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TS2 may help address capital shortfall says PwC / Clearstream paper

The European Central Bank's much anticipated plan to streamline the continent's securities settlement structure is now scheduled to go live in 2015. Known as Target2-Securities (T2S), the programme could enable eurozone banks to plug the €295 billion ($388 billion) capital shortfall that they must recoup as part of the Basel III agreement, according to a study conducted by Clearstream and PricewaterhouseCoopers (PwC).

The research claims T2S could provide vital assistance to banks in Europe as they attempt to make up for the shortfall expected under Basel III and new trade regulations. Indeed the move could provide institutions with €33 billion, claims the study, which is a sizable segment of the total.

It would be unlocked by banks pooling cash accounts into T2S, enabling them to centralise and net off cash payment obligations associated with their settlement activity in relevant markets.

Philip Brown, head of client relations in Europe and Americas at Clearstream, said the study shows TS2 has the potential to help market participants to meet their capital requirements.

"The potential relief on participants' capital requirements should be a key trigger to gear up to T2S which, ultimately, will also make the market more robust," he added.

By Tony Aynsley