Infrastructures for the Euro markets

Transcription

1 Infrastructures for the Euro markets Marino Perassi Head of the Legal Department Banca d Italia years or European Monetary Union: a legal perspective Frankfurt January 30 th 2009

2 THE INTEREST OF THE EUROSYSTEM The Euro financial markets. Evolution generated by the adoption of the single currency together with developments of technology ; Interest of the ESCB: Safeguarding financial stability and promoting European financial integration; Treaty: Article 105 (2) implementation of monetary policy and smooth functioning of payment systems The fields: relation of CBs with their counterparties; among financial institutions and among financial institutions and their clients. Where the Eurosystem is playing its main role? 2

3 THE ACTION OF THE EUROSYSTEM To ensure the correct implementation of the monetary policy; To facilitate the quick and smooth flow of payments in the Euro area; To adopt provisions and offer arrangements and facilities for the conduct of its operations with the counterparties (Statute: articles 3.1, 17, 18 and 22); The ECB may also contribute in its consultative role on proposed national and Community legislation in the field (Statute, art. 4). 3

4 THE LEGAL FRAMEWORK AT THE TIME OF THE ADOPTION OF THE EURO (1) Fragmentation. Heritage from the age of national currencies; A unique monetary law in the Euro area since (Council Regulation EC- 1103/97 and Council Regulation EC- 974/98); Private law concerning payments and financial transactions. Different legal systems; Mandatory rules in the area of bankruptcy proceedings and judiciary procedures (e.g. realisation of collateral in financial transactions). 4

5 THE LEGAL FRAMEWORK AT THE TIME OF THE ADOPTION OF THE EURO (2) EC Directive n. 98/26 (SFD), a benchmark in the development of the European legal framework: Insulation of payment and securities settlement systems from the effects of insolvency, Protection of collateral provided to the CBs in connection with ESCB operations. Elimination of legal risks which affects payment and securities settlement systems in the events of insolvency of their participants; The new European provisions ensured a safe legal ground in the area where private law and the contractual arrangements could not intervene. 5

6 COMMUNITY LAW AND NATIONAL RULES THE TARGET SYSTEM Launch of the Target System, composed of national RTGS systems: ECB payment mechanism and interlinking; Two layers approach: ECB Guideline; an integral part of Community law (Statute, articles 12.1 and 14.3); agreements with <<out>> NCBs; National rules governing RTGS system; Principle of decentralisation in carrying out operations which form part of the tasks of the ESCB (Statute, art. 12.1, last sentence); Principle of minimum harmonisation. Minimum common features of national RTGS systems (ECB Target Guideline 2005/16, Art. 3). 6

7 THE CROSS BORDER USE OF COLLATERAL The principle of adequate collateral in credit operations of ECB and NCBs (Statute, art. 18.1); Fragmentation of national rules on settlement procedures. Concerns about risks; Need to ensure that ESCB credit operations are conducted according to procedures which will (i) prevent the central banks from assuming inappropriate risks in conducting monetary policy operations; and (ii) ensure the same level of safety for all central banks operations throughout the European Union, regardless of the settlement method (EMI, Standards for the use of EU securities settlement systems in ESCB credit operations January 1998); The most significant standards: 1-Legal soundness; 3-No undue custody risk. 7

8 THE EUROSYSTEM ARRANGEMENTS (1): CCBM The Correspondent Central Banking Model (CCBM): ref. General Documentation on Eurosystem Monetary Policy Instruments and Procedures. 8

9 THE EUROSYSTEM ARRANGEMENTS (2): LINKS Assessed and approved against the standards for the use of EU SSSs. 9

10 MARKET INITIATIVES WITH THE SUPPORT OF THE EUROSYSTEM Short-term European papers (STEP). Set up and managed by ACI and FBE aims to foster the integration of the European markets for short-term securities through the voluntary adoption by market players of the standards set out in the STEP Market Convention. European Master Agreement (EMA). Legal infrastructure launched by FBE, with the support of the Eurosystem. A multi-lingual, multi-jurisdictional, multiproduct master agreement which may be used, in particular, to document repurchase agreements, foreign exchange, derivatives and securities loans. Drafted with due attention to the rules of European jurisdictions. 10

11 DEVELOPMENTS IN THE LEGAL FRAMEWORK Financial Services Action Plan (FSAP) 1999; Extension of the protective measures against insolvency provided in the SFD. (EC Directive 2002/47); General rules on cross-border insolvency. EC Regulation 2000/1346. Certainty on insolvency regime and prevention of forum shopping (e.g. caselaw); Rules for insolvency in banking sector and insurance companies (EC Directives 2001/17 and 2001/24). The framework on insolvency does not affect special provisions concerning netting, financial contracts and payment and settlement systems. 11

12 THE SECOND GENERATION OF EUROSYSTEM INFRASTRUCTURES Target 2, (November 2007). Projects: CCBM2 and Target 2 Securities. Underlying concept: Euro market to be seen as a wide domestic market; Decentralised structure replaced by the Single Shared Platform provided by Deutsche Bundesbank, Banque de France and Banca d Italia; Legal issues: Two-layers system maintained. Target 2 composed by a multitude of systems managed by each CB; Terms and conditions harmonised to the greatest extent possible. ECB Guideline 2007/2; Liquidity pooling: neutralises the fragmentation of liquidity by multi-country credit institutions that need to maintain accounts with several CBs. 12

13 PENDING ISSUES Conflict of laws. Lex rei sitae and its adaptation in case of book-entry securities: the PRIMA approach (EC Directives) versus the draft Hague Convention (universally applicable conflict of law rule). Barriers to integration: The Giovannini Group reports ( ) on cross-border clearing and settlement arrangements and existing barriers; Initiatives of the European Commission; the advisory groups: CESAME, FISCO, dealing with tax procedures, Legal Certainty Group, as regards legal barriers. 13

14 TOWARD AMBITIOUS ACHIEVEMENT Increasing integration. Private international law rules on conflicts of law appear to be inadequate. Need for harmonised legal framework. EU. Legal Certainty Group s proposals: Legal effects of book-entries made to securities account: the functional approach. Other issues: legal certainty in corporate action processing; restriction in the location of securities issue in Member States; World-wide. The International Institute for the Unification of Private Law - UNIDROIT project: Draft Convention on Substantive Rules regarding Intermediated Securities, To enhance the internal stability of national financial markets, and To ensure cross-border system compatibility between jurisdictions. 14

15 References Il diritto del sistema dei pagamenti; Milano, 2005; contributions by M. Mancini, M. Marcucci, M. Perassi. K. Lober., The developing EU legal framework for clearing and settlement of financial instruments; ECB, 2006; K. Laurinavicius, K. Lober, H. Weenink; Legal aspects of Target 2, JLBR, Il nuovo quadro normativo comunitario dei servizi di pagamento. Prime riflessioni; Banca d Italia, Quaderni di ricerca giuridica della Consulenza legale, Roma, 2008; contributions by E. Papa and M. Perassi. Legal aspects of the ESCB Liber amicorum Paolo Zamboni Garavelli; ECB, 2005; contributions by D. Devos, F. De Tomasi, A Sainz de Vicuna. EMI, Standards for the use of EU securities settlement systems in ESCB credit operation, January

16 References (2) European Commission. Financial Services: Implementing the framework for financial markets: Action Plan, May The Giovannini Group. Cross-Border Clearing and Settlement Arrangements in the European Union. Brussels, November 2001 and April ECB, The implementation of monetary policy in the Euro area. General documentation on Eurosystem monetary policy instruments and procedures, November Legal Certainty Group, Second Advice. Solutions to Legal Barriers related to Post-Trading within the EU, August UNIDROIT, Draft convention on substantive rules regarding intermediated securities, September