Market participants reflect on the postponement of the ECB’s Eurosystem Collateral Management System. Carmella Haswell reports
The European Central Bank (ECB) has postponed the launch of the Eurosystem Collateral Management System (ECMS) by seven months until 18 November 2024.
The decision follows an assessment completed by the ECB’s Market Infrastructure Board which found that users need additional time to complete testing of the ECMS functionalities in a stable environment.
According to the Bank, the extra time will ensure greater system stability and user readiness, as well as facilitate a smooth migration to the new platform.
It is not the first time the ECB has postponed the launch of the ECMS, with the Bank previously pushing the date back almost six months from 20 November 2023 to 8 April 2024.
The Eurosystem will continue to support users throughout the testing execution phase to ensure that sufficient progress is made and that all milestones are reached in time for the new launch date.
The ECMS is a unified system for managing assets used as collateral in Eurosystem credit operations. It will replace the existing individual systems belonging to the national central banks of the euro area countries, and unify 20 collateral management systems into one.
Alongside other TARGET Services — a number of payments-related services developed and operated by the Eurosystem — ECMS will ensure the free flow of cash, securities and collateral across Europe, and will be available through the Eurosystem single market infrastructure gateway.
The system aims to provide “considerable benefits” to the Eurosystem, its counterparties and the wider market by harmonising collateral management practices and contributing to further EU financial integration.
The realisation phase began in December 2017 and will end when the new system is launched in November 2024.
Migration to the new system will take a ‘big-bang’ approach, meaning that all interaction related to collateral management between national central banks and their communities — for example, counterparties, central securities depositories and triparty agents — will be carried out using the ECMS from the migration date onwards.
Meanwhile, the current system — the correspondent central banking model (CCBM) — will remain active until the new go-live. The CCBM was introduced by the Eurosystem together with the euro in January 1999, with a purpose to ensure all marketable and non-marketable assets eligible for use in monetary policy operations or to obtain intraday credit in TARGET 2 are made available to all Eurosystem counterparties, regardless of where the assets or the counterparty are situated.
Commenting on the new implementation date, the ECB says it does not expect a significant impact as a result of this postponement as “the old system is always running”.
The move came as no surprise to Gael Delaunay, head of collateral management at Clearstream, who indicated that the shift in dates was expected “in light of the overall level of platform and technology readiness”.
He adds: “Now it is imperative to work together and to make this project a priority across Eurosystem organisations to make this transition a success. Clearstream is well-advanced in its preparation and we will be ready as of day one to support our clients for triparty and bilateral flows for their central bank operations.”
For Sabine Farhat, head of securities finance product management at Murex, ECMS is a big step forward for Europe to move to more automated and standardised operations and assist in better collateral mobilisation. Farhat explains: “Nevertheless, this is the second announced delay, and it shows the real situation on the electronification of the market when it comes to collateral exchanges.
“We faced the same testing-related delays in the Central Securities Depositories Regulation (CSDR) and the Securities Financing Transactions Regulation (SFTR). T+1 in the US, meanwhile, is going fine. One takeaway is we must move to an automated processing of securities exchanges in general to ensure future standards adoption migration is less costly and easier. We must also be better in planning standardisation and regulatory deadlines to have accurate and useful IT budgets.”
