FAQs - collateral management harmonisation

• To enhance the safe and efficient settlement of securities and management of collateral
• To remove barriers and inefficiencies in a holistic, consistent and detailed manner
• To meet stakeholder demands for further integration of financial markets in Europe, thereby promoting the smooth implementation of monetary policy and ensuring financial stability

• Principle 1: Harmonisation should lead to a single pan-European collateral management rulebook for the interaction of financial market infrastructures and their users, including central banks.
• Principle 2: Harmonisation should lead to messaging based on the latest international standards.
• Principle 3: Harmonisation should lead to interoperability.
• Principle 4: Harmonisation should lead to straight-through processing.
• Principle 5: Harmonisation should remove operational impediments to availability, usage and mobility of collateral.

The Single Collateral Rulebook for Europe (SCoRE) is an industry-led initiative to define harmonised rules for managing collateral in Europe. The Rulebook is comprised of standards prepared by the Advisory Group on Market Infrastructures for Securities and Collateral (AMI-SeCo).

AMI-SeCo standards detailing harmonised business processes, workflows and messaging have already been agreed in the following areas:

• triparty collateral management;
• corporate actions for debt instruments;
• billing processes.

Harmonisation work is underway in the following areas (no timelines are available yet):

• corporate actions for non-debt instruments;
• taxation processes;
• bilateral collateral management;
• margin calls;
• cut-off times;
• collateral data;
• sourcing of collateral;
• non-euro-denominated collateral.

For further information, take a look at the Report on Collateral Management Harmonisation.

ECMS stands for the Eurosystem Collateral Management System, which is being set up by the Eurosystem to go live in November 2022. It will replace the individual collateral management systems currently in use by Eurosystem national central banks and will be capable of managing the assets used as collateral in Eurosystem credit operations for all jurisdictions.

As a general principle, the ECMS will rely on harmonised processes, workflows and messaging. The project will take into account harmonisation standards endorsed by the AMI-SeCo which are relevant for the ECMS (corporate actions, triparty collateral management services, taxation processes and billing processes), as well as any follow-up regarding the work on needs identified with respect to managing Eurosystem-eligible collateral.

The AMI-SeCo is made up of representatives of banks active in the European Union, (international) central securities depositories, central counterparties and national central banks.

The AMI-SeCo:

• facilitates an active dialogue with market participants on issues related to the clearing and settlement of securities and to collateral management;
• has proven its ability to successfully harmonise markets and monitor the implementation of detailed standards (e.g. related to TARGET2-Securities, or T2S);
• monitors harmonisation efforts and provides full transparency on the status of implementation efforts on a regular basis.

AMI-SeCo’s HSG is also made up of representatives of banks active in the European Union, (international) central securities depositories, central counterparties and national central banks.

The HSG advises the AMI-SeCo on issues related to its securities and collateral management harmonisation agenda.

The CMH is a sub-group of the AMI-SeCo’s Harmonisation Steering Group. It, too, is made up of representatives of banks active in the European Union, (international) central securities depositories, central counterparties and national central banks.

The CMH:

• analyses collateral management harmonisation with a view to presenting a detailed list of harmonisation needs and activities;
• defines harmonised business processes and workflows to address the identified harmonisation needs;
• identifies how compliance with the new AMI-SeCo standards should be measured.

A common set of processes for the interaction between European triparty service agents and their participants, including the Eurosystem. The triparty standards are part of the Single Collateral Rulebook for Europe.

No. The standards are applicable to the interaction of triparty service agents with both the Eurosystem and commercial banks.

Some processes are more relevant to central banks, for example:

• the automated increase process for triparty transaction amounts;
• operating hours and automated unilateral removal of assets.

Other processes are more relevant to commercial banks, for example:

• the possibility of future date processing;
• customised baskets agreed between the collateral giver and collateral receiver.

No. The standards ensure that triparty service agents (TPAs) offer common processes, workflows and messages for triparty collateral management. There is no restriction on TPAs offering specific market products which are not covered by the standards.

• Regulated (international) central securities depositories, custodians or commercial banks that act as providers of triparty services in the European Union and Switzerland
• Eurosystem central banks
• Central counterparties active in the European Union and Switzerland

As of November 2022 all triparty service agents are required to offer the harmonised services described in the AMI-SeCo triparty collateral management standards. Eurosystem central banks and central counterparties have to be able to use these services. All messaging between these actors must be able to be processed in ISO 20022 format.

• To avoid the need to deal with different messaging standards across Europe
• To be in line with the overall strategy of establishing an integrated capital markets union
• To meet upcoming legal requirements
• To support the needs of treasurers to access detailed information in real time
• To meet the needs of market stakeholders for automated processing

Triparty service agents, Eurosystem central banks and central counterparties will lead by example and introduce triparty services based on ISO 20022 messaging by November 2022.

Yes. Triparty service agents and (international) central securities depositories in the national stakeholder groups will publish implementation plans at the end of September 2019. Monitoring of implementation progress will start as of this date.

Actors will be monitored at the national level every six months.

The AMI-SeCo will publicly report on the completion of agreed milestones.

No. Triparty service agents will continue to offer triparty services to market participants and the Eurosystem. The ECMS will provide a common application which triparty agents can use in their handling of collateral provided by counterparties to the Eurosystem.

A common set of rules for corporate action events and business processes for debt instruments. The business processes cover bilateral interactions with the Eurosystem and all interactions with triparty agents.

Similar AMI-SeCo standards for other instruments (e.g. equities) will be developed in a second stage.

Yes. The standards are aligned with the market standards of the Corporate Actions Joint Working Group, but are more granular and detailed.

The standards of the T2S Corporate Actions Sub-group (CASG) have a different scope.

The AMI-SeCo standards are in line with the existing ISO 20022 messaging standards and market practices defined by the Securities Market Practice Group.

The standards introduce a single harmonised approach for corporate actions, valid both for existing and newly issued securities. Corporate action procedures should also be harmonised for existing securities, as long as this does not contravene local specifications.

No. The standards ensure common processes for a set of corporate action events between post-trade service providers and their users in the context of collateral management. There is no restriction on providers offering specific market products that are not covered by the standards.

• (International) central securities depositories ((I)CSDs) acting as issuer and/or investor CSDs in the European Union and Switzerland
• Providers of triparty services in the European Union and Switzerland
• Custodians acting as account servicers in the European Union and Switzerland
• Agents of issuers of debt instruments in the European Union and Switzerland
• Eurosystem central banks
• Eurosystem counterparties

If assets are held via links, investor (I)CSDs have to ensure that they can handle all corporate action events covered by the standards.

The asset currency is irrelevant and (I)CSDs that process corporate action payments denominated in a foreign currency should follow the applicable rulebook.

Other stakeholders, such as collateral providers, collateral receivers, issuers’ agents and data vendors, will also be able to use the common processes in the European Union and Switzerland.

November 2022, with the exception of ISO 20022 messaging, which will be implemented in two waves:

• Actors involved in Eurosystem credit operations, i.e. (international) central securities depositories, Eurosystem central banks and Eurosystem counterparties, will lead by example and adopt ISO 20022 messaging in Wave 1 by November 2022.
• Other market participants will adopt the ISO 20022 messaging standard in Wave 2. The AMI-SeCo has not yet confirmed the implementation timeline for Wave 2.

Yes. Triparty service agents and (international) central securities depositories in the national stakeholder groups will publish adaptation plans in September 2019. Custodians (in their capacity as account servicers) and other stakeholders in the national stakeholder groups will review the adaptation plans and start implementation activities. Monitoring of the implementation progress will start in 2020.

The AMI-SeCo will publicly report on the completion of agreed milestones.

Monitoring of the standards of various bodies will be conducted separately, but using synergies wherever possible. The reporting timelines and procedures will be aligned.

The ECMS is the technical platform that Eurosystem NCBs will use to manage assets eligible as collateral in Eurosystem credit-providing and liquidity-absorbing operations. As such, it will process some categories of corporate action events, based on the AMI-SeCo corporate actions standards.

Corporate actions will continue to be handled by account servicers (e.g. (I)CSDs, TPAs and custodians), who remain responsible for interacting with account owners (e.g. Eurosystem NCBs and banks).

A common set of billing processes for services related to securities, custody and collateral management.

• (International) central securities depositories ((I)CSDs) acting as issuer and/or investor CSDs in the European Union and Switzerland
• Providers of triparty services in the European Union and Switzerland
• Custodians acting as account servicers in the European Union and Switzerland
• Eurosystem central banks
• Commercial banks

November 2022, with the exception of ISO 20022 messaging, which will be implemented in two waves:

• Actors involved in Eurosystem credit operations, i.e. (international) central securities depositories, Eurosystem central banks and Eurosystem counterparties, as well as all triparty agents, will lead by example and adopt ISO 20022 messaging in Wave 1 by November 2022.
• Other market participants will adopt the ISO 20022 messaging standard in Wave 2. The AMI-SeCo has not yet confirmed the implementation timeline for Wave 2.

• To avoid the need to handle different messaging standards across Europe
• To be in line with the overall strategy of establishing an integrated capital markets union
• To meet current and upcoming legal requirements, for example the reporting requirements for transactions defined in the Regulation on Transparency of Securities Financing Transactions, the European Market Infrastructure Regulation, etc.
• To meet the needs of market stakeholders for automated and real-time processing

Yes. Triparty service agents and (international) central securities depositories in the national stakeholder groups will publish adaptation plans in September 2019. Custodians (in their capacity as account servicers) and other stakeholders in the national stakeholder groups will review the adaptation plans and start implementation activities. Monitoring of implementation progress will start in 2020.

The AMI-SeCo will publicly report on the completion of agreed milestones.