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Clearstream – ready for new CSDR challenges

06 Dec 2017

Clearstream – ready for new CSDR challenges

 

Following the 2008 financial crisis, a set of new regulations emerged to secure securities settlements and infrastructures in the EU. One of the most important regulations is called CSDR. The Central Securities Depositories Regulation (CSDR) is keeping project managers Tara Byrden and Fernand Weber very busy. In our interview they tell us more about it.

Ms. Byrden, what is the focus of the project?

Tara Byrden and Fernand Weber collaborate closely for CSDR.

The goal of the CSDR Readiness Project is to ensure that the Clearstream CSDs – CBF, CBL and LuxCSD – are fully compliant with CSDR and that each CSD obtains its CSDR “licence to operate”. The project started by conducting a detailed impact analysis of the regulation. It was then followed by the launch of a series of implementation projects across business and IT.  Each CSD has recently submitted an application for authorisation to their local regulators, representing the first critical milestone of the project. Now, the focus of the project is to ensure that CSDR compliance is achieved at each CSD.

What impact does the CSDR have on Clearstream business?

The impacts of CSDR are far-reaching, affecting almost all areas of the organisation. In a nutshell, CSDR introduces a harmonised set of rules for the authorisation, operation and governance of CSDs as well as a standardised set of rules for the provision of CSD services.

What does this mean in practice?

Well, the full scope is too vast to go into detail now but to give a few examples, colleagues in Credit are having to adapt the way in which credit lines will be granted, while the Controls unit are transforming the securities reconciliation process, as CSDR requires it to be done more quickly, thereby also impacting our operational areas. In future, the Network Management area will have to conduct more frequent and tighter due diligence of Clearstream’s suppliers, while colleagues in Boards and Committees will have to cater for stricter governance arrangements.

We are also actively working with our Core Product Development and Relationship Management teams to communicate the impacts of the regulation to our client base.

Mr. Weber, what are the challenges for the IT side?

The challenge is twofold: firstly, to translate all CSDR requirements into system requirements and secondly, to secure the IT resources from different product lines, enabling the delivery of the CSDR enhancements according to an implementation approach over three years with four project releases.

Settlement discipline regime rings a bell for you, tell us more about it!

CSDR introduces a “settlement discipline regime”, or SDR, which aims to increase settlement efficiency, e.g. by applying late-settlement cash penalties and mandatory buy-ins for matched settlement instructions that fail to settle. SDR also addresses numerous aspects related to settlement functionalities, mandatory matching fields and additional information in settlement instructions.

The adoption of the final SDR legislative text is ongoing, however it is becoming effective two years after its adoption. This is leaving us with a lead-time of 24 months … and a lot of work ahead of us.

Interview: Marie-Chantal Weber

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