How ready are Eurozone credit institutions for the launch of the Eurosystem Collateral Management System?
A use case reflection
The European Central Bank (ECB) is introducing the Eurosystem Collateral Management System (ECMS) to unify the management of collateral of national central banks across the Eurozone. ECMS will standardise collateral management across the Eurozone, advancing the liquidity and automation potential.
For the launch of ECMA in April 2024, Clearstream will be the only Eurozone CSD offering comprehensive triparty collateral services fully integrated into ECMS and for all the Eurozone national central banks.
Acting now to prepare readiness will be crucial for a smooth transition to ECMS .
Why an efficient central bank access is key for Eurozone credit institutions?
The market environment calls for financial institutions to optimise scarce resources usage and particularly under new market conditions with less accommodative central bank policies.
Central banks play an important role in ensuring sufficient liquidity is available to financial markets.
The European Central Bank (ECB) and the related 20 Eurozone NCBs (National Central Banks) comprising the Eurosystem can only provide credit when it is backed up by adequate collateral.
As borrowing has increased over time, both the range and volume of eligible collateral has increased, more than doubling in over a decade. Mobilising global collateral is an increasingly complex process, but vital to efficient liquidity management. Mobilisation of credit claims is also becoming crucial for banks, particularly in the context of collateral shortage. As the pools of ECB eligible collateral has expanded, infrastructures developed new tools and technologies to enable efficient global collateral management.
Innovative solutions have supported the market’s ability to respond quickly in times of crisis and contributed greatly to market stability. For instance, Triparty collateral management services were introduced and have been adopted by the Eurosystem.
What is ECMS and how will it impact Eurozone credit institutions, CSDs and triparty agents?
Each National Central Bank (NCB) in the Eurozone maintains systems to manage the collateral they receive and the credit lines they grant.
The Eurosystem Collateral Management System (ECMS) is a new platform which will replace the existing collateral management systems of the 20 Eurosystem central banks. By April 2024, ECMS will become the sole system used to manage both collateral and credit in the Eurosystem. An orderly transition is vital to maintaining access to central bank liquidity facilities thereafter.