Author: Irina Bussoli

ECSDA published its response to the targeted consultation on SRDs

ECSDA published its response to the targeted consultation on SRDs

On 31 January, ECSDA published its response to the targeted consultation on the Shareholder Rights Directives (SRDs), which is part of a study for the European Commission to assess the implementation and application of certain parts of the SRDs.

The consultation aims to cover a broader range of the provisions of the SRDs and potential changes in the future.

Read the full consultation.

ECSDA Publishes its Systemic Risk Indicators Report

ECSDA Publishes its Systemic Risk Indicators Report

FMIs, including CSDs, play a critical role in the financial system and the broader economy. While safe and efficient FMIs contribute to maintaining and promoting financial stability and economic growth, they also concentrate risk. If not properly managed, FMIs can thus be sources of financial shocks or a major channel through which these shocks are transmitted across domestic and international financial markets.

With the objective of contributing to safer financial markets, ECSDA Risk Management Working Group (RM WG) decided to set up a Task Force dedicated to deepening our understanding of systemic risk and the indicators allowing CSDs to identify, assess, measure, respond to, and report on systemic risk. From the outset, the Task Force focused on the potential exposures to macroeconomic stress for CSDs and the systemic risk implications of the interaction between CSDs and market participants for the financial ecosystem. The Task Force discussions revealed that systemic risk touches upon various other domains that deal with significant stress, disruption, or financial shocks, such as business continuity, disaster recovery, and recovery planning. It was, therefore, a challenge to approach some of these domains from a systemic risk perspective and leverage existing insights, while avoiding unnecessary overlap.

We concluded on a proposed set of indicators, structured in the form of a high-level systemic risk dashboard that is presented in the report. It was agreed that ECSDA RM WG Members will start using the proposed methodology, which may evolve and mature over time.

ECSDA and its Members would be pleased to exchange views with the relevant stakeholders on the occasion of this publication.

Link to the report

ECSDA Enhances Governance and Aligns Articles of Association with Belgian Company Code

ECSDA Enhances Governance and Aligns Articles of Association with Belgian Company Code

In a strategic move, during its General Meeting on Friday, 24 November 2023, ECSDA undertook significant changes to fortify its governance structure and bring its Articles of Association in line with the Belgian company code.

Governance Restructuring for Enhanced Efficiency
One of the notable changes includes the establishment of a more streamlined Board, comprising a maximum of 14 members (versus 30 in the past). This adjustment aims to enhance overall organizational efficiency and to align it with the best governance and decision-making practices.

Introduction of the Senior Council
To bring extensive expertise to the table for defining the CSD industry strategy, ECSDA has introduced a Senior Council of the CSD Industry, comprised of seasoned professionals known as Senior Advisors, and may invite experienced non-CSD observers to join its meetings.

These changes underscore ECSDA’s commitment to bolstering its leadership in driving the harmonisation and innovation of financial market infrastructure, rendering financial markets safer and more efficient in Europe and beyond.

Implementing these decisions, ECSDA will conduct Board elections, nominations to the Senior Council, and consideration of relevant non-CSD observers in the first half of 2024.

Link to the New ECSDA Articles of Association.

ECSDA welcomes Verðbréfamiðstöð íslands as a new member

ECSDA welcomes Verðbréfamiðstöð íslands as a new member

We are delighted to announce that the recent general meeting, held on 24 November, marked the inclusion of a new member to the ECSDA family — Verðbréfamiðstöð Íslands hf. The ECSDA team is thrilled to welcome them aboard and looks forward to a fruitful collaboration.

With the addition of Verðbréfamiðstöð Íslands hf., ECSDA reaches a milestone of 40 Central Securities Depository (CSD) members. This achievement underscores our commitment to fostering a strong and diverse community within the European CSD landscape.

We extend our warmest greetings to Verðbréfamiðstöð Íslands hf. and are excited about the collaborative endeavors that lie ahead. Together, we will continue to enhance the efficiency and effectiveness of securities depositories across Europe.

ECSDA publishes its Settlement efficiency considerations

ECSDA publishes its Settlement efficiency considerations

In November, one year and a half after the implementation of the Settlement Discipline Regime, the ECSDA Settlement Working Group is releasing this discussion paper to share its preliminary analysis about the main root causes of settlement fails in Europe, as far as visible at the level of CSDs and reported through a survey by their participants. The intention is to share some initial recommendations to improve the settlement efficiency in Europe.

The deep attention of CSDs to settlement efficiency is driven by one of their main missions which is to support market efficiency and financial stability. Settlement fails stand in the way of efficiency by generating undue costs, creating further frictions for the connected transactions and ultimately being a driver of systemic risk. If a participant is expecting to receive securities or cash on the intended settlement date but is not receiving them because of a settlement fail from its counterparty, there is a risk that the affected participant is also unable to meet its obligations with other counterparties. That might result in a potential “domino effect” and be a cause of systemic risk.

However, in our view, allowing for a lower level of fails is preferable to aspiring to full efficiency, as it might lead to an unreasonable level of rigidity in financial markets and result in high costs (for pre-funding in addition to the necessary ecosystem technology upgrades). A certain level of tolerance is instrumental to the well-functioning financial markets aspiring for high levels of liquidity and settlement velocity.

This paper is, therefore, looking at how to reduce the number of fails, while not reducing the volume and value of transactions to be settled.

Read the full document.

ECSDA Responds to Faster and Safer Relief of Excess Withholding Taxes EC Consultation

ECSDA Responds to Faster and Safer Relief of Excess Withholding Taxes EC Consultation

On 18 September, The European Central Securities Depositories Association (ECSDA) welcomed the European Commission’s Proposal for a new EU system for the avoidance of double taxation and prevention of tax abuse in the field of withholding tax. We salute the intention of the proposal to simplify the procedures for claiming cross-border withholding tax relief and eliminate tax barriers.

We reiterate our support for the Directive and would like to express our commitment to continue engaging in further enhancements of the proposal. In the below brief response, our intention is to contribute to the concerns that require thoughtful consideration to foster a more streamlined,
efficient, and inclusive financial market. Further refinement is indispensable in our view to ensure that the proposal reaches its objective.

The tax barriers have been highlighted in a variety of post-trade industry reports as a major impediment to the proper functioning of the Capital Markets Union (CMU), the free movement of capital and the prevention of tax abuse faced by financial investors and intermediaries.

We particularly acknowledge the directive’s objective to build standardised digital tax residence certificates (eTRC), common reporting obligations, and standardised processes and timeframes for “at source’ and ‘quick refund’ procedures that are all aligned with ECSDA’s vision for a more
efficient, transparent, and user-friendly market.

For decades, the disparities in withholding tax procedures among the EU Member States have created significant barriers to cross-border capital flows, hindering, together with other inefficiencies, the creation of a truly integrated Capital Markets Union. By proposing a common framework to streamline and digitalise withholding tax procedures on cross-border investments, the FASTER directive attempts to address these barriers. In the digital age, transitioning from paper-based procedures to a more efficient and unified system is imperative. ECSDA is keen to support this transformative journey towards harmonisation leveraging on the expertise of its members in this field.

For this purpose, ECSDA has identified some aspects of the EC proposal requiring careful consideration to ensure that the FASTER directive effectively meets its objectives. In particular, we identified the following areas:

  • Role of CSDs as CFI;
  • Financial instruments in scope;
  • Technical aspects related to relief at source and quick refund.

Read the full response