ECB and EBA sign settlement service agreement

At a meeting today in Frankfurt the European Central Bank (ECB) signed the agreements governing the function that the ECB will perform in respect of the EBA’s Euro Clearing System. This is the final step to complete all the migration from ecu to euro.

Among the persons attending the formal signing ceremony were Wim Duisenberg, president of the ECB and other representatives of the ECB. Representing the EBA were Willy Scheerlinck, Chairman of the EBA Clearing Company, Olivier Mas, Chairman of the Euro Banking Association (EBA) and Gilbert Lichter, CEO of the EBA Clearing Company.

The ECB plays a role at the heart of the system as settlement service provider. It will receive payments from Clearing Banks settling a debit balance in the system and, upon instructions of the EBA, pay the Clearing Banks with a credit balance.

The ECB also holds the system’s liquidity pool to cover a bank's failure to settle. A central liquidity pool has been created as part of the EBA’s system structure. The liquidity pool held with the ECB will total 1 billion euro. If at the end of a day, a member bank cannot settle, the EBA will activate the liquidity scheme to complete settlement.

The ECB acts as overseer of the EBA Clearing system. The ECB has confirmed compliance of the EBA Euro Clearing System with the Lamfalussy standard compliance. The Lamfalussy Report of 1990 ("G10 Report on Interbank Netting Schemes") laid down the necessary safety standards for all clearing and settlement systems.

Willy Scheerlinck, Chairman of the EBA Clearing Company said, "This is a very important day for the EBA. We are pleased to be able to sign a contract with the ECB to be our settlement service provider."