARGET2 Only Value Added Service: Function available for single participants and group of accounts (GoA) manager. Provisioning of information about o aggregated RTGS liquidity, o the liquidity on the DCA linked to the participant s RTGS account, o the ordered and executed amount of standing order transfers from RTGS to DCA, o pending RTGS transfers to DCA, i.e. RTGS debits to DCA and o settled RTGS transfers to DCA, i.e. RTGS credits from DCA and RTGS debits to DCA will be displayed. Opening function Liquidity Transfer T2S DCA. 36

37 Liquidity transfer DCA VAS TARGET2 Function is used for liquidity transfers between RTGS account and DCAs in T2S. Selection of linked DCAs or entering of other DCAs is enabled. Core Service: Liquidity transfers from RTGS to Dedicated Cash Accounts. BIC of RTGS account is default value and not editable. Additional Value Added Service: Function only available for single participants and group of accounts (GoA) manager. Additionally Liquidity transfers from RTGS to Dedicated Cash Accounts possible, i.e. the arrows direction can be turned from DCA to RTGS. Fees for Display Liquidity T2S DCAs will only be charged if in section Dedicated Cash Account a linked DCA is selected and part Display Information is opened. 37

38 Standing order DCA VAS TARGET2 Core Service: Possibility to define and modify Standing Order Liquidity Transfers to Dedicated Cash Accounts. Changes will be valid from the next TARGET2 business day on. 38

39 STATIC DATA 39

40 Static Data Each payment bank/dca holder will have to register multiple times 2x for test environment T2S community pre-production 1x for production environment The standard DCA forms will be available via the TARGET2-BE website of the NBB Paper based forms The forms must be duly signed before forwarded to the responsible CB 40

41 Static Data The NBB can assist on filling in the forms We advise to send the forms at least 2 weeks before the activation date Check forms Entering forms in static data Links must be entered by other CSDs or NCBs Check by DCA holder 41

42 Static Data The DCA holder is responsible for: Completing the DCA forms Forwarding all the necessary forms to the responsible CB The CBs are responsible for: Entering the static data into the system Providing a direct point of contact for all questions Forwarding the forms to another CB whenever appropriate In addition the participants will be invited to doublecheck via the T2S GUI the static data entered by the CB 42

43 Static Data Two types of forms have been developed in TARGET2 Forms for Cash Directly Connected Parties (DCPs) linked to T2S via a Value Added Network service provider (A2A and U2A) Forms for Cash Indirectly Connected Parties (ICPs) linked to T2S via the Target2 Value Added Services for T2S 43

44 Static Data Forms for Directly connected DCA holders Forms for Indirectly connected DCA holders The registration process for DCA holders follows the process currently in place for PM account holders: CB enters the static data into T2S (after validation) and grants access rights (pre-defined roles) (directly /Indirectly connected) DCA Holders 44 Central Bank

45 BILLING 45

46 Billing of T2S related services Central Bank Monthly invoices are sent no later than the 5 th business day of the following month - Payment shall be made on the 10 th business day, at the latest Invoice for T2 related services Invoice for T2S related services (Main) PM account holder Includes fees currently in place plus the fee for TARGET2 Value added services for T2S (if subscribed) and fee for each linked DCA. Invoice for T2S relate services is sent to the main PM account holder (and not to the DCA holder); Includes T2S services fees (internal liquidity transfers; A2A reports; U2A/A2A queries; messages bundled into files; transmissions). 46

47 Billing TARGET2 invoice Monthly fee of 250/DCA linked to your RTGS Value Added Services Option A: monthly fee 50 Option B: monthly fee 625 T2S invoice U2A enquiries on DCA via T2SGUI A2A messages related to DCA 47

48 Billing 48

49 Billing 49

50 DCA Info session Yvan Timmermans 9 December 2014

51 AUTO-COLLATERALISATION 51

52 What is T2S auto-collateralisation? Intraday credit operation Automatically triggered by T2S (no instructions to be sent by parties) When a buyer lacks funds for settling a securities transaction Solely created for the settlement of the underlying transaction During day-time and night-time settlement 52

53 Why is auto-collateralisation needed? To reduce Settlement failures due to lack of liquidity Gridlocks (when one party cannot deliver assets to another as it has not settled the assets) Intraday liquidity needs for the settlement of assets To ease the settlement especially during the night time period 53

54 Central Bank auto-collateralisation Central Bank auto-collateralisation T2S core settlement optimization procedure automatically providing the buyer with collateralised liquidity in case the buyer lacks liquidity on the T2S Dedicated Cash Account to settle the underlying DvP transaction On flow (credit secured by purchased securities) or on stock (credit secured by securities already held by the buyer in an earmarked position) No limits set by the NCBs To be reimbursed before close-of-day with an automated reimbursement triggered by T2S 54

55 Client Collateralisation Client collateralisation Payment Bank A s ability to provide intraday credit to a Payment Bank B making use of its DCA Triggered by T2S when the PB B is exceeding the headroom limits set by PB A Payment Bank A must provide list of assets and prices to T2S 55

56 Reimbursement on the initiative of the credit taker At the moment of triggering of auto-collateralisation T2S will also create reverse settlement instructions and puts them on Party hold It is up to the credit taker to release the on hold transactions to trigger reimbursement Cut-off for reimbursement: 4pm 56

57 Conditions for T2S auto-collateralisation NCB offers auto-collateralisation Buyer eligible counterparty (same conditions as for TARGET2 intraday credit => T2 Guideline) Agreement with its NCB (Reglement betreffende intradaykredietverlening en monetaire beleidsoperaties / Règlement des crédits intrajournaliers et des opérations de politique monétaire) Own RTGS account and own DCA Used collateral is eligible For non-domestic collateral: Domestic CSD of the NCB has links Specific case of the NBB: will open a receiving securities account in more than one CSD 57

58 Collateralisation techniques (repo/pledge) Repo: underlying collateral transferred to NCB s securities account Pledge: underlying collateral booked in favour of NCB but staying on the account of the counterparty Variant 1: so called pledge Collateral transferred to counterparty s pledge securities account Variant 2: so called pledge-sub Collateral earmarked on a counterparty s main securities account 58

59 Collateralisation technique with NBB Technical setup: repo NBB will open a dedicated NCB auto-collateralisation securities account in NBB-SSS and possibly in Euroclear France/BNYMellon CSD NBB will open an auto-collateralisation cash account as credit giver Legal setup: transfer on a pledge account of the NBB 59

60 Static Data: roles of the counterparties Earmarking of the securities On flow At the level of: the securities account the settlement instruction (account level overrides instruction level) On stock At the level of: the securities account the securities position in a securities account No earmarking of securities with close links = responsibility of the counterparty 60

61 Static Data: roles of the NCB To provide to T2S: Eligible assets Valuation of the assets To check the close links (ex-post) 61

62 Substitution (lack of securities) T2S will substitute securities used as collateral in an auto-collateralisation operation if they are needed for settling a settlement transaction T2S will release the on hold transaction If enough liquidity: OK If lack of liquidity: generation of a new autocollateralisation operation 62

63 Automated reimbursement (rebalancing of cash on DCAs) If reimbursement is not done by credit taker on its own initiative => mandatory/automated reimbursement of the intraday credit T2S will automatically use all the liquidity available on the DCAs (liquidity rebalancing) 63

64 Automated reimbursement (relocation of collateral) Exceptional case: procedure when insufficient liquidity after rebalancing Relocation of the equivalent collateral to the regular NCB collateral securities account Increase of the credit line in T2 Reimbursement of the NCB in T2 If liquidity on the PM account in T2 is still missing: intraday credit => marginal lending facility 64

65 T2S Pricing for auto-collateralisation Auto-collateralisation transactions (Provision of liquidity, rebooking of securities): free in T2S End of day relocation of collateral (exceptional case): EUR Reporting (as reporting messages): depending on message and report subscription 65

66 Belgian specificities 3 CSDs in T2S: NBB-SSS, Euroclear Belgium and BNYMellon CSD Euroclear Belgium (EBE) is not an Eurosystem eligible CSD: NBB can therefore not receive collateral in EBE NBB-SSS has no links Consequence: in principle only eligible assets issued in NBB-SSS are currently usable for autocollateralisation by Belgian payment banks 66

67 Belgian specificities (examples) Belgian DCA Holder is participant in Monte-Titoli (MT) No auto-collateralisation using Italian securities (no link NBB- SSS with MT) Auto-collateralisation (on stock) using eligible securities held in the NBB-SSS possible Belgian DCA Holder is participant in Euroclear Belgium Auto-collateralisation (on stock) using eligible securities held in the NBB-SSS possible 67

68 NBB participant in Euroclear France / BNY Mellon CSD Euroclear France (EF) has links with non-eses CSDs NBB could open a receiving securities account in EF NBB could then receive collateral through the eligible links held by EF Same process could be applied when BNYMellon CSD will: Be in T2S Have eligible links with other T2S CSDs 68

69 Normal mobilisation with NBB Besides auto-collateralisation, the current collateralisation procedures of monetary policy operations and intraday credit remain as is after migration to T2S Counterparty will still: Send a mobilization instruction to NBB Back Office Send a transfer instruction to the CSD (NBB-SSS, Euroclear Bank, BNYMellon CSD or a foreign CSD (CCBM)) 69

70 DCA Info session Rudi Verschaeren 9 December 2014

71 TESTING 71

72 User testing: general issues No DCA s will be opened by payment banks connected via the NBB in wave 1 Testing with the community as from 21 September 2015 Testing will be performed on 2 different environments: Community Pre-production Parties defined with set of production BIC s: BIC11 of system entity & own BIC11 72

73 Set-up of the test environments Static data: pre-migration dress rehearsal: Upload production like set of static data By system entities (NBB in close cooperation with the migrating CSD s) Example interaction needed: NBB to create payment bank and DCA; CSD to create CSD client and securities account; CSD to link securities account and DCA By DCP s: connectivity testing at the latest 1 month before start testing activities Start of the pre-migration activities (proposal): Community: 21/06/2015 Pre-production: 14/11/

74 Set-up of the test environments (2) Dynamic data:migration weekend dress rehearsal Testing of migration weekend playbook Upload by system entities: All transactional data and positions by CSD s; NBB to provide CMS feeds and monitor liquidity transfers Timing: Community: September January 2016 (backup) Pre-production: February

75 Set-up of users by payment bank NBB to create administrator user for each party This user is able to create it s own users and grant them privileges or roles in 2 or 4 eyes Privilege: capability of triggering T2S functions Role: set of privileges At Eurosystem level there is an agreement to provide payment banks with a set of predefined roles Eg: Liquidity manager 2 or 4 eyes grouping all privileges to query a DCA, initiate liquidity transfers, create-delete-modify liquidity transfer order, NBB can always act on behalf of its parties 75

76 Testing on the community environment Connectivity DCP certification: only by participants connecting in A2A mode Prove not to harm the system Limited set of test cases During first 4 weeks following the migration weekend dress rehearsal 76

77 Testing on the community environment Authorisation: Test cases defined by Eurosystem Mandatory/Conditional based on business activity in production environment includes: Access right management Liquidity management Auto / client collateralisation Reports Queries Monitoring by NBB End-to-end testing possible: T2 connected 77

78 Business day testing stage Objective: verify correct functioning of T2S under production-like conditions Includes simulation of several consecutive business days after migration Includes testing of operational procedures described in the MOP Run for 2 to 4 weeks with the T2S live timing 78

79 MISCELLANEOUS 79

80 Useful documents Discussion paper on cash and collateral aspects Legal Liquidity management Billing Technical Registration Testing Auto-collateralisation ussion_paper_on_cash_and_collateral_aspects_related_to_ta RGET2-Securities.pdf?3b a197d14776f d29e UDFS TARGET2 Value Added Services TARGET2 80

81 Useful documents T2 Infoguide T2S Infoguide Registration guide Pricing guide TARGET2 guideline Published on website ECB TARGET2 T2S 81

82 Contacts T2S user testing Rudi Verschaeren: T2/T2S cash aspects Patrick Heyvaert: 02/ / T2S Auto-collateralisation Yvan Timmermans: Collateral Management Renan van der Wolf:» 02/ /

83 Q & A 83