Estonia, EU – Baltic States, Financial Services, Good for Business, Investments

"On the one hand, thanks to the T2S, the Estonia investor can in the future carry out simpler transactions with different European securities, the buying and selling of which at present is more difficult, time-consuming and expensive. On the other hand, European investors will in the future have easier access to Estonian securities and those of the other Baltic countries," Mihkel Nommela, head of the Bank of Estonia's payment and settlement systems department, said in a press release.

The main aim of creating T2S was to simplify the cross-border settlement of securities, harmonize settlement rules and increase competition between depositories. Kristi Sisa, head of the Estonian branch of Nasdaq CSD, said that Nasdaq CSD which was created as a result of the merger of the Estonian, Latvian and Lithuanian depositories is one of the first larger examples of fulfilling the aims of T2S, as it would have been difficult for the three small depositories independently to stay in the competition in changed conditions. Trading with German or Italian securities is no longer a cross-border securities transaction for the investor, but it will be settled in the same conditions as a domestic securities transaction.

"The corresponding supervision management is to also change in relation to the merger of the Baltic depositories. As the depository in Latvia will in the future render services in Estonia and Lithuania through a branch, then the leading supervision authority will in the future be the Latvian Financial and Capital Market Commission. A pension's register was separated from the depository in Estonia, which will still be located in Estonia. Procedures pertaining to compulsory and voluntary pension fund shares will be registered in the pension register," Andre Nomm, board member of the Financial Supervision Authority, said.

T2S is the third joint European solution for developing transactions and settlements. The first step were large cross-border bank transfers in Europe, which were made available in Estonia in 2008. The second step was the Single Euro Payment Area (SEPA) launched in 2014, which helped people make retail payments across Europe. The third pan-European settlement platform added this week is T2S, which was created to simplify and speed up securities settlements.

For the commercial banks T2S means that it will be slightly easier for them to get a loan from the Bank of Estonia, which from the point of view of the central bank helps Estonian financial stability. In order to get a loan from the central bank, the commercial bank must provide a guarantee and quality securities are also suitable for that.

As the commercial banks will have an easier access to a much larger securities market through T2S, it will be easier for commercial banks in the future to offer a suitable guarantee to the central bank. Securities accounts as well as dedicated cash accounts are on the same technical platform on the T2S platform, which enable account managers or banks to better manage liquidity.

Nasdaq CSD, which was created as a result of a merger of the central securities depositories in Estonia, Latvia and Lithuania, along with the Spanish depository on Monday joined the pan-European securities settlement platform TARGET2-Securities, a major financial infrastructure project initiated by the European Central Bank. Along with the Baltic and Spanish depositories, by now altogether 22 depositories from 20 countries have joined T2S, which was launched in 2015.

Approximately half a million transactions with a total turnover of over 700 billion euros are made with the T2S plaftorm per day.