KELER, the sole central securities depository in Hungary, submitted the CSDR re-authorization request to the Central Bank of Hungary on 29 September 2017 and expects to receive the new license latest by the end of the first quarter of 2018.
As previously communicated (CSDR impact on the clients of KELER, published on 22 September 2017) the changes related to CSD Regulation will have effect both on clients of KELER (local brokers and custodian banks) and on the customers of the clients of KELER (such as foreign investors).
The information about the CSDR impacts constitutes a high priority for the market, therefore the CSD has published further elements influencing the clients of KELER and its procedures and services.
With the aim to assist the clients in the future CSDR developments, KELER has created a new dedicated information part in its website (https://english.keler.hu/Strategy/CSDR).
After the submission of the request to the Central Bank of Hungary, the following target dates have been disclosed:
- The new General Business Rules and Fee Schedule complying with the CSDR requirements will be applicable simultaneously when the new license is received by KELER.
- The provisions on the internalized settlement will apply as of 10 March 2019.
- The provisions of the Settlement Discipline regulatory technical standards are expected to be applied as of Q4 2019.
- The obligatory dematerialization and immobilization will enter into force:
- a. as of 1 January 2023 for transferable securities issued after this date,
- b. as of 1 January 2025 for all transferable securities.
CSDR provisions affecting the operation of KELER:
- Due to the CSDR requirements, besides the license for the performance of central depository activity, KELER, as a special credit institution, will have to obtain the license for banking-type ancillary services as well. In addition, as part of the licensing, the Central Bank of Hungary needs to approve the ownership of KELER Ltd. in KELER CCP Ltd.
- KELER will henceforward provide the market participants with central securities depository services, that will not cover securities lending and services related to the settlement of trades made on the Deutsche Börse XETRA system from the date the CSDR license is received. KELER has submitted its request to become a LEI (Legal entity identification) issuer.
- Regarding the organizational structure, CSDR requires the setup of various committees. Besides the already established User Committee, Risk Management Committee and Audit Committee were created.
- KELER, as a central depository is required to meet the prudential provisions of CSDR and as a provider of banking-type ancillary services has to comply with any current and future regulations applicable to credit institutions. Hence KELER, involving the User Committee, created new risk management methods (e.g. the extension of the recovery plan and the preparation of related restructuring and orderly winding down plans, management of intraday counterparty risks, extension of counterparty ratings). In the frame of prudential requirements, CSD links and institutions involved in settlements are annually surveyed in order to properly monitor the counterparty risk. KELER is already compliant with the new, higher capital requirements under CSDR, thus does not need to increase it.
- In addition to the services that KELER provides as a special credit institution licensed in accordance with the Hungarian Banking Act, in the future it will provide the following banking-type ancillary services specified in the CSDR:
- cash account management and payment services
- provision of cash credit to KELER CCP only
- management of the long positions of participants.
Once the license is received, additional services could be offered, like provision of cash credit to any client, cash lending to pre- finance corporate actions, securities lending to securities account holders, guarantees and commitments related to securities lending and borrowing.
Impact on investors: Until the effective date of introduction of the Settlement Discipline Rules in 2019, KELER’s clients and foreign investors will not be required to implement any major changes in their business practice.
Dario Mariotto, Relationship Manager
Tel. +36 1 301 1910, Fax +36 1 475 3043