T2S transition could do with a Nordic-centric push

VIDEO | Sweden’s central bank, Riksbanken confirmed on 18 June this year its decision to join the pan-European T2 platform for payment settlement, after first indicating plans to do so in 2021. Also announced was a commitment to move to the T2S platform for securities settlement – but the central bank stopped short of giving a fixed date for that. In the session titled “Sweden’s approach to T2S” at the PostTrade 360° Nordic 2024 conference, a panel debated the decision – as well as non-decision.

“I would have loved to see that we are going to enter into T2S by, for example, 2030,” said Citi’s Ola Mjorud. “A stipulated date would have been great.”

Christine Strandberg of SEB agreed. “I would also have preferred a more actual decision. The risk is that without a clear deadline, the industry would lack the push to work consistently on prepping for T2S migration, potentially forcing a delay in implementation when the time comes. “I’m afraid that we will lose momentum.”

From Riksbanken’s perspective, the decision has been thought out. Christina Wejshammar, the bank’s representative on the panel explained, “Both us (Riksbanken) and the market have come to the conclusion that we don’t want to do two things at the same time… It would be too much, too risky, and a sequential order would be better.”

The onboarding of T2 would thus come first, before the onboarding of T2S. “It leaves us with a 10-year perspective. We believe that it will take five years to onboard T2. Then, we’ll start the onboarding of T2S,” Wejshammar shared. “I know that there is, sometimes, hesitation or ambiguity. But from our (Riksbanken’s) point of view, there is not. We are moving towards T2S.”

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Growing pains

Euroclear’s Sandra Holmqvist does not expect the transition to T2 to be a big issue in her organisation. “We are already connected to T2 for our euro (denominated) settlements. When it comes to the movement of payments to T2, it would be a relatively easy – in citation marks – operation for us, because we already have a solution for euro, which could be reused under the condition that there are no major changes in how we access central bank money… We can reuse much of the technology and the solution that we already have today.”

As for T2S, Holmqvist claimed that Euroclear is satisfied with the commitment to a sequence of onboarding from Riksbanken. “By having the sequence more clear, we can start planning for how to move to the next step. We see this as the path to T2S. It’s not slowing down our ambitions, our plans, or pace. We are moving along as if following the decision from 2021.”

Strandberg begged to differ. She expressed worry that Sweden would follow a two-step process similar to the one Finland embarked on during its transition to T2S last year. Instead of moving from the current VPC settlement system directly to T2S, it involved first moving from VPC to a T2S-like system, before the final transition to T2S.

“To my mind that is a more costly project as a whole,” she said. “The big risk – the migration risk – doesn’t come when we move to T2S. It comes when we start moving out of the existing CSD system to something that is T2S-like. So let’s not say that the total risk will necessarily be reduced. We don’t know that. It could be, or it could actually be increased by the fact that we are doing two major migrations.”

The Nordic way

Holmqvist believes that the Nordics might just have to find its own way in the transition. Pointing out that many of the discussions around standardisation in the EU are centred around circumstances in central Europe, she reminded the panel that the Nordics have “completely different starting points”. Sweden, for example sees more IPOs than Germany does even though “Germany is a big market in Europe”. Retail investors are also much more active in the Nordics than in other markets. “Some of those discussions are aiming at a problem that we don’t have in the Nordics.”

“I don’t think anyone can see any negative impact from standardisation. I think the question remains, how do we keep the strength in the Nordic markets while we move to a common platform?” she asked.

Strandberg agreed. “I think we need to keep in mind that whatever happens with T2S, we are moving forward in trying to make the Swedish and Nordic markets more harmonised to central Europe. But what we should also do… is try to convince central European markets to become more harmonised to the Nordics.”

Panellists:
Sandra Holmqvist, Chief Business Officer Financial Institutions – Sweden, Euroclear
Ola Mjorud, Nordic Head of Securities Services, Citi
Christine Strandberg, Head of Investor Services Banks Product Management, SEB
Christina Wejshammar, Head of Payments Department, Sveriges Riksbank

Moderator:
Urban Funered, CEO, Swedish Securities Markets Association

• The consolidated PostTrade 360° Nordic conference, in Stockholm on 4–5 September 2024, came to host 1,200+ delegates and featured 70 sessions.
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