Preparation for Target-2 Securities (T2S) will be a core topic at Sibos, according to BNP Paribas Securities Services’ Alan Cameron, head of relationship management international banks and brokers, with a number of bulge bracket banks preparing to dramatically change their operating model across Europe for the post-T2S environment.

While smaller firms are taking a passive stance ahead of the change in regime, some large firms are using T2S as a catalyst for taking control of their settlements. BNP Paribas is working with a small number of firms to take on control of their asset servicing in a new so-called sponsored access operating model.

“We’ve been working with some clients to construct a model whereby they can be directly connected participants to T2S and we provide the asset servicing in all the markets across Europe,” said Cameron.

“It’s complicated as the asset servicer has to know exactly what’s happening on the trade flow in order to do the asset servicing correctly. The way we do that is by us routing the client’s instructions into the eurosystem and by doing so we can update our records and hence provide asset servicing for the local markets.”

To prepare to move to a sponsored access model firms might have to go through a number of changes, including consolidating services across Europe with one agent bank and moving from the traditional agent banking model to an account operating model at the CSD.

BNP Paribas’s preparation for T2S has involved testing the new model and revising its own operations.

Working with all user groups and their advisory board, the firm has confirmed that the new model works in local markets. Cameron says it comes with improved settlement algorithms, auto collateralisation and it will cut down on the amount of collateral required.

“The other really good thing about the new system, once it’s in place, is we’ll only have to cope with one settlement system updating at any time. Previously, any time a CSD changed settlement platform it was difficult to adapt,” he said.

The firm’s new settlement hub in Lisbon harmonises settlements Europe while local offices will remain focused on asset servicing. When T2S comes into force, the centralised hub will reduce the firms’ costs and give clients economic advantages.

“If you just sit still T2S won’t give you any cost savings, indeed it might increase your costs. You need to ask yourself not so much what T2S will do for you but what you can do for T2S,” added Cameron.