T2S Auto-collateralisation. 19 November 2013

Transcription

1 T2S Auto-collateralisation

2 Additional background information after the date of the workshop A Eurosystem workshop entitled "Set-up for autocollateralisation/client collateralisation in T2S was held on 29 November A change request (CR429) was discussed there and is under advisement for implementation. If implemented it will have a larger impact especially on the first part of this presentation. Additional information can be found here: t2s_0429_sys.pdf? ab3ba2ec16f586639ece4 Page 2

3 Agenda 1. Account set-up 2. T2S auto-collateralisation functionality I. Intraday credit II. Payment bank requirements III. Characteristics and management options 3. Auto-collateralisation during the business day / at the end of the day 4. Eligible collateral 5. Service during the migration phase 6. Technical connection 7. Client collateralisation Page 3

4 1 Account set-up

5 Fundamentals Cash and securities accounts in T2S In order to be able to carry out securities settlement in central bank money in T2S, payment banks need to have the following: dedicated cash account (DCA): a cash account held at a national central bank (NCB) securities account (SAC): a securities account held at a central securities depository (CSD) Credit memorandum balance (CMB): a link between the DCA and SAC, which also offers management options Page 5

6 Fundamentals Cash and securities accounts in T2S DCA Function Properties Requirements Cash account: cash clearing for securities transactions in T2S takes place via this account Cash and securities accounts in T2S It is possible to use a single DCA for cash pooling, but additional DCAs can be applied for at any time Set up by BBk Every DCA must be linked to a T2 PM account In the event that T2S auto-collateralisation is used, the PM account must be owned by the payment bank and equipped with a credit line from the BBk SAC Securities account Set up by a CSD Conditions are defined by the respective CSD Page 6

7 Fundamentals Cash and securities accounts in T2S SACs DCAs PM 1) accounts In T2S, cash accounts and securities accounts are maintained for securities settlement. While the securities accounts remain the legal property of the CSDs (eg Clearstream), the DCAs must have a link to a PM account in TARGET2 maintained by an NCB (eg BBk). The latter makes the provision of liquidity to the DCA possible. Page 7 1) Payments Module (PM)

8 Fundamentals Cash and securities account links in T2S CMB: the link between DCAs and SACs DCAs and SACs must be linked to each other via a CMB CMB = tool for managing the outflow of liquidity from SACs Distinction between primary and secondary CMBs Primary CMB Every DCA is automatically provided with a primary CMB by the Bundesbank A primary CMB is required in order to be able to use T2S autocollateralisation Secondary CMB Payment banks are responsible for secondary CMBs, the Bundesbank provides help with set-up Use of T2S client collateralisation is possible via secondary CMBs A primary CMB must be in place in order to be able to use a secondary CMB Page 8

9 Fundamentals Cash and securities account links in T2S Each T2S party is given a BIC11 by a CSD or NCB, referred to as a party BIC" For each party, if it is a payment bank, several DCAs can be opened If a DCA is to be opened with a different BIC, a further T2S party is needed The Bundesbank will not put any restrictions on the number of T2S parties or DCAs If the party is a CSD participant, one or more SACs can be opened The respective CSD provides further information in this regard Eurosystem (T2S) CSDs Central banks CSD customer CSD customer Payment bank (NCB customer) Payment bank (NCB customer) Page 9

10 Fundamentals Cash and securities account links in T2S If the SAC and DCA BIC8 roots match, the accounts must be linked via a primary CMB If the SAC and DCA BIC8 roots do not match, the accounts must be linked via a secondary CMB DCA The BBk provides each DCA with a BIC11 Example 1: BANKDEFF123 Example 2: BANKDEFF123 Primary CMB Secondary CMB SAC The CSD provides each SAC with a BIC11 Example 1: BANKDEFFaaa Example 2: BANKDEDDaaa Page 10

11 Fundamentals Cash and securities account links in T2S Each BIC can be allocated to a CMB on an individual basis, but it is also possible to allocate a group of BICs to a CMB Each SAC can only be assigned to one DCA by one CMB All BICs with the same BIC8 root as that of the DCA are automatically assigned to the primary CMB The CSD is responsible for the linking once the CMBs have been set up Sequence of steps Step 1 SAC CSD: set up SAC DCA BBk: set up DCA and primary CMB PB: set up secondary CMB Linking is only possible once the CMBs have been put in place; however, it is not obvious to the CSD when this has been achieved Step 2 CSD: create link between SAC and DCA Page 11

12 Fundamentals Cash and securities account links in T2S Set up by Primary CMB Bundesbank: every DCA is automatically provided with a primary CMB Secondary CMB Payment bank: there is no limit on the number of secondary CMBs that can be created, Bundesbank provides support BIC requirements Limits Use of T2S autocollateralisation Collateral requirements BIC8 roots of SAC and DCA are identical No limit Use of T2S auto-collateralisation possible As with T2 intraday credit, but ex ante exclusion of collateral with potential close links and limit on eligible links BIC8 roots of SAC and DCA differ 1 limit; 3 limits (when using client collateralisation) Use of T2S client collateralisation possible PB can provide liquidity on a collateralised or uncollateralised basis, requirements set by PB Page 12

13 Fundamentals Example of a set-up in T2S Example: PBs with one DCA and several SACs Bundesbank SAC 1 BANKDEFFaaa CSD A SAC 2 BANKDEDDaaa TARGET2 PM account DCA BANKDEFF123 Primary CMB Secondary CMB A Secondary CMB B SAC 3 BANKLULLaaa CSD B SAC 4 BNKBLULLaaa SAC 5 BANKDEFFbbb CSD C Legend: BANKDEFF: BIC8 code of the payment bank's DCA; BIC s of the DCA and the SAC differ secondary CMB Bundesbank area of responsibility CSD area of responsibility Page 13

14 Fundamentals CMBs and liquidity management in T2S Impact of the CMB rules on liquidity management If using a primary CMB: access to all of the available liquidity in the DCA if the PB also uses T2S auto-collateralisation, the Bundesbank can provide additional liquidity If using a secondary CMB: secondary CMBs can be used for client collateralisation the payment bank can apply three limits to secondary CMBs Page 14

15 Impact on account set-up Who needs to act? General advice The choice of how DCAs and SACs are linked has a significant impact on a payment bank s internal account set-up When planning the account set-up in T2S (DCAs and SACs), it should be kept in mind that the rules relating to the CMB will have an effect on this set-up, even if T2S client/auto-collateralisation is not used Page 15

16 Impact on account set-up Example of a set-up in T2S Option A Example: PBs with one DCA and one SAC Bundesbank Recommendation: Option A PBs with only one DCA and one SAC do not need to undertake any additional liquidity management and are therefore not affected by the CMB restrictions TARGET2 PM account DCA BANKDEFF123 Primary CMB SAC 1 BANKDEFF123 CSD A Liquidity management via TARGET2 and/or T2S auto-collateralisation Option B TARGET2 PM account DCA BANKDEFF123 Primary CMB Secondary CMB A SAC 1 BANKLULLaaa CSD A Liquidity management via TARGET2 and/or T2S client collateralisation only Technically required SAC 2 BANKDEFFaaa Legend: BANKDEFF: BIC8 code of the payment bank's DCA; BICs of the DCA and the SAC differ secondary CMB Bundesbank area of responsibility CSD area of responsibility Page 16

17 Impact on account set-up Example of a set-up in T2S Example: PBs with one DCA and several SACs Bundesbank PBs with only one DCA and several SACs should consider: is the BIC8 compatible with the desired set-up in each case? should liquidity be limited to a specific SAC? SAC 1 BANKDEFFaaa SAC 2 BANKDEDDaaa CSD A TARGET2 PM account DCA BANKDEFF123 Primary CMB If liquidity is unrestricted for all SACs, It should be noted that: only SACs linked via a primary CMB are eligible for T2S autocollateralisation for SACs linked via a secondary CMB, the limit can still be set sufficiently high Secondary CMB A Secondary CMB B SAC 3 BANKLULLaaa SAC 4 BNKBLULLaaa CSD B SAC 5 BANKDEFFbbb CSD C Legend: BANKDEFF: BIC8 code of the payment bank s DCA; the SAC BICs differ in part. Bundesbank area of responsibility CSD area of responsibility Page 17

18 Impact on account set-up Example of a set-up in T2S Example: PBs with several DCAs and multiple SACs Example A Bundesbank SAC 1 BANKDEFFaaa TARGET2 PM account DCA BANKDEFF123 Primary CMB Secondary CMB A SAC 2 BANKDEDDaaa CSD A PBs with several DCAs and multiple SACs must consider precisely which of the SAC BICs are identical to those of the respective DCAs and develop an appropriate set-up TARGET2 PM account DCA BANKDEFF456 Primary CMB Secondary CMB B SAC 3 BANKLULLaaa SAC 4 BNKBLULLaaa CSD B The BIC8 of the DCAs is identical. The corresponding SACs can be linked to the DCAs via the primary CMB. SACs can be linked to both DCAs. Cash pooling in T2S is restricted in this example. One T2 PM account is sufficient. SAC 5 BANKDEFFbbb CSD C Legend: BANKDEFF: BIC8 code of the payment bank s DCA; the SAC BICs differ in part. Bundesbank area of responsibility CSD area of responsibility Page 18

19 Impact on account set-up Example of a set-up in T2S Example: PBs with several DCAs and multiple SACs Example B Bundesbank SAC 1 BANKDEFFaaa TARGET2 PM account DCA BANKDEFF123 Primary CMB Secondary CMB A SAC 2 BANKDEDDaaa CSD A A second DCA (with a different BIC8, including new primary and secondary CMBs) can be set up in the same way as the first DCA cash pooling is not possible TARGET2 PM account DCA BANKDEDD123 Primary CMB Secondary CMB B SAC 3 BANKLULLaaa SAC 4 BNKBLULLaaa CSD B The BIC8 of the DCAs is not identical. Various SACs can be linked to the DCAs via the primary CMB. SACs can be linked to both DCAs. Cash pooling in T2S is restricted in this example. One T2 PM account is sufficient. SAC 5 BANKDEFFbbb CSD C Legend: BANKDEFF: BIC8 code of the payment bank s DCA; the SAC BICs differ in part. Bundesbank area of responsibility CSD area of responsibility Page 19

20 Impact on account set-up Illustration of the link between BIC8s and CMBs Page 20

21 Impact on account set-up Possible courses of action The Italian NUG has issued a change request to remove the described restrictions relating to the use of BIC8s. This request only has prospects of implementation as of the second release By changing the party BIC for the DCA and/or SAC, the desired set-up can be achieved For the Party BIC, the Bundesbank can only use those BICs for which the payment bank has exclusive authorisation rights For SACs, this is up to the authorised CSD The German market is asked to give its opinion on the Italian NUG's change request Page 21

22 2 T2S auto-collateralisation functionality 2.1 Intraday credit

23 Auto-collateralisation in T2S Auto-collateralisation in T2S T2S auto-collateralisation = a method for obtaining intraday credit directly in T2S Liquidity is only generated in case of insufficient liquidity in the DCA Securities are pledged, ie booked, only at the moment in which the liquidity is generated The securities must either be in the process of being purchased or already in the possession of the respective payment bank (as with the safe custody account: ownership or authorised for pledging) Page 23

24 Basic principle: granting of intraday credit (I) Monetary policy counterparties can deposit eligible securities at the Deutsche Bundesbank in order to obtain intraday credit 4. Additional security 1. Security 2. Submission to the Bundesbank Seller Buyer Bundes bank 1. Liquidity 4. Liquidity 3. Provision of intraday credit The intraday credit granted can thus be used to finance the purchase of an additional security Page 24

25 Basic principle: granting of intraday credit (II) T2S auto-collateralisation speeds up this process If insufficient liquidity is available for the purchase of a given security, this security is automatically submitted by T2S to the Bundesbank and the liquidity made available is used to effect its purchase 1. Security 1. Submission to the Bundesbank Seller Buyer Bundes bank 1. Liquidity 1. Provision of intraday credit As with intraday credit in T2, the credit provided by T2S autocollateralisation is limited by the available collateral and must be reimbursed on the same business day Page 25

26 2 T2S auto-collateralisation functionality 2.2 Payment bank requirements

27 Requirements for T2S auto-collateralisation (I) General requirements Only collateral for which settlement occurs via SACs connected to the DCA by a primary CMB can be pledged to the Bundesbank Own PM account in TARGET2 BBk account Access to the standing facilities / intraday credit at the Bundesbank via the PB's own TARGET2 PM account via securities account with safe custody facility Own DCA in T2S Page 27

28 Requirements for T2S auto-collateralisation (I) The DCA must be linked to a T2 PM account It is not absolutely essential for a PB to link its own T2 PM account to the DCA; the linked T2 PM account can also be managed by another central bank Application to the Bundesbank for access to auto-collateralisation Earmarking of one or more securities account(s) linked to the DCA for autocollateralisation (carried out by the CSD) Provided the relevant requirements are fulfilled, auto-collateralisation will always be attempted in case of a lack of liquidity in T2S Page 28

29 2 T2S auto-collateralisation functionality 2.3 Characteristics and management options

30 Characteristics Auto-collateralisation on flow If the security which is to be purchased is eligible, T2S will attempt autocollateralisation on flow. In other words, the security being purchased is collateral for itself The settlement instruction must refer to a securities account which is earmarked for auto-collateralisation The earmarking function is provided by the CSD. The CSD can, at the payment bank's request, also earmark sub-positions/accounts in a securities account. In each case, the relevant CSD is the one that has ownership of the payment bank's securities account Multiple securities accounts across several CSDs can be used The haircut applied to the security must be available as liquidity in the DCA In the event that additional liquidity is available, only part of the securities is used as collateral, the rest is delivered immediately to the purchaser's securities account Page 30

31 Characteristics Auto-collateralisation on stock If the security to be purchased... is not eligible as collateral, or is to be delivered to a securities account that is not earmarked for auto-collateralisation, or the liquidity available is less than the amount of the haircut, an eligible security that is already in an earmarked securities account can be used as collateral This new service is called auto-collateralisation on stock Liquidity does not need to be provided in advance for auto-collateralisation on stock T2S attempts T2S auto-collateralisation on flow first and if this is unsuccessful, then T2S auto-collateralisation on stock Page 31

32 Characteristics Auto-collateralisation on stock/on flow Auto-collateralisation on flow 1. Security 1. Submission to the Bundesbank Seller Buyer Bundes -bank 1. Liquidity 1. Provision of intraday credit Auto-collateralisation on stock 1. Security Securities account 1. Submission to the Bundesbank Seller Buyer Bundes -bank 1. Liquidity 1. Provision of intraday credit Page 32

33 Characteristics Payment bank management options (I) When using several securities accounts, on flow can be used for purchase instructions that refer to an earmarked securities account. If the purchase instruction refers to an account that is not earmarked, on stock can still be used If only one securities account is used in T2S and is earmarked for autocollateralisation, all purchase instructions are eligible for on flow and all holdings are eligible for on stock Securities account 1 does not need to have Security (on flow and on stock) Seller Security (on stock only) Securities account 2 (earmarked) Buyer securities account 1 (not earmarked) an identical BIC8! Submission to the Bundesbank Bundes bank Liquidity Provision of intraday credit Page 33

34 Characteristics Payment bank management options (II) It is also possible, as with the safe custody account, to provide collateral to the Bundesbank in advance For this, the bank's usual account set-up is used, but a further SAC is created and earmarked The collateral in the new securities account can be accessed at any time Provision of collateral Seller Normal settlement only Liquidity Securities account 2 (earmarked) Buyer securities account 1 (not earmarked) Submission to the Bundesbank Provision of intraday credit Securities account 1 does not need to have an identical BIC8! Bundes bank Page 34

35 3 Auto-collateralisation during the business day / at the end of the day

36 Future cash clearing Overview of future settlement times Overview of future settlement times in T2S SoD Night-time: 2 cycles Realtime Maintenance window 02.XX Real-time DvP cut-off BATM cut-off EoD T2S auto-collateralisation can be used during the night-time and real-time settlement windows It is therefore possible to make use of it from until (DvP cut-off) BATM = Bilaterally Agreed Treasury Management, eg GC pooling instructions Page 36

37 Repo procedure: bookings and information flow The technical provision of collateral for auto-collateralisation is done by means of a repo booking procedure: the selected collateral is taken from the SAC of the credit consumer/pb and booked in the Bundesbank's SAC, and thereby pledged to the BBk Opening leg If T2S auto-collateralisation is triggered, T2S informs the parties involved (sese./camt. messages) Two instructions are initiated: an RvP for the Bundesbank and a DvP for the PB Collateral pledged to the Bundesbank Repo procedure At the same time as the opening Closing leg is settled, T2S generates the leg reimbursement instruction, which is initially put on hold The reimbursement instruction can be released later by: the payment bank T2S in the context of reimbursements for collateral substitution T2S, in the event that the limit is decreased during the course of the day T2S, in the event of automatic reimbursement at the end of the day Page 37

38 Auto-collateralisation at the end of the day: automated reimbursement Credit provided via auto-collateralisation must be reimbursed in T2S at the end of the day At 16.30, T2S attempts to automatically reimburse all auto-collateralisation transactions still outstanding The payment bank can do this itself at any time beforehand if there is sufficient liquidity in the DCA T2S first attempts to reimburse the credit using the available liquidity in the DCA If there is insufficient liquidity, T2S attempts to use liquidity held in any other DCAs belonging to the payment bank (only in the event that the same party BIC was used to open the additional DCAs) Page 38

39 Auto-collateralisation at the end of the day: automated reimbursement / relocation of collateral If transactions are still outstanding at this point, the Bundesbank converts the T2S auto-collateralisation credit into regular intraday credit in T2 To do this, T2S books the collateral, via the payment bank's SAC, to the Bundesbank's regular SAC/safe custody account for monetary policy operations/intraday credit Using a "connected payment" by the Bundesbank, the payment bank's credit line in its T2 PM account is increased by the value of the collateral delivered and, at the same time, the amount still outstanding in T2S is taken from the payment bank's T2 PM account If the payment bank has chosen a fixed credit line, this is maintained, provided the payment bank has sufficient liquidity in its T2 PM account for the Bundesbank to be able to collect the outstanding sum A special fee of 100 is levied for automated reimbursement (assessment basis not yet fixed) Page 39

40 Auto-collateralisation at the end of the day: additional information Once the transfer is complete, the collateral can be demobilised at any time if there is sufficient available collateral value/credit line If T2 intraday credit is not repaid, the applicable interest for overnight credit is charged as of (normal T2 procedure) The special fee will not be charged for a certain initial period Page 40

41 4 Eligible collateral

42 Eligible collateral Collateral requirements: As with regular intraday credit: ie only collateral identified as eligible by the central bank is permitted The same valuation parameters as those used for monetary policy operations (prices, accrued interest, pool factors, haircut) are used to calculate the collateral value Restrictions: It is not possible to use the CCBM Eurosystem-approved links are required for foreign securities CBF has announced its intention to open a link to every T2S CSD, so this should not represent a restriction Page 42

43 Eligible collateral Close links The Bundesbank does not accept collateral with potential close links as per a request by the German NUG (ex ante exclusion) Avoiding close links is the responsibility of the payment bank In principle, T2S offers the option of an ex ante transaction check For this, the NCBs must provide data for the close link database in T2S The database is used for T2S client and auto-collateralisation Payment banks do not currently have any access to this database The Italian change request envisages the creation of an individual database for each payment bank (ie for each T2S party), which the payment banks can supply with data themselves at any time they choose The German market is asked to give its opinion on the Italian NUG's change request Page 43

44 5 Service during the migration phase

45 CBF/BBk self-collateralisation Service available until migration of CBF to T2S Service available until migration phase German self-collateralisation (SC), which is offered by CBF in cooperation with the Bundesbank, will continue to be available until CBF migrates to T2S (09/2016) New customers are accepted at any time The existing collateral framework was extended on 18 November 2013 to include approx 1,200 government bonds from Austria, Spain, France and the Netherlands with a nominal value of approx 2.7 billion and the collateral framework for German SC is now close to the future service level for T2S auto-collateralisation The extension is of a purely technical nature; existing customers do not need to re-register, etc Page 45

46 T2S auto-collateralisation during the migration phase Payment bank requirements Own BBk T2 PM account Own DCA Securities account (or accounts) in a CSD that has already migrated The BIC8 of the DCA and the SAC must be identical! This means that liquidity will continue to only be provided to Bundesbank payment banks Legally independent subsidiaries abroad can only take part in T2S autocollateralisation at the supervising central bank If legally independent subsidiaries conduct securities settlement exclusively in T2S CSDs other than CBF and this continues to be the case for T2S, it will only be possible to use T2S auto-collateralisation at the BBk after CBF has migrated! Page 46

47 T2S auto-collateralisation during the migration phase Special Bundesbank requirements The supply of statistical data for T2S auto-collateralisation is to be brought forward to the first wave, pending a decision by the ECB's Governing Council. The list of eligible collateral will be based on the list for intraday credit in T2, with the following restrictions: exclusion of securities with potential close links, as requested by the NUG.DE Only collateral issued in the T2S CSD will be permitted. In addition, collateral issued in a CSD with which the T2S CSD has an eligible link Should this have a negative impact on the level playing field for CSDs (high movement of holdings, etc), the Bundesbank is obliged to restrict eligible collateral to that of the T2S CSDs The Bundesbank is establishing a monitoring mechanism for this purpose Page 47

48 T2S auto-collateralisation during the migration phase Differences during the migration phase As the CCBM cannot be used, the T2S CSD's link structure for eligible collateral is relevant Otherwise, no further differences are expected for normal T2S autocollateralisation Special case of "automated reimbursement" Given the special set-up required, a number of features are likely to be of note in the event of automated reimbursement: Immediate processing cannot be guaranteed for corporate actions The exact procedure for demobilisation has not yet been decided There could be additional custodian fees, modelled on the CCMB Page 48

49 6 Technical connection

50 T2S: technical connection options Overview There are three connection options, which can be combined: A) Connection via ICM using standard services B) Connection via ICM using valued-added services (VAS) C) Direct connection to T2S U2A and A2A can be used for all three options. A B C VAS VAS Page 50

51 T2S: technical connection options Indirect connection via TARGET2 FIN / MTs ICM / U2A A2A / camt5 Liquidity transfer T2 T2S Liquidity transfer T2 T2S Definition of standing order T2 T2S Liquidity transfer by third party Debit notification upon transfer Credit notification upon transfer Current balance of DCA Standard Value-added service Not offered Page 51

52 T2S: technical connection options Direct connection The direct connection can be via U2A (user-to-application) only or via U2A and A2A (application-to-application) T2S auto-collateralisation can be managed sufficiently using the T2 VAS The current account balance provides information as regards early reimbursement options Any additional DCAs can be exhausted before automated reimbursement Via the connection to the securities side (DCP and CSD dependent as well as ICP), reverse settlement instructions can be released at any time For operational reasons, a U2A-DCP connection is required in order to be able to use T2S client collateralisation An A2A connection is also recommended if the payment bank does not have a data provider that delivers eligible collateral and daily price updates Page 52

53 7 Client collateralisation

54 Client collateralisation Provision of (un)collateralised liquidity T2S client collateralisation: provision of (un)collateralised liquidity for settling transactions similar to T2S auto-collateralisation; differences as follows: Provision of liquidity in T2S T2S auto-collateralisation Provision of collateralised liquidity By: the Bundesbank To: the payment bank T2S client collateralisation Provision of (un)collateralised liquidity By: the payment bank To: clients Each secondary CMB linking an SAC or groups of SACs to the DCA is an individual client (eg other banks, own subsidiaries, other entities, for which securities settlement is conducted) Page 54

55 Client collateralisation Setting of limits The payment bank can apply three limits to each secondary CMB There is no such management tool for primary CMBs, ie SACs that have the same BIC8 as the DCA If the payment bank does not make use of client collateralisation, only the external guarantee limit is of relevance 1. External guarantee limit: Upper limit on the amount of liquidity that can be taken from the DCA for securities settlement in linked SACs Limit, but no liquidity is reserved This limit can be applied independently to every secondary CMB Liquidity can therefore be managed in a targeted manner for each individual SAC or groups of SACs Limits can be bigger than the available liquidity, but in this case cannot be exhausted Page 55

56 Client collateralisation Setting of limits 2. Client collateralisation limit: Limits the amount of collateralised liquidity provided by the PB to the client If the client needs liquidity, securities from the client s SAC are booked in one of the payment bank s SACs, as defined in the CMB In return, the payment bank provides liquidity which can be used for settlement in the client's SACs Liquidity can only be provided up to the amount that is available in the DCA (DCA balance + possible T2S auto-collateralisation) The payment bank must agree with its clients during which period the collateralised credit must be reimbursed The PB can also set up the accounts in such a way that the collateral accepted generates liquidity in the DCA via T2S auto-collateralisation in this case, the payment bank must have full authorisation rights in order to be able to pledge the collateral to the Bundesbank Page 56

57 Client collateralisation Setting of limits 3. Unsecured credit limit: Limits the amount of uncollateralised liquidity provided by the PB to the client Can be used in addition once the client collateralisation limit has been reached The three limits can be set independently of each other and are exhausted consecutively: 1. External guarantee limit 2. Client collateralisation limit When limit is reached 3. Unsecured credit limit When limit is reached Page 57

58 Client collateralisation Payment bank management options Seller If the collateral-receiving account specified in the secondary CMB is earmarked for T2S auto-collateralisation, the relevant collateral provided it meets the eligibility criteria can be repledged to the Bundesbank Client Securities account Scenario 1: Collateral can be repledged to the BBk Scenario 2: Collateral remains with the payment bank T2S auto-collateralisation possible using other collateral Securities account 2 (earmarked) Buyer securities account 1 (not earmarked) Submission to the Bundesbank Provision of intraday credit Bundes -bank Page 58

59 Thank you for your attention!