Are ICSDs too close for comfort?

While the consultation continues on how the EU might achieve a harmonised infrastructure for cross-border transactions, Frances Maguire finds that another highly charged debate is going on: should ICSDs and CSDs compete with global custodian and agent banks?When is a bank, not a bank? When it’s an international central securities depository (ICSD). At present, both Europe’s ICSDs, Euroclear and Clearstream, are banks, and despite moves by Euroclear to restructure its banking and its depositories into separate entities, and the European Commission’s accusation that Clearstream is abusing its “dominant supplier position”, the fact still remains that both ICSDs offer “bank accounts” to their securities customers that do not pay interest.

by Frances Maguire

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Historically, the ICSD banking licences and accounts came about simply to extend the services of the ICSDs in securities processing. But increasingly – especially now the regulators and market participants are trying to redraw the fragmented clearing and settlement infrastructure of the EU – the question is: should utilities compete with their users?

Several sub-custodian, or agent banks believe CSDs should consolidate and remain as utilities – monopolistic, for limited profit, and user-governed or owned, such as the Depository Trust Clearing Corporation in the US.