Informe_Anual_Cecabank

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03 Our Business Model
Cecabank 2015 Annual Report
What is the purpose and the main novelties of the
Securities Market Reform (the Clearing, Settlement
and Registration System)?
The reform of the securities markets comprises a set
of measures which we have to adopt in the Spanish
securities market to adapt to the European settlement
platform called Target 2 Securities (T2S).
This is a platform created by the Eurosystem so that
all the European markets have a common settlement
system. The idea is to be more competitive and to
reduce costs. Spain has to adapt its entire settlement
mechanism, including the creation of a Central
Counterparty Clearing House, to be able to meet the
objectives and standards established by Target 2
Securities.
As a Spanish entity which offers
custody and settlement services, what
do these changes imply for Cecabank?
It is a great challenge for the bank.
Firstly, like any other entity in the
Spanish market, it has to adapt and set
up all the mechanisms for forming part
of the new system. This has meant that
in the last three years we have had to
work on the computer aspect and on
training our teams to adapt all our systems to the new
environment of the reform.
But there is another side to it. The reform is a change,
and as such, it brings business opportunities with it.
We have gone from offering custody and settlement
services to offering custody, clearing and settlement
services. The reform has enabled us to reach a larger
number of clients and a number of different clients from
what we worked with before and, consequently, it allows
us to extend the range of services offered by Cecabank
Securities Services.
And what do they imply for your clients?
Up to now, we have worked on developing systems,
on new business models and new services, but this
has to be explained to our clients. It will be a complete
change of lifestyle for them. The typical customer
who was used to buying telephone companies or any
other securities will have to get used to the fact that
things are going to change radically. For instance,
in the current system, when a client buys securities,
their settlement is guaranteed and the system has
mechanisms which ensure that the customer always
receives their securities, come what may.
With the reform, settlement is no longer guaranteed.
Although there is a clearing house, the securities will
only become the customer’s propertywhen the seller has
handed the securities over and the buyer has disbursed
the cash. Consequently, the system is different.
It is also important to remember that financial
operations change. For example, now when a client
reads in the newspaper that Telefónica
will be paying dividends the next day,
they will have the right to the dividend
if they buy Telefónica shares today.
Tomorrow, with the reform, a set of
mechanisms are established which
define exactly when the client buying
has the right to receive the dividend.
Consequently, clients are going to notice
a series of changes - very significant
changes - in their operations.
Should clients be worried?
It’s true that the system is different and it’s true that the
mechanisms are very different and that clients have to
adapt. But clients need to know that there is no reason
at all for them to worry or be alarmed. The system has
created a set of mechanisms to keep the number of
failed operations down. Thus, all the customers who buy
shares will receive their shares and all the customers who
have the right to dividends will receive their dividends.
So, changes, of course - and very substantial ones - but
the system is still secure.
Changes of
course - and
very substantial
ones - but the
system is still
secure