Transcript ECB III

New Global Note structure
for
international bearer debt securities
issued through the ICSDs
1 June 2006
1
• The international debt market
• New Global Note
• Legal framework
• Market impacts
• Additional information
2
International debt market
Key features
The international debt market features instruments that are initially issued
(and subsequently traded) across borders and has the following features:
• Wide range of issuers
• Different jurisdictions
• Deposited with ICSDs
• Multi-currency
• Multi-product
• Can be offered simultaneously to investors in a number of
countries
• Often stock exchange listed (although the bulk of trading is overthe-counter)
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International debt market
Attractiveness of international debt securities
14,000
12,000
International Debt Securities
Key features:
France
10,000
Germany
• Accessibility
US Dollar Billions
Italy
8,000
• Price
6,000
• Liquidity
4,000
2,000
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Q1
2003 2003
Q2
Q3
2003 2004
Q4
Q1
2004
Q2
Data source: www.bis.org
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International debt market
Eurosystem collateral eligibility
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Eurosystem: the ECB and the National Central Banks of member
states which have adopted the single currency
Principal objectives of the Eurosystem are price stability and support
of the general economic policies of the European Community
Eurosystem uses monetary policy instruments to help steer interest
rates and manage liquidity
Liquidity provided to the market via monetary policy instruments
usually requires the placement of “eligible collateral”
More information on www.ecb.int
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International debt market
Eurosystem collateral eligibility
Eurosystem collateral eligibility criteria (amongst other requirements):
• euro-denominated
• debt
• issued by an EEA , G10 or supranational issuer
• meets high credit standards
• is listed or quoted on a regulated market or an approved non
regulated market
• is settled in the Eurozone
• is held with a Securities Settlement System (SSS) complying
with further Eurosystem criteria
• More information on
http://www.ecb.int/pub/pdf/other/gendoc2005en.pdf
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• The International debt market
• New Global Note
• Legal framework
• Market impacts
• Additional information
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New Global Note
Classical Global note (CGN) Structure
International securities issued in CGN form
Euroclear
I
C
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D
C
l
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e
n
t
s
Terms & Conditions /
Operating
Procedures /
Customer Handbook
Common
Depositary
Agreement
Common
Depositary
Issuing & Paying
Agency
Agreement
Issuer
Agent
I
s
s
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e
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Clearstream
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New Global Note
Trigger of the new structure
•
Request from Eurosystem leads to the proposal of a new structure for
securities to be recognised as eligible collateral
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The new structure will be mandatory for Eurosystem collateral eligible
securities as of 1 January 2007
•
The NGN structure can also be used at issuer’s choice for other
bearer debt securities
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New Global Note
New structure
International securities issued in NGN form
Issuer- ICSD Agreement
Euroclear
I
C
S
D
C
l
i
e
n
t
s
Issuing & Paying
Agency
Agreement
CSK
Agreement
Terms & Conditions /
Operating
procedures /
Customer handbook
CSK
Issuer
Agent
CSP
I
s
s
u
e
r
CSP
Agreement
Clearstream
Issuer- ICSD Agreement
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New Global Note
Key features
•
Bearer form securities
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New type of global certificate: New Global Note (NGN)
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Issue Outstanding Amount (IOA) = ICSDs’ records
→ No need for physical annotation of the Global Note
•
Issuer-ICSD agreement
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Two new types of agents:
– Common Safekeeper (CSK): commercial banks or ICSDs
– Common Service Provider (CSP): commercial banks
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New Global Note
Overview of the dual structure
CGN
NGN
International securities
International debt securities
Global Bearer or Registered
Global Bearer
Asset servicing
CD
CSP
Safekeeping
CD
CSK (Bank or ICSD)
Legal record keeper
CD
ICSDs
Since 1986
As from 30 June 2006
Yes, for securities issued
before 1 January 2007
Yes, if deposited with ICSD
CSK
Type of security
Legal form of security
Date of existence
Eligibility for Eurosystem
monetary policy and
credit operations
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New Global Note
Collateral eligibility
As from 1 January 2007 collateral eligible international debt securities
in bearer form will have to comply with:
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The current collateral eligibility criteria, AND
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New criteria:
– NGN form
– Kept in safe custody with an ICSD CSK
Grandfathering will apply for securities issued before 1 January 2007
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New Global Note
Collateral eligibility for securities issued through the ICSDs
30 Jun
CGN
CGN
1 Jan
Potentially eligible
Not potentially
eligible
NGN + ICSD CSK
Potentially eligible
NGN +
Commercial bank
CSK
Not potentially
eligible
As from 1 January 2007, Eurosystem collateral eligibility
= current Eurosystem criteria + NGN form + ICSD CSK
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• The International debt market
• New Global Note
• Legal framework
• Market impacts
• Additional information
15
Legal framework
Principles
New or updated legal documents:
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New Global Note (NGN)
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Effectuation authorisation
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Issuer-ICSD Agreement
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Legal Opinions for four jurisdictions: England, Germany, Netherlands,
New York
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Model provisions for offering documentation
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Standard clauses for Trust Deeds / Issuing and Paying Agent
Agreements
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• The International debt market
• New Global Note
• Legal framework
• Market impacts
• Additional information
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Market Impacts
Generic
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New operational flows had to be designed for the NGN structure when
necessary
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Changes led to optimisation of the operational flows
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Harmonisation of the current and new flows
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Standard Market Protocol to promote the changes to the market
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Market impacts
Issuance process
€
Issuer
Common
Safekeeper
Positioning
Mark Up
Instruction
Confirm
receipt and
validity of
the NGN
Common
Service
Provider
€
Confirm
Mark Up +
Instruction
to credit LM
account
Euroclear
Clearstream
€
Lead
Manager
NI
Account
€
Syndicate/
Allottees
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CS358F
Market Impacts
Impact for issuers
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Specific form of security (NGN) deposited with a CSK
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Updated offering documentation
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Issuer-ICSD Agreement
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Legal opinion on validity and enforceability of NGN (except in four
markets covered by WG opinions)
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Effectuation authorisation
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Market Impacts
Impact for issuer agents and lead managers
For issuer agents and lead managers:
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Specific form of security NGN
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New issue documentation
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New procedure for New Issue issuance process.
For issuer agents only:
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New procedures/systems for reconciliation
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Enhanced procedures for Income and Corporate Actions processing
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New responsibilities created by the Issuer-ICSD Agreement
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Market Impacts
Impact for investors
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Eurosystem-eligibility maintained
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Communication of new criteria
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Improved asset servicing
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• The International debt market
• New Global Note
• Legal framework
• Market impacts
• Additional information
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Additional information
Project organisation
• Working Group
• Market Advisory Group
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Additional information
Documents covering the NGN structure
• NGN brochure
• FAQ
• Legal pack including:
• NGN templates
• standard provisions for agency agreements
• standard provisions for offering documentation
• Issuer-ICSD agreement
• Effectuation authorisation
• Operating & Administrative Procedures Memorandum
• NGN New Issues Procedures
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Additional information
Where to obtain additional information
www.icma-group.org
[email protected]
www.euroclear.com
[email protected]
+ 32 2 224 4527
www.clearstream.com
[email protected]
+ 352 243 32119
www.capmktserv.com
[email protected]
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