Banks’ top brass need persuading over T2/T2S opportunities

By David Beach | 24 May 2019

Banks’ middle management and specialists must do more to convince the executive of the opportunities and cost saving benefits posed by T2/T2S (TARGET2 & TARGET2 Securities) Consolidation.

Affecting some 1,700 EEA bank accounts, the T2/T2S Consolidation project - which is due to go live in November 2021 - is a great burden for European banks who face weighty penalties for non-compliance.

“This is what we’re finding on the ground talking to our clients. Middle management is understanding the project but there is resilience in the top management,” said Giuseppe Niolu, partner of financial risk management at KPMG Italy, on a recent bobsguide panel.

Also on the panel, Mario Mendia, head of the capital markets and treasury business unit at TAS Group, pointed out that the firm - which recently conducted a T2/T2S workshop with 20 Italian banks - was helping client middle management drive the business agenda towards Consolidation opportunity.

“The top management awareness is not yet mature despite eurosystem efforts,” said Mendia. “We see this in our experience with customers to help them with the strategic relevance of the project to their top management.”

A poll conducted during the webinar panel found that 29.2% of the treasury and banking audience had not begun work on T2/T2S Consolidation, while 54.2% had and 16.7% were planning on doing so shortly.

T2/T2S Consolidation comes at a testing time for European financial institutions, particularly with the density of wider regulatory change. Another poll during the webinar found that 89.3% agreed that the treasury and liquidity management function was currently changing their role within the bank and would continue to do so in the future.

“The eurozone is on a journey,” said Fabrizio Sarrocco, finance and risk lead for Europe at Accenture, also on the panel and reacting to the poll, “it started with Instant Payments and now we are currently dealing with T2/T2S and soon we will have new collateral frameworks in 2022.

“The treasury function is and will work in this new environment with a few constraints from a regulatory point of view but also opportunities to better manage liquidity,” he said.

It makes sense for banks to proactively embrace technological and structural change, believes Sarrocco.

“Considering the complexity of this programme and the relevance of this journey in the eurozone and liquidity in general, a clear IT model and roadmap (below) to execute is a key factor to the success of this programme,” he said. 

A clear IT roadmap for T2/T2S Consolidation by Accenture. Source: bobsguide webinar panel

Technology is also changing the treasury function, particularly with new expectations around intraday liquidity management, but also, warned KPMG’s Niolu, regulators’ expectation for improved reporting.

“Regulators could get even tougher on banks. I’m afraid that these constraints and requirements from regulators could become even tougher when technology innovation allows faster and more precise,” he said.

Listen to KPMG, Accenture and TAS Group as they provide an update on the T2/T2S Consolidation project and suggest roadmaps and strategies.


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