INTERVIEW – CHRISTINE STRANDBERG | Albeit that Sweden comes on about a decade later than its neighbours Denmark and Finland … Still, the way that was paved with last week’s affirmation by central bank Riksbanken, for a transition to the pan-European securities settlement system Target2-Securities, could impact the landscape notably, and see winners and losers. PostTrade 360° speaks with custodian SEB’s Christine Strandberg.
4 September sees Christine Strandberg join a top panel on Sweden’s T2S journey, at PostTrade 360° Nordic in Stockholm. Click here to read more, and secure your free ticket today!
Technically, it was a non-decision. Regarding real-time gross settlement of pure money payments, Riksbanken decided on 18 June to seek to join the Eurosystem’s platform Target2, “T2”. Yet, for the settlement of securities transactions, where Riksbanken for three years has worked in an explicitly stated direction of joining the corresponding Target2-Securities platform, this was postponed to an unknown point only beyond the T2 implementation.
Even so, the decision and its motivation are contributing to the certainty of where Sweden is going. The phrasing of Riksbanken’s press release about the T2 decision, sets a preliminary time line that is consistent with previous forecasts for implementation of T2 around 2030.
Delaying Sweden’s connection with T2S, the securities settlement platform, to a later point than that, is in line with wishes expressed by market participants through the consultation phase. While not hugely surprising, this is one of the important certainty elements that have now thus been added.
“If the Swedish securities market, the payments market, the central bank and the CSD would all have had to migrate simultaneously, that could well have challenged the time frame,” says Christine Strandberg, Head of Investor Services Banks Product Management at SEB.
Two years later would be nice
“The market stakeholders have also presented earlier that they would prefer to see two years between the implementations of T2 and T2S, to allow for a year of testing in the securities market. So the idea was to connect with T2, run a stabilisation period, then migrate to T2S, still with time for testing.”
In comparison with, say, the US, Europe’s capital market is a highly fragmented affair. Without the possibility to consolidate settlement and clearing at the scale that the DTCC group does in the US, the EU has sought to lay some foundation for the possibility of cross-border competition and consolidation by standardising processes onto a shared underlying platform, over which securities depositories then manage their business. While some discussion is going on in the industry over the optimal level of competition stimulation in settlement services, most will agree that the series of hurdles is rather long. Christine Strandberg is not under the impression that anyone touts T2S as a decisive enabler of tougher competition. Anyone entering a country on the back of the shared technology platform would still be up against the national delicacies in terms of e.g. legislation regarding securities registers and types of CSD securities accounts, Companies acts, tax legislation, all managed in relation with the national regulator.
“These are not things you’ll do immediately if you come in from another EU country. Yes, the Central Securities Depository Regulation makes passporting possible, but it is not like we’re observing big growth in the number of companies who want to pick up these business activities.”
Harmonisation, yes – T2S, well …
Christine Strandberg sees the T2S discussion as an element of a broader EU harmonisation debate in the Swedish securities market. With a coordinated “Harmonisation road map”, last updated in 2023, the market univocally weighs in behind the idea of harmonising nearly as much of its processes as possible with European standards. Still, when it comes specifically to T2S, Christine Strandberg perceives that different actors can find themselves on rather different sides of the changes it brings.
“There are mixed views. International actors who may already be members of several other T2S-based CSDs tend to be more positive than purely local actors”, she says.
Losers could be, for example, smaller regional banks who are today direct CSD and clearinghouse members, managing things well on their old setups – but with constraints to their business cases for investment into a new platform. Some may come to consider connecting via larger banks instead, to provide their clients with the securities services.
“I don’t think anyone expects T2S to make services cheaper to the Swedish securities market. Over the long term, it could, possibly, but it would be hard to see a short-term business case on a cost basis,” she adds. For Riksbanken there could hypothetically be operational advantages to the de-facto outsourcing of the platform, such as in the race against cyber crime.
“So, the general advantage to Swedish securities market participants can be harder to observe. Many aspects will come out as an advantage or a disadvantage depending on the position you see it from.”
