European Central Bank: Eurosystem Reschedules Launch of New Collateral Management System

The Governing Council of the European Central Bank has reportedly decided to reschedule the launch of the Eurosystem Collateral Management System (ECMS) from 20 November 2023 to 8 April 2024.

This decision was “taken to mitigate the impact of the rescheduled launch of T2, the Eurosystem‘s new real-time gross settlement system and central liquidity management model, which was postponed by four months on 20 October 2022.”

The ECMS will be “a unified system for managing assets used as collateral in Eurosystem credit operations.” It will aim to “replace the existing individual systems of the euro area national central banks.”

The ECMS is expected “to deliver considerable benefits to the Eurosystem and its counterparties and to the market at large by harmonizing collateral management practices and contributing to further EU financial integration.”

The Eurosystem Collateral Management System (ECMS) is “a unified system for managing assets used as collateral in Eurosystem credit operations.” Its launch had been “planned for November 2023.”

Together with the other TARGET Services that the Eurosystem offers – and making use of the components it shares with those services – the ECMS will “ensure that cash, securities and collateral flow freely across Europe.”

The ECMS will be “made available through the Eurosystem single market infrastructure gateway, along with the other TARGET Services.”

The ECMS will aim to “replace the existing systems of the 19 national central banks that are currently used to manage assets used as collateral for Eurosystem credit operations.”

Although all the existing systems adhere to the same set of rules on the use of collateral (as set out in the Eurosystem legal framework for monetary policy instruments which consists of the “General framework” and the “Temporary framework”), each one is “maintained individually.”

This means that “each Eurosystem national central bank implements changes to the legal framework separately, leading to a duplication of effort and making it more likely that the rules will be applied differently in different countries.”

This in turn could “affect the level playing field that monetary policy counterparties should enjoy.”

Replacing the current fragmented and decentralized structure is “in line with other Eurosystem initiatives aimed at developing common platforms and systems that work across the euro area to further consolidate and simplify the provision of market infrastructure services.”

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