CSD

A far more careful examination of corporate governance practices has become relevant as a result of recent financial crises and the defaults associated with them. Corporate scandals that have impacted companies all over the world have led to the re-examination of the role of corporate governance in their day-to-day operations. Moreover, expectations of the business world are heightened; society is demanding more responsiveness and certainly more communication to stakeholders as to how enterprises will be successful members of society beyond the next three-month reporting period. Many challenges have to be met as directors oversee senior management. And this is all the more true for infrastructure businesses.

T=2 settlement is coming with CSD R and T2S, but Euroclear CSDs are moving ahead of time

Concerns around Asset Safety have increased substantially during the global financial crisis as the full and ugly consequences of high-profile defaults (e.g. Lehman Bros and MF Global) and fraud in financial services companies (e.g. Madoff) have crystallised. Although losses were mainly in cash and collateral, the increased concerns of the investment community are such that they now extend even to the simplest of custodied securities held in the local Central Securities Depositories (CSDs). To what extent can the CSDs mitigate this risk? The risk essentially comes down to losing or having loss of use over assets and the following factors commonly act as the trigger points for exposures arising:

BNY Mellon CSD SA/NV to work with Eurosystem to become part of T2S

As part of the global regulatory drive to ensure safer capital markets globally, measures to prevent settlement fails in cash markets due to short securities positions are being imminently addressed by two new European regulations. Both the EU regulation No 236/2012 related to ‘short selling and certain aspects of credit default swaps’ applicable from 1 November 2012, and the proposed CSD Regulation (CSDR) provide for harmonised and standardised approaches to buy-in procedures across the region. The CSDR stipulates that buy-in mechanisms should be present in any European market.

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