ECB defends new settlement plan as cost-effective

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STRASBOURG, France, Sept 26 (Reuters) The European Central Bank's proposed new platform to settle stock and bond trades in the euro zone would cut costs for users, a member of the bank's executive board said on Wednesday, defending a project delayed by industry and EU member state concerns.

The ECB has said the Target 2 Securities or T2S project announced last year would exploit the benefits of financial integration better than the current patchwork of clearing and settlement systems, many run by private operators.

''The running costs would be 100 million euros a year compared to the three digit (million) profits made out of this business at the moment,'' Gertrude Tumpel-Gugerell told the European Parliament's economic affairs committee.

The project would also simplify, harmonise and improve legal certainty in the settlement system, she added, citing the reasons usually given in defence of the project.

Clearing and settlement systems swap legal ownership and safe keeping of a security for cash following a transaction.

The new platform, a separate EU code of conduct on stronger competition in clearing and settlement already in force, and new EU rules on share trading from November would all benefit users, she said.

''This means more pressure on the fee. This has started already. This is one of the main points where the consumer can benefit. There is more transparency. There was no transparency at all in the past,'' Tumpel-Gugerell said.

''At the moment, profits are made out of barriers, limitations and complexities,'' she added.

''The biggest challenge is to reduce the complexity of all the different requirements,'' she said of the T2S project.

The new platform, which would come into operation in 2013, would carry out an operation currently handled by private sector settlement operators such as Euroclear and Deutsche Boerse's Clearstream.

Concerns among EU finance ministers effectively forced the ECB to delay a final decision on the plan until next year in order to consult more extensively with the securities industry.

Tumpel-Gugerell said finance ministers have, overall, given a positive assessment of T2S and she defended the central bank's consultation efforts and how the new platform will be governed.

There was full transparency and full representation from all parts of the industry as well as non euro zone states such as Britain, the Nordics and the Baltics, she said.

The ECB will try to find a way to give settlement houses and users a special role in the project. ''We cannot say we handover the project to them, but we will find a way to have more involvement of users and customers,'' she said.

REUTERS PBB RN1731

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