EBA欧洲银行-CEBS-2009-07-Annex-1-28Questionnaire-to-market-participants29_2页_131kb

Call for Evidence on Custodian Banks Summary

Introduction

The European Banking Authority (CEBS) has initiated a call for evidence to assess the materiality of custodian banks engaging in internalised settlement activities or conducting Central Counterparty (CCP)-like activities. This initiative follows the publication of a report on custodian banks by ECOFIN, which highlighted regulatory gaps in these areas compared to the ESCB-CESR draft Recommendations. CEBS aims to gather insights from market participants to better understand the extent and implications of these practices.

Core Content

CEBS is seeking to evaluate the significance of custodian banks internalising settlement and performing CCP-like functions. These activities involve custodian banks taking on roles traditionally handled by Central Securities Depositories (CSDs), such as holding omnibus accounts and settling trades internally rather than passing them to a CSD. The objective is to determine whether these practices pose material risks to the financial system and whether current regulations are sufficient to address them.

Main Questions and Key Points

Internalisation of Settlement

1. Omnibus Accounts: Market participants are asked to report how many CSDs they have access to that allow omnibus accounts, which are necessary for internalising settlement.
2. Settlement Distribution: They are required to specify the percentage of trades settled internally versus those passed on to a CSD.
3. Client Aggregation: Whether all clients are aggregated into omnibus accounts, or only a subset. If only a subset, the criteria for inclusion and the types of clients involved (e.g., institutional, retail) must be indicated.
4. Monitoring Procedures: The methods used to monitor internalised trades and the presence of specific rules and procedures.
5. Client Notification: Whether clients are explicitly informed about internalised settlement and the level of detail provided in the process.
6. Product and Trade Type Differences: Whether the degree of internalisation varies across different product classes (e.g., bonds vs. equities) and types of trades (e.g., exchange-traded vs. OTC).

CCP-like Activities

7. Counterparty Risk Assumption: Whether custodian banks take on counterparty risk and assume losses from positions, and the significance of such activity to their business.
8. Intermediary Role: Whether they act as intermediaries between clients and CCPs (General Clearing Members), and the importance of this activity.
9. Risk Management: The monitoring and risk protection mechanisms in place for both internalised settlement and CCP-like activities.
10. Product Differentiation: Whether custodian banks differentiate between products and trading types when deciding to offer these services.

Key Information

• Deadline for Responses: Responses must be submitted by 4 March 2009.
• Submission Address: cb@c-ecs.org.
• Publication of Responses: The responses will be published on the CEBS website unless the respondent requests otherwise.
• Public Hearing: A hearing is scheduled for 24 March 2009 from 10:00 am to 1:00 pm at CEBS's premises, allowing interested parties to express their views on the draft outcomes.

Conclusion

The call for evidence is a critical step in understanding the evolving role of custodian banks in financial markets. It seeks to identify the extent of internalised settlement and CCP-like activities, the associated risks, and the adequacy of current regulatory frameworks. The findings will inform future regulatory developments and ensure that custodian banks operate in a manner that safeguards the stability and integrity of the financial system.