When Target2-Securities (T2S) goes live in waves from 2015 to 2017, international members of the Liquidity Alliance will gain access to the pan-European liquidity pool that T2S will create.

Iberclear in Spain and Clearstream’s central securities depository (CSD) in Germany, Clearstream Banking AG, will act as the gateway into T2S for the entire Liquidity Alliance.

The Liquidity Alliance says it will thereby add a global dimension to what the European Central Bank (ECB) had conceived as a purely European project:

“This new facility will allow all members to tap the huge collateral resources T2S will make available. In this way, we will be able to maximise the full potential of T2S, enhancing its capabilities and extending its reach at a time when the efficient access and use of collateral has become a priority," said Jesús Benito, CEO of Spanish CSD Iberclear.

T2S will make cross-border settlement and respective collateral flows in Europe more attractive and boost collateral liquidity beyond and within Europe.

The Liquidity Alliance will extend their services beyond domestic markets to provide cross-border collateral mobilisation in real time. In other words, the Liquidity Alliance is planning to mobilise offshore assets for the coverage of domestic exposures as well as to mobilise domestic assets for the coverage of offshore exposures.

The Liquidity Alliance will deliver such cross-border solutions to overcome collateral fragmentation by using domestic collateral to cover international exposures and vice versa.

“While we had already been following [T2S] with interest from a distance, we did not think we could benefit directly. Our Liquidity Alliance membership now opens up a great opportunity to access T2S,” said Monica Singer, CEO of Strate, the South African CSD.

When Clearstream connects to T2S in wave three on September 12 2016, it will also make Eurobonds available on T2S. This means that Liquidity Alliance members will also be able to access this important asset class for their customers. Iberclear will connect to T2S in wave four.

T2S brings further advantages for collateral management: European domestic and international assets can be consolidated into a single pool of liquidity. As a result, Liquidity Alliance members will be able to seamlessly transfer collateral between CSD (T2S) accounts and ICSD accounts for their customers.