1. TARGET2-SECURITIES Economic Impact Analysis 28 March 2008 Jaap Mauritz

2. Background An integrated platform for the settlement of securities transactions in CeBM in the Eurozone The model can offer advantages in terms of efficiency and cost-cutting, provided that a critical mass of CSD’s actually joins and the system can be developed at reasonable costs For the longer term: 2013

3. Background CSD’s outsource the administration of securities accounts to the Eurosystem, which then manages the securities and associated cash accounts on the platform. Dedicated cash accounts on T2S are feeded by cash accounts from T2 At the beginning of the day both cash and securities accounts are moved to T2S At the end of the day the money goes back into the TARGET2 payment system, and the securities return to the CSD’s Only securities settlement, CSD’s keep the custody and notary functions

4. Scope Scope of assets All types of securities which CSD’s are settling today (debt instruments, equities, investment funds, warrants) Scope of services Whole life cycle of a transaction (receiving settlement instructions, providing matching facilities, verifying availablity of securities and CeBM etc.)

5. Milestones Consultation User Requirement Document (URD): Deadline 1 April 2008 Economic Impact Analysis Questionnaire: Deadline 15 April 2008 Governing Council decision: Summer 2008

6. Economic Impact Analysis Assumptions Scenario 1 T2S is built according to URD as under public consultation All settlements in central bank money in the euro area CSDs are processed in T2S Figures based on current fees and volumes for 2007

7. Economic Impact Analysis Assumptions Scenario 1 Complete reshaping with respect to settlement of securities CSDs continue to offer their existing services: nothing less, nothing more (e.g. new business opportunities are not taken into account, e.g. no additional CSD links). Customers continue to use CSD or custodians as of today CSDs offer both direct and indirect connectivity

8. Economic Impact Analysis Other scenario’s Scenario 2: all European currencies and CSDs (at least GBP, DKK, CHF and SEK) are in T2S Scenario 3: CSD-investments continue as currently planned despite T2S and minimum reshaping at CSD level. Scenario 4: only part of the CSD traffic goes to T2S

9. Questionnaire for T2S users Aim: determine the net impact of T2S on T2S users T2S Users to evaluate: Settlement volume and fees for 2007 Settlement directly with CSDs Settlement through custodian banks Impact on operating/running costs Operating cost reductions in treasury processes due to T2S, including potential revenues from currently unused liquidity and collateral holdings Operating costs related to settlement today and with T2S in the future (e.g. reduction of interfaces) Investment cost related to settlement Average annual investment cost 2001-2006 Expected investment cash-flows during development phase 2007-2012

10. Questionnaire Strict confidentiality framework Only 3 internal ECB staff members will temporarily access individual data/information. Data to be destroyed afterwards. Compilation to be confirmed by independent third party, e.g. external auditor