The European Banking Authority (EBA) has launched a public consultation on the draft regulatory technical standards (RTS) defining the threshold of activity for CSDs subject to prudential risk management requirements under the Central Securities Depositories Regulation (CSDR). The authority reveals in a press release that “the aim of this work is to allow CSDs to do more settlement of foreign currency in commercial bank money without increasing the risk in CSDs or the overall financial system”.
The RTS will only apply to CSDs providing banking-type ancillary services. These services refer to activities such as the provision of cash accounts to, and acceptance of deposits from participants in a securities settlement system, as well as payment services involving the processing of cash and foreign exchange transactions.
The EBA is proposing that the threshold comes with staggered requirements adjusted to a CSD’s level of activity in these banking-type ancillary services – “to ensure that the threshold is risk sensitive and proportionate, without impacting market stability”.
According to the analysis included in the consultation paper, “the maximum level of activity a CSD can provide before having to meet the requirements set out in CSDR is 2.5 per cent of the total value of all securities transactions against cash settled in the books of the CSD over one year”. This would account for up to €6.25 billion a year. CSDs with activity value below 1.5 per cent and up to €3.25 billion are only subject to basic prudential requirements.
