The European Central Bank (ECB) is considering creating an integrated European financial market, particularly in the areas of securities issuance and instant payment settlement.

Speaking at Joint ECB and European Commission Conference “Into the future: Europe’s digital integrated market”, Frankfurt, on 31 January 2017, Yves Mersch, Member of the Executive Board of the ECB, said digitalization is opening new opportunities for integration of the financial market.

He said that the launch of T2S in 2015 and two further migration waves last year, followed by the impending migration of the German market to T2S, is expected to bring a big increase in the volume of securities transactions being settled on the platform. According to Mersch, T2S has created the basis for an efficient and effective settlement mechanism for securities in Europe.

“I still see gaps that are in the way of our achieving a truly integrated European financial market. The first area is securities issuance, the second instant payment settlement”, he said.

Mersch believes that a fully harmonized system of securities issuance could reduce the transaction costs for capital financing, make the European securities market more attractive in the global economy, and allow an effective redistribution of private risk across the EU markets. However, legal and national rules have led to fragmentation of services, he said, noting that there is still too little evidence of competition.

“This fragmentation is an area that calls for action. It may be worth exploring the establishment of a truly European issuance service – at least for some supranational debt instruments. We could even think about the ECB/Eurosystem playing an active role in setting up such an issuance service. And we could consider whether and to what extent new technologies, like distributed ledger technology (DLT), can be used in that process”, Mersch said.

For pan-European instant payment solutions, he said that the proposed TARGET instant payment settlement (TIPS) service would offer a series of benefits to the payment service providers. This includes pan-European reachability for instant payments, the possibility of using credit lines by payment service providers stemming from their collateralised positions in TARGET2, eliminate credit risk, and more choices for payment service providers.

“The Eurosystem will take a decision by June 2017 on whether to develop the service, based on the results of the public consultation. TIPS could commence operations as soon as 2018”, Mersch added.