22 November 2007

'Clearstream launched Euro Night-time Funding Link service

Clearstream launched its Euro Night-Time Funding Link (ENTFL) service to TARGET2. This service will allow customers to access their liquidity held in TARGET2 Real Time Gross Settlement (RTGS) accounts and make it available for the settlement of transactions in euro during Clearstream’s night-time processing.

With this new service, customers use dedicated liquidity from their TARGET2 account as collateral for credit granted by Clearstream to settle transactions in Euro during night-time processing. Any available liquidity in TARGET2 can be used by the Euro Night-time Funding Link up to the limit set by the customer, and is eligible as collateral for EUR credit at Clearstream.

This service operates during the night, when TARGET2 is closed for payments and provides a flexible means to bring in collateral dedicated for Euro settlement. The collateral within Clearstream can be used for credit required in other currencies, or can still be used for additional credit in Euro. ENTFL has been designed to provide operational efficiencies for customers such as a clean starting position before TARGET2 opening, easy and full control over the liquidity dedicated to the service, reduction or replacement of the need for customer to pre-advise Clearstream of their Euro payments, ahead of Clearstream's Night-time processing.

Commenting on the launch of the Euro Night-time Funding Link service, Mr Pierre Beck, Head of General Department at the Luxembourg Central Bank, said: "We are very pleased that the original service we launched in 2002 with Clearstream Banking Luxembourg has set a basis that can now be extended with TARGET2, contributing to a more efficient liquidity management by credit institutions across the euro-zone".

Mr Joachim von Eiberg, Director Transaction Banking Markets at Commerzbank AG, commented: "Clearstream’s early use of TARGET2 features to provide this liquidity management service is a further step to improve the efficiency of liquidity provisioning for the settlement of securities transactions, which is in the interests of all market participants".

Michael Jaeggi, Member of the Executive Board of Clearstream Banking SA said: "This service adds to the existing settlement and operational efficiency of Clearstream by creating a reliable option for our customers to easily add liquidity. This means customers can optimise the availability and use of their collateral as they can draw on their TARGET2 pool of liquidity for euro securities settlement as and when they need it. Customers manage this service using the same tool as for their TARGET2 account, making this service efficient and easy to use and implement".

Customers participating in Target2 are able to use the Euro Night-time Funding Link service. The migration of all European domestic central banks to Target2 - the centralized payment system designed by the European Central Bank- will be done in four phases with Group 1 starting on 19th November and Group 4 finishing in September 2008.

© Graham Bishop