EBA欧洲银行-CEBS-2008-18-12-Final-response-to-ECOFIN-on-custodian-banks_73页_591kb

CEBS's Response to ECOFIN's Request on Custodian Banks

Core Content

CEBS was requested by the Council of the European Union on 3 June 2008 to assess whether the risks borne by custodian banks are adequately covered by EU banking regulations, specifically the Capital Requirements Directive (CRD), to ensure a level playing field and avoid inconsistencies or double regulation.

CEBS conducted a comprehensive review of the ESCB-CESR draft recommendations for securities settlement systems (RSSS) and central counterparties (RCCP), comparing them with the CRD and other relevant EU Directives and Level 3 guidance. The analysis was based on the distinction between custodian banks that act solely as intermediaries in settlement systems and those that perform activities similar to CSDs/ICSDs/CCPs.

Main Findings

1. Coverage of Risks by Banking Regulations

• Custodian banks as intermediaries: Risks related to these banks are generally covered by the CRD and other EU regulations.
• Custodian banks performing CCP-like activities: Risks associated with such activities are not fully or only partially covered by current regulations, highlighting a gap.

2. Key Recommendations and Their Mapping

3. Informal Meeting with Custodian Banks

• CEBS organised an informal meeting with European custodian banks to understand their practices.
• Banks indicated that internalisation of settlement is a negligible part of their operations.
• Some banks stated that they do not perform internal settlement at all.
• There was a suggestion that the level-playing field assessment should be reversed, examining whether CSDs are adequately regulated.

4. Challenges in the Mapping Exercise

• The mapping was challenging due to the contrast between non-binding recommendations and binding EU Directives.
• The CRD focuses on prudential aspects (bank soundness), while the recommendations cover a broader range of issues, including market integration, efficiency, and post-trading risks.
• CEBS believes that the CRD and other regulations do not explicitly address certain aspects such as settlement finality, operational risk, or legal risk in the same way as the draft recommendations.

5. Future Steps

• CEBS proposes to investigate the materiality of custodian banks internalising settlement.
• It will also assess whether any custodian banks perform CCP-like activities beyond their role as General Clearing Members (GCMs).
• If materiality is established, CEBS may explore how to ensure a level playing field and address legislative gaps.
• CEBS will work in coordination with the ESCB-CESR group and consider ongoing initiatives such as the CRD amendments and the BCBS/CEBS liquidity risk work.
• If no materiality is found, the issue will be revisited in two years.

Key Information

• The Council of the European Union requested a review to ensure a level playing field and avoid inconsistencies in regulation.
• CEBS found that while some recommendations are met or partially met, others are not or only indirectly met.
• Custodian banks that internalise settlement face more significant regulatory gaps compared to those that act as intermediaries.
• The CRD and MiFID provide some coverage but are not designed to address settlement-specific risks directly.
• CEBS suggests further work to clarify the extent of internalisation and the role of custodian banks in CCP-like activities.
• CEBS is also considering whether to assess the risks within the GCM community.