The 2008 business results for the Euroclear group of national and international central securities depositories (CSDs) were resilient. Against equity market capitalisation decreases of more than 45% in Belgium, France, Ireland, the Netherlands and the UK in 2008, the Euroclear group settled 157 million transactions worth approximately EUR 560 trillion in 2008, on par with 2007.
Euroclear also made good progress on delivering its strategic objectives, launching its platform to process all domestic and cross-border transactions involving Belgian, Dutch and French securities in January 2009, finalising in October 2008 the acquisition of NCSD, covering the CSDs of Finland and Sweden, and announcing an agreement to purchase Xtrakter in early 2009.
Pierre Francotte, Chief Executive Officer of Euroclear SA/NV, said:
"Euroclear proved very resilient in 2008, helping to bring safety and stability to the capital markets, precisely what is expected of a market infrastructure, particularly during periods of tremendous volatility. We have been leveraging our risk management expertise to offer our clients a safe haven for their securities business, now and in the difficult months ahead. Notwithstanding the impact of the financial crisis on securities values and the levels of client trading and settlement activity generally, Euroclear's solid 2008 operational performance demonstrates our clients’ search for low risk and low cost post-trade solutions. Our focus in the coming months will be to further reduce their costs and risks."
The entity-specific and combined results of the Euroclear group (including November and December 2008 figures for turnover and transactions settled, and the year-end 2008 value of securities held for Euroclear Finland and Euroclear Sweden, which became part of the group on 31 October 2008) are:
• Turnover, or the value of securities transactions settled, was largely stable at EUR 559.8 trillion compared to EUR 561.8 trillion in 2007.
• The number of netted transactions settled in the Euroclear group increased slightly to 157.3 million in 2008 compared with 155.6 million in 2007.
• The value of securities held for Euroclear clients at the end of 2008 was EUR 18.1 trillion, a 6% decrease from the EUR 19.2 trillion recorded at year-end 2007, driven mostly by lower equity and fund asset values in some of the CSD markets of the Euroclear group.
• The combined daily value of collateral provision outstanding in Euroclear Bank and Euroclear UK & Ireland experienced a 29% drop in
2008 to EUR 424.3 billion compared with EUR 595.0 billion at the end of 2007, largely due to deleveraging in the industry.
Breakdown per Euroclear entity
Turnover was effectively stable at Euroclear Bank, Euroclear UK & Ireland and Euroclear France.
Euroclear Bank’s turnover was EUR 282.5 trillion in 2008 compared with EUR
284.5 trillion in 2007. Euroclear UK & Ireland had a sixth consecutive year of turnover growth by recording EUR 177.7 trillion in 2008, slightly higher than the EUR 176.5 trillion recorded in 2007. High UK market volatility during 2008 was a contributing factor to this development.
Turnover at Euroclear France was EUR 93.6 trillion in 2008 compared to EUR
94.7 trillion in 2007. An increase in settlement activity for fixed-income transactions largely compensated for the decline in equity settlement activity in France.
Turnover for Euroclear Nederland receded from EUR 5.6 trillion in 2007 to EUR 4.3 trillion in 2008, a decline of over 20%. In 2008, Euroclear Belgium’s turnover dropped by 34%, from EUR 510 billion in 2007 to EUR 335 billion in 2008. The declines in Belgium and the Netherlands mirror the difficult market environments and lower equity investment levels experienced throughout the year. For example, the BEL 20 and AEX both contracted more than 50% by the end of 2008 compared to year-end 2007.
Euroclear Finland’s combined turnover for the months of November and December 2008 was EUR 90 billion. Euroclear Sweden’s turnover for the same period was EUR 1.3 trillion.
Number of netted transactions settled
In 2008, Euroclear Bank settled 42.0 million transactions, an increase of 3% from the 40.8 million transactions processed in 2007, which constitutes a strong achievement in comparison to similar service providers in the market. Euroclear France settled 31.7 million transactions in 2008, almost equal to the 32.3 million processed in 2007. Euroclear UK & Ireland settled 69.1 million versus 75.0 million, or 8% fewer transactions than in 2007.
Euroclear Nederland processed 4.4 million transactions in 2008, almost on par with the 4.7 million transactions processed the previous year.
Euroclear Belgium processed 2.2 million transactions in 2008, 21% less than the 2.8 million transactions in 2007, partly due to account consolidation by clients.
Euroclear Finland settled 2.6 million transactions in November and December 2008. For the same period, Euroclear Sweden recorded 5.3 million settled transactions.
Securities held in custody
The results reported across the group for assets held in custody reflect the sharp erosion of securities values across asset classes, most predominantly in equities, as well as the market trend towards cash liquidity. At the same time, Euroclear benefited from the inclusion of Euroclear Finland and Euroclear Sweden, and from growth in fixed-income securities holdings.
The value of securities held in custody by Euroclear Bank was relatively flat in 2008 at EUR 9.1 trillion, compared to EUR 9.2 trillion recorded in 2007.
At Euroclear France, the 2008 total value of securities held was EUR 4.5 trillion, a 15% decrease from 2007’s EUR 5.3 trillion.
Securities held for clients through Euroclear UK & Ireland dropped 10% in
2008 to GBP 2.3 trillion from GBP 2.6 trillion in 2007. The large swings in sterling/euro currency exchange rates in 2008 magnifies the decline when expressed in euro, i.e., 26% from EUR 3.5 trillion in 2007 to EUR 2.6 trillion in 2008.
The value of securities held in Euroclear Nederland fell to EUR 819 billion in 2008 compared to the EUR 945 billion recorded in 2007, a decrease of 13%. Last year, securities held by Euroclear Belgium declined by 29% to EUR
161 billion from EUR 228 billion in 2007.
Euroclear Finland recorded EUR 199 billion and Euroclear Sweden posted EUR
643 billion in the value of securities held in custody at year-end 2008.
Daily value of collateral provision outstanding The combined 2008 yearly average in triparty collateral management deals outstanding at Euroclear Bank and in daily Delivery-by-Value (DBV) and money-market instrument repo instructions at Euroclear UK & Ireland decreased by 29% compared with 2007. The fall in triparty collateral management activity can be attributed to several factors: the failure of Lehman Brothers, an active triparty client; substantially lower levels of leveraged borrowing in the banking system; and less overall collateralised trading as most financing is now provided by central banks, which largely takes place through bilateral agreements.
Reflecting market trends in 2008, triparty collateral management deals outstanding managed by Euroclear Bank at year-end 2008 fell 35% to a daily average of EUR 211.9 billion compared with EUR 328.1 billion at the end of 2007. Euroclear UK & Ireland processed the equivalent of GBP 190.2 billion in daily Delivery-by-Value and money-market instrument repo instructions in 2008, 3% less than the GBP 196.9 billion in 2007. When stated in euro, due to currency exchange rate fluctuations, the figures show a 20% decline to EUR 212.4 billion in 2008 compared to EUR 266.9 billion in 2007.
Like most other sectors, European investment funds were severely affected by the credit crisis in 2008. The combined assets of European investment funds plunged to EUR 6.1 trillion at the end of 2008 from EUR 7.9 trillion a year earlier, according to figures from the European Fund and Asset Management Association (Efama).
Contrary to market trends, the number of fund transactions processed by the Euroclear group, including EMXCo, reached a record 10 million in 2008.
FundSettle now covers more than 39,000 offshore and domestic funds from 22 countries, including clients’ in-house funds, having added more than 6,000 funds in 2008. The number of active FundSettle accounts increased from 451 to 482 in 2008.
EMXCo, a leading UK provider of investment-fund order routing and part of the Euroclear group since 2007, routed over 22.7 million messages in 2008, an increase of 17% on the 19.2 million messages routed in 2007. This increase, during difficult market conditions, is attributable to growth from existing participants as well as the high number of new joiners to the system; 14 fund providers and 160 distributors joined the EMX Message System in 2008, taking the total to 89 fund providers and 342 distributors by the end of the year.