European Collateral Management System (ECMS)
Adapting to the
unified system for managing collateral in Eurosystem credit operations.
implementation challenges to operational process efficiency.
The “Vision 2020” initiatives under the direction of the ECB serve to
strengthen the market infrastructure of the Eurosystem, raise potential and
further deepen the integration of the European financial market. In addition to
and T2 / T2S consolidation, the ECMS (European Collateral Management System) is
one of the migration projects that can be classified in the context of Vision
The go live of the ECMS was originally planned for November 2022,
however, it was rescheduled due to the delay of the T2 / T2S consolidation
project (Covid-19 pandemic) and the postponement of the SWIFT ISO 20022
migration in correspondent banking. The “big bang” implementation of the ECMS
will also be moved to November 2023.
To ensure a smooth “big bang” migration, the national central banks of
the euro zone will closely support the ECMS migration of their communities who
currently have a monetary policy collateral account with them in a supervisory
monitored process (community readiness monitoring). A Europe-wide harmonized
milestone schedule developed by the ECB serves as a planning basis for all
activities related to the migration of data and systems.
Objective of the ECMS
The aim of the ECMS project is to replace the 19 different collateral
management systems (“Collateral Management Systems” - CMS) of the national
central banks and to introduce a uniform system for the entire euro zone.
Sufficient harmonization of underlying processes is a prerequisite for a
uniform functional approach. With that in mind, the introduction of the ECMS
will not only affect the euro zone banking sector but also CSDs (central
securities depositories) and TPAs (triparty agents)
After the Go-live of the ECMS communication with all TARGET services (T2
(consisting of CLM and RTGS), T2S, TIPS and ECMS) will be executed via the
Eurosystem Single Market Infrastructure Gateway (ESMIG). This single gateway
guarantees access to the ECMS for the community in a uniform and standardized
way, so that they benefit from a simpler and more efficient procedure for the
cross-border mobilization of collateral. However, the responsibility of the
national central banks for their communities will remain unchanged. The ECMS
will consist of core components (functionalities, services and processes) that
have already been or harmonized or allow for further standardization at
Obligations of the national central banks
For some ECMS components, the respective national central bank can choose
whether it wants to use the ECMS services or to continue with the national
collateral management system for these parts. Non-harmonized functionalities,
services and processes will not be part of the ECMS. However, the ECMS will
largely replace the nationally operated applications for the administration of
monetary policy collateral. Only the administration of credit claims will be
handled by the national central banks as before via their national system.
Monetary policy peculiarities
In order to continue to participate in monetary policy operations, ECMS
migration is mandatory. For full use of the ECMS, monetary policy business
partners will need a new system access. Communication with the ECMS can take
place U2A (user to application, i.e. via a graphical user interface) and / or
A2A (application to application, i.e. via the exchange of messages in ISO 20022
format between systems). For technical communication, the use of an eligible network
provider approved by the Eurosystem is mandatory for both U2A and A2A access.
Business partners can either connect themselves to ECMS via ESMIG or use the
technical access of a third party.
Outlook for banks, CSDs and TPAs in course of the
The counterparties affected by the ECMS migration (banks, CSDs &
TPAs) are required to prepare early in order to ensure connectivity and
communication with the ECMS for the Go-live. From this point on, queries and
orders placed on the monetary policy collateral account, which is then managed
in the ECMS, can only be initiated via ESMIG. The current access channels (e.g.
for Germany Bundesbank-CAP
or the previous
form of SWIFT access) will no longer be available for this after the launch of
ECMS. The current delivery channels for collateral can still be used, although
settlement will generally take place in T2S.
The use of triparty systems will also be possible in the future. In
order to be able to adequately check the connectivity and communication within
the scope of the planned testing activities, which are carried out by the
national central banks and the ECB in summer 2022
, ECMS participants are
now required to prepare their internal adaptations. The planned milestone,
known as IAD5, starts in January 2022.
The cross-departmental implications for the procedural and
organizational infrastructures should not be underestimated. In this context,
the first banks are reporting that closer cooperation between the IT,
treasury, cash and securities settlement as well as other affected functions for
ECMS purposes is being promoted
. In particular, the effects on liquidity
management must be examined more closely at an early stage, since the available
open credit line in the form of an essential parameter for managing intraday liquidity
will be calculated in the ECMS and sent to the central liquidity management tool
Further feedback from practice highlights the positive effects that
the ECMS migration brings with it. In this context, the first preliminary
studies are being carried out to use the ECMS initiative as an opportunity to
promote harmonization and optimization in the collateral management environment
which were long considered but never tackled in the past.
Our consultants were able to achieve significant results for our
customers in the course of the first ECMS preliminary studies. The following
services are in focus for banks, CSDs and TPAs:
- Evaluation of new ECMS ISO20022
messages as well as communication & connectivity requirements
- Support in adapting the relevant ECMS
system landscape and operational processes, taking into account all affected
areas, processes & systems
- Support in the implementation of
specified milestones including preparation and follow-up of communication with
supervision and documentation
Preparation & implementation of
test activities; incl. affected internal applications, test cases and
Collateral management optimization
 TIPS: Target Instant Payment Settlement
 Triparty as a service provider who carries out all the
collateral management related activities (collateral valuation, optimization,
substitutions, settlement). Also
relevant in the context of collateral but not to be confused with is the Third
manager/administrator values and selects the collateral and provides settlement
instructions to a custodian, who carries out settlement, segregation and
Read more about TARGET T2/T2S Consolidation Project: Successful & timely adaption of the new TARGET platform here.Contacts
has over 7 years of consulting experience. She combines her experience in
implementing supervisory driven initiatives with a distinct Capital Markets
focus and a profound knowledge of the European banking domain.
Daniela Rothley is a Partner in LPA´s Frankfurt-based
consulting team. She has significant experience in the Capital markets arena
and is LPA´s lead for many international banking clients and partners.
Milic has over 10 years of experience within the Capital Markets area. She acquired
profound knowledge of the European Market Infrastructure and post-trade
services on projects at various European CSDs and financial institutions.
Wingenbach has over 10 years of experience within the European banking sector. In
his role as LPA´s subject matter expert for implementing Risk Management and Treasury
solutions he is advisor to many European banking clients.