Chapter 9 Financial services. Central Securities Depository and Clearing House. Republic of Serbia

Transcription

1 Chapter 9 Financial services Central Securities Depository and Clearing House Republic of Serbia 1

2 Chapter 9 Financial services Overview of the Legal Structure in the EU Overview of the Legal Structure in the Republic of Serbia Harmonization with Acquis Current State of Play in the Republic of Serbia Planned Dynamic of Harmonization 2

3 1. Overview of the Legal Structure in the EU Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012; Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories; Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems; Directive 2009/44/EC of the European Parliament and of the Council of 6 May 2009 amending Directive 98/26/EC on settlement finality in payment and securities settlement systems and Directive 2002/47/EC on financial collateral arrangements as regards linked systems and credit claims; Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements; Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU 3

4 2. Overview of the Legal Structure in the Republic of Serbia Legal framework of Republic of Serbia: Law on Capital Market (Official Gazette of the RS No 31/2011); Company Law (Official Gazette of the RS Nos. 36/2011, 99/2011, 83/2014 and 5/2015); Law on Privatisation (Official Gazette of the RS No 83/2014); Law on Take-Over of Joint Stock Companies (Official Gazette of the RS Nos. 46/2006, 107/2009 and 99/2011); Law on foreign exchange operations (Official Gazette of the RS Nos. 62/2006, 31/2011, 119/2012 and 139/2014); Law on Investment Fund (Official Gazette of RS, Nos. 46/2006, 51/2009, 31/2011 and 115/2014) CSD and CH of Serbia (CSD) by-laws: Operating Rules (10 No 2/12-3 of 27 April 2012, with amendments: 10 No 2/12-2 of 26 December 2012, 10 No 2/6-3/1 of 09 October 2013, 10 No 2-8/21-2 of 25 July 2014, 10 No 2-8/ of 29 December 2014); Tariff Rate Rules (10 No 2/12-5 of 27 April 2012); Term Schedule Rulebook (10 No of 05 July 2012) 4

5 3. Harmonization with Acquis General remark: Law on Capital Market, as the basic law that regulates capital market, was adopted in 2011, i.e. before the actual European legislation covering this field was created Due to this fact, Serbian CSD legislation is not harmonized with above mentioned Acquis Nevertheless, CSD activities and by-laws follow the main principles for financial market infrastructure developed by CPSS-IOSCO, also the basic principles for the actual EU legislation 5

6 4. Basic information (1/1) Central Securities Depositary and Clearing House of the Republic of Serbia Established on 1 January 2004 by the Law on Market in Securities and other Financial Instruments in a form of a joint-stock company, owned 100% by the Republic of Serbia. Today, CSD is regulated by the Law on Capital Market 6

7 4. Basic information (1/2) 7

8 5. Supervision of CSD The Securities Commission acts as a competent authority and supervises CSD activities The Securities Commission approves all relevant CSD by-laws CSD is obliged to obtain prior approval from the Securities Commission for the appointment of the Director and members of the Management Board The supervision of the Commission over CSD is dedicated to monitoring whether the CSD operates in compliance with laws and in professional way to improve integrity of the capital market in the Republic of Serbia, including legal and efficient clearing, settlement and registration of financial instruments The supervision of the Commission over CSD is based on a supervisory principle of assessment of risks, implying direct control of areas of operations representing the largest systemic risk in terms of the volume and type of transactions and activities performed The Commission is obliged to conduct at least one, annual on-site inspection of CSD 8

9 6. Main CSD s Activities 1) managing the registry of financial instruments; 2) keeping records of financial instruments in issuers' accounts; 3) managing and recording of accounts of CSD members and of their clients; 4) recording third party rights in financial instruments; 5) keeping electronic records on financial instruments and maintaining materialized securities; 6) managing money accounts of members of CSD, including activities in relation to payment and other yields to financial instruments; 7) registering ownership of materialized securities in dematerialized form; 8) clearance and settlement based on concluded transactions involving financial instruments and determining of liabilities and claims of members of CSD and their clients after the settlement of their mutual liabilities; 9) transfer of financial instruments in the accounts of the members of CSD; 10) defining and assigning a unique identification number to financial instruments; 11) keeping the codebook of financial instruments; 12) performing transactions related to corporate operations of financial instrument issuers; 13) depositing of shares in relation to taking over of joint stock companies; 14) calculation of any taxes relating to transfer of financial instruments, in compliance with the law; 15) participating in and cooperating with international organizations dealing with registration, clearing and settlement, etc. 9

10 7. Dematerialized Book-Entry Form According to the Law: all securities must be dematerialized; records have to be maintained in electronic form; electronic record-keeping of securities have to be maintained in the CSD information system For all dematerialized securities, CSD acts as the central registry and National Numbering Agency, which allocates CFI codes and ISIN numbers to all financial instruments Securities accounts are held at the beneficial owner level, although omnibus accounts are possible for participants with a custody license 10

11 8. CSD Management Bodies CSD bodies are: Shareholders Meeting Competencies of Shareholders Meeting are performed by the Government through its representatives Management Board Shareholders Meeting appoints and relieves from their duties members of the Management Board Director Director is appointed and released from duties by the Government at proposal of the ministry in charge of finance affairs 11

12 9. Membership Members of CSD may be the Republic of Serbia, the National Bank of Serbia, investment firms, credit institutions, market operators, regulated market, fund management companies and foreign legal entities that perform clearing and settlement or registration of financial instruments, or other persons, provided that they fulfill requirements for membership required by CSD CSD performs activities electronically Acceptance to membership is based on: submitted request and the provision of the relevant documentation stipulated under CSD s rules participant s payment to the Guarantee Fund provided bills of exchange Issuers are not participants but appoint a participant to act on their behalf with regards to corporate actions and obtaining shareholder lists for GMs, etc. Membership fee and other fees for CSD s services are stipulated in the Tariff Rule Book 12

13 10. Settlement system (1/1) CSD manages different types of accounts for both domestic and international investors, including omnibus account and designated beneficial owner Participants are obliged to segregate their own assets from the clients, and hold them on segregate accounts Collateral /loans held at CSD are maintained on a separate account from the other assets of the participant and client Securities undergoing settlement are not co-mingled with the securities of custodians, brokers or any other party, at any point in the settlement process CSD performs securities transfer from the seller s onto the buyer s account simultaneously with cash transfer from the buyer s onto the seller s account (Delivery versus Payment DVP) as well as without cash transfer (Free of payment FOP) 13

14 10. Settlement system (1/2) The securities settlement system has been designed according to the Recommendations for Securities Settlement Systems issued by the Committee on Payment and Settlement Systems (CPSS-BIS) and the Technical Committee of the International Organisation of Securities Commissions (IOSCO): Delivery versus Payment (DVP), real-time settlement, rolling settlement cycle up to T+3 depending on the request from the CSD s member, and risk management, i.e., guaranteeing the successful completion of transactions and eliminating unfavourable effects on the final settlement (finality and irrevocability of settlement) CSD provides gross settlement of securities and net settlement of cash, i.e. model 2 settlement (BIS) Settlement of securities on a gross basis is performed at the individual client level Cash settlement is on a net basis at the member level Settlement can be carried out either in local currency or in euros through direct accounts with the National Bank of Serbia 14

15 10. Settlement system (1/3) 15

16 11. Settlement fails In case either party in the on-exchange transaction fails to fulfil its obligations, CSD activates procedures for the enforced settlement of such transaction: activating the Guarantee Fund presenting bills of exchange for payment or initiating buy-in and sell out process Since its inception, CSD has not had a single incomplete on-exchange transaction, which means that all performed transactions have been settled and paid 16

17 12. Prudential requirements Legal risks CSD by-laws are the Statute, Operating Rules, Tariff Rate Rules and other All relevant CSD by-laws are publicly disclosed at CSD site General business risk and operational risks In order to provide continuous functioning of information system, CSD has a Business Continuity Plan, which includes two off site centres and back-up power supply (UPS and Generator Set) and separate internal audit department Systems security is designed to provide full protection against any attempt at unauthorised access to CSD information system. It is based on cryptographic algorithms, both symmetric and asymmetric, digital signature and smart-card technology CSD is keeping for at least five years in a safe place original documentation for the registration financial instruments and is permanently keeping the documentation and information recorded by means of electronic media Investment policy CSD holds its financial assets at authorized credit institutions and has prompt access to its assets, where required Capital requirements Minimum capital requirements for CSD are prescribed by Law on Capital Market 17

18 13. CSD s reporting The data of issuers shareholders are public and are disclosed on CSD website CSD publicly discloses following data: on issuing, replacement and cancellation of financial instruments; on corporative activities of CSD in relation to those financial instruments; on shareholders and percentage of shares CSD submits an annual report on business operations to the National Assembly, the Government and the Securities Commission CSD discloses annual financial statements, produced in compliance with the Law regulating accounting and audit and submits them to the Government and the Securities Commission along with the report of an independent auditor 18

19 14. International Activities CSD is a member of the following international organisations: Association of National Numbering Agencies (ANNA) since June, 2004 European Central Securities Depository Association (ECSDA) since January, 2006 Thomas Murray, an international institution, which measures the range and degree of risk to which institutional investors are exposed when assets are held within a CSD, is annually reviewing and updating the report for Serbian CSD for the risk evaluation needs. According to the last risk evaluation report, CSD is rated A- CSD also participates in annual Depository Information-Gathering Project (Depository Project), which is conducted by the Association of Global Custodians (AGC), an international institution, that provides securities safekeeping services and asset-servicing functions to primarily institutional cross-border investors worldwide. 19

20 15. Planned Dynamic of Harmonization No serious obstacles in the process of harmonisation with Acquis in the field of CSD regulation The sufficient timeframe would be of an essence In the next period, at the latest six months prior to the accession to the EU, CSD regulation will be fully harmonised with Acquis 20

21 Thank you for your attention 21