Clearstream and Banque centrale du Luxembourg Collaborate on Collateral Management

Luxembourg based banks benefit from further collateral optimisation

Clearstream, the International Central Securities depository within Deutsche Boerse Group, and the Banque centrale du Luxembourg (BCL) are launching a new service allowing all Luxembourg based banks to optimise further their use of collateral to cover any operation with the Eurosystem via BCL.

Clearstream will act as a triparty agent for the banks looking to cover any operation with BCL. Through their securities account with Clearstream, the banks will manage one central, multi purpose collateral pool allowing them to not only cover their monterary policy operations but also to perform other operations necessitating collateral among which intraday credit operations in TARGET2, the real time gross settlement system for the euro.

Luxembourg based banks will benefit from the flexibility of Clearstream’s fully automated CmaX (collateral management eXchange) system. This includes automatic allocation of collateral, eligibility checks, substitutions of collateral, mark to market valuation, margin calls, re-use of collateral and reporting facilities.

Operationally, Banque Centrale de Luxembourg will communicate electronically to Clearstream the amount to be collateralized and Clearstream will ensure that eligible assets are pledged as collateral. Assets eligible at the European Central Bank and for which Clearstream already has “assessed links” (1) represent some 40,000 securities, 90% of the total number of eligible assets.

The financial crisis and the subsequent freeze on money markets have shed light on the importance of accessing central banks liquidity as well as on the crucial role of securities financing mechanisms and infrastructures which provide much of the liquidity to the world’s capital market. Since the beginning of the financial crisis, collateral managed by the Eurosystem has gone up from € 800 billion to € 1500 billion.

Clearstream pioneered the development of collateral management services, including triparty repo, in Europe by launching the world’s first such multi-currency service back in 1993. It now offers a wide range of collateral management services together with a suite of securities lending products under the name of Global Securities Financing (GSF) services. In the past weeks, GSF services have broken the €500 billion mark for monthly average outstandings (from € 400 billion a year ago), illustrating the growing importance of secured financing and the continued flight of collateral towards central liquidity pools at a time of market uncertainty.


(1) Background on assessed links. assessed links are contractual and technical arrangements for the transfer of securities involving between securities settlement systems which may be used in the collateralisation of the credit operations of the Eurosystem after an assessment has been carried out against the Eurosystem’s standards to ensure that the conditions set by the Governing Council have been met.