T2S will be a single IT platform for settling most securities in Europe, eliminating any differences between the settlement of domestic and cross-border transactions. T2S is being developed following a Governing Council decision on 17 July 2008 to provide the necessary resources until its completion and will be owned by the Eurosystem.
T2S will be a state-of-the-art settlement engine, providing commoditised and harmonised DvP settlement in central bank money on a real-time gross basis. The most important, and most direct, benefit of T2S will be a significant reduction in cross-border settlement fees, which are still significantly higher than domestic fees.
T2S will also be a big step towards a single market for financial services, thereby supporting the EU’s Lisbon strategy which is aimed at making the EU the most competitive economy in the world. T2S will create a “domestic” market for the settlement of European securities, directly and indirectly removing many of the “Giovannini barriers” to cross-border clearing and settlement. Beyond its direct impact, T2S will act as an important catalyst for further harmonisation across Europe.
Finally, T2S will have a positive impact on financial stability in three ways. First, it will drastically reduce or even eliminate the risks that still affect the settlement of cross–border securities transactions. Second, it will help banks to optimise their collateral and liquidity management, which is crucial in times of financial market turbulence. Third, by fostering greater efficiency and integration of European financial markets, T2S will promote greater diversification and sharing of risk, which will help make the whole system more stable.
Further information can be obtained from the T2S website of the ECB.