2014年-EBA欧洲银行管理局_Report_on_the_outcome_of_the_call_for_evidence_on_custodian_banks_activity_9页_189kb

Summary of CEBS Report on Custodian Banks' Internalisation of Settlement and CCP-like Activities

Introduction

CEBS conducted a call for evidence in February 2009 to assess the materiality of custodian banks' internalisation of settlement activities and CCP-like functions. This initiative followed the ECOFIN report on custodian banks and aimed to identify regulatory gaps compared to the ESCB-CESR draft recommendations. CEBS received 33 responses, including 17 from members and 16 from market participants, representing most major European custodian banks. A public hearing was also held on 24 March 2009 to discuss the findings.

Internalisation of Settlement

Omnibus Accounts

• Omnibus account structures are well established across EU Member States.
• Only three countries limit the use of omnibus accounts, though clients can request segregated accounts.
• Custodian banks generally aggregate their clients, with some differentiating between private and institutional clients.
• In some markets, omnibus accounts are prohibited for domestic investors, but clients are still segregated at the custodian level.
• Clients typically agree to omnibus account aggregation through an upfront Service Level Agreement (SLA).

Internalisation Practices

• The percentage of trades internalised by custodian banks is generally low, with most respondents stating they did not internalise any trades.
• Of those that did internalise, the range was typically between 1–3%, with a few cases reaching up to 30%.
• One CSD was noted to prevent DVP within the same account, leading to inevitable internalisation.
• Most custodian banks apply the same procedures for internal and external settlement, with only one bank having specific rules for internal trades.

Client Notification

• Informing clients about the place of settlement is not standard practice.
• Clients may be indirectly informed through:
  • SLA agreements for omnibus accounts.
  • Invoicing structures that indicate internal settlement.
  • Order routing systems that allow trade tracking.

Materiality and Product Type

• Internalisation is more common for OTC products than for exchange-traded ones.
• Regulatory structures and market practices in some jurisdictions limit internal settlement, particularly for cleared trades.
• The materiality of internalisation varies significantly across Member States and is not considered a major risk by most custodian banks.

Materiality of CCP-like Activities

Role of Custodian Banks

• Most custodian banks do not engage in CCP-like activities beyond their role as General Clearing Members (GCMs).
• Two custodian banks reported acting in a CCP-like function:
  • One by taking on clearing party responsibilities in the absence of a CCP.
  • One by operating a stand-alone CCP within its group.

Risk Management Practices

• Risk management for CCP-like activities includes internal risk measurement, collateral management, limit setting, and credit lines.
• Some custodian banks implement daily controls on margin requirements and trading volume limits.
• A few banks replicate the CCP margining approach, allowing for intraday collateral calls and even exceeding CCP requirements.

Scope and Implications

• GCM activities are typically limited to equities and only accept clients based on their risk profile.
• The responses suggest that while GCM activities are not significant in terms of revenue, they do imply a certain level of materiality.
• CEBS notes that not all custodian banks act as GCMs, and not all GCMs are custodian banks, which has implications for the broader clearing member community.

Conclusion

• The practice of settlement internalisation is not widespread among custodian banks.
• There is little evidence that such activities require European-level intervention.
• However, custodian banks that engage in material internalisation should follow procedures aligned with the relevant ESCB-CESR recommendations.
• CCP-like activities are rare outside of GCM roles, though the risk management practices for GCMs are similar to those of CCPs.
• CEBS will consider future work on GCM risk management practices, as outlined in its work programme, and may expand the scope to include all general clearing members.

Annex 1: Relevant ESCB-CESR Draft Recommendations

RSSS 1 - Legal Framework

• Securities settlement systems must have a clear, transparent, and well-founded legal basis.
• Legal frameworks should ensure enforceability and clarity, even in insolvency scenarios.
• CSDs should apply for designation under the Settlement Finality Directive.

RSSS 2 - Trade Confirmation and Settlement Matching

• Trade confirmation should occur as soon as possible, preferably on T+0.
• Settlement instructions should be matched before settlement, no later than the day before the settlement date.

RSSS 7 - Delivery versus Payment (DvP)

• DVP should be ensured through the technical, legal, and contractual framework.
• All securities transactions against cash should be settled on a DVP basis.
• The time between blocking and final delivery should be minimised.

RSSS 8 - Timing of Settlement Finality

• Intraday settlement finality should be achieved through real-time or multiple-batch processing.
• Settlement instructions should be irrevocable and enforceable.
• Unilateral revocation of unsettled instructions should be prohibited.

RSSS 10 - Cash Settlement Assets

• Cash settlement assets should carry minimal credit and liquidity risk.
• Central bank money should be used where feasible.
• Cash settlement agents must be regulated and have robust capacity.
• Proceeds from securities settlements should be available intraday or same-day.

RSSS 16 - Communication Procedures and Straight-Through Processing

• CSDs and participants should use international messaging standards to facilitate STP.
• Communication procedures and reference data standards should be applied across the securities transaction flow.