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Perform
ing on the biggest stage there isEuroclear annual report2007
Euroclear plcExecutive officeBaarermatte6340 BaarSwitzerland
Euroclear plc is incorporated in England and Wales under registered number 1060802, with registered address at 2 Lamb’s Passage, London EC1Y 8BB, United Kingdom
Euroclear SA/NV1 Boulevard du Roi Albert IIB-1210 Brussels, BelgiumTel. +32 (0)2 326 1211RPM Brussels number 0423 747 369www.euroclear.com
EuroclearEuroclear is the marketing name for the Euroclear System, Euroclear plc, Euroclear SA/NV and their affiliates
© 2008 Euroclear SA/NV
Performing onthe biggest stage there is
Euroclear annual report 2007
ContentsHighlights 2Reaching new heights 4Performance highlights 6Financial highlights 8
Strategy 10Chairman’s statement 12Chief Executive’s review 16Group management 22
Delivery 24Achievingourobjectives 26Delivering platform consolidation 27Increasing product efficiency in a globalising industry 32Reducing cost 38Serving clients globally 40
Performingstronglyacrossthegroup 42Euroclear Bank 43Euroclear Belgium 46Euroclear France 48Euroclear Nederland 49Euroclear UK & Ireland 50EMXCo 51
Responsibility 52People 54Corporate responsibility 56Risk management 58Inter-company Transaction Policy audit 64Corporate governance 66Internal control system 75
Finance 78Financial review 80Capital management 86Annual accounts and auditors’ opinion 88Directors’ report CD onlyFinancial statements CD only
Annexes 89Board and Board Committees composition 90Market Advisory Committees (MACs) 96Euroclear group principal offices 97List of Euroclear plc shareholders CD only
Glossary see back cover foldout
2I
The further you push the boundaries, the greater the performanceIn 2007, Euroclear went further than ever before. Further in the sense of delivering
progress. Further in the sense of the service we gave to our clients. And further in
its most literal sense, that of geography. The result is that more institutions than
ever before, in more places than ever before, chose to rely on our uniquely strong
market infrastructure solutions. The success of this approach is confirmed by our
strong figures. But it was not the figures that inspired it: we went further so that
our clients could too. After all, one great performance can inspire a thousand more.
Highlights
euroclearIannual report 2007I�
4I
The Euroclear groupReaching new heights
13 locations
The world’s largest provider of domestic and cross-border settlement and related
services for bond, equity, fund and derivative transactions
euroclearIannual report 2007I5
19.2
561.8
trillion euro securities holdings
trillion euro turnover
6I
• Turnover,orthevalueofsecuritiestrans-actionssettled,was€561.8trillionin2007,anincreaseof24%from€451.7trillionin2006.
• ThevalueofsecuritiesheldforEuroclearclientsattheendof2007was€19.2
trillion,a5%increasefromthe€18.2trillionrecordedatyear-end2006.
• Thenumberofnettedtransactionsset-tledintheEurocleargroupincreasedby9%to155.5millionin2007comparedwith143.1millionin2006.
• ThecombinedaveragedailyvalueofcollateralprovisionoutstandinginEuroclearBankandEuroclearUK&Irelandgrewby11%in2007to€595.0billioncomparedwith€537.9billionattheendof2006.
Performancehighlights
euroclearIannual report 2007I7
0
100
20
120
40
140
60
80
160
2004 2005 20072006
23.9
26.5
61.53.0
26.9
30.9
65.83.12.5
33.9
32.5
70.2
3.8
40.8
32.3
75.04.6
2.7
2.8
114.9
129.2
143.1
155.5
Euroclear Bank
Euroclear France 2
Euroclear Nederland
Euroclear Belgium
Euroclear UK & Ireland 2
Euroclear Bank
Euroclear UK & Ireland 2
0
100
200
300
400
500
600
2004 2005 20072006
161.4
159.6
246.0
235.9
308.7
229.2
328.1
266.9
321.0
481.9
537.9
595.0
Euroclear Bank
Euroclear France 2
Euroclear Nederland
Euroclear Belgium
0
100
200
300
400
500
600
2004 2005 20072006
132.6
60.2
114.4
154.8
72.7
130.63.3
218.8
84.3
144.83.5
284.5
94.7
176.55.6
0.3
0.5
307.2
361.4
451.7
561.8
Euroclear UK & Ireland 2
0
10
2
12
4
14
6
16
8
18
20
2004 2005 20072006
5.9
3.8
2.7
0.7
7.1
4.4
3.3
0.9
8.1
5.0
3.8
1.0
9.2
5.3
3.5
1.00.3
0.2
13.1
15.7
18.2
19.2
Euroclear Bank
Euroclear France 2
Euroclear Nederland
Euroclear Belgium
Euroclear UK & Ireland 2, 3
1 The data includes intra-group holdings/transactions, as relevant.2 The data for Euroclear UK & Ireland excludes self-collateralising repos; the data for Euroclear France excludes ‘pensions livrées’ with the Central Bank of France.3 Securities in the United Kingdom are held through Euroclear UK & Ireland on the books of the registrars.4 The data for Euroclear UK & Ireland consists of Delivery By Value (DBV) and money-market instrument repo transactions.
Turnover1 (in € trillion) Valueofsecuritiesheld1 (in € trillion)
Numberoftransactionsafternetting1 (in million)
Averagedailycollateralprovisionoutstanding4(in € billion)
8I Highlights
0
5
10
15
20
25
30
19.00
21.4021.40
24.2025.58
2004 2005 200720062005
UK GAAP IFRS
0
500
1000
1500
2000
2500
3000
250
750
1250
1750
2250
2750
3250
3500
20032002 2004 2005 2004 2005 2006 2007
2,457.1
2,132.22,331.3
2,420.12,557.3
2,627.9
2,886.7
3,126.0
UK GAAP IFRS
0
900
300
1200
600
1500
2004 2005 20072006
862.3
963.3
2005
960.3
1,085.4
1,244.0
UK GAAP IFRS
0
300
100
400
200
500
243.4
364.2
308.4
418.2435.3
2004 2005 200720062005
UK GAAP IFRS
Operatingincome (in € million) Operatingprofitbeforetax(in € million)
Dividendpershare (in € per share) Shareholders’equity (in € million)
In2007,theEurocleargroupincreaseditstotalincomeby15%to €1,244million,andhasbeenabletodelivertariffreduc-tionsof€100millionasaconsequenceofstrongoperatingresults.
Atthesametime,wehave:• continuedtoincreaseefficiencythrough
serviceimprovementsforclients;and• madedecisiveprogresswithourplatform
consolidationprogramme.
TherobustperformancehasallowedEurocleartobuildonitssolidcapitalbaseandtoincreasethedividendpaymentby6%to€25.58persharefor2007.
Financialhighlights
euroclearIannual report 2007I9
2007 2006
Euroclearplcconsolidated
Fortheyearended�1December(in€million)
Operating income 1,244.0 1,085.4
Profit for the year 330.5 318.6
Net earnings per share 86.3 83.2
Dividend per share 25.58 24.20
At�1December
Total assets 16,328.5 14,057.0
Subordinated liabilities 297.9 547.4
Shareholders’ equity 3,126.0 2,886.7
Shareholders’ equity/Total assets 19.1% 20.5%
10I
Strategy
Making history is all about knowing what’s happening nextIn today’s rapidly evolving markets, anticipation is everything. Those who wait to
react are left behind by those who plan ahead. And with the global post-trade
industry at stake, you can’t afford to improvise. We are now over half way
through implementing a ground-breaking programme to make cross-border
domestic. And today, with our clear strategies for emerging markets and specific
instruments, we’re already setting the stage for a strong global presence.
euroclearIannual report 2007I11
12I
SirNigelWicksChairman
Chairman’s statementYour Board has proposed for 2007 a record dividend of €25.58 per share, representing a
payment of €98 million, compared with €92.7 million in 2006. More than €100 million in
tariff reductions was implemented in 2007, with another €100 million already announced for
2008. Client cost reduction will continue to be a key driver for the Euroclear group. Euroclear
invested €210 million in 2007 to develop services for clients and to help them reduce their
costs and risks. In these ways, Euroclear continues to seek opportunities to share economies
of scale and lower costs for clients, while rewarding shareholders.
euroclearIannual report 2007I1�
MarketdevelopmentsSincelastsummer,boutsofmarketilliquid-ity,volatilityandturmoilhavepresentedmarketparticipantswithenormouschal-lenges.Evenso,astheauthoritieshavenoted,thesecuritiesandpaymentinfra-structureshavecontinuedtheirsteadyperformance.
Forourpart,theEurocleargroup’sInternationalCentralSecuritiesDepository(ICSD),EuroclearBank,andnationalCentralSecuritiesDepositories(CSDs),EuroclearBelgium,EuroclearFrance,EuroclearNederlandandEuroclearUK&Ireland,aswellasEMXCo,havesoughttosupportglobalfinancialstability.EuroclearBankisasingle-purposebank,designedtoensureveryhighsettlementefficiencyatverylowrisk.Itslong-standingpolicyofconservativeriskmanagement,with
about99%ofEuroclearBank’sexposurestoclientssecurelycollateralised,hasservedthemarketwellduringthisdifficultperiod.TheICSDandCSDsofthegrouphavealsocopedwellwithunprecedentedspikesinsettlementactivity.Duringtheuncertaintimesahead,Euroclearwillhaveasitshigh-estprioritythemaintenanceofitsveryhighstandardsofstabilityandcontrol.
DeliveringonourpromisesThereductionincostsandrisksincross-bordersettlementandcustodyinEuropeiscentraltoEuroclear’sstrategy.Accordingly,Euroclearhaspressedaheadduringtheyearwiththedeliveryofourmarketpracticeharmonisationandplatformconsolidationprogramme.Wearemostgratefultothemanymarketparticipantswhocontinuedtodevotetimeandeffortinshapingtheneces-saryconsensusonthenewmarketstandards.
Followingcompletioninearly2007ofthefinalphaseoftheSingleSettlementEngine(SSE),whichisthefoundationforEuroclear’sSinglePlatform,webeganrollingoutthesecondwave–theEuroclearSettlementofEuronext-zoneSecurities(ESES)programme.Whencompletedlaterthisyear,ESESwillprovideasinglesettlementandcustodysolutionforthreeEuronextmarkets:Belgium,FranceandTheNetherlands.Euroclearisthuswellonitswayindeliveringthebasisfora‘domesticsettlementmarketforEurope’,whichweplantocompleteoverthenextthreeyears.Weestimateourprogrammewillgeneratemorethan€300millioninannualsavingsforclients.TheacquisitionofEMXCo,whichtookeffectinearly2007,isprovingtobeasuccessinprovidingvaluablesupporttoEuroclear’sinvestmentfundbusiness.
14I Strategy
Euroclearhasalsorecentlycompleteditsmulti-year,€100millionplanstodeliveralevelofdatacentreresiliencethatisunparalleledamongEuropeaninfrastruc-tureserviceproviders.Threedatacentres,replacingeightthatwereinoperationbyEurocleargroupCSDscollectively,shouldenableclientstofullyresumetechnicaloperationswithEuroclearwithinonehourofalocaldisasterandwithinthreehoursofamajorincidentonthescaleof11September2001.Thistypeofinvestmentdemonstratesthemeritsofuserownershipandgovernance,asweareabletoplaceuserprotectionandbenefitsatthetopofthecompany’spriorities.
TheCodeofConductonClearingandSettlementEuroclearstronglysupportstheEuropeanCommission’sCodeofConductonClearingandSettlement.Webelievethatitiscapableofdeliveringgreatertransparency,competitionanduserchoicemorequicklythananEUDirectivecouldhaveachieved.EurocleargroupCSDsandtheICSDareoperatinginfullcompliancewiththeCode.Moreover,wehaveextendeditsapplicationwithinEurocleartoallassetclasses,i.e.equity,fixed-incomeandfundtransactions.Weencourageothersettlementinfrastruc-tureserviceproviderstoadoptasimilarapproachinordertoacceleratetheprocessofmakingEuropeanpost-tradingmoretransparentandefficient.
EuroclearBankhasmaderequestsforaccesstoseveralstockexchangesandclearinghousesand,inturn,Euroclearentitieshavereceivedrequestsforaccessfromotherpartsoftheinfrastructure.Userdemand
andbusinessneedsaretheprimarycriteriagoverningouranalysisandconclusionstobedrawninmovingahead.
TheproposedTARGET2-SecuritiessystemInJuly2006,theEuropeanCentralBank(ECB)proposedadirect,public-sectorownedandoperatedcommonsettlementplatformforalleuro-zonemarkets.ThedecisionwhethertobuildTARGET2-Securities(T2S),anticipatedforlaunchin2013,isexpectedduringthecourseof2008.GoodworkhasbeendonebytheECBindefininguserrequirementpropos-alsbytheendof2007.Thereare,however,stillsomefundamentalquestionsoutstand-ingon,forexample,thetotalityofcostsandbenefitsforusersfromtheintroduc-tionofT2S,thesystem’sgovernanceandeconomicfeasibility,andtheallocationofrisksandliabilitiesbetweenparticipants.EuroclearisparticipatingactivelyonseveralT2Stechnicalandadvisorycommittees,andisseekinganswerstothesefundamen-talquestions.BeforemakingadecisionwhetherornottojoinT2S,EuroclearwillconsultwithuserstomakeanassessmentwhetherT2Scouldbeexpectedtoprovideamoreefficient,lowercostandlowerrisksettlementenvironment.
AnexpandingmarketplaceGlobalnetcross-borderflowsareestimatedbytheInternationalMonetaryFundtohavebeenaroundaquarterofworldGDPin2006.Justadecadeago,cross-borderflowswerearoundathirdoftheirpresentlevels.Thisglobalisationoffinancialmarketshasgonehandinhandwiththeglobalisationofinstitutions.Ourclientsarechangingthewaytheytradeandinvest,andareglobalis-
ingthemselvesthroughcross-bordermerg-ersandacquisitions.Cross-borderholdingsofprimarilydebtsecuritiesinEuroclearBank,forexample,havemorethandoubledsince2001,thevalueofcross-bordersecuritiestransactionssettledhasmorethantripledandtheuseofcross-bordercollateralhasmorethanquadrupledsince2001.
Inaddition,thegrowthofcreditderiva-tives,structuredproductsandsecuritisationhasbroughtnewpossibilitiestofinancialinstitutionstomanagetheirrisksactively.Bankscandecidewhatriskstheywanttoholdontheirbalancesheets,andthosetheyneedtotransfer.Atthesametime,thismodelismoredependentonmarketliquid-ityandtheabilitytopackageandtransfertheserisks,therebyincreasingdependenceonthesmoothfunctioningofmarketsandtheinfrastructuressupportingthem.
Euroclearmustadaptandrespondtothesetrends.Weare,therefore,seekingtobroadenEuroclear’sportfolioofproductswhilemaintainingourtraditionalfocusontheprovisionofcommoditisedtransaction-processingservices.Wewilldosothroughdialogue,collaborationandcooperationwithourclients.
Aspartofthisapproach,EuroclearBanknowoffersexposuremanagementservicesforderivativestradesandisthefirstset-tlementinfrastructureserviceprovidertooffersettlementandsafekeepingservicesforcarbonemissionrights.Inaddition,EuroclearisformalisingitsalreadystrongrelationshipswithvariousmarketsandinfrastructureserviceprovidersbeyondEurope’sborders.Informationsharing
euroclearIannual report 2007I15
agreementsandotherformsofcollabora-tionhavebeenestablishedin2007withCSDsinBrazil,Russia,IndiaandChina.Moreover,ourlong-standingcommitmenttoclientsinAsiawillbereinforcedwiththedevelopmentofanoperationscentreinourexistingHongKongoffice.ThiswillimprovethespeedandqualityofresponsetoAsianclientenquiriesaboutoperationalissues.WearealsoopeningarepresentativeofficeinBeijing.
Shareholding-usagerebalancingAtthetimeofEuroclear’smergerwithCRESTCoLimitedin2002,thecompanymadeclearitsintentionthatthesharehold-erbaseofEuroclearshouldcloselyreflecttherelativeusageofthenewgroup’sservicesbyitsshareholders.Itdidnotproveprac-ticableatthetimetodeviseanacceptableschemetomeetthisobjective.TheBoardofEuroclearplcis,however,activelyconsider-ingthismatter.Indoingso,itwould,ofcourse,keepinmindtheneedtosafeguardshareholders’interests.
TheBoardWewelcometotheEuroclearplcandEuroclearSA/NVBoardsMichelBerthezèneofCaissedesDépôtsetConsignations,TimHowellofHSBCHoldingsplc,M.AndrewThreadgoldofUBSAGandRobertC.M.WigleyofMerrillLynchInternational.InOctober2007,theBoardappointedJean-JacquesVerdicktasDeputyChairmanofbothEuroclearplcandEuroclearSA/NV.Hisyearsofexperienceinthebankingindustry,asaformerEuroclearBoardmemberandhiscurrentroleasanindependentDirectorontheEuroclearBankBoardwillbe
mostwelcome.CharlotteBlackofBrewinDolphinSecuritiesLimited,JohnS.GubertofHSBCHoldingsplc,SimonM.HaslamofFidelityInternationalLimited,AlainPapiasseofBNPParibas,JohnM.SchofieldofUBSInvestmentBankandCharlesF.WintersofMerrillLynchhaveresignedfromtheBoard.Iwouldliketothankthemwarmlyfortheircontributions.
Furthermore,IpaytributetoMartineDinne,therecentlyretiredChiefExecutiveOfficerofEuroclearBank,whofornearly40yearswithEuroclearinspiredthosewithwhomsheworkedwithazealforqualityandexcellence.IwouldalsoliketocommendEuroclearmanagementandstafffortheirsuccessindeliveringonsomanyfrontsatthesametime.
Sir Nigel WicksChairman
16I
Chief Executive’s reviewThe year 2007 will obviously be remembered as a very mixed year in financial markets. The
credit crisis that was triggered in the summer by the subprime woes of a number of banks
has created a shock, the full effect of which has not yet been felt. In this turbulent context,
Euroclear has done well in 2007. Group turnover increased by 24% in 2007, an increase only
slightly smaller than was seen in 2006. Obviously, like other firms in the securities business,
we have seen the value of some of the assets under our custody drop in the second part of
the year. But this has affected us less than most in relative terms, because only a moderate
part of our revenues is based on the value of the assets we hold. Considering the financial
impact of the crisis on our clients, we have been especially sensitive to the need to reduce
their costs. In 2007 we made more substantial fee cuts than ever in our history, and we intend
to implement reductions of similar proportions in 2008.
euroclearIannual report 2007I17
PierreFrancotteCEO of Euroclear SA/NV
KeepingupthepaceAgainstthebackdropofthecreditcrisis,thetradingandpost-tradinginfrastructurelandscapehascontinueditsfar-reachingtransformationin2007.Thelargeststockexchangesarenolongeraspiringtobecomeregionalchampions,butinsteadtopositionthemselvesgloballyandacrossallassetclasses.Traditionalexchangesarefacingnewcompetitors,notonlyfortheirtradingactivities,suchasTurquoiseorChi-X,butalsoforsomeoftheirotherbusinessessuchastradereporting(e.g.Boat).Inthepost-tradingfield,attentionhasshiftedtoclear-ing,notonlybecauseclearingoflistedorOver-The-Counter(OTC)derivativeshasbecomeatopicofmajorstrategicimpor-tancetobothexchangesandusers,butalsobecauserealcompetitionisnowemergingforclearingofcashandderivativesmarkets,promptedinsignificantpartbytheCodeofConduct.Insettlement,competitionhasbeenaccentuatedevenfurther,withthe
distinctionbetweencustodianbanksandCSDsbecomingevenmoretenuous.
Inthiscontext,Euroclearhasimportantlymaintainedthepaceoftransformingthesecuritiesinfrastructuremarketsthispastyear,whichwillhelptostructurallyreducecostsandrisksforourclientsinanevenmorefundamentalway.Wemetthreekeymilestonesintheimplementationofourbusinessmodel:thecompletionofourSSEprogramme,thedeliveryoftheESESplatforminEuroclearFrance,andthecompletionofourambitiousdatacentreprogramme.
Wehavealsodevelopedandintroducedanumberofnewproductsandserviceen-hancementsdesignedtosolveinefficienciesinfixedincome,equities,funds,derivativesandcarbonemissionrightsmarkets.Perhapsmostsignificantly,feedbackfromclientsofallgroupentitiesshowsthatservicequalityhasimprovedappreciablyinthelastyear,
thankstoaspecialfocusinallareasofthegrouponclientserviceandimprovementsinservicingunderourcampaigntobethe‘bestofclass’serviceproviderinourfield.StronggrowthsupportingdeeptariffcutsThegrowthgeneratedthroughout2007hasledtoeconomiesofscalewhichhavebeentranslatedintosignificanttariffreduc-tionsforclients.Inearly2007,EuroclearBankcutitstariffsby€78milliononanannualisedbasis,withafurtherannualfeereductionof€27millioninJune,repre-sentingthelargesttariffreductioninEuroclearBank’shistory.InDecember2007,EuroclearBankannouncedanotherprogrammeofmajorfeereductionsfor2008amountingto €70million,thuscompoundingtheeffectforclientsofthe2007feecuts.EuroclearBankalsopaidclientsover€82millionin2007,followingthemajordecisiontakentoremunerateout-standingcashbalances.EuroclearBankis
18I Strategy
theonlyICSDthatremuneratesbalancesinatransparentanduniformwaytoallclients.
EuroclearUK&Irelandwasalsoabletosignificantlylowercostsforclientsthankstorecordtransactionactivity,thusconfirm-ingitscommitmenttogiveclientsthebenefitsofthelargeeconomiesofscalegeneratedsinceitjoinedtheEurocleargroup.EuroclearUK&Irelandpaid€11millioninrebatestoclientsinearly2007,inproportiontotheiractivityduring2006.Arecord€16.5millionoftariffreductionsannouncedinearly2008aredeliveringa50%reductioninclearing-relatedservicefeesanda10%reductioninsettlementfeesforbothretailandwholesaleclients.
ThelaunchofthecommonESESplat-formfortheclientsofEuroclearBelgium,EuroclearFranceandEuroclearNederlandwillalsotriggerasignificanttariffreduc-tionbythesethreeCSDs,atthesametimeastheirtariffsareharmonised.Theoveralltariffreductionwillamounttoabout€15millionwhenESESisfullylaunchedattheendof2008(about10%reductiononaver-age).Thistariffreductionwillbeincreasedtoaround€50millionwhentheSinglePlatformislaunchedinEuroclearUK&Irelandinacoupleofyears,sorepresentingareductionofabout20%.AthirdwaveoftariffreductionsfortheCSDsofthegroupisanticipatedfor2012,which,takingintoaccountexpectedvolumegrowth,wouldresultinarounda25%feereductionfortheclientsoftheseCSDscomparedtotoday.TheEurocleargroupisalsorollingoutin-ternalprogrammeswiththeaimtoenhanceefficiencyandlowercosts.
BuildingonharmonisationachievementsHarmonisationofmarketpracticesgoeshandinhandwithtechnologyconsolida-tioninseekingtoreducecostsandrisksforclients,bothfordomesticandcross-borderactivity.
Inlinewithourobjectives,theharmonisa-tionofmarketpracticesforassetservicingandsettlementinBelgium,France,Ireland,TheNetherlandsandtheUnitedKingdomwascompletedin2007.Workontheopera-tionalimplementationoftheseagreementsisalreadytakingplace.Afewissuesarebeingreassessedattherequestofthemarketwithaviewtoensuringanoptimaloutcomeforallcountries.
ThisharmonisationisbyfarthesinglemostimportantcontributionsofarofanyCSDorgroupofCSDsinEuropetotakingdownthebarriersidentifiedbytheGiovanninigroupofexperts,which,astheEuropeanCommissionhasstressed,aremateriallyimpairinggrowthinEuropeatthistime.TheseEuroclearachievementsaresignificantatEuropeanlevelbecausethefivedomesticmarketsofthegrouprepresent53%ofequi-tiescapitalisationinEurope.Beyondsettle-mentandassetservicing,theEurocleargroupisnowworkingtoachieveharmonisationinotherareas,namelycollateralmanagement,forwhichaworkinggrouphasalreadybeencreated,aswellasfundsprocessingandissuerservices.Invariably,progresswillbemadeinclosecollaborationwiththemarket.
Wehavealsochosenaharmonisedcentralbankmoneypaymentmodel,theDedicatedLiquidityModel,tobeusedasofthelaunchofSinglePlatformSettlement.Thismodel
willprovideefficiencyforclientswhilecashaccountscontinuetobeoperatedexclusivelybythecentralbanks.Itwillreplacetheintegratedmodelthathadoriginallybeenin-tendedtobeusedinallthedomesticmarketsofthegroup,astheECBhasdeterminedthattheintegratedmodelcouldnotbeextendedinfuturetoanyothermarketinEurope.
OverhalfwaytowardsplatformconsolidationStrongprogresswasagainmadethisyearinthephaseddeliveryoftheplatformcon-solidationprogrammethatis,togetherwithmarketpracticeharmonisation,atthecoreofourbusinessmodel.
TheSSEisnowfullyimplemented,fol-lowingitsintroductioninJanuary2007inEuroclearBank.Performingthecorefunc-tionsofsecuritiessettlement,theSSEisthefoundationontowhichallITsystemswithintheEurocleargrouparebeingconsolidated.ThesuccessfullaunchofESESinEuroclearFranceinNovember2007isamajorsteptowardstheimplementationoftheSinglePlatform.ThesecondphaseofESES,theconnectionofthenewplatformtotheECB’sTARGET2paymentsystem,wasalsodeliveredonscheduleinFebruary2008.ThethirdandlastphaseofESES,theextensionoftheplatformtotheBelgianandDutchCSDs,isscheduledforthelastquarterof2008,allowingforadditionaltestingtoensureasmoothlaunchforthesemarkets.
SignificantprogresswasalsomadetowardsthesubsequentSinglePlatformphasesthroughout2007.ForSinglePlatformCustody,detailedservicedescriptionsarenowbeingpublished.Wehavealsoim-
euroclearIannual report 2007I19
provedtherolloutplan,allowingmigrationasofthefourthquarterof2009followingasinglelaunchofsoftwareandthereforereducingmigrationriskandmigrationeffortforclients.WorkiswellunderwayforthefinalSinglePlatformSettlementphase,withtheblueprintpublishedattheendof2007.EuroclearthereforeremainsontracktodeliverthekeycomponentsoftheSinglePlatformbytheendofthedecade.
AnimportantpartoftheSinglePlatformisthedevelopmentofaCommonCommuni-cationInterface(CCI)thatclientswillusetoaccessalltheservicesoftheEurocleargroup.Itwillenablethefragmentationbetweenmarkets,acauseofsignificantcost
toourclients,tobereduced,andwillberolledoutinphasesinparallelwiththedeliveryoftheSinglePlatformitself.Thefirstphaseisscheduledtotakeplacein2008whenthelaststageofESESislaunched.
Anintensemarketcampaignhasbeencon-ductedtohelpclientsprepareformigrationtotheSinglePlatform,andinparticulartoadvisethemofthewaysinwhichtheywillbeabletoconnecttoitusingtheCCI.
Anothermajorcomponentofourbusinessmodelwastheambitiousprogrammetoconsolidateourdatacentresforthediffer-ent(I)CSDsofthegroup.Thislargeandhighlycomplexprogrammewascompleted
in2007andisalandmarkachievement.Athirddatacentrelocatedinadifferentcoun-trycantakeoverEuroclear’scriticalbusinessactivityifourtwoprimarydatacentreswereevertobecomeunavailablesimultaneously,forinstanceduetoametropolitandisasterofthesortthatcouldhaveaffectedmarketson11September2001.Noothersettlementserviceprovider,whetherinfrastructureorcommercial,hassuchathreedatacentreconfigurationinEurope,butweexpectthatovertimethiswillbecomethenormex-pectedbyclientsandregulators,asisalreadythecaseintheUnitedStates.
ItwouldclearlybeadvantageousforthemarketsifthebenefitsoftheSingle
The Euroclear group strongly supports the Code
of Conduct for Clearing and Settlement as a
means to deliver greater transparency and access
for users of European trading, clearing and
settlement services.
We have fully complied with the first pillar of the
Code with regard to pricing transparency since it
came into effect in early 2007. Complete tariff in-
formation for each (I)CSD of the group is publicly
available on www.euroclear.com.
The Euroclear (I)CSDs are also all applying the
guidelines from the second pillar of the Code on
access and interoperability, which came into effect
on 1 July 2007. The guidelines provide a basis for
the development of new links between trading
platforms, Central Counterparties (CCPs) and set-
tlement systems. Market participants should now
have the freedom to select their preferred provider
of clearing and settlement services, building on the
provisions that have come into effect under the
Markets in Financial Instruments Directive (MiFID).
The Euroclear group has a well-established track
record, which started years before the Code of
Conduct called for it, of allowing open access
to external providers, including parties that
sometimes seek to compete with Euroclear. As an
illustration, in the last seven years Euroclear UK
& Ireland has given access to eight trading, clear-
ing or settlement parties (LCH.Clearnet Limited,
x-clear, Eurex Clearing AG, European Multilateral
Clearing Facility, London Stock Exchange, Irish
Stock Exchange, SWX Europe and Chi-X) and is
currently following up requests for interoperability
from three parties. The Euroclear (I)CSDs have re-
ceived four requests for access or interoperability
under the second pillar of the Code since August
2007, and have been responding to each of them
in compliance with the Code. Euroclear is itself
seeking access to other post-trading infrastruc-
tures in accordance with the Code, with Euroclear
Bank requesting access to instruction feeds from
stock exchanges and clearing houses in Germany,
Italy and Switzerland.
Euroclear is also complying with the third pillar
of the Code, relating to unbundling and account
segregation, which came into effect on 1 January
2008. Unbundling is the separate offering of
services, which allows any client to purchase a
single service without being compelled to pur-
chase another single service. All Euroclear (I)CSDs
are also in a position to produce financial data in
relation to account segregation to their national
regulators, as called for by the Code.
ImplementingtheCodeofConduct
20I Strategy
Platformandthedatacentreconfigurationcouldbeextended,bothwithinEuropeandbeyond.ThiswouldincreasetheeconomiesofscaleforEuroclearclients,andwouldalsoallowtheinfrastructuresoftheseothermarketsandtheirclientstoshareinthesesavingsandbenefitfromtheinvestmentsal-readymade.Itwouldsubstantiallyimprovethecostprofileforbothdomesticandcross-bordersettlementandcustodyinEuropeandmoreglobally.Euroclearwillthereforeworktocollaboratewithothermarketstobroadenthebenefitsofthebusinessmodel,whetherthroughmergers,platformsharingorincreasedinteroperabilityofsystems.
Newproductsforfast-growingmarketsAsbefitsEuroclear’sroleasaninternationalproviderofmarketinfrastructureservices,
weareseekingtotranslatetheexpertisethatwehavebuiltupintonewsolutionsforevolvingbusinesses.Inthiswayweareabletoprovidemaximumbenefits,includ-ingincreasedefficiencyandlargerpoolsofliquidity,forourclients.
Forinstance,EuroclearBankhasbeendiver-sifyingtosupportthreeexpanding,globalbusinesses.DerivManager,launchedin2007,isanexposuremanagementsolutiontosupporttherapidlygrowingOTCderiva-tivesbusinessbyincreasingautomationandreducingrisk.Wearealsoenteringtheworldwidebusinessofcarbonemissionrightsin2008withthelaunchofClimateSettle.Thisservicelargelyautomatesthepreviouslymostlymanualpost-tradeprocessesforthisemergingbusiness.Inaddition,weintend
tolaunchanothernewserviceforthefast-growingbusinessofbankloans.
BestofclassserviceproviderInrecentyears,Euroclearhasundertakenaseriesofinitiativesinordertosustainanattitudethatclientscomefirst.Theseinitiativeswereintensifiedin2007whenwelaunchedafar-reachingprojecttoensurethatweachieveourgoalofbeingthebestinourclassinclientservice.
Followingthoroughanalysisoffeedbackfromclientsandstaff,wehaveinitiatedimportantmeasuresin2007,startingwithEuroclearBank.Forinstance,oneofthekeyimprovementshasbeenthat,followingamajorreorganisationoftheclientservicefunction,eachclientnowbenefitsfroma
Atrulyglobalprovider
Besides the credit crisis, 2007 will be remembered
in the securities markets as the year when a major
step was made towards the globalisation of the
securities infrastructure, with the completion of
the NYSE-Euronext merger and the announcement
of the merger of NASDAQ with OMX, among
others. Major financial firms have been global for
a number of years, but the securities infrastructure
remained largely domestic or at best regional. In
the future, the global needs of clients will increas-
ingly require a worldwide service offering across
asset classes. As the most global of securities
infrastructures, with clients from over 80 countries
and services covering markets in all regions of the
world, Euroclear is well placed to lead this evolu-
tion in the post-trading area.
Euroclear is further strengthening the close
relationship we have with our clients across the
world, in particular by increasing our presence in
Asia. Euroclear has worked with Asian markets
for 40 years and, drawing on this experience, is
now stepping up its involvement in the region
to help our clients seize the vast opportunities
that the growth of Asia is offering. In the second
quarter of 2008, our representative office in
Hong Kong is being expanded to become a
branch office. The transfer of certain operational
functions to Asia will provide increased process-
ing efficiency for Asian securities and clients, as
service windows are increased and waiting times
dramatically reduced. We are also increasing our
proximity by opening an additional representa-
tive office in Beijing, further demonstrating
our commitment to the region.
Longer term, we plan to develop links and
share our expertise with the securities players
in the region. It was with this objective that
we concluded cooperation agreements with
The Clearing Corporation of India, the China
Government Securities Depository Trust &
Clearing Co, National Securities Depository
Limited (India) and Central Depository Services
(India) Limited in 2007 and early 2008. We
have also concluded a cooperation agreement
with CETIP, the Brazilian CSD, illustrating our
focus on Latin America as another region with
promising prospects.
euroclearIannual report 2007I21
dedicatedaccountmanageranddirectaccesstospecialistswithindifferentserviceareas.
Improvedresultsfromthe2007ClientSatisfactionSurveydemonstratethatwehavealreadyachievedtangibleprogress,withclientserviceforEuroclearBankratedsignificantlyhigherthaninpastyears.
ConsiderationisnowbeinggiventoasimilarinitiativefortheCSDsofthegroup.Furtherimprovements,includingclosermonitoringofservicelevels,willbeintro-ducedatEuroclearBankduring2008.
ContinuouslyenhancingservicesItisalsoimportantfortheEurocleargrouptorespondquicklytotheevolutionofourclients’needs,asithelpsclientsgrowfasterandfurtherthantheyotherwisecouldiftheinfrastructurewasdraggingbehind.ThishasbeenanareaofspecialfocusacrosstheEurocleargroupin2007.
ThesuccessfullaunchofFundSettlePremieratEuroclearBankin2007hasenabledclientstobenefitfromrecordlevelsofprocessingefficiencyforcross-borderfundtransactionsatlowercost.Inaddition,EuroclearBankintroducedthetrademarkEquityReachfortheserviceitspecificallyoperatesforequities.ThisunderlinesthematurityofEuroclearBank’sequitiesserv-ice,whichwasfurtherimprovedthisyearforEuronext-zonecountries.OneofourambitionsisforthetopservicelevelsthathavebeenachievedinthesecountriestobeexpandednowtoothercountriesinEurope.
TheCSDsofthegrouphavealsoworkedtoenhanceservicesfortheirclients.In
responsetotheneedsofissuersduringthedematerialisationprocess,EuroclearBelgiumhaslaunchedCapitrack,aserviceenablingissuerstoeasilymonitorthedema-terialisationoftheirissuedsecuritiesandtheownershipoftheirsharecapital.
EuroclearUK&IrelandintroducedanenhancedtransactionreportingserviceinNovember2007inordertohelpclientsmeettheirreportingresponsibilitiesfollowingtheintroductionofMiFID.MiFID-relateddatacanalsonowbeincludedinSBItransactionnoticessentbyEuroclearFranceclients.EuroclearNederlandhasrespondedtotheneedsofnewmulti-CCPsin2007byofferingsettle-mentsolutionsfortheseplatforms.
Euroclearentitieshavebeenworkingtogethercloselyindeliveringsolutionsthatbuildontheirspecificstrengths.Forexample,thefundsorderroutingservicedevelopedforEuroclearFrancewillalsobeofferedinBelgiumandTheNetherlandsfollowingthelaunchofESES.EuroclearUK&IrelandandEMXCoareusingtheirsharedexpertiseintheUKfundsmarkettodeliveranintegratedcashsettlementsolu-tionin2008.EuroclearBelgiumisnowpro-vidingitssafekeepingservicestoEuroclearBanktodeliveranoptimalsafekeepingsolu-tionforNewGlobalNotes,inthecontextoftherestructuringthathadbeencalledforbytheECBforsecuritiesusedascollateralformonetarypolicyoperations.
AgroupthatactsresponsiblyWeareproudthatthefeedbackfromthe2007ClientSatisfactionSurveyhasparticularlyrecognisedthehighcalibre
ofourstaff.Thegroupaimstorewardtheachievementsofitspeopleanddevelopthebrightesttalent.Theknowledge,insightandambitionofourpeoplearevitalinachievingourbusinessgoals.Tothisend,weplaceahighvalueondeliveringqualitytobothexternalandinternalclientswhileencouragingopenness,toleranceandrespectthroughoutthecompany.
Wefirmlybelieveinahealthywork-lifebalanceforouremployees,andwantthemtoenjoyworkingwithus.In2007wecreatedagroup-widefunctiondedicatedtowork-lifebalance,recognisingEuroclear’scompetitiveandchallengingenvironment.
Wecontributetosocialsupportinitia-tivestakingplaceoutsideourimmediatemarketcontext,butexpressingourvaluesandconvictions.Forexample,wehavesponsoredamajormultinationalconferenceonmicrofinancethatgatheredmostoftheworldexpertsinthefield.TheEurocleargroupalsogavecloseto€735,000tocharityin2007.Asignificantpartofthissumwasgrantedthroughaprogrammewherebythecompanymatchesindividualdonationstocharitiesmadespontaneouslybyouremployees.ThisisalsopartofwhatEuroclearstandsfor.
Pierre FrancotteCEO of Euroclear SA/NV
22I
Group management (as at 26 March 2008)
11-17-2-18 7-16-23-6 26-25-15-4
Strategy
1. PierreFrancotte Chief Executive Officer, Euroclear SA/NV
2. IgnaceR.Combes Deputy Chief Executive Officer,
Euroclear SA/NV
�. WimClaeys Head of Strategic Programmes Division,
Euroclear SA/NV
4. FredericHannequart Chairman, Euroclear Bank SA/NV
5. Dr.TimMay Chief Executive Officer,
Euroclear UK & Ireland Limited
6. JoëlMérère Vice Chairman, Euroclear France SA
7. AndréRolland Chief Financial Officer, Euroclear SA/NV
ManagementCommitteeofEuroclearSA/NV
euroclearIannual report 2007I2�
24-27-8-12 1-3 21-5-20-919-28-22
8. StéphaneBernard Chief Executive Officer, Euroclear Belgium
9. BernardBoyette Head of ESES Programme and
Legacy Roadmap France Division, Euroclear SA/NV
10. JanColaes Head of Project Delivery Services,
Euroclear SA/NV
11. RichardCrews Deputy Chief Executive Officer,
Euroclear UK & Ireland Limited
12. PierreYvesGoemans Head of Product Management Division,
Euroclear SA/NV
1�. MarkKirby Head of Business Model and Harmonisation
Division, Euroclear SA/NV
14. AmbroseMurphy Head of Legal and Compliance Division,
Euroclear SA/NV
15. YvesPoullet Chief Executive Officer,
Euroclear Bank SA/NV
16. GuySchuermans Chief Executive Officer, Euroclear Nederland
17. MichaelShipton Head of Corporate Technology Division,
Euroclear SA/NV
18. PierreSlechten Chief Executive Officer, Euroclear France SA
19. PeterSneyers Head of Asset Servicing Operations
and Client Services Division, Euroclear Bank SA/NV
20. PeterSucaet Head of Internal Audit Division,
Euroclear SA/NV
21. AnneSwaelus Head of Legacy Roadmap BE/NL/UK
and Development Services Division, Euroclear SA/NV
22. PaulTaylor Head of Financial Division,
Euroclear SA/NV
2�. AnsoThiré Head of Global Capital Markets Division,
Euroclear SA/NV
24. JohnTrundle Head of Risk Management Division,
Euroclear SA/NV
25. ValérieUrbain Head of Human Resources Division,
Euroclear SA/NV
26. LucVantomme Head of Network Management and
Banking Division, Euroclear Bank SA/NV
27. YannicWeber Head of Commercial Division,
Euroclear SA/NV
28. MaxWright Chief Executive Officer,
EMX Company Limited
GroupManagementTeam
24I
Delivery
When everything depends on you, you’ve got to be ready to give everythingEverything we do at Euroclear is driven by a commitment to three things: forcing out market
inefficiencies, reducing risks and lowering costs for clients. Objectives this important demand
real dedication. Our overriding aim is to give our clients a ‘best of class’ service. But there’s
also a whole industry to help move forward. Which is why, around the world, we put every-
thing we have into delivering on our goals.
euroclearIannual report 2007I25
26I
Achieving our objectives
euroclearIannual report 2007I27
Theyear2007wasanimportantyearintheimplementationoftheEuroclearbusi-nessmodel,withsignificantprogressmadeacrossallprojectsleadingtoourultimategoalofdeliveringa‘domesticmarketforEurope’forsettlementandassetservicing.Afterthepivotalyearof2006,ourmoveintotheimplementationphasewascon-firmedin2007withthreekeymilestonesreachedontheroadtoourSinglePlatform.
BackgroundForoverfiveyears,Euroclearhasbeenattheforefrontofinitiativestoincreasetheefficiencyofcross-bordertransactionprocessingbyreducingmarketfragmenta-tioninEurope.Theexistinginefficienciesmeanpost-tradetransactionprocessingiscurrentlyseveraltimesmoreexpensiveinEuropethanintheUnitedStates.
TheEurocleargroupisgraduallyimple-mentingabusinessmodelforlow-costcross-bordersettlementandassetservic-ing.Theconceptsofthismodelwerefirstpresentedin2002,andconstitutethemostsignificantinitiativeunderwaytoremovebarrierstocross-borderefficiencyinthepost-tradesegment,asdefinedinthe2001Giovanninigroupreport.
Themainobjectiveofthebusinessmodelistofundamentallyenhancecross-borderefficiencyinsettlementandassetservic-ing,throughthecombinationofmarketpracticeharmonisationandtechnologyplatformconsolidation.AnimportantfactorinthesuccessofthisinitiativeisthatEuroclearhasbeenworkinginclosecollaborationwithclientsandmarketstakeholders.
Wearedeliveringconsolidatedplatformsolutionsthatcanofferallsettlementandcustody-relatedservicesacrosscountriesandassetclasses,usingasetofcommon,harmonisedpracticesandtechnologyinterfaces.
Theundertakingishugeanditsimplemen-tationisphasedoverseveralyears,butitsbenefitswillbeevenmoresubstantial.Fullimplementation,foreseenfortheendofthedecade,willallowcostsavingsofover€300millionperyearfortheindustry.IfthissolutionwereextendedtothewholeofEurope,thebenefitswouldriseto€700-€800millionperyear.
Delivering platform consolidation
Deliveringlow-costcross-borderefficiencyinEurope
The work towards the creation of the Single Platform through which Euroclear group (I)CSDs will offer harmonised services consists primarily of two parallel
and inter-related project streams: the harmonisation of standards and market practices on the one hand and the development of a consolidated IT platform
and client interface on the other.
Harmonisation Platformconsolidation
• Market practices • Consolidated data centres
• Central bank money payment model • SSE
• CSD services • ESES
• Tariffs • CCI
• Single Platform Custody
• Single Platform Settlement
28I Delivery
HarmonisedmarketpracticesCompletingthreeyearsofintenseconsulta-tionandcollaborationwiththemarket,in2007Euroclearsucceededinfinalisingtheprocessofmarketpracticeharmonisa-tiononcoresettlementandassetservicingfunctionalitiesfortheSinglePlatform,asintended.Wewarmlythankallmarketparticipantsandstakeholdersoncemorefortheireffortsandsupportinachievingthismilestone.
In2008,wecontinuetofocusonsomespecificaspects,suchasthedefinitionofasettlementdisciplineregimefortheSinglePlatform.Furthermore,wecontinuetocommunicateverycloselywiththemarketinkeyareassuchassettlementandcustodytokeepabreastofharmonisationinitiativesatEuropeanlevelandensureconsistencywithwhatwehaveachievedsofar.Forthisreason,theCross-borderMarketAdvisoryCommitteeagreedtoreorganisetheCross-borderHarmonisationWorkingGroupsattheendof2007.
Inaddition,theEurocleargroupislook-ingintoevenmoreservicesthatcanbeharmonisedatdomesticlevel,withthesupportofclientsandmarketstakeholders.ThecreationoftheCollateralManagementWorkingGroupin2007wasthestartofanintenseperiodofcollaborationwiththemarkettoachieveapatternforharmonisedcollateralmanagement.Issuerservicesaresimilarlyonthelistforharmonisation.
HarmonisedcentralbankmoneypaymentmodelEurocleartookthedecisionin2007todevelopanewpaymentmodeltobeusedasoftheimplementationoftheSinglePlatform.ThisfolloweddiscussionswiththeEurosystem,whichindicatedthattheintegratedpaymentmodelusedforESEScouldnotbeextendedtoCSDsotherthanthoseusingitalready,andthatthemodelcouldnolongerbeusedifTARGET2-Securitiesweretogolive.TheDedicatedLiquidityModelachievesouraimofmaintainingaveryhighlevelofefficiencyforclients,whilecashaccountswillcon-tinuetobeoperatedbythecentralbanksthemselves.
HarmonisedtariffsAsanintegralpartofitsbusinessmodel,Euroclearaimstoharmonisetariffsacrosscommonlyofferedservices.In2007,EuroclearpublisheditsharmonisedtariffsforESESCSDs.ThesewillapplytoclientsofEuroclearBelgium,EuroclearFranceandEuroclearNederlandasofthemigra-tionofEuroclearBelgiumandEuroclearNederlandtotheESESplatform.Thenewtariffsreflecttheaimofdeliveringharmo-nisationandconsolidationandwillleadtocostreductionsof10%,orapproximatelyE15millionperyearafterthelaunchofESES,whichisexpectedtoincreaseto25%by2012.EuroclearUK&IrelandwilladoptharmonisedtariffsasoftheimplementationoftheSinglePlatform.
euroclearIannual report 2007I29
The group will seek to maximise the benefits of its achievements and aims to extend the use of its consolidated platform solutions beyond the initial five countries.
WhatdoesEuroclear’sharmonisationandconsolidationprocessdeliver?
The market practice harmonisation and platform
consolidation being delivered by Euroclear opens
the door to a true ‘domestic market for Europe’.
Based on the harmonisation agreements reached
for settlement and asset servicing, clients of the
CSDs of any of five European countries (Belgium,
France, Ireland, The Netherlands and the United
Kingdom) will soon be able to hold and settle
transactions in securities from another of these
countries in exactly the same way as those in their
own. In this way, Euroclear will effectively abolish
the concept of ‘cross-border’, with domestic-like
processing efficiency and cost levels as benefits
for clients. Harmonisation was designed with a
view to be extendable to other European coun-
tries, offering the prospect of additional savings
for clients in years to come.
A key factor is that Euroclear is providing
harmonisation beyond settlement to also include
comprehensive custody services, reporting and
communication, because we are convinced that
real and substantial efficiency and cost benefits
can be delivered to market participants only
by harmonising end-to-end processes.
Our harmonisation and platform consolidation
work therefore represents a major contribution
to the removal of several of the 15 Giovannini
barriers, as shown below.
Giovanninibarrier
Barrier1Diversity of IT platform interfaces
Barrier�Different rules governing corporate actions
Barrier6Differences in standard settlement periods
Barrier7Different operating hours and settlement deadlines
Eurocleardeliverable
Euroclear is delivering single IT platforms and client interfaces:
• ESES in France: launched November 2007• ESES in Belgium and The Netherlands: November 2008• Single Platform in Belgium, France, Ireland, The Netherlands, the United Kingdom and Euroclear Bank: from Q4 2009 onwards
Harmonisation agreements reached across corporate actions and custody practices for both ESES and the Single Platform (five countries)
Harmonisation agreements achieved for standardised settlement periods, operating hours and settlement deadlines for both ESES and the Single Platform (five countries)
Harmonisation agreements achieved for standardised operating hours and settlement deadlines for both ESES and the Single Platform (five countries)
�0I Delivery
Threekeymilestonessuccessfullyachievedin2007WiththesuccessfullaunchoftheSSEinJanuary2007inEuroclearBank,theSSEisnowfullyimplemented.TheSSEperformsthecorefunctionsofsecuritiessettlement,includingthepositioningandbookingofcashandsecuritiestransfers.Itisthefoun-dationontowhichallITsystemswithintheEurocleargrouparebeingconsolidated.
TheintroductionofESESinFrancewasamajorstepforwardbytheprivatesectorinremovingthebarriersidentifiedbytheGiovanniniGroup.Bytheendof2008,theCSDsoftheEuronext-zonecountriesBelgium,FranceandTheNetherlandswillhaveasingleplatformandfunctionasaunifieddomesticmarketforsettlementandassetservicing.ESESwillsupportNYSEEuronext’sSingleOrderBookfortransac-tionsemanatingfromtheAmsterdam,BrusselsandParismarkets.
Asaresultofthedeliveryofthefinalcomponentsinourresilienceandrecoverystrategy,wenowhavethreegroupdatacentresinplacetosupportourfuturecon-solidatedplatforms,whicharesufficientlydistancedtosustainoperationsacrossallgroup(I)CSDsintheeventofaregional-scaledisaster.
TowardstheSinglePlatformESESisanintermediarysteptowardstheSinglePlatform.WiththeSinglePlatform,marketparticipantswillreapallefficiencybenefitsdeliveredbyourharmonisationandconsolidationworkinsettlementandassetservicingcombined.ItwillofferstandardisedpracticesandaccesstoIreland,theUnitedKingdomandtheinternationaldimensionofEuroclearBankontopoftheEuronext-zonecountries.
TheSinglePlatformwillbedeliveredintwophasesfollowingESES,withthe
custodyphasescheduledforgradualimple-mentationasofQ42009,andthesettle-mentphaseattheendofthedecade.Theorderofthephaseshasbeendeterminedtoensureanaccelerateddeliveryofback-officesavingsforclients,asthelevelofstandardi-sationinthecustodyareaisgenerallylowerthaninthesettlementarea.
In2007,werolledoutanintensemarketawarenesscampaignonSinglePlatformCustodyandtheCCI,thesinglecom-municationinterfacethatclientswillusetoaccesstheSinglePlatform.WehavealsoreviewedandimprovedtherolloutplanforSinglePlatformCustody,defininganopti-malimplementationwithasinglelaunchofsoftware.
In2008,wewillmoveintothedesignphaseofSinglePlatformSettlement.Wewillalsocompletemarketconsultationonforeignsecuritiesandonamarketdisciplineregime.
Platformconsolidation
January 2007
SSE fully launched
following its introduction
in Euroclear Bank
December 2007
Completion of data centre
consolidation with setup of
third, remote data centre
November 2007
Launch of ESES in France
November 2008
Launch of ESES in
Belgium and The
Netherlands
From Q4 2009
Launch of Single
Platform Custody
Late 2010/early 2011
Launch of Single
Platform Settlement
2007 2008 2009 2010
euroclearIannual report 2007I�1
In the course of 2008, the ECB will take a decision
on whether to go ahead with its plans to build
TARGET2-Securities (T2S). T2S is intended to be a
centralised technical platform to provide securities
settlement in euro central bank money. It is sched-
uled to be implemented around 2013.
The Euroclear group, which provides settlement
services in sterling and in commercial bank
money, as well as in euro and central bank money,
will take a decision on whether to participate
in T2S after consultation with Euroclear’s users,
when information has become available on some
important outstanding questions.
The main questions relate to the project’s market
impact and its economic feasibility, together
with legal and governance questions which are
being discussed with the ECB and the market. In
particular, the design of T2S as a settlement-only
platform creates a unique split between settle-
ment and custody services including, inter alia,
corporate actions, collateral management and
securities financing, the cost and risk implications
of which need to be fully understood by the mar-
ket. The most fundamental question is whether
T2S, as an additional platform, can effectively
deliver upon its vision of efficiency and cost
reduction across the European securities markets.
Euroclear continues to provide constructive
feedback to the ECB and has participated in
the Advisory Group and a number of Techni-
cal Groups established by the ECB during this
project. Clarification of the open issues will
assist CSDs, including Euroclear, and market
participants in making a judgment on whether to
participate in T2S.
Regardless of any T2S decision, Euroclear will con-
tinue to implement its Single Platform, bringing all
custody, settlement (and gradually other services)
provided by group (I)CSDs onto one platform.
Our platform goes much beyond settlement and
is scheduled to be completed years before T2S
would go live. Also, in our experience, far-reach-
ing harmonisation of market practices is the key
to success in delivering substantial efficiency
and cost gains from consolidation. Our clients
will therefore realise significant benefit from the
Euroclear market practice harmonisation work
delivered across services, which effectively creates
a ‘domestic market for Europe’ in these countries.
TARGET2-Securities:awaitingmoreclarity
�2I Delivery
Ontopofourconsolidationandharmoni-sationprogrammes,specificstrategiesperassetclasswillhelpachieveevengreaterefficiency.Fundamentalchangeisusuallythefruitofseveralsteps,whichmaytaketime.Thatiswhyweensurethatanystepstakenachievesteadyandtangibleimprove-ment,andatthesametimeleaveroomforflexibilityandaccelerateddeliveryshouldthesituationsorequire.
Theservicesthatwehavedevelopedin2007andearly2008forderivativesandemissionrightsdemonstratetherelevanceofusingexpertisegainedinexistingassetclassesinEurocleartoprovideefficientsolutionsforneweronesinaveryshorttimeframe.
EquitiesTheobjectivetofundamentallyenhanceefficiencyinequitiessettlementandassetservicinghasbeenanimportantpartoftheEuroclearbusinessmodelfromitsinceptionin2002.
Inlinewithourstrategy,thefocusofservicedevelopmentsisatbothCSDandICSDlevel,withtheaimofofferingchoiceandefficiencyinresponsetodistinctclientneeds.
WiththeintroductionofESES,thefirstcross-marketconsolidatedsettlementandcustodysolutionisbeingputinplace.Onitscompletionin2008,threeoftheEuronext-zonemarketswilloperateasone.Seealsopage47.
EuroclearBanklaunchedthetrademark‘EquityReach’fortheserviceitspecificallydesignedforequities.Thisdecisionun-
derlinesthematurityoftheservice,whichhasbeendevelopedoverseveralyears,andnowprovidescross-borderaccesstoover25equitiesmarkets.
EquityReachachievedevenhigherservicelevelsintheEuronextzone.InparallelwiththeobviousmarketdemandforESES,EquityReachhasalsoattractedsignificantnewbusinessinthesecountries,frominvest-mentbanksandnumerousEuropeancom-mercialbanks,demonstratingthatEuroclearissucceedinginitsobjectivetoofferrealchoicetoclientsinthisimportantsegment.
In2008,theprogressmadeintheEuronextzonewillbeexpandedtootherEquityReachlinks.AspartofthisandinlinewiththeinteroperabilityguidelinesintheCodeofConduct,EuroclearBankhasofficiallyrequestedaccesstoinstructionfeedsfromstockexchangesandclearinghousesinGermany,ItalyandSwitzerland.
InternationaldebtsecuritiesTheeurobondbusinessrepresentsthelargestpoolofliquidityinEurope,withthetotalvalueofsecuritiesissuedthroughandprimarilydepositedwiththeICSDsreachingE8.2trillioninDecember2007,andgrowingmorethan14%peryear.EuroclearBankhashistoricallyplayedaleadingroleinachievingveryhighlevelsofsettlementefficiency.Meanwhile,businessgrowth,combinedwithgrowingdiversityandcomplexityofinstruments,hasledtoprocessingchallengesinkeyareassuchasissuanceandassetservicing.
EuroclearBankandClearstreamBankingLuxembourg,togetherwiththemarket,
Increasing product efficiency in a globalising industry
euroclearIannual report 2007I��
havelaunchedaprogrammetosetprocess-ingstandardsfortheservicingofinterna-tionaldebtsecuritiesprimarilydepositedintheICSDs.TheinitiativeissteeredbytheInternationalSecuritiesMarketAdvisoryGroup(ISMAG),aseniormarketcommit-teeformedforthispurposeinJune2007.Theprogrammewillspanthreeyears,andwillfocusonsecuritiesissuanceandassetservicingprocesses,suchascorpo-rateactionsandincomeinformationandinstructionprocessing.Thisisanambitiousinitiative,whichfurthershowsthemarket’sdeterminationtotackletheGiovanninibar-riersdecisivelyintheshortterm.
Certainshort-termdeliverablesintheareasofinformationprovisionfornewissuesandcorporateactionsshouldbereachedinmid-2008.Itisanticipatedthatamarketprotocoldetailingtheagreedstandardswillbefinalisedin2010,includingfullSTPintheend-to-endprocessesfromissuertoinvestor.Thechangeprogrammeissettoachieveahighlevelofserviceandefficiencytowardsinvestorsandissuers,combinedwithareductioninriskandoperationalcostsforallplayersinvolved,andwillfuelcontinuingcompetitivenessandhighlevelsofinnovation.
DomesticdebtsecuritiesEuroclearisfocusingonthecontinueddevelopmentofitsserviceofferingfordomesticdebtsecurities.
EuroclearBankhasdevelopedasignificantpositionindomesticdebtsecuritiesovermanyyears,andoffersclientsasingleaccesstoover30countries,therebyeffi-cientlycombiningcross-bordersettlement,
comprehensiveassetservicing,collateralmanagementandlendingservices.In2007,wehavefurtherimprovedtheturnaroundandinteroperabilitywithBelgium,France,GermanyandTheNetherlandsbyextend-ingreimbursementtimingsinthelendinginfrastructure.EuroclearBankalsoexpand-editsreachasJapaneseGovernmentBonds(JGBs)becameeligibleandanewlinkwithSloveniawasadded.
Complementingthegroupofferinginpri-marymarkets,wesuccessfullyextendedourprimarydealerservicestoincludeBelgium,inadditiontoAustria,France,Ireland,TheNetherlandsandPortugal.ClientsparticularlyvaluetheefficiencyandlocalmarketproximityinthecountriesinwhichEuroclearoperatesCSDs.
ThegroupactivelyseekstomaximiseSTPefficiencyfromtradingthroughtosettlement,andforthisreasontakesdirectfeedsfromCCPsandtradingplatforms.Inthiscontext,Euroclearisfullypreparedtooffersettlementservicestonewentrantsinthemarket,bothatCCPandtradingplatformlevel.
The International Securities Market
Advisory Group will bring greater
operational efficiency to the interna-
tional securities business by working
to reduce the back-office costs and
risks that are growing as volumes
and complexity increase.
JohnGubertChairmanInternational Securities Market Advisory Group
�4I Delivery
DerivativesTheworldwideOTCderivativesbusinessisgrowingatanexceptionallyrapidpace.Accordingtothe2007OperationsBench-markingSurveyfromtheInternationalSwapsandDerivativesAssociation,month-lyOTCderivativetransactionvolumesnearlydoubledinthespaceofayeartoover17,000permonth.Handinhandwiththisgrowth,thelevelofdiscrepancyinexposureamongdealershasincreasedtohundredsofmillionsofeuros.
EuroclearBankhasrespondedtotheneedforanexposuremanagementsolutionbyintroducinganewserviceinQ42007.DerivManagerisanimportantsteptowardsprovidinggreatertransparency,flexibilityandautomationinmanagingbilateralexpo-sure.Itprovidestradematchinganddailyportfolioreconciliationsbetweencounter-parties,helpingclientstosubstantiallyreducecounterpartyrisk.Theservicealsoallowsclientstocollateralisetheirderiva-tivesexposuresmoreeffectively.
DerivManagercomplementsthesolutionsalreadyputinplacebyTheDepositoryTrust&ClearingCorporation(DTCC),amongothers.Majormarketparticipants,mainlyinvestmentbanksandbrokers,subscribedfromtheoutsettotheservice,whichwasdevelopedincloseco-operationwithkeymarketparticipants.Itisagoodexampleofhowthefinanceindustrycanworktogethertodevelopefficientmarketinfrastructure.
Theservicefitsnaturallywithinourexist-ingroleasaproviderofautomationandstandardisationinderivativespost-trade
services.Aheadofthislaunch,EuroclearBankalreadyhandled€500billionofsecuritiesderivativesbusiness.
Developmentworkwillcontinue,firstbyextendingtheofferingtoprovideinvestmentbankswithatoolforefficientexposuremanagementwiththeirunderlyingclients.
FundsInvestmentfundsinEuropehavebeengrowingatacompoundannualrateof15%since2003,withtotalEuropeanfundassetscrossingtheE8trillionthresholdin2007.Themajorityofthisgrowthcontinuestobeconcentratedincross-borderfunds.Domesticandcross-borderfundtransac-tionprocesseshaveonthewholedevelopedwithmajorstructuralinefficiencies,andEuroclearhasbeentacklingtheseinefficien-ciesheadon.
In2007,thesuccessfullaunchofFundSettlePremier,ahigherqualityservicelevel,hasenabledclientstobenefitfromthehighestlevelsofefficiencyintheprocessingofcross-borderfundsatlowercost.In2008,amongotherinitiatives,wewillconsiderhowtoextendourfundservicestothehedgefundmarket,tohelptackleitshugeoperationalinefficiencies.
WelaunchedthesecondphaseofourorderroutingfunctionalityinEuroclearFranceinApril2007.Asaresult,theorderroutingandsettlementprocessforFrenchfundsisnowfullyautomated.Clienttake-upsofarhasbeenpromising,withasteadyincreaseindomesticfundsmovingtothisnewmarketsolution.
DerivManager is an important move
towards greater transparency, flexibility
and automation in managing bilateral
exposures. It is a result of close col-
laboration between the Collateral
Framework Group and Euroclear Bank,
and is set to meet the OTC derivatives
market’s needs.
MarkRowlandsCo-Chair of the Collateral Framework Group
euroclearIannual report 2007I�5
Funds:threephasestowardsanefficientinfrastructure
Developmentofharmoniseddomesticofferingsacrossgroupcountries
EMXCo and Euroclear UK & Ireland will
deliver an integrated cash settlement solution
for UK funds in 2008. The second phase, a
cash and securities settlement solution, is
planned for 2009.
A harmonised solution for Euronext-zone
countries, extending the Euroclear France
solution to Belgium and The Netherlands, will
be implemented shortly after the launch of
ESES in these countries.
Linkingofexistingsolutionstowardsasingleaccesspoint
Domestic and cross-border services will be con-
nected to extend coverage and gradually move
towards a single access point:
• French distributors using Euroclear France
for funds order routing are already able to
connect to FundSettle for cross-border funds
• In 2008, FundSettle will connect to the
Euroclear France order routing service, and
to EMXCo for UK funds
• In 2009, Euroclear intends to further lever-
age the group capabilities to service funds,
for example by extending EMXCo’s order
routing service to cross-border funds via a
connection to FundSettle.
IntegrationofallfundsolutionsintotheSinglePlatformusingtheCCI
The launch of Euroclear’s Single Platform will
allow funds to be integrated with other asset
classes while maintaining specific functionality
related to funds services.
Euroclear will offer open architecture for
messaging, accommodating both major
standards (ISO and FIX).
�6I Delivery
EmissionrightsEuroclearBankisenteringintothefast-growing,worldwidebusinessofcarbonemissionrightstrading,withthelaunchofasettlementandsafekeepingservice,ClimateSettle,in2008.Carbonemissionrightstradingvolumeshitrecordhighsin2007,withanestimated€25billiontradedworldwide(comparedto€9billionin2005).Increasedinterestfromretailinves-torsisestimatedtotipthebusinesstowards€40billionby2012.
Beforethenewservice,processeswereviewedasinsufficientandlackinginauto-mationandthereforecostly,time-consum-inganderror-prone.ThenewserviceoncemoreunderlinesEuroclear’scommitmenttoprovidemarketinfrastructurefacilitiestoincreaseefficiencyacrossconstantlyevolvingbusinesses,andtobeasingleentrypointforourtraditionalclientsacrossthefullrangeofproductsforwhichtheyneedinfrastructureservices.
Severaltypesofemissionrightshavebeendeveloped,withtradingtakingplaceonmarketplaces,electronicplatformsandOTC.AtEUlevel,nationallyallocatedquotasforemissionsaretradedasEuropeanAllowances.In2008,amarketforaUN-approvedtypeofcreditforemission-friend-lyprojectsknownasCertifiedEmissionReductionrights(CERs)willopen.LikeEuroclear’sexistingsettlementservicesforfixedincomeandequities,ClimateSettleisanopensolution,whichcanprovidesettlementforalltrades,irrespectiveoftradingvenue.Forexample,itwillbeabletosettletradesstruckontheClimateSpotExchange,anelectronictradingplatform
accountingfor82%ofallexchangetradesinemissionsfutures.
WithClimateSettle,matchingandsettle-mentoftransactionstakesplaceonthebooksofEuroclearBankonaDVPbasis,withclientssendinginstructionsforbothexchange-tradedandOTCtransactions.Euroclearisdeliveringtheflexibleandstandardisedsolutionthatemissionstradingrequires.
Euroclear is a natural choice for set-
tlement and post-trade services in the
emissions market because of its history
of success in delivering such services to
a wide range of asset classes.
PhilBrownChief Executive Officer Climate Spot Exchange
euroclearIannual report 2007I�7
Collateralmanagement
In parallel with the continued trend of collater-
alisation, Euroclear has further strengthened its
focus on the development of its collateral man-
agement services, both at CSD and ICSD level.
We are in the process of designing a harmonised
collateral management offering for all CSDs,
allowing clients to benefit from the significant in-
crease in pooling capabilities that will result from
the Single Platform. This service harmonisation
is in line with that being delivered for settlement
and custody services.
In order to assist Euroclear in this process, a cross-
border Collateral Management Working Group
has been set up. This group of expert practitioners
is providing advice on functionality and market
practices, and guiding the design of a service
meeting the needs of the market.
In other local developments, Euroclear UK &
Ireland made the changes in 2007 to enable the
direct input of Delivery By Value (DBV) instructions
and associated repo payments, in order to support
LCH.Clearnet’s RepoClear service. In France,
Euroclear France extended the pool of eligible
collateral and is improving STP for foreign debt.
Following the successful launch of a facility for
clients to re-use collateral in 2007, and amid dif-
ficult market conditions in the wake of the credit
crisis, Euroclear Bank has reinforced its position in
collateral management services.
Euroclear Bank will support LCH.Clearnet’s new
EuroGC RepoClear service when it is launched in
Q2 2008. EuroGC is a general collateral clearing
service for euro-denominated government bond
baskets, for which Euroclear Bank will use its
auto-allocation tool AutoSelect® to offer settle-
ment services. Euroclear Bank will also further
enhance the allocation and pooling capabilities
for collateralisation with TARGET2 central banks.
�8I Delivery
> >
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Reducing cost
Euroclearhasaclearmissionto:• continuouslyenhanceitsservicesand
provideincreasinglyefficientsolutionswithaviewtolowercostsforthemarket;and
• sharethebenefitsofincreasedefficiencyandeconomiesofscalewithitsclients.
Euroclearhasmadethecommitmenttodrivedowncostsforclients.Thecostreductionsdeliveredin2007,andthosealreadydeliveredorplannedfor2008,demonstrateoncemorethatwedeliveronourcommitments.
EuroclearBanktariffreductionsImportantbusinessgrowthgeneratedthroughout2007hasrealisedsignificanteconomiesofscaleand,asaresult,EuroclearBankwasabletoimplementitslargestpack-ageoftariffcutsever,amountingtoover€100milliononanannualisedbasis.Thefullpackagewasdeliveredthroughperma-nentfeereductionsratherthanrebates,thusgivingclientsthebenefitofcompoundedfeereductionsoverseveralyears.
Themajordecisiontakenlastyeartoremu-nerateoutstandingcashbalancesresulted
inover€82millionbeingpaidtoclientsin2007.EuroclearBankistheonlyICSDthatremuneratesbalancesinatransparentanduniformwaytoallclients.
Afurther€70millionfeereductionhasalreadybeenannouncedfor2008,enablingclientstobenefitfromlowertariffsfordo-mesticbondandeurobondsafekeeping,settlementandsafekeepinginEuronext-zoneequitiesandtripartycollateralmanagement.Forthelatterservice,thisconstitutesanother15%reduction,ontopofthe25%reductiondeliveredin2007.
Euroclear maintains strategically competitive
pricing, and takes subsequent initiatives to deliver
further efficiency gains. This results in both a
decrease in pricing and cost reductions for clients
in their back-office operations, which in turn
allows for additional business growth for us and
our clients. Efficient solutions and competitive
pricing lead to further economies of scale.
Thedualbenefitsofefficiencygains
Efficiencygains/enhancedservicing
attracting higher volumes economies of scale
loweringinternalcostforclients
benefitspassedontoclientsincostreduction
euroclearIannual report 2007I�9
WiththelaunchofESESinBelgiumandTheNetherlands,thefamilyconcept,whichiscurrentlyappliedtoholdingsacrossEuroclearBankandEuroclearFrance,willbeextendedtoincludeEuroclearBelgiumandEuroclearNederland.Itsextensionwillresultinsafekeepingfeereductions,passingonthebenefitsofcostsynergiestoourclients.
CSDtariffreductionsEuroclearUK&Irelandpaid€11mil-lioninrebatestoclientsinearly2007,inproportiontotheiractivityduring2006.
Furthertariffreductionsof€16.5millionin2008aredeliveringa50%reductioninclearing-relatedservicefeesanda10%reductioninsettlementfeesforbothretailandwholesaleclients.
During2007,EuroclearpublisheditstariffforharmonisedCSDservicesontheESESplatform.ThenewharmonisedtariffswillapplytoclientsofEuroclearBelgium,EuroclearFranceandEuroclearNederlandasofthemigrationofEuroclearBelgiumandEuroclearNederlandtotheESESplatform.EuroclearUK&Irelandclients
willseetariffreductionswhentheSinglePlatformislaunched.
Tariffswillbecutbyabout10%asofthelaunchofESES,around20%whentheSinglePlatformisextendedtoEuroclearUK&Irelandin2010,andanexpected25%by2012.
Thenewtariffrepresentsamajormilestoneinmakingharmonisationareality.IthasbeenstructuredtoensurefairaccesstoESES,regardlessofthescaleofholdingsandtransactionvolumes.
Overviewofmajorcostreductionsandclientbenefits
Level
ICSD
CSDs
2006
• €45 million in rebates paid
early 2006, in proportion to clients’
activity in 2005
• €40 million in annualised
fee reductions
• €11 million as a result of our deci-
sion to start paying credit interest
on outstanding cash balances
• Euroclear UK & Ireland: €15 million
in annualised tariff reductions
• Euroclear France: €1 million per
year for users of SBI post-trade
confirmation service
2007
• €100 million in annualised
fee reductions
• €45 million in rebates paid early
2007, in proportion to clients’
activity
• €82 million paid as remuneration
of outstanding cash balances
• Euroclear UK & Ireland:
€11 million in rebates paid early
2007, in proportion to clients’
activity in 2006
20081
• €70 million in annualised fee
reductions already announced
• Euroclear UK & Ireland:
€16.5 million in fee reductions
• €15 million in annualised
fee reductions resulting from
the implementation of ESES
1 Amount confirmed to date
40I Delivery
Serving clients globally
All Euroclear group (I)CSDs made significant
progress with their Client Satisfaction Survey
results for 2007, with a group-wide satisfaction
score of 74.1%, compared to 70.9% in 2006.
The results provide confirmation that the initia-
tives made in recent years to reinforce client
focus, such as the drive to be ‘best of class’ in
client service, are bearing fruit. Clients welcomed
our communication with the market, for example
through the Implementation Committees that we
have set up in the ESES countries. More generally,
our strength in our core services and the excel-
lence of our people were recognised. Our employ-
ees in Europe and in our local offices around the
world are perceived to be knowledgeable and to
provide a quality service.
In 2008 we are focusing on those areas where
clients still have some concerns. We are increasing
our efforts to reduce the turnaround times for
queries in certain areas, as part of further imple-
mentation of our ‘best of class’ initiatives.
We are also reviewing our communication
streams to clients in order to avoid information
overload, and a new website with enhanced
navigation and search functions will make it
easier for people to find the information they
are looking for.
TheEurocleargroupservesclientsfromMelbournetoHelsinkiandfromLosAngelestoTokyo.
Ourmottoisthatclientsalwayscomefirst.Wewanttomeetourclients’needsastheyevolveamidchangingmarketconditionsandincreasingglobalisation.In2007,webuiltonourglobalpresence,andwereinforcedourclientfocusinitiativeswiththeclearambitiontoberecognisedas‘bestofclass’inourindustry.
Beingthe‘bestofclass’serviceproviderEuroclearisdeterminedtostandoutfromitscompetitorsacrossalltheareasthatcon-tributetoclientsatisfaction.Wearerecog-nisedinthemarketashavingperhapsthemostknowledgeableandreliablestaffandwewanttoleveragethistogiveourclientsthebestserviceavailable.
Thereisaneedformoredirectaccesstospecialistassistanceasaresultofthegrowingdiversityandcomplexityofinstrumentsandoptions.Todeterminehowbesttorespondtothisneed,wesoughtinputdirectlyfrom
alargenumberofclientswithdifferentpro-files.Basedonthisinput,wehavedefinedawide-reachingprojecttoensurethatweachievethegoalofbeing‘bestofclass’inclientservice.
Manymeasureshavealreadybeenimplementedin2007inEuroclearBank.Eachandeveryclientnowbenefitsfromdirectaccesstospecialistswithindifferentserviceareas,locatedintheoperationaldepartmenttowhichtheirservicerelates.Everyclientalsohasanaccountmanager,whoisthedesignatedcontactpointforthemonitoringofaccountactivityandanescalationpointifrequired.
Theresultsfromthe2007ClientSatisfac-tionSurveyareaclearsignalthatthisinitia-tivehadanimmediateandnoticebleimpactonclients.Clientservicecriteria(suchastelephoneservicelevelsandquickresponsetoqueries)forEuroclearBankwereratedover4.5%higherthanin2006.
Furtherimprovementsarebeingrolledoutduring2008.All(I)CSDsareexpand-
Increasedclientsatisfactionatall(I)CSDs
Euroclear’s transformation into a client-
driven business over the past two years
is nothing short of remarkable.
From being more of a utility, Euroclear
has evolved into a full-blown business
partner that listens to its clients’
demands. This has resulted in a major
overall improvement in its client service,
from the day-to-day service we receive
all the way up to top management.
Well done. Keep up the good work.
TomS.JensenSenior Vice President Head of Securities Services Danske Bank
euroclearIannual report 2007I41
ingbothqualitativeandquantitativekeyperformanceindicatorstoensureclosemonitoringofservicelevelsasawholeandincreasedtransparencyontheserviceprovidedtoclients.
MajorstepsinimprovingservicinginAsiaFormanyyearsnow,EuroclearBankhasserveditsimportantclientbaseinAsia,withstrongclientrelationshipandclientservicefunctionsoperatingfromthreelocations:Tokyo,SingaporeandHongKong.EuroclearBankhasestablisheditselfasthepreferredgatewayforAsianfinancialinstitutionstoaccesstheEuropeanandinternationalfixedincomebusiness.
AstheAsianeconomygrows,thefinancialmarketisalsoexpandingrapidly,withChinaandIndiaasmajordrivers.Anim-portantnumberofEuropeanandUSbankshaverelocatedtheiroperationscentresorprocessingactivitiestoAsia,primarilyIndia.
EuroclearBankisrespondingtothediverseneedsoftheAsianmarketsbybuildingonitspresenceintheregion.Twokeyinitiativesin2008,whicharepartofourlonger-termstrategy,demonstrateourcom-mitmenttotheAsianregion:• theexpansionoftherepresentativeoffice
inHongKongtobecomeabranchofficeinQ22008,withseveraladditionaloper-ationalfunctionstobeoffereddirectlyfromthenewbranch;and
• theopeningofafully-staffedrepresenta-tiveofficeinBeijing.
MovingkeyoperationsfunctionstoHongKongwillsignificantlyimprovetheservic-ingoftheAsianclientbaseasawhole.The
branchofficewillinitiallyhaveabout50employees,operatinginthesametimezoneasourclientsintheregion,allowingforasignificantextensionoftheprocessingandservicewindows.
Initially,wearefocusingonthestreamsofservicesthatrequirethemostfrequentsup-port,suchasincome,settlement,newissues,moneytransferandcorporateactionsservic-es.ThepresenceofoperationsstaffinHongKongwillenableinformationdistributionandprocessingtotakeplacefullywithinthesametimezone.Asaresult,waitingtimesforAsianclientswillbedramaticallyreduced.
OurnewofficeinBeijingwillenableustooffersuperiorcareandsupporttoclientsinChina.OurlocalpresencewillallowustooffermuchcloserandmorefrequentsupporttoChinesefinancialinstitutionsandtodevelopfurthercontactswiththemarketasawhole.
EuroclearBankopensFrankfurtofficeIn2007,EuroclearBankopenedarepre-sentativeofficeinFrankfurt,inordertoofferadedicatedservicetoitsclientbaseinEurope’slargesteconomy.Beyondofferingdirectaccesstospecialisedsupport,EuroclearBanklooksforwardtoexpandingitsserviceofferingandclientbaseinGermany.Today,over80%offoreignholdingsinGermandebtsecuritiesareheldthroughEuroclearBank.WehavealsoappliedundertheCodeofConducttoEurextoopenaninter-operabilitylinkwiththeaimofofferingsettlementandassetservicingforGermanequities.ThewillingnessofEurextogiveustherequestedfeedwillbeanimportanttestoftheefficiencyoftheCodeofConduct.
42I
Performing strongly across the group
euroclearIannual report 2007I4�
Euroclear Bank
2007hasbeenaveryactiveyearintermsofservicedevelopment,withmajorinitiativesandnewdevelopmentsacrosstheinstru-mentswetraditionallyserviceaswellasdiversificationintonewareas.
Ourroleistoexpandourexpertisetothoseclassesofinstrumentwhereourclientsareactiveandrequireimprovedback-officeprocessingefficiency.
Atthesametimewearestrengtheningourroleasasingleaccesspoint,therebycontinuouslygeneratingneweconomiesofscaleforthebenefitofourclients.
Twonewproductsweresuccessfullylaunchedin2007(underthetrademarknamesofFundSettlePremierandDerivManager).Thisprocesscontinuesin2008,startingwithClimateSettle,asettlementandsafe-keepingserviceforcarbonemissionrights.
Withthesenewproducts,likeourexist-ingproducts,ourgoalistodelivermoreefficient,cross-bordersolutionsthatreducecostandrisks.
DebtsecuritiesThegrowthoftheeurobondbusinessinrecentyears,togetherwithincreasingdiversityandcomplexityofinstruments,hascreatedprocessingchallengesinareassuchasissuanceandassetservicing.Tooptimiseefficiency,EuroclearBank,togetherwithClearstreamBankingLuxembourg,launchedaprogrammein2007todefinenewprocessingstandardsfortheservicingofinternationaldebtsecuritiesprimarilydepositedintheICSDs.Itisbeingrolledoutundertheguidance
oftheISMAG,anewmarketsteeringcommittee.Formoreinformationonthisinitiative,pleaseseepage32.
Wehavealsoextendedourrangeofmarketlinkstoinclude:
• Slovenia,MalaysiaandtheDubaiInternationalFinancialExchangeLtd.(DIFX);and
• JGBsforbothdomesticandcross-bordersettlement.TheacceptanceofJGBsaseligiblecollateralisamajorstepforwardinthepossibilitiesforcollateralisationforclients.
Inaddition,thelinkswithAustralia,Canada,Japan,PortugalandtheUnitedKingdomhavebeenenhanced.
OurofferingtoprimarydealershasbeenextendedtotheentireEuronextzone.Thisservicehasalreadyattractedimportantbusinessvolumes.
EquitiesIn2007,EquityReachwassuccessfullyintroducedasthetrademarknameforEuroclearBank’sequitiesservice.TheservicehasbeenfurtherenhancedfortheEuronextzoneduring2007,wherewenowachievehighservicelevels.Theaimfor2008istoalignadditionalEuropeancountriestothishigherservicelevel,andtoenhanceaccesstomorecountries.
Withimportantfeereductionsin2007fortheEuronextzone,theserviceiscon-tinuallyattractingmoreclients,includingbothlargeandmedium-sizedfirms.
44I Delivery
FundsOurfundsbusinesscontinuestoexpand,withtotalclientholdingsinfundsincreas-ingby20%inEuroclearBankin2007.ThenewFundSettlePremierservice,whichoffersthird-partyfunddistributorsfaster,moreefficientprocessingatalowercost,wassuccessfullyintroducedin2007.
Otherserviceenhancementswereimple-mentedduring2007includingimprovedtransferinstructions.Coveragehasalsobeenfurtherexpanded,withover36,000fundsnoweligibleinFundSettle.
DerivativesEuroclearBankhasrespondedtothegrowingneedforanexposuremanagementsolutionbyintroducingDerivManagerinQ42007.Theservicewasdevelopedinclosecollaborationwiththemarket,andisanimportantsteptowardsprovidinggreatertransparency,flexibilityandautomationinmanagingbilateralexposure.
Mostofthetopsixmarketparticipants,amongothers,havealreadysubscribedtotheservice.ForfurtherinformationonDerivManager,pleaserefertopage34.
EmissionrightsEuroclearBankisenteringthefast-grow-ing,worldwidebusinessofcarbonemissionrightstradingin2008.Thenewsettlementandsafekeepingservice,ClimateSettle,un-derlinesEuroclear’scommitmenttoincreas-ingefficiencyacrossconstantlyevolvinganddiversifyingmarkets.
Severalmajorfinancialinstitutionsthatareincreasinglyactiveinthisbusiness,mostly
existingEuroclearclients,haveexpressedastronginterestinusingtheservice.AdditionalinformationaboutClimateSettleisavailableonpage36.
CollateralmanagementEuroclearBankprocessedparticularlyhighvolumesoftransactionssuccessfullyonitstripartyplatformin2007.Anumberofrecentindependentsurveyshaveconfirmedthestrengthoftheservice,withEuroclearBankgainingtopscoresinparticularforefficiencyandclientsupport.
TheservicewasfurtherstrengthenedinFebruary2007bythelaunchofcollateralre-usecapability,whichenablescollateraltakerstore-usethecollateralreceivedinonwardtripartytransactions.Theintroduc-tionofJGBsonthetripartyplatformhasincreasedtherangeofeligiblecollateral.Furtherenhancementsincludedanextend-eddeadlineforsame-dayfinancingandbetterreporting.TheAutoSelectmodulehasbeenoptimisedtofurtherimprovecollateralallocations.
SecuritieslendingandborrowingTheservicewasenhancedin2007bytheextensionoftheend-of-daylendingandborrowingprocessacrossallmarkets,whichallowsborrowerstoreimburseloanslaterintheday.Thepooloflendablesecuritieshasbeenenlargedby15%asaresultofextendedeligibilitycriteria.
AstabilisingfactorinturbulenttimesEuroclearBank’srobustpositionaspartofthesettlementinfrastructurehasprovidedstabilityinthemarketduringthesubprimecreditcrisis,asdiscussedonpage62.
euroclearIannual report 2007I45
>
>
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>
TheDVPmodelthatEuroclearBankoffersforcross-bordersettlementensuresthatitcontainsthesystemicrisksthatcouldresultfrompotentialsettlementfailuresandthatliquidityismaintained.
Withits‘singlepurpose’bankingfunction,EuroclearBankwasabletoreassurethemarketthatefficientsettlementwouldcon-tinueasnormal.EuroclearBank’sexposuresaremainlyintra-day,andwedonotlendlongtermorholdsubprimeinvestments.Ourlowriskprofile,withabout99%ofourclientexposurecollateralisedbyhighqualityassets,meantthatwewereabletosatisfyourliquidityneedsasinnormalcircum-stances,andinturnprovidenormallevelsofcredittoourclientstosupporttheiractivitythroughoutthesubprimecrisis.
EuroclearBankholdsaverylargeanddiversepoolofcollateraltotalling€2.4trillioninmarketvalue,whichispledgedwithstrongvaluationmechanisms.Collateraliseddebtobligationscompriseonly1.5%ofthewholepool.Furthermore,ourtripartycollateralmanagementservices,withEuroclearBankasneutraltripartyagent,allowedmajorfinancialinstitutionstooptimisetheuseoftheircollateralandavailableliquidity,andprovidedopportuni-tiestomobiliseglobalcollateral.
OntrackforMiFIDEuroclearBankhasintroducedproceduresfortheclassificationofclients,andchangeshavealsobeenmadetotransactionreport-ingservicesinordertomeetrequirementsforincreasedtransparency.
MajorchangestoclientserviceInlinewithchangingclientexpectationsandmarketconditionswhereinstruments,primarilybonds,arebecomingmorecomplex,EuroclearBankhassubstantiallyimproveditsclientservice.Eachclientnowhastwowaysofcontactingus:• directcontactwithspecialistteamswho
haverelocatedtoworkalongsideopera-tionaldepartments,takingfullowner-shipofclientrequestsanddeliveringcompleteend-to-endsolutions;and
• dedicatedaccountmanagers,whoactasacentralescalationpointforopera-tionalissuesandoverseetheiropera-tionalactivity.
ClientSatisfactionSurveyOverallrateofsatisfaction:2007:74.14%2006:70.98%
Therewasasignificantincreaseinclientsatisfactionlevelsin2007.Thisisevidencethatthe‘bestofclass’initiativeisbearingfruit.Clientshavesaidinparticularthattheyarehighlyappreciativeofthecalibreofemployeesandthesupportprovidedbylocaloffices.
As an Asian banking specialist, DBS
welcomes Euroclear’s establishment of
an operations centre in the region, which
underscores its commitment to Asia.
Euroclear recognises its clients’ growing
needs and is taking the lead in bringing
service excellence to clients in Asia.
ElizabethChiaManaging Director Head of Securities Services DBS Bank Ltd
Keyfigures
Strong growth was achieved in all areas in spite of the turbulent market conditions.
Turnover
€284.5trillion +30%
Holdings
€9.2trillion +14%
Numberoftransactionsafternetting
40.8million +20%
Collateralprovisionoutstanding
€�28.1billion +6%
46I Delivery
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SupportingissuersasdematerialisationcontinuesAmajorsteptowardsfulldematerialisation,duetobecompletedin2013,wasachievedin2007.EuroclearBelgiummetthefirstcriticaldeadlineinthemovetoapaper-freecapitalmarketattheendof2007,withtheautomaticconversionofsomeBelgianbearersecuritiesintodematerialisedsecuritiesrepresentedbyelectronicregistrationwithafinancialinstitution.ThiswasconductedwithfullmarketparticipationcoordinatedbyBelgium’sDematerialisationTaskForce,comprisingrepresentativesfromBelgianissuers,NYSEEuronext,notaries,financialinstitutions,theNationalBankofBelgiumandEuroclear.
Overthepastthreeyears,aspartofthedematerialisationprocess,EuroclearBelgiumhasdestroyedabout15millionpapersecuri-ties,representingabout250tonsofpaper,witharemaining40millionsecuritiestar-getedfordestructioninthecomingsixyears.
EuroclearBelgiumhasdevelopedCapitrack,anewservicetohelpissuersinthedema-terialisationprocess.Capitrackprovidesanup-to-dateviewoftheforminwhichsharesarebeingheld,allowingissuerstoeasilymonitorthedematerialisationoftheirissuedsecurities,aswellasgettingabetterpictureoftheownershipoftheirsharecapi-tal.AllEuronextBrussels-listedcompaniesontheregulatedandnon-regulatedmarketshavesubscribed,andtheservicehasnowbeenextendedtonon-listedcompanies.
Asecondphaseoftheservice,deliveredinJanuary2008,allowsissuerstoobtainsupportservicesforthemanagementof
theirshareholderregisterfromEuroclearBelgium.Severalmajorissuershavealreadysubscribed.Tosupportthegrowingrangeofissuerservices,anewIssuerRelationsteamhasbeensetupwithinEuroclearBelgium.
MeetingthegrowingneedsofthemarketEuroclearBelgiumhastakenimportantorganisationalmeasurestomeetthemulti-plechallengesahead.Alongsidetheforth-cominglaunchofESES,thedematerialisa-tionprocessandrisingvolumes,thesehaveenabledEuroclearBelgiumtocontinuetodeliverhighqualityday-to-dayservicesandserviceenhancements.
EuroclearBelgiumcontinuestobuildonitsstrengths,forinstanceasaholderofphysicalsecurities.In2007,itexpandedthescopeoftasksperformedonbehalfofEuroclearBankinthecontextoftheim-plementationofNewGlobalNotesintheinternationalcapitalmarkets.
WealsosuccessfullyprocessedthelargestevercapitalincreaseinBelgium’shistoryforFortisBank,resultinginadepotincreaseof€13billion.
ClientSatisfactionSurveyOverallrateofsatisfaction:2007:70.3%2006:67.6%
Theincreaseofover2%inthesatisfactionrateillustratesourclients’positivefeedbackonsystemreliabilityandtheSWIFTcom-municationinfrastructureinparticular.Clientscoresalsohighlightthestrengthsofourstaffandthesuccessfulmanagementofthedematerialisationproject.
Euroclear Belgium
The migration to electronic registration
is an important milestone in the moderni-
sation of Belgium’s securities market.
The excellent work conducted by
Euroclear Belgium and financial inter-
mediaries, together with dematerialisa-
tion monitoring tools such as Euroclear
Belgium’s Capitrack, significantly eased
the transition for UCB.
MichèledeCannartVP General SecretaryUCB SA
Keyfigures
Turnover
€510billion +58%
Holdings
€228billion -14%
Numberoftransactionsafternetting
2.8million +4%
A large increase in the value of transactions settled was the result of strong market activity.
euroclearIannual report 2007I47
ESES will provide the first ever consolidated settlement and custody solution covering three markets: Belgium, France and The Netherlands. It represents an important step towards the delivery of both NYSE Euronext’s Single Order Book and Euroclear’s Single Platform.
Euroclear France successfully migratedIn November 2007, Euroclear France became the first Euroclear group entity to launch ESES. The legacy settlement platform Relit+ was decommissioned at the same time and key components of the RGV settlement system were used as a basis for the ESES platform.
The ESES launch has enabled very high settlement efficiency rates of 99.61% (based on cash consideration) to be achieved on average since the launch. Clients of Euroclear France have also implemented some key changes and harmonised processes in the
areas of corporate actions, settlement and payments.
The project is a good example of what can be accomplished through close and fruitful collaboration with the market. In the same spirit, an ESES market discipline operational group, composed of clients and market stakeholders, has been set up to continue to monitor settlement performance.
The second phase of the ESES programme in February 2008 involved the connection of ESES to the TARGET2 euro payment system and to Gestion Globale des Garanties (3G), the new collateral management facility provided by the Banque de France.
Focus on migration of Euroclear Belgium and Euroclear NederlandThe migration of Euroclear Belgium and Euroclear Nederland, planned for Q4 2008, will impact all three Euronext-zone CSDs. Each CSD is focusing on this migration
with high levels of staff and operational readiness. The Belgian, Dutch and French Implementation Committees comprising market participants have helped to fine tune some aspects of ESES and guide the imple-mentation process, together with dedicated working groups.
Harmonised tariff During 2007, Euroclear published its tariff for harmonised CSD services on the ESES platform. The new harmonised tariffs will apply to clients of Euroclear Belgium, Euroclear France and Euroclear Nederland as of the migration of Euroclear Belgium and Euroclear Nederland to the ESES platform. Tariffs will be reduced by about 10% as of the launch of ESES.
Preparing for ESES
48I Delivery
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FullyautomatedfundsprocessingEuroclearFrancehasbecomethefirstCSDinEuropetoprovidefullSTPforfundsorderroutingandsettlementwiththelaunchofthesecondphaseofitsfundsserviceinApril2007.Theprocessisnowfullyautomated,fromtheplacingofordersthroughtosettlement.
Theserviceisprovingattractivetoclientsandbytheendof2007wewereprocess-ingover10,000instructionspermonth.Accountholdersrepresentingmorethan45%ofinvestmentfundorderflowsandcentralisingagentsaccountingforabout80%ofallorderflowsinFrancearenowconnectedtotheplatform.
TheservicewillbeexpandedtoBelgiumandTheNetherlandsonceESESislaunchedinthesecountries.
ReadyforMiFIDMiFID-relateddatacannowbeincludedinSBItransactionnoticessentbybrokerstointermediaries.TheSBIplatformisbeingfurtherdevelopedinQ12008,basedontherecommendationsofaspeciallycre-atedmarketworkinggroup,withaviewtoitbeingextendedasasolutionformultiplemarkets.
InlinewiththerequirementsofMiFID,EuroclearFranceisnowabletosettletrans-actionsfromalternativeCCPsortradingplatforms.
EnhancedcollateralmanagementTheavailablepoolofcollateralhasbeenextended,withadditionalforeigndebtsecu-ritiesbecomingeligibleforthecollateral
mechanism(Finnish,ItalianandSpanishcorporatedebt,aswellasGreekandPortuguesegovernmentdebt).WearealsoworkingonimprovedSTPforcross-borderlinkstoforeignCSDsforECB-eligibledebtcollateral.
WehavecollaboratedwithBanquedeFranceonits3Ginitiative,whichisintendedtocreateacentralisedpoolofcollateralfortreasuryoperationswiththecentralbank.
ClientSatisfactionSurveyOverallrateofsatisfaction:2007:78.93%2006:77.91%
Forthefourthyearinarow,thesurveyresultsshowedanoverallsatisfactionrateincrease,withgoodprogressmadeinmostareas.HighscoreswereobtainedforactionsrelatingtoESES,reflectingthecarefulhandlingofthemigrationandourongoingandopencommunicationwiththemarket.Thequalityoftheserviceprovidedhasalsobeenparticularlyrecognised.
Following three years of intensive work
and careful preparation by all parties,
Euroclear France smoothly implemented
the first phase of ESES. A major step
towards European consolidation has
been successfully achieved.
Jean-MarcEyssautierChief Executive OfficerCACEIS Bank
Euroclear France
Keyfigures
Turnover
€94.7trillion +12%
Holdings
€5.�trillion +6%
Numberoftransactionsafternetting
�2.�million -1%
A significant increase was recorded in the value of transactions settled.
euroclearIannual report 2007I49
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EnhancedassetservicingIn2007,EuroclearNederlandfurtherupgradedassetservicing.Inordertode-creasethenumberofmarketclaims,attherequestoftheDutchmarket,arecorddatewasintroducedfordistributionstobringTheNetherlandsintolinewithEuropeanharmonisationstandardsaheadofthelaunchofESES.EuroclearNederlandalsoimproveditsprocedures,acceleratingtheadmissionofsecuritiestoitsbook-entrydepositsystem.Inaddition,aFrenchwith-holdingtaxreclaimservicefornon-Dutchresidentshasbeenintroduced.
DematerialisationprogressTheprincipleofmandatorydematerialisa-tioninTheNetherlandswasapprovedbymajormarketstakeholders,includingEuroclearNederland,in2006.During2007,EuroclearNederlandhasactivelyparticipatedinadematerialisationworkinggroupwhichhasbeenhelpingtodraftabillundertheauspicesoftheDutchMinistryofFinance.Thedraftbillproposesatwo-yearmigrationphasetowardsfulldematerialisa-tionofphysicalsecuritieswiththeexceptionofglobalnotes.TheworkinggroupaimstosubmitthebilltotheDutchParliamentforfinalapprovalin2008.EuroclearNederlandisanticipatingareductioninthenumberofphysicalsecurities,whichhavealreadydecreasedby21%in2007.
SettlementsolutionfornewtradingplatformsAlternativetradingplatformsinvolvingmulti-CCPsenteredthefinancialmarketinTheNetherlandsinQ22007.EuroclearNederlandrespondedtotheirsettlementneedsbyofferingsettlementfortradesin
DutchequitiesstruckontheseplatformsandnettedthroughtheseCCPs.
NationalNumberingAgencyInQ12007,EuroclearNIECbeganoperatingasNationalNumberingAgencyforDutchsecurities,arolepreviouslyperformedbyEuronextAmsterdam.ThisbringstheDutchCSDinlinewithEuroclearFranceandEuroclearBank,whichalreadyactasnumberingagencies.
ClientSatisfactionSurveyOverallrateofsatisfaction:2007:69.4%2006:68.6%
Improvedscoreswerereceivedforclientserviceandservicedelivery,theresultofaclearlyarticulatedactionplanwhichtookintoconsiderationcommentsfromthepreviousclientsurvey.Communicationwiththemarketwasalsoratedhighly,withthecreationoftheESESImplementationCommitteeregardedasagoodinitiative.
We continually experience valuable
improvements in the level of support
provided by Euroclear Nederland.
We very much appreciate that they are
always willing to listen and consider
our suggestions concerning future
service enhancements.
HansvanderWaalHead of Securities OperationsABN AMRO Bank
Euroclear Nederland
Keyfigures
Turnover
€5.6trillion +60%
Holdings
€945billion -1%
Numberoftransactionsafternetting
4.6million +21%
Transaction volumes reached an all time high, reflecting strong market activity.
50I Delivery
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SignificantincreaseinvolumesAcombinationofmarketvolatilityandtheriseinalgorithmictradingresultedinunprecedentedvolumeincreasesatEuroclearUK&Irelandin2007,witha76%riseingrosstransactionscomparedto2006.Settlementprocessingfunctionedwellduringhigh-volumeperiods,andEuroclearUK&Irelandisimplementingaseriesofsystemupgradestoensurecapac-ityforfuturegrowthismaintained.
MajortariffreductionsforclientsEuroclearUK&Irelandpaid€11mil-lioninrebatestoclientsinearly2007,inproportiontotheiractivityduring2006.Furthertariffreductionsof€16.5millionin2008aredeliveringa50%reductioninclearing-relatedservicefeesanda10%reductioninsettlementfeesforbothretailandwholesaleclients.
SinglePlatformpreparationsSinceEuroclearUK&IrelandisnotpartoftheESESprogramme,thelaunchofSinglePlatformCustodywillbethefirstmigrationfortheUnitedKingdomandIreland.Preparationisnowwellunderway,withthesetupoftheSinglePlatformImplementationForuminOctober2007.TheForum,whichincludesarepresentativesetofclients,meetsregularlytoshareinfor-mationbetweenEuroclearanditsclientsinatimelyfashion.
ProvidingsolutionsforaconstantlyevolvingmarketplaceTheever-changingneedsoftheLondonmarketplacemeanthatEuroclearUK&Ireland,asaninfrastructureserviceprovider,mustshowgreatflexibilityin
respondingtothem,whileatthesametimeassessingprioritiesandmanagingacrowdedlaunchschedule.In2007,EuroclearUK&IrelandhasdeliveredenhancementstosupportFortisBankasaCCPandEurexClearingAGinitsforthcomingCCProle.ChangeshavealsobeenintroducedtoallowthedirectinputofDBVinstructionsandassociatedrepointerestpaymentstosup-portLCH.Clearnet’sRepoClearservice.
Inadditiontothehistoricalaccessprovid-edtotheLondonStockExchangeandLCH.ClearnetforLondonStockExchangetrades,sixotherinfrastructuresalreadyhaveaccesstoEuroclearUK&Ireland.Wearenowfollowinguponeightrequestsfromthreeparties,includingEuroCCPforTurquoisetrades.
TailoredtransactionreportingservicesforMiFIDInNovember2007,EuroclearUK&Irelandintroducedtransactionreport-ingservicescompliantwithMiFID.Thechangesallowclientstomeettheirrevisedtransactionreportingresponsibilitiesinaflexibleandcost-effectivemanner.
IntegrationunderlinedbychangeofnameCRESTCo’sreputationasastronglocalbrandmeantthatthecompanydidnotchangeitsnameimmediatelyafterthemergerwithEuroclearin2002.Followingmarketanalysisthatshowedsupportforachangeofname,theentitywasrenamedEuroclearUK&IrelandinJuly2007.
Euroclear UK & Ireland
We fully support the harmonisation
process and the Single Platform.
As an Irish market participant, we look
forward to seeing how the services of
Euroclear will evolve and the resulting
efficiencies.
EamonnDoyleChief Operations OfficerDavy
Keyfigures
The significant increase in volumes has been driven by strong activity in the UK and Irish markets.
Turnover
€176.5trillion +22%
Holdings
€�.5trillion -8%
Numberoftransactionsafternetting
75.0million +7%
Collateralprovisionoutstanding
€266.9billion +16%
euroclearIannual report 2007I51
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SignificantincreaseinvolumesIn2007,EMXCoensuredcontinuityandachievedsustained,substantialgrowthtostrengthenitspositionasthedefactosolutionforfundsmessaging.EMXCohasseenagrowthof97%infundflowsand44%inmessagesduring2007,meetingkeyperformancetargets.
ThegrowthwasduetoexistingparticipantsincreasingtheirusageoftheEMXMessageSysteminadditiontothelargenumberofnewjoiners–15providersand48interme-diaries.Thisresultedinayear-endtotalof208intermediariesand76providers.
ImplementingnewsystemsAnewsystemsarchitecturewasseamlesslyimplementedatthesametimeasachangeofhostproviderwhilemaintaining100%systemavailabilitythroughout2007.
EMXCo
ClientSatisfactionSurveyOverallrateofsatisfaction:2007:74.13%2006:72.88%
ImprovedscoreswereobtainedineachofthethreemainsectionsoftheEuroclearUK&Irelandquestionnaire–‘people’,‘clientservice’and‘coreservices’.TheactionsthathavebeentakentoimprovethestabilityofcoreservicesandtheopencommunicationthatfollowedtheSSElaunchhavebeenparticularlywelcomedbyclients.
CombiningfundorderroutingandsettlementintheUKFollowing Euroclear’s acquisition of EMXCo
in January 2007, EMXCo and Euroclear UK &
Ireland have been working to deliver a sub-
stantially more efficient combined solution
for UK funds. These efforts are supported by
a Funds Liaison Group, comprising senior
executives from across the fund industry,
which was created to provide a forum for
market consultation.
The first phase of the solution, which will
offer improved cash settlement, will be
launched in 2008. The second phase, a cash
and securities settlement solution, is planned
for 2009, and will enable funds to achieve a
level of settlement efficiency similar to other
instruments such as bonds and equities.
Without the EMX Message System we
would have found it difficult to grow
as quickly and as profitably as we have
done. The acquisition of EMXCo by
Euroclear is a very positive development
and we look forward to being able to
benefit from the efficiencies that settle-
ment will bring and reducing our costs
still further.
MarkLinksHead of OperationsIntegrated Financial Arrangements PLC (Transact)
Keyfigures
Routedmessages
19million +44%
52I
True responsibility is being there before you’re needed. Nobody understands the role Euroclear has to play better than we do. We not
only have a duty to our individual financial institutions, but to the system as
a whole. It is our responsibility to ensure continuity and sustainability in the
world’s markets at all times. But we believe our company can make a difference
as well as keep things the same. That’s why we’re also conscious of the respon-
sibility to our people, our environment and our society. Not because it’s fashion-
able. But it cements a stronger relationship with a wider world.
euroclearIannual report 2007I5�
True responsibility is being there when you’re neededWe truly understand the role we have to play. We not only have a duty to
individual clients, but to the financial system as a whole. It is our responsibility
to manage risk and ensure sustainability in the world’s markets at all times.
But we believe our company can make a difference in other ways too. That’s
why we’re also conscious of the responsibility to our people, our environment
and our society. Not because it’s fashionable. But because it cements a
stronger relationship with a wider world.
Responsibility
54I Responsibility
Serviceexcellence,ambitiousprogrammesandinnovativesolutionsallthriveonthequalityofthepeopleinvolved.Weareproudthatthefeedbackfromthe2007ClientSatisfactionSurveyparticularlyrecognisedthehighqualityofourstaff.Aboveall,Euroclearvaluesitspeopleandunderstandstheneedtomanageandinvestinitshumancapital.
Wearealeaderinourfieldandaimtocontinuemakingadifferencethroughourskills,know-howandcreativity.Toattainthisobjective,Euroclearalsowantstoberecognisedasanemployerofchoiceacrossthefinancialworld.
Weaimatcontinuouslyattractinganddevelopingthebrightesttalentinorder
tomeetand,wherepossible,exceedclientexpectations.Weofferourstaffcompetitivecompensation,astimulatingworkingenvi-ronment,self-developmentandlong-termcareeropportunities.
Ourresourcemanagementprogrammeisbasedonourcorporatevalues,withastrongemphasisonmanagingtalentandrecognisingachievement.
ManagingtalentEuroclearhasover3,600employees.Ourexplicitsearchfordiversityovertheyearshasmadeasignificantcontributiontoourcurrentstrength.Awideculturalmix,alargevarietyofskillsandawide-rangingexpertiseinourfieldarekeycontributingfactorstoacompetitiveadvantage,the
significanceofwhichwillonlyincreaseastheglobalisationofoursectorcontinues.
Thegroupholdsastrongbeliefinthecapabilitiesofitspeopleandaimstoofferaframeworkinwhichindividualsandteamscanmakethemostoftheirtalentsandam-bitions.Wehaveastronginternalmobilitypolicyofferingouremployeesexcellentopportunitiestodeveloptheircareerwithintheorganisation.Thankstothesuccessofthispolicy(18%ofourstaffmovedtoanewrolein2007,comparedwith16%in2006)andacontinuedincreaseininternationalmobility,thegroupgreatlybenefitsfromthemultipleandcross-marketexpertisegainedbyitsstaff.Furthermore,webalanceexpertisedevelopedin-housewithtalentrecruitedexternally.
Eurocleargrouppeopleprofile (as at December 2007)
Numberofemployees �,619
Europe �,551
- Belgium 2,632
- France 428
- The Netherlands 78
- United Kingdom 403
- Other European countries 10
Asia 52
Americas 16
Staffincreasein2007 �29
Genderbalance 51%male–49%female
Nationalitiesrepresented 74
Averageage �5
Averagelengthofservice 8years
People
euroclearIannual report 2007I55
Amidgrowingbusinessvolumesandacompetitiverecruitmentmarket,attractingnewstaffwasoneofourmainchallengesin2007,with780newrecruitsjoiningthegroup.Toachieveourfutureobjectives,wehavefurtherinvestedinrecruitmentandarestrengtheningEuroclearasarecognised‘recruitmentbrand’.
Weinvestsignificantlyinregulartrainingforbothnewrecruitsandexistingstaff.In2007,weinvestedanaverageof5.4daysontrainingperemployee,represent-ing3.4%ofthetotalsalaryexpenditure.Businessandpersonaldevelopmenttrain-ingisprovidedthroughoutanemployee’scareer.Particularattentionisalsobeingpaidtodevelopingpeoplemanagementskills.Thegroupconsiderstheseskillsasvitaltoitssuccess;goodpeoplemanage-mentbeingessentialtoemployeemotiva-tion.Peoplemanagementcourseshavebeenmademandatoryforeverynewpeoplemanager.Careerdevelopmentandsuc-cessionplanningareotherpointsoffocustoensurehighlevelsofmotivationandcontinuity.
Withinourlargestoperationsgroups,wehavealsolauncheda‘Lean’changemanage-mentprogrammethatfocusesasmuchonpeopledevelopmentaspects(suchasdailyperformancemanagement,skillbuilding,
mindsetandbehaviour)asonpureprocessimprovements.Thisholisticapproach,insteadoffocusingsolelyonshort-termoperationalenhancements,providesacon-tinuousimprovementenvironmentthatenableseveryindividual–whateverhisorherlevel–tocontributetomakingEuroclearabetterandstrongercompany.Euroclear’sLeanprogrammeempowersitsemployees,increasesjobsatisfactionandallowsachieve-mentstobeproperlyrecognised.
RecognisingachievementsIn2007,theEurocleargrouphascontinuedtomovetowardsanevenmoreperformance-drivenrewardandcompensationsystem.Wehaveadjustedourremunerationpolicytoensurethatcompensationpackagesareincreasinglyharmonisedthroughoutthegroupanddifferentiatedaccordingtoindividualperformance,subject,ofcourse,toappropriatelocalstandards.
ThetotalbonuspoolisdeterminedonayearlybasisbytheBoardofDirectors.Indoingso,theytakeintoaccounttheresultsoftheBalancedScorecard.Thisisagroup-widesetofperformanceindicatorscoveringimportantareassuchasclientsatisfaction,theprogressmadeindeliveringtheSinglePlatform,theoperationalandfinancialperformanceofthegroupandsomeHR-relatedmatters.
Wearealsotakingadditionalinitiativestorecogniseemployeeachievements.Forexample,inlinewithourgoalofprovid-ing‘bestofclass’servicequality,asystemofsmallawardshasbeenimplementedforindividualorteamperformancethatexcelsinclientfocus.
ClimatesurveyEachyear,Euroclearorganisesaclimatesurvey.In2007,atotalof66%ofstaffrespondedtotheclimatesurvey,comparedto69%in2006.Thissurveyallowsustomeasureemployees’emotionalandmoreobjectiveattachmenttoourcompany,whichareimportantmotivationalfactors.Thesurveyincludesquestionswhichgaugeemployees’levelsofsatisfaction,motivationandloyalty.Theresultsareusedtomeasureandcontinuouslyimprovetheoverallcorporateperformancethroughemployeeengagement.
Markedincreasesinappreciationwereseenforpeoplemanagement,reflectinggreatereffortsinthisdomainandtheavailabilityofcareeranddevelopmentopportunities.
Inaddition,employeesexpressedastrongwishtofurtherintegrateandcontributetoagroupwithanexcitingvisionandclearstrategies.
2005
2006
2007
Climatesurveyresult
67.1%
67.3%
68.7%
56I Responsibility
Itisessentialthatcompaniesareawareofthesocialandeconomicimpactoftheiroperations.
Wearealong-standingleaderinourindus-trythankstotheapplicationofprofessionalcompetenceandthefocusonlong-terminvestmentsandrelationships.Wealsoaimtoleadbyexampleinourcorporaterespon-sibilitystrategies,whicharedrivenbythesamevaluesofcompetenceandlong-termsustainability.
CorporateresponsibilityatEurocleartakesplaceontwomainlevels–inourwiderresponsibilityasakeyplayerinthefinancialmarket,andinhowwedealwithpeopleandtheworldaroundusonaday-to-daybasis.
Farfrombeingawasteofresources,webelievethatdemonstratingenvironmentalandsocialleadershipwillhelptobuildthetrustofthepublicandofemployees,andcanstrengthenacompany’sreputa-tionamongallitsstakeholders,includingitsclientsandshareholders.Itisourviewthatcompaniesthatrecognisethevalueofcorporateresponsibilityattractpeoplewhoarebothtechnicallyproficientandinclinedtothinklongterm.
DoingwhatisrightforthemarketEuroclearisauser-ownedanduser-governedorganisationwithadutytoensurethatwhatwedoisrightforthemarket.Wearealeaderinafieldthathasparticularsignificancefortheefficiencyandsafetyofthefinancialinfrastructure.Anumberoffeaturesthatareintegraltoasecureandefficientrunningofouroperationsarethereforeourcorecorporateresponsibility.Forexample,we
havedevelopedleadingresiliencestandardsthroughtheimplementationofstate-of-the-artbusinesscontinuityarrangements,whichshouldallowustosustainoperationsevenintheeventofaregionalscaledisaster.OurongoingworktointegratesystemsandharmonisemarketpracticeshelpstocreateamoreefficientEuropeanmarket.Thisinturncancontributetothecreationofwealthandwell-beinginEuropeandbeyond.
Companiescanalsohelpbyapplyingtheirskillstodevelopnewmarketswithenviron-mentalorethicalvalue.WiththelaunchofClimateSettle,EurocleariscontributingtothesuccessofcarbonemissionrightsissuedundertheKyotoProtocol.Thenewservicesettlestradesincarbonemissionrights(seepage36formoreinformation).WebelievesuchinnovationcanaddrealclientandbusinessvaluewhileatthesametimehelpingtodecreasetheadverseimpactofindustryandbusinessontheenvironmentviathemechanismsdefinedintheKyotoprotocol.
TakingcareofourpeopleandtheenvironmentEuroclearisalsoconvincedbythevalueofcorporateresponsibilityinitsmoreconven-tionalsense.Wehaverobustpoliciesandavarietyofinitiativesinplacetoprotectandofferopportunitiestopeople,bothwithinandoutsideofthecompany.
SomefactsstandoutwhenlookingatEuroclear’speopleasawhole:weareatrulymulti-culturalcompanywithcloseto75nationalitiesrepresentedamongour3,600staffandanalmostequalgenderbalance.
Thesefiguresaretheresultoflong-standingprinciplesonequality,non-discriminationandafirmbeliefthatanorganisationcanonlybeinternationallysuccessfulinthelongtermifitattractsandtrainstalentedpeoplefromdiverseculturesandbackgrounds.
Work-life balanceItisouraimthatemployeesacrossthegroupareliterally‘feelinggood’workingatEuroclear.RecognisingthatEuroclearisademandingandcompetitiveenvironment,weaimtoofferahealthywork-lifebalancetoourstaff.Euroclearhascreatedagroup-widefunctiondedicatedtowork-lifebalance,themainobjectivesofwhicharetoimprovewell-beingatworkandtoaddressthemaincausesofstressintheworkplace.
Weoffervariousflexibleworkarrangementswhicharewidelyappreciatedbyemploy-eesatdifferentpointsintheircareersandpersonallives.
Weorganisehealthylifestylecampaignsandsportandentertainmenteventsforstaffandtheirfamiliesacrossthegroup.In2007,amajor‘eatwell’campaignwasrolledout.Otherexamplesincludehealthymenuoptionsincompanyrestaurants,theweeklyprovisionoffruittostaff,andfinancialcon-tributiontosportsandfitnessactivities.
Equality and non-discriminationApolicyofnon-discriminationunderpinsouremploymentpolicyandwealsoprovideopportunitiesforpeoplewithdisabilitiesaccordingtotheircapabilities.Inaddition,weconsultregularlywithemployees,ortheirrepresentatives,incompliancewithnationalemploymentlaw,ensuringthecompany
Corporate responsibility
euroclearIannual report 2007I57
takestheirviewsintoaccountwhenmakingdecisionslikelytoaffectstaffinterests.
Code of ethicsEuroclearattachestheutmostimportancetoitsreputationforintegrity,honestyandfairnessinitsconducttowardsitsemploy-eesandcontractors.Ithasalsoestablishedclearstandardsofbehaviourexpectedfromallthoseassociatedwithitinreturn.Theseprinciplesaresetoutintheorganisation’sEthicalConduct,LegalandComplianceRiskpolicy.
Health and safety Eurocleariscommittedtohealthandsafetyandtheprotectionofpeople,propertyandtheenvironment.Wearecontinuouslyrefiningourpoliciesandproceduresinordertoprovideanevenmorerobusthealthandsafetymanagementsystem.Weaimtosetandmaintainhighstandards,ensuringthehealth,safetyandwelfareofouremployees,contractorsandvisitors.
Weunderstandtheimportanceofintegrat-inghealthandsafetyconsiderationsintoallaspectsofourbusinessandfullyrecognisetheadvantages.Wewilldrivecontinualimprovementofbothourhealthandsafetymanagementsystemandourperformance.Euroclearrecognisesthatthenegativeimpactofwork-relatedstressonpeople’shealthisamajorriskintheexecutionoftheirfunctions,andthereforeplacesapar-ticularfocusonwell-beinginitiatives.
Environmental responsibilityEuroclearaimstoimplementacomprehen-siveenvironmentalmanagementsystem,anddrivescontinualimprovementofthe
systemandourperformance.Forexample,wehavecreatedlocalenvironmentalteamstomonitorandmeasureenvironmentalperformanceongoalsandinitiatives.
Weareaimingtoreducetheamountofwastethatwesendtolandfillbyimplementingwasteminimisation,reuseandrecyclingini-tiatives,andtoreduceourcarbonfootprintthroughamoreefficientuseofelectricity.
Recentinitiativesinclude:• implementationofenvironmental
awarenessaspartoftheinductionfornewstarters;
• promotionofcarpooling;• useofbio-degradableandenvironmen-
tallyfriendlymaterialsinnewlyopenedbuildings;and
• wasterecycling.
SupportingthewidercommunityEuroclearhasalsodevelopedclearviewsandinitiativestoputintopracticethewaysitwishestosupportandcontributetothedevelopmentofthewidercommunity.
Charity and community involvementEuroclearsupportsandcontributestothedevelopmentofthecommunitybyprovid-ingfinancialassistancetonot-for-profitassociations.WeencourageandsupportcharitiesinthecountrieswhereEuroclearoperates,inparticularthoseinwhichourstaffortheirrelativesarepersonallyactive.EachcountryinwhichEuroclearoper-atesan(I)CSDnowhasaCommunityRelationsCommittee,towhichstaffareinvitedtosubmitprojectsassistinglocalcharitiesdeservingsupport.Thecommittee,composedofvoluntarystaffalsoactivein
charitiessupport,decidesonwhichchari-tiesreceivedonationsinlinewithasetofagreedcriteria.
Inaddition,thereisa‘matchinggift’programme,wherebythecompanymatchesindividualdonationsmadespontaneouslybystaff.Closeto€735,000wasgiventocharityin2007.
SponsorshipAspartofoursocialresponsibility,wecontributetosocioeconomicinitiativestakingplaceoutsideourmarketcontext,butexpressingourvaluesandconvictionsofdeliveringfundamentalandlastingimprove-ment.Asanexample,in2007Euroclearsupportedaconferenceonmicrofinance,gatheringmanyoftheexpertsfromacrosstheworldinthisfield.Wehavedonethiswithoutanyintentionofgainingbusiness,andchosethisareabecauseweareconvincedoftheworthofitsinnovativeprinciplesandthefundamentalimprovementitcanbring.
Euroclear is one of five industry leaders
with major operations centres in Belgium
that established TransConstellation and
the TransConstellation Academy in 2003.
TransConstellation is a not-for-profit organ-
isation aiming to promote Belgium as a
centre of excellence in financial transaction
processing. The TransConstellation Academy
is a shared training centre run in partnership
with the Solvay Business School. In addition
to broadening the horizons of their knowl-
edge, participants are given an excellent
opportunity to form lasting relationships
with professionals from other companies.
TransConstellation
58I Responsibility
Euroclearfulfilsacentralroleinfinancialmarketsandtheeffectivenessofitsactivitiesiscriticaltothestabilityofthefinancialsystemasawhole.Itsriskmanagementpracticesthereforehavetobeofanappro-priatelyhighstandard.Bystrivingforexcellenceinriskmanagement,Euroclearcanmeetmarketexpectationsandbeastabilisingfactorinturbulenttimes.
RigorousmarketpracticesandindustrystandardsToensurecompleteandconsistentmanagementoftherisksfacedbyeachofitsservices,Euroclearhasorganiseditsriskmanagementfunctionatgrouplevel.Workingwiththebusinessareas,theriskmanagementfunctionhasdevelopedacomprehensiveriskframeworkandpolicies.Thesearebasedonindustrystandards,suchasISO17799and27001forInformationSecurity,andtheAdvancedMeasurementApproach(AMA)forOperationalRisk,aswellasmoregenericbestpractices,includinganEnterpriseRiskManagement(ERM)frameworkandacentralisedPolicyControlOffice.SeveralEuroclearentitiesmakeauditedSAS70controlstatementstoinformclientsandotherstakeholdersabouttheircontrolenvironments.Inaddi-tion,eachofthegroupCSDsandEuroclearBankcompleteandpublishannuallyonwww.euroclear.comtheDisclosureFrameworkforSecuritiesSettlementSystems,whichisoneoftherequirementsforcompliancewiththeRecommendationsforSecuritiesSettlementSystems,pub-lishedbytheCommitteeonPaymentandSettlementSystems(CPSS)andtheInternationalOrganizationofSecuritiesCommissions(IOSCO).Theseframeworks
andpoliciesaresupportedbyagovernancestructurethatmakescleartheresponsibil-ityforcontrolmonitoring.Euroclearalsohasappropriatelyformalbutpragmaticprocessesandprocedures.Thesecoverbothday-to-dayoperationalprocessesandrisk/controlprocesses,whichincludetheidentification,monitoringandmitigationofrisksandincident-handlingprocesses.
In2007,Euroclearagainmademajorprogressinseveralareas.AfterhavingsubmitteditsapplicationtousetheAMAtocalculateregulatorycapitalrequirementsforoperationalriskinDecember2006,EuroclearhasusedtheAMAinparallelwiththeBasicIndicatorApproach(BIA)overthecourseof2007.Inaddition,inthesecondquarterof2008EuroclearwilldeliveritsfirstpublicdisclosureunderPillar3ofBaselII.
AnewdepartmentfocusingonStrategicandProgrammeRiskswassetupintheRiskManagementDivisioninordertomanagetherisksrelatedtothecompany’sstrategydefinitionandtheimplementationofrelatedlargestrategicprojects.
Euroclear’sriskmanagementpracticeshelptoprotectitfromthemarketturmoiltrig-geredduringthesummerof2007bythesubprimecrisis.Euroclear’smarketmodelhasplayedanimportantroleinensuringaconstantlevelofservicetoitsclients,allowingthemarkettomovesecuritiesandliquidityefficiently(seepage62).
EnterpriseRiskManagement:arisk-controlledenvironmentEuroclearusesanERMframeworktoensurethecoherenceofitsriskmanage-
mentfunction.Itconsistsofthreemaincomponents:• AllthemajorrisksfacedbyEuroclear
arelistedintheRiskRegister.Intotal,sevenriskcategorieshavebeenidenti-fied.ThreearisefromtheprovisionofEuroclear’sdailyservices(credit,liquid-ityandoperationalrisk).AnotherthreearerelatedtotheenvironmentinwhichEuroclearoperates(market,businessandstrategicrisk).Finally,onerisk(strategicprojectsrisk)isaddressedseparately,asitisparticularlyimportantfortheorganisation,andismanagedseparatelyfromday-to-dayservices.Thehigh-levelRiskRegisteriscomplementedbyamoredetaileddatabaseofrisks(includ-ingmitigatedandacceptedrisks).
• ERMprovidesaframeworktoallocaterolesandresponsibilitiesinthemanage-mentofrisks.ThekeyrisksdescribedintheRiskRegisterareownedbydivisionheads,whohavetheleadresponsibilityinmanagingtheserisks.Thisapproachenablestherisksrelatedtotheprovisionofourservicestobeidentifiedandthenmanagedoracceptedinaccordancewithourbusinessmodel.
• ThethirdcomponentofERMistheSystemofInternalControls.Euroclearhasamaturesystemofinternalcontrols,whichisdetailedonpages75-77.
OperationalriskEuroclearusesanOperationalRiskManagement(ORM)framework,whichformspartof,andisalignedwith,itsERMprogramme,mainlyusingthesameconcepts,toolsandsolutions.
Risk management
euroclearIannual report 2007I59
TheORMframeworkconsistsofseveninterconnectedpillars,whichareexplainedonpages75-77.
Together,theORMframeworkpillarsdetailhowoperationalrisksareidenti-fied,whoownsthem,andhowtheyaretobemitigated.TheORMframeworkalsodescribesallrelevantoperationalriskprocesses,theroleofpeoplewithinthem,andwhatinformationistobeprovidedtotakepropermanagementdecisions.Each
pillarhasbeenimplementedconsistentlyacrossthegroup.
SecurityandresilienceProtectingEuroclear’scriticalassetsandensuringahighlevelofresilience,inlinewithbusinessobjectives,istheprimefocusoftheSecurityandResilienceteam.
Information securityThecorporateobjectiveofthegroupsecu-rityteamistoensureanappropriatelevelof
protectionofEuroclear’sinformationandrelatedcriticalassets,inlinewiththeriskappetitedefinedbyseniormanagement.
Anindependentcomplianceauditwascon-ductedayearagousingISO17799:2005/27001:2006asareference.ThisallowedmanagementtomeasureprogressobjectivelywithregardstothematurityofEuroclear’sinformationsecuritycontrolenvironmentusingISOstandardsasareferencecontrolframework.Theauditconfirmedthatthe
60I Responsibility
group’sinformationsecuritymanagementsystemwaslargelyinplaceandisconsistentwiththeISOstandard.Italsoconcludedthat‘activitiestoimprovethestanceofinformationsecurityatEuroclearinthepastthreeyearshavebeenfruitful.’Afewpointsforimprovementwerenotedandarebeingimplementedfully.Inaddition,theinformationsecurityinternalcontrolsystemhasbeenincludedintheORMframework,allowingcompliancewiththerequirementsassociatedwithEuroclear’sadoptionoftheAMAunderBaselIIandfullalign-mentwithotherinternationallyrecognisedreferenceframeworkssuchasCobITandITIL.ContinuousmonitoringofemergingthreatsandevolvingrisksisalsoundertakenandallowsEurocleartoimprovethecontrolenvironmentcontinuously.
Business resilienceToensurecontinuousavailabilityofbusi-nesscriticalservices,theBusinessResilienceteam,withintheRiskManagementDivision,monitorstheimplementationoftechnicalandnon-technicalsolutions,en-compassingtechnology,buildingsandstaff.ThelastkeymilestonesintheresilienceandrecoverystrategyadoptedbytheBoardin2003wereachievedwhenathirddatacentrewaslaunchedin2007.Euroclearnowhasdatacentressufficientlydistancedfromeachothertosustainoperationsintheeventofaregional-scaledisaster.Theeffectivenessofdatacentresandrecoveryproceduresisassuredthroughthetransferofproductionactivitybetweensitesonamonthlybasis.
EuroclearBank,EuroclearFranceandEuroclearUK&Irelandareoperating
inadualofficestructure,guaranteeingtheavailabilityofcriticalexpertiseacrossseverallocations.Additionally,EuroclearBelgiumandEuroclearNederlandcanuseofficespaceinBrusselsasaremotebackup,shouldalocalisedeventdisruptaccesstotheirmainfacilities.
Allentitieshaveperformeddetailedbusinessimpactanalysestoidentifytheircriticalactivitiesandrecoverytimeobjec-tives.Businesscontinuityplanshavebeenharmonisedatcorporateanddepartmentallevelsthroughoutthegroup.Finally,eachelementofthestrategyisregularlymain-tainedandtested.Acomprehensivetrain-ingprogrammeisinplaceandcomplexityisprogressivelyintroducedinrehearsals,reflectingincreasedawarenessatorganisa-tionallevelandtheincreasedexperienceofthecrisismanagementteams.
Themainelementsofthebusinessresil-iencestrategyarereassessedeveryyearinresponsetoemergingorincreasingthreats.In2008,Euroclear’sbusinesscontinuityframeworkwillcontinuetodevelop,takingaccountofinternationalstandardsandbestpractice,includingtherecentlypublishedBritishStandard25999.
FinancialriskEuroclearmanagesitsfinancialrisksaccordingtostringentstandards.SuchrisksaremainlybornebytheICSD,EuroclearBank,initsroleassingle-purposesettle-mentbank.TheCSDsofthegrouphaveaverylowriskappetiteand,astheyofferonlysecuritiessettlementservicesincentralbankmoney,arelargelyinsulatedfromfinancialrisks.
Credit riskThespecificroleofEuroclearBankinfinancialmarketsoffersahighlevelofprotectionagainstcreditrisks.Asapuresettlementinstitution,itsmainexposuresareconcentratedwithinabusinessday.Suchashortdurationsignificantlylimitstheprobabilityofanunexpecteddefault,allthemoresoasEuroclearBank’scli-entbasemainlyconsistsofhighly-ratedbanks.Inaddition,EuroclearBankalmostexclusivelygrantscreditsecuredbyhighqualitycollateral,withabout99%ofitsclientcreditexposurebeingsecuredbycol-lateralpreferablyheldandpledgedwithintheParticipant’sEuroclearaccount.Othermeansofrecoursearealsopossibleinsomecircumstancessuchasstatutorylien,exter-nalcollateral,pledgedtimedeposits,reverserepos,lettersofcreditandguarantees.
Inaddition,EuroclearBankalsoincurstreasuryexposureresultingfromclients’end-of-daypositions.Suchpositionsareusuallyredepositedinthemarketwithhighqualitycounterparties.Wherepos-sible,reposareusedbutsomeexposureisunsecured.Therisksarelimitedbytheirshortduration(mainlyovernight),aswellaspolicycaps.Concentrationrisk,theriskthatEuroclearBankwouldbetoohighlyexposedtooneorafewcounterparties,isalsomonitoredandlimited.EuroclearBanktherebyalsocomplieswithBelgianbankingregulationsrelatingtolargeexposures.
Since1January2007,EuroclearBank,aswellasEuroclearSA/NVandEuroclearplc,hasappliedtheFoundationInternalRatingsBasedApproach(FIRBA)forcreditriskundertheBaselIIframework.The
euroclearIannual report 2007I61
ratingsofparticipantsandcounterpartiesresultingfromtheinternalratingmodel,whichhadtobeimplementedtocomplywiththeapproach’srequirements,areusedinthecalculationofregulatoryandeconomiccapital.TheyalsoofferEurocleartailor-madetoolstorefineitscreditriskmanagement.TheresultingregulatorycapitalforEuroclearBankatE115millionislessthanonetenthofthetotalavailablecapital,whichstandsatE1.47billion.
TheseconservativecreditpracticeshaveenabledEuroclearBanktoavoidanycreditlosstodate.
TheCSDsavoidprovidingcredittotheirparticipantsforsettlementpurposes.Theydonotengageinoperationswithcounter-parties,exceptfortheinvestmentoftheirownfunds.
Liquidity riskEuroclearhasastrongliquidityriskman-agementframeworkinplace,inlinewithinternationalstandards,wherebynetfund-ingrequirementsareadequatelymeasuredandmonitored.Theframeworkalsoallowsforahighlevelofpreparednesstocopewithunexpectedliquidityshocks.
LiquidityisnecessarytoallowEuroclearBanktoperformitssettlementoperationsefficiently.Duringtheday,EuroclearBankisanetliquidityprovidertothemarket,asitprocessespaymentsandsecuritiessettle-mentsbasedonclient’savailablefundsandcollateral.Tocopewithitsdailyliquidityneeds,EuroclearBankcanrelyuponawiderangeofliquiditysourcesinallitseligiblecurrencies,includingalargenetworkofcash
correspondentsandsettlementbanksanddirectaccesstoTARGET2.Furthermore,EuroclearBankhasanexcellentnameintheinter-bankmarketandhasaccesstoabroadrangeofestablishedcounterparties.Ithasfirst-andsecond-levelcontingencyliquiditysourcesinplaceforthemajorcurrencies.
End-of-dayclientbalancescanberedepositedintheinter-bankmarketforwhichtermlimitsaresetinordertomaintainliquidityavailability.
AsthecashlegoftheCSDs’securitiessettlementtakesplaceexclusivelyintheaccountsofacentralbank,theCSDsdonotincurliquidityriskoriginatingfromclientcashdeposits.Surpluscashinvest-mentsoftheCSDsarealwaysassessedagainstexpectedfuturecashflowsandcanbeinvestedonlyintermdeposits.
Market riskEuroclearBankdoesnotseekmarketrisk,butsomeriskarisesasaby-productoftheinvestmentofitscapital,businessearningsandhedgingstrategy.EuroclearBank’sinvestmentbookaimsatcapitalpreserva-tionand,assuch,isveryconservativelymanaged.Theapproachtothetreasurybookissimilarlyconservative.Tradesresultfromend-of-dayclientpositionsthatareredepositedinthemarket,mostlyonanovernightbasis.Thehedgingbookcompris-esmarketderivativestransactions,whicharedesignedtoinsulatefuturefinancialresultsfromadversemarketdevelopments.AsEuroclearBankdoesnothaveatradingbook,itisexemptedfromtherelevantcapitalprovisionsrequiredundertheBaselIICapitalAccord.
TheinterestrateandforeignexchangerisksincurredintheseactivitiesarelimitedbytheriskappetitesetbyEuroclearBank’sBoardofDirectors.Thisisdeterminedbythecapitalallocatedannuallyforsuchrisks(the‘uppertolerancelevel’).Thisisreinforcedbyinternalmarketlimits,suchasValueatRisk(VaR)andEarningsatRisk(EaR),andlegalorregulatorylimits.
TheCSDsareexposedtoaverylowlevelofinterestraterisk,resultingfromthein-vestmentsofproprietaryfunds(i.e.regula-toryandworkingcapital,surpluscash).Thedurationoftheseinvestmentsislimitedtoamaximumtermofsixmonths.Finally,EuroclearBelgium,EuroclearFranceandEuroclearNederlandfacelimitedrisksrelatedtodownwardmovementsinequityprices,whichmightaffecttheirexpectedfeeearningsonsecuritiesincustody.
62I
ParticipantswereabletocontinuetorelyonEuroclear’sservicesduringthesubprimelendingcrisis.Euroclearwasnotaffectedandcouldtherebyplayastabilisingrolebycontinuingtoofferuninterruptedcreditandliquiditytothemarkettoenablesecuritiestradestobesettledefficiently.ThreecomponentsofEuroclear’sbusinessmodelshieldedthecompanyandthemarketveryeffectivelyfromtherepercus-sionsofthecrisis:
• Thesecuritiessettlementinfrastructureishighlyresilient,andtheDVPmodelthatitoffersensuresthatitcontainsthesystemicrisksthatcouldresultfrompotentialsettlementfailures.Duringthesummer,Euroclearsafelysettledarecordnumberoftransactions,ofwhichthestrongestincreaseswereinEuroclearUK&Ireland.
• EuroclearBankisasinglepurposebankandthemarketisconfidentthatitwill
continuetosettlereliably.EuroclearBankdoesnotlendlongtermandholdsonlyhigh-qualityassets.Itselectsitsparticipantsandcounterpartiescarefully.
• EuroclearBankgrantsintra-daycredittoitsparticipantsagainstcollateral.Itthereforeholdsaverylargecollateralpool.Inaddition,itofferstripartycol-lateralmanagementservicestohelpmarketplayersoptimisetheuseoftheircollateralandtheiravailableliquidity.
Euroclear:astabilisingfactorduringthecreditcrisis
euroclearIannual report 2007I6�
BaselII
Euroclear started to adopt the Belgian regulatory
requirements derived from the Basel II Accord in
January 2007. Since then, it has been using the
FIRBA for credit risk measurement under Pillar 1.
It intends to adopt the AMA for operational risk
measurement under Pillar 1 and to finalise the
implementation of Pillars 2 (supervisory review)
and 3 (market discipline) in 2008.
Pillar1:Operationalrisk:Advanced
MeasurementApproach
Euroclear Bank, Euroclear SA/NV and Euroclear
plc submitted their application to use the AMA
to calculate regulatory capital requirements for
operational risk in December 2006. Euroclear has
used the AMA in parallel with the BIA over the
course of 2007 and, conditional upon supervisory
approval, plans to adopt a hybrid approach at
all consolidated levels above Euroclear Bank, by
combining the AMA for Euroclear Bank with a
Standardised or Basic Indicator Approach for the
group’s other entities.
The AMA model was developed to be used both
for the determination of minimum operational risk
regulatory capital under Pillar 1 of Basel II, and for
the calculation of economic capital. For the regu-
latory capital, a confidence level of 99.9% is used,
while for the economic capital, a confidence level
of 99.98% is now used, consistent with Euroclear
Bank’s AA+ rating.
The building blocks of the model are frequency
and severity distributions, the parameters of
which are estimated or calculated using data
inputs that are compliant with the Basel II sound-
ness standards. They include the four required
elements: internal losses, relevant external losses,
scenarios, and business environment and internal
control factors.
Pillar2:Supervisoryreview
The Supervisory Review Process aims at ensuring
that institutions adequately understand and
manage their risks, including by way of capital
assessment and planning, in a continuous
dialogue with their supervisors. Under the Internal
Capital Adequacy Assessment Process (ICAAP),
institutions are expected to identify and quantify
the risks that they face and to relate this to the
level of capital needed to fulfil their plans. In
contrast, under the Supervisory Review Evaluation
Process, the evaluation of risks is carried out by
the institutions’ supervisors. Supervisors also
assess the adequacy of the ICAAP. If the ICAAP
is deemed unsatisfactory, supervisors might
request an addition to Pillar 1 regulatory capital
requirements.
Euroclear has progressed well in implementing
the organisational and methodological changes
necessary to formalise the ICAAP, with the use of
economic capital models and the formalisation of
capital planning and strategic risk management.
In addition, Euroclear will deliver its first stand-
ardised report of risks not covered under Pillar 1
(interest rate risk in the banking book, liquidity
risk, and concentration risk on specific sectors or
geographic areas) to the regulators in the first
half of 2008.
Pillar�:Marketdiscipline
Pillar 3 relates to the disclosure of information
by supervised institutions (at the highest consoli-
dated level), with a view to encourage better risk
management through the market discipline of
this transparency. Information will be disclosed
about the structure of the institutions’ capital, as
well as the capital requirements associated with
the different exposures incurred. Alongside such
quantitative information, institutions will describe
their various risk management processes and the
methodologies applied.
The first disclosure under Pillar 3 for Euroclear plc
will be published in Q2 2008 on www.euroclear.com.
64I Responsibility
1 Arm’s length definition according to the OECD guidelines
Inter-company Transaction Policy audit
TheEurocleargrouphascommitteditselftothepolicyofnocross-subsidybetweenthegroupICSDandCSDs.
Everyyear,werequestanindependentaudi-tor,PricewaterhouseCoopers,toconductanauditandprovideanattestationtotheEuroclearBoard.TheconclusionsofthisreportarepublishedintheEuroclearannualreport.TheaudittakestheformofayearlyconfirmationthattheEuroclearInter-com-panyTransactionPolicycomplieswiththeOECDTransferPricingGuidelinesandthattheseguidelinesareappliedbytheEurocleargroup.Suchanattestationhasbeeninclud-edintheannualreportsince2003.
Acopyoftheindependentauditor’sattesta-tionfor2007isincludedontheoppositepage.TherelatedEuroclearmanagementassertionstatementregardingInter-com-panyTransactionPolicyprovidedtotheindependentauditorwithrespectto2007canbefoundbelow.
Euroclearremainstheonlysettlementserviceproviderfurnishingthistypeofindependentthird-partyverification.
Management’sassertionstatementEuroclearSA/NVanditssubsidiariesmain-taineffectivecontrolstocomplywiththeEuroclearInter-companyTransactionPolicy(the‘Policy’).Thecontrolsincludethoseprocessesandproceduresthat(i)pertaintothemaintenanceofrecordsthat,inreason-abledetail,accuratelyandfairlyreflecttheinter-companytransactionsandarrange-ments(ii)providereasonableassurancethattransactionsarerecordedasnecessarytocomplywiththePolicy,andthosetransac-tionsandarrangementsarebeingmadeonlyinaccordancewithauthorisationsofmanagementanddirectorsofEuroclearSA/NVanditssubsidiaries.Oursystemcontainsself-monitoringmechanisms,andactionsaretakentocorrectdeficienciesastheyareidentified.
ThePolicy,whichhasbeenestablishedbyManagementandapprovedbytheBoardsofDirectorsofeachoftheEuroclearenti-ties,complieswiththeOECDTransferPricingGuidelinesofJuly1995,includingsubsequentamendments.
ThePolicyisdesignedtoensurethatforanygoodsorserviceswhichareprovidedbetweenentities,agreementsareinplacefor‘atarm’slength’1remunerationbetweenthoseentities.
ManagementisresponsibleforestablishingandmaintainingprocessesandprocedurestoensurecompliancewiththePolicy.
ManagementhasassessedtheapplicationoftheInter-companyTransactionPolicyfortheperiod1January2007throughto31December2007.
Basedonourassessment,andtakingintoaccounttheaboveassertions,EuroclearSA/NVbelievesthat,fortheperiod1January2007through31December2007,theInter-companyTransactionPolicyhasbeeninaccordancewiththeOECDGuidelinesandwasappliedeffectivelyamongstEuroclearSA/NVanditssubsidiaries.
26March2008
Pierre FrancotteCEO of Euroclear SA/NV
euroclearIannual report 2007I65
ReportoftheindependentauditorregardingtheInter-companyTransactionPolicyofEuroclearSA/NVfortheyearended�1December2007
UponrequestfromEuroclearSA/NV’sBoard,inlightoftheirstatedobjectivetoavoidcross-subsidybetweentheICSDandtheCSDsofthegroup,wehaveexaminedEuroclearSA/NV’sManagementCommittee’sassertionsontheinter-companytransactions,statingthat:
• theEuroclearInter-companyTransactionPolicy(‘Policy’)complieswiththeOECDTransferPricingGuidelinesofJuly1995,includingsubsequentamendments;and
• effectiveinternalcontrolovercompliancewiththePolicyhasbeenmaintainedduringtheyearending31December2007.
EuroclearSA/NV’sManagementCommitteeisresponsiblefortheassertions.Ourresponsibilityistoexpressanopinionontheassertionsbasedonourexamination.
OurexaminationwasconductedinaccordancewithattestationstandardsestablishedbytheAmericanInstituteofCertifiedPublicAccountants(SSAENo.10)and,accordingly,includedexamining,onatestbasis,evidencesupportingmanagement’sassertionsandperformingsuchotherproceduresasweconsiderednecessaryinthecircumstances.Webelievethatourexaminationprovidesareasonablebasisforouropinion.
Inouropinion,basedontheOECDTransferPricingGuidelines,themanagement’sassertionsasreferredtoabovearefairlystatedinallmaterialrespects.
26 March 2008PricewaterhouseCoopers Reviseurs d’Entreprises sccrlRepresented by
R. PeircePartner
66I Responsibility
Corporate governance
What does corporate governance mean to Euroclear?Euroclearbelievesthatsoundcorporategovernanceenhancesthegroup’sabilitytopromotethesuccessofthecompanyforthebenefitofitsshareholders.TheBoardofEuroclearplchasendorsedusergovern-anceasasolidandefficientgovernanceframework,whichensuresthattheBoardandmanagementoperatewithintheirrolesandresponsibilitiesdeliveringstrongleadershipinpursuitofthegroup’spurpose.TheBoardofEuroclearplcbelievesthattheenhancementofthegroup’sfranchisethroughefficientandcompetitiveproductandservicedeliverytoclients,togetherwiththecontinuedincreaseinthelevelofdividendspaidtoshareholders,reflectsthevalueofusergovernancewithinEuroclear.
EuroclearplcandEuroclearSA/NVcontinuetheirvoluntaryapplicationoftheUKCombinedCodeonCorporateGovernance(the‘Code’).Thispartoftheannualreportdemonstrateshow,during2007,EuroclearhasappliedtheprinciplessetoutinSection1oftheCodesoastodeliversound,strategicleadershipandcontrol.Infurtheranceofitscommitmenttosoundgovernance,EuroclearSA/NVseekstocomply,inadditiontotheCode,withtheprinciplesofgoodcorporategovernancedefinedbytheBelgianBanking,FinanceandInsuranceCommission(CBFA).Theseprinciplesreflectapplicableregula-tions,recommendationsandbestpracticeoncorporategovernanceandarefullyinlinewiththephilosophyoftheCode.
Exceptwherementionedbelow,EuroclearplcandEuroclearSA/NVcomplied
throughout2007withtheprovisionsoftheCode.
Boardofdirectors
Who is on our Boards?ThedirectionoftheEurocleargroupisdividedbetweentheBoardsofEuroclearplcandEuroclearSA/NV(the‘Boards’).ThedivisionofresponsibilitiesbetweenthetwoBoardsissetoutbelow.BothBoardshavethesamemembership,consistingof22non-executivedirectors,theChairman,SirNigelWicksandtheDeputyChairman,Mr.Jean-JacquesVerdickt.Allbutthreeofthe24directorsareseniorexecutivesfromfirmswhichareacross-sectionofusersofEuroclearservicesandshareholdersofthecompany.TheirknowledgeandexperienceismostvaluableforthedevelopmentoftheEuroclearstrategyandthemonitor-ingofitsimplementation.MembersoftheManagementCommitteeofEuroclearSA/NVarenotBoarddirectors.However,theyparticipateinallBoardmeetingsandhavefrequentcontactwithBoardmem-bersin-betweenmeetings.TheroleoftheManagementCommitteeisdescribedbelow.
TheBoardsconsiderallthedirectorstobeindependentincharacterandjudgementwithinthemeaningsetoutintheCode,havingexaminedeachdirectoragainsttheindependencecriteriadescribedintheCode.Inaddition,giventhatmostofthedirectorsaredrawnfromusersofthegroup’sservices,theBoardshaveagreedandappliedobjectiveguidelinestoevaluatewhetherthebusinessrelationshipbetweenEuroclearandtherelevantusercompa-niescouldinfluenceadirectorincarrying
outtheirduties,tothedetrimentofthecompany.Mr.FrankJ.DeCongelioisconsideredbytheBoardstobeindepend-entnotwithstandinghistenureofmorethannineyearsonaEuroclearBoard,duetothefactthatduringthefirstfiveyearsofhistenurethecompanydidnotoperatetheEuroclearSystem,andasaresulttheBoardhadsubstantiallydifferentresponsibilitiesandalimitedrelationshipwithmanagement.
SinceAugust2006,SirNigelWickshasbeenChairmanoftheBoards.InJuly2007,SirNigelwasappointedasamemberoftheJerseyFinancialServicesCommission,astatutorybodycorporatewhichisrespon-siblefortheregulationandsupervisionofthefinancialservicesindustryontheislandofJersey.ThisnominationwasapprovedinadvancebytheBoards,havingassessedtheimpactofsuchamembershipagainsttheresponsibilitiesandavailabilityofSirNigelWicksinEuroclear.SirNigelmeetstheindependencecriteriasetoutintheCode.
Mr.Jean-JacquesVerdicktwasappointedDeputyChairmanoftheBoardson29October2007uponarecommendationoftheNominationsandRemunerationCommittee.Thisfollowedareviewofsev-eralpossiblecandidatesandanassessmentoftheirknowledgeofEuroclear’sbusinessandthemarketinwhichitoperates,back-ground,seniorityandpreviousexperience,andoverallreadinesstofulfilthefunction.Asindependentnon-executivedirectorofEuroclearBankSA/NV,aBelgiansubsidiaryofEuroclearSA/NV,sinceJanuary2005,Mr.Jean-JacquesVerdicktalreadyhasanin-depthknowledgeofthebusinessactivitiesandthegovernanceofEuroclear.Mr.Jean-
euroclearIannual report 2007I67
JacquesVerdicktmeetstheindependencecriteriasetoutintheCode.TheprimaryroleofMr.Jean-JacquesVerdickt,asDeputyChairman,istoactintheplaceoftheChairman,shouldtheChairmanbecomeincapacitatedorotherwisenolongerabletocarryouthisBoardresponsibilities,andtoassisttheChairmaninperforminghisrole,particularlywithregardtogovernanceissues.Mr.Jean-JacquesVerdicktexercisesothernon-executivedirectorshipmandatesoutsidetheEurocleargroup,thelistofwhichisavailableonwww.euroclear.com.
TheBoardhasdesignatedthechairmanoftheNominationsandRemunerationCommitteeastheSeniorIndependentDirector,exofficio.ThepositioniscurrentlyheldbyMr.MarkS.Garvin.GiventhechannelsofcommunicationbetweenEuroclearanditsshareholders(asdescribedonpage74),theroleoftheSeniorIndependentDirectorinEuroclearisprincipallytobeavailabletofellownon-executivedirectors,eitherindividually
orcollectively,shouldtheywishtodiscussmattersofconcerninaforumthatdoesnotincludethemanagementofthegrouportheChairman,andtoleadtheBoardintheassessmentoftheChairman.
MembersoftheBoardsareappointedbytheGeneralMeetingofShareholdersofeachcompanyforaninitialtermofnomorethantwoyears.HalfoftheBoardsstandforre-electioneachyearandnewdirectorsaresubjecttoelectionatthefirstopportunityfollowingappointment.TheNominationsandRemunerationCommitteemakesrecommendationstoeachBoardfortheappointmentandrenewalornon-renewalofBoardmembers.TheBoardsthensubmittheCommittee’sproposalstotheshareholders.Thisproce-duredoesnotapplytodirectorsnominatedbythe‘S’shareholders,who,inaccordancewiththerightssetoutintheArticlesofAssociationofEuroclearplc,currentlyhavetherighttonominatethreedirectorsforappointmenttothatBoard.Uponappoint-
ment,Boardmembersreceivealetterofappointmentwhichoutlinestheirresponsi-bilitiesandthetermsuponwhichtheyareappointedtotheBoard,includingthetimetheyarerequiredtoallocatetofulfiltheirroleinEuroclearplcandEuroclearSA/NV.
AllrecommendationsoftheNominationsandRemunerationCommitteetotheBoardsaremadeonthebasisofadirector’spotentialcontributionintermsofknowl-edge,experienceandskill,andinaccord-ancewiththeneedsoftheBoardatthetimeofthenomination.Inaddition,theNominationsandRemunerationCommitteeverifiesthateachBoardasawholepossessesthenecessarybalanceofskillsandexperi-encetosetthegeneralpolicyandstrategyofEuroclearplcandEuroclearSA/NVandthegroupgenerally,andtoproperlysupervisemanagementintheimplementationofsuchpolicyandstrategy.
In2007,theBoardhasendorsedapolicysettingoutselectioncriteriaforBoard
68I Responsibility
memberscoveringtheintegrity,availability,experienceandseniorityofdirectorsaswellastheirknowledgeofthemarketsandofthegroup’scorebusinesslines.Alsotakenintoconsiderationiswhetherthecandidateisdrawnfromtheshareholdersand/orsignifi-cantusersinEuroclear.TheNominationsandRemunerationCommitteeassessesthedirectorcandidateagainsttheselectioncrite-riasetoutinthispolicy.AsthedirectorsaredrawnfromusersofEuroclearservices,whoaregenerallywellknownintheindustry,theBoarddoesnotrelyonanexternalsearchagencyoropenadvertisingintheappoint-mentofdirectors.
TheNominationsandRemunerationCommitteereportstotheBoardonthecom-positionoftheBoardsandtheircommitteesonanannualbasistoensurethattheyremainappropriatetopromotetheeffectiveleader-shipofeachcompanyandtheEurocleargroup,inaccordancewiththispolicy.
In2007,theNominationsandRemunera-tionCommitteeundertookareviewoftheappropriatenessofthecurrentcommittees’structure,roleandcompositiontakingintoaccountthecurrentbusinessneedsofthegroupandtherolefulfilledbyeachoftheexistingcommittees.Followingthatreview,theBoardapprovednewappointmentstocommitteesoftheBoards,disbandedtheEx-ecutiveCommitteeofEuroclearplcandap-provedthattheDeputyChairmanbecomesanexofficiomemberofallcommitteesexcepttheJointAuditCommittee,which,he,liketheChairman,attendsoninvitation.
Boardcompositionandbalance,anddirectorperformance,wereanalysedbythe
NominationsandRemunerationCommitteeatitsmeetingwherethelistofcandidatesproposedforre-electionattheAnnualGen-eralmeetingwasconsidered.
Uponappointment,eachdirectorisofferedaninductionintoEurocleardesignedtodevelophis/herknowledgeandunderstand-ingofallimportantelementsofthegroup’sbusinessandtheresponsibilitiesoftheroleasaBoarddirector.Duringtheirmandate,directorsattendongoingtrainingsonmat-tersrelevantandmaterialtotheirdirector-shipsandcommitteemandates,asnecessaryorrequestedfromtimetotime.Inaddition,workshopsarearrangedfortheBoardsontopicsofparticularrelevanceorimportance.In2007,theBoardsdecidedtodeviseatrainingplaneachyearonthebasisoftheresultsofsuchBoardselfassessmentandtheadviceoftheChairman,CompanySecretaryandGeneralCounselongeneraltrainingneeds.
What are the Boards’ responsibilities and how do they meet them?TheBoardshaveseparateanddistinctresponsibilitiesasdescribedindetailbelow.BothBoardsareassistedbytheircommitteesinfulfillingtheirdutiesandresponsibilities.Theworkingsofthecommitteesaresetoutbelowonpage70.
TheBoardofEuroclearplcisresponsibleforallshareholdermatters,settingvaluesandstandardsingovernancemattersandensuringthatnecessaryfinancialresourcesareinplacetomeetstrategicaims.ThisBoardmetseventimesduring2007.AtfourofthesemeetingsitreceivedanupdatefromthegroupCEOonallmaterialmattersaffectingthegroup
anditsperformanceaswellasareviewofthegroup’sfinancialperformancetodate.TheBoardmeetingsalsocoveredvariousshare-holdermatters,includingthereviewandapprovaloftheannualreportandaccountsandconsiderationofthelevelofdividends.
Inadditiontothosefourmeetings,theEuroclearplcBoardmetthreetimesjointlywiththeEuroclearSA/NVBoardduring2007:onceinordertodedicateafulldaytoEuroclearstrategyinidentifyingpoten-tialstrategicopportunitiesandthreatsforEurocleararisingoutofmarkettrendsanddevelopments,oncetofollowuponthediscussionsheldduringthestrategymeetingandoncetoapprovetheappointmentoftheDeputyChairman.
In2008,theBoardofEuroclearplcwillconsiderandexpectstoproposeamend-mentstoitsArticlesofAssociationtokeepitcurrentwiththenewUKCompaniesAct2006.
TheprincipalresponsibilitiesoftheBoardofEuroclearSA/NVaresettinggroupstrategyandoverseeingitsimplementation,ensuringeffectivecontrolsareinplacethatenablesrisktobemanaged,andsettingtheframe-workforgrouppolicies.
In2007,theBoardofEuroclearSA/NVhadsixordinarymeetingsandtwoextraordinarymeetings.ThreeofthosemeetingswerejointlyheldwiththeEuroclearplcBoard(asmentionedabove).Ateachoftheothermeetings,theBoardhadin-depthdiscus-sionsonstrategicdevelopmentswithinthegroup,andexternaldevelopmentswithanimpactonEuroclear.
euroclearIannual report 2007I69
TheexerciseoftheEuroclearSA/NVBoard’soversightandcontrolfunctionwasalsoevidentthroughouttheBoardmeetingsin2007.Inadditiontotheupdateonfinancialresultsreceivedateachmeeting,theBoardreviewedandapprovedthebudgetpresentedbyManagement.
TheBoardofEuroclearSA/NVhasseveraltoolstoensurerisksareproperlyman-agedandassessed.ItisassistedbytheRiskPolicyCommittee,whichreviewsgroupriskpoliciesthoroughly,andbytheAuditCommittee,whichcloselymonitorsthegroup’sinternalfinancialcontrolsandtheinternalcontrolandriskmanagementprocessesaswellasitscompliancefunc-tion.TheBoarditselfundertakesanannualreviewofthesystemofinternalcontrolsasreportedonpage75.
InadditiontotheinformationreceivedaspartoftheBoardmeetingprocess,ManagementpreparesquarterlyreportstotheBoardsprovidingupdatesonfinancialandoperationalperformanceofeachofthe(I)CSDsandtheworkingsoftheMarketAdvisoryCommittees.ThosequarterlyreportsaresenttoallBoardmembersatthebeginningofeachquarter,whereupontheBoardisgiventheopportunitytoraiseques-tionsatthenextfollowingBoardmeeting.
TheChairmanisinregularcontactwiththemembersofBoardsandmeetseachdirectorindividuallyoutsideofboardmeetingstodiscussEuroclearmatters.
During2007,theBoardscontinuedtheirongoingevaluationprocesstoassessperformanceandidentifyareasinwhich
itspolicies,processesandeffectivenessshouldbeenhanced.TheChairman,theManagementCommitteeandtheCEOwereeachassessedbytheBoard.ThisannualreviewwasbasedonadetailedquestionnairecompletedbyeachmemberoftheBoards.Ananalysisoftheresponsestothequestion-nairewasreviewedbytheNominationsandRemunerationCommittee,theresultsofwhichwerereportedtotheBoards.Furthertotheserecommendations,theBoardsagreedonstepstofurtherimproveitseffec-tivenesswhereappropriateaswellasaplanongeneraltrainingneeds.
Management
How does management support the workings of the Board?TheBoardofEuroclearSA/NVhasestablishedaManagementCommitteeanddelegatedtoitresponsibilityformanagingthebusinessofEuroclearwithinthestrategyandgeneralpolicydecidedbytheBoardandtoimplementsuchstrategyandgeneralpolicy.Itiscomprisedofsevenmembersincludingitschairman,Mr.PierreFrancottewhoistheCEOofthecompany.
TheManagementCommitteereportsregularlytotheBoardondecisionstakenpursuanttoitsdelegatedpowers.UnderthedirectionoftheChairman,theCommitteeensuresrelevantitemsarepresentedtotheBoardinafullandthoroughfashion,takingresponsibilityforthepreparationoftheinformationreceivedbytheBoard.TheChairmanoftheBoardseekstopromoteef-fectiveandopencommunicationbothinsideandoutsidetheboardroombetweenthemembersoftheBoardandtheManagement
Committee.HeprovidessupportandadvicetotheManagementCommittee,whilerespectingitsexecutiveresponsibility,andrepresentstheinterestsoftheBoardbetweenBoardmeetingsasacomplementtomanagement’srelationshipwithothernon-executivedirectors.TheCEOactsasliaisonbetweenseniormanagersandtheChairmanandotherBoardmembersandcoordinatesinteractionbetweenthem.
ToaidtheBoardinsettingappropriatestrategicobjectives,theManagementCommitteemonitorstheexternalenviron-ment(includingthecompetitiveclimate,economicandindustrytrends)andmakesrecommendationstotheBoardinordertoidentifycurrentandemergingissuesthatmayaffectthegroupaswellasfuturegrowthopportunities.TheCEOworkstogetherwiththeChairmantoformulatestrategicproposalsforconsiderationbytheBoard.Inthiscontext,theManagementCommitteerecommendstotheBoardanannualplanandbudgetaddressinghowtoimplementcorporatestrategyandlong-termgoals,andpoliciesdesignedtoestablishclearriskmanagementobjectivesforthecompany.OncetheannualplanhasbeenapprovedbytheBoard,theManagementCommitteemanagestheday-to-dayoperationsbydecid-ingonorguidingkeycoursesofactioninoperationsbystaffandensuringtheefficientmanagementofhuman,financialandphysi-calresources.
In2007,theManagementCommitteeper-formedanannualselfassessmentwithaviewtoidentifyingwaystodevelopitseffective-nessandagreedonactionpointsarisingoutoftheresultsofthisassessment.
70I Responsibility
BoardCommittees
What is the composition and role of the Board Committees?InorderfortheBoardsofEuroclearplcandEuroclearSA/NVtofulfiltheirresponsibili-tiesefficiently,committeeswithdifferentexpertiseandpowershavebeenputinplace.Theirtermsofreference,whichincludedetailsoftheroleandresponsibilitiesofeachofthesecommittees,canbefoundonwww.euroclear.com.
EuroclearplchasthreeBoardcommittees–theNominationsandRemunerationCommittee,theAuditCommitteeandtheOperationsCommittee.TheBoardofEuroclearSA/NVhasestablishedsevencommittees–theManagementCommittee,theExecutiveCommitteewhichistoberenamedtheInterimBusinessCommittee,theNominationsandRemunerationCommittee,theAuditCommittee,theStrategyCommittee,theRiskPolicyCommitteeandtheBusinessModelImplementationCommittee.AllthesecommitteesareadvisorycommitteesexceptfortheExecutiveCommitteeandtheManagementCommittee.
Fromtotimetotime,theBoardsofEuroclearplcandEuroclearSA/NValsoestablishadhoccommitteesdesignedtosupporttheBoardinrelationtospecificprojects.
ThecommitteesmeetonaregularbasisandeachcommitteechairpersonreportsattheBoardmeetingimmediatelyfollowingacommitteemeeting.Thetableonpage73setsoutthemembershipofeachcommit-
teetogetherwithdetailsofthenumberof,andindividualattendanceat,committeemeetings,otherthantheManagementCommitteemeetingswhichareweekly.
IncommonwiththeBoard,eachofthecom-mitteesmayrequestanyinformationfrommanagementnecessarytodischargetheirfunctionsandmay,whereconsideredneces-sary,seekindependentadviceandcounsel.
TheChairmanandtheDeputyChairmanaremembersorex-officiomembersofeachcommittee(dependingonthecommittees’termsofreference),excepttheAuditCom-mittees,whichtheyattendoninvitation.
EuroclearplcandEuroclearSA/NVjointcommittees
TheAudit CommitteesofEuroclearplcandEuroclearSA/NV,chairedbyMr.FrankJ.DeCongelio,metjointlysixtimesduring2007.AllmembersoftheAuditCommitteesareindependentnon-executivedirectorsandtheBoardsconsiderthatthereissufficientrecentandrelevantfinancialexperiencewithintheseCommitteesforthemproperlytodischargetheirfunctions.Theexternalauditors’leadpartner,theheadofinternalaudit,togetherwiththegroupCEO,ChiefFinancialOfficer,andGeneralCounsel,aswellastheBoardChairmanandDeputyChairman,attendedeachmeetingattheinvitationoftheCommitteechair-men.TheCommitteesmetonceduring2007withtheinternalauditorandexternalauditorwithoutmanagementbeingpresent.
TheAuditCommittees’tasksaresetoutindetailintheirtermsofreference,which
havebeenapprovedbytheBoards,andcoverthoseitemsenvisagedbytheCode.TheCommitteeshaveanagreedreportingcalendartoensuretheyproperlydischargetheirresponsibilitiesandcoverallmatterswithintheirpurview.
Inlinewiththereportingcalendar,during2007,theCommitteesreceivedstand-ingquarterlyreportsonhighriskcontrolissues,legalandcompliancematters,theinternalauditstatusofthemajorbusinessmodelprojectsandprogressoftheannualinternalauditplan.AteachmeetingtheCommitteesreceivedanupdateonunau-ditedfinancialresultstodate.
TheCommitteesreviewedandmaderecommendationstotheirrespectiveBoardsonadhocfinancialmattersarisingthrough-outtheyear.TheexternalauditorreportedateachCommitteemeetingonrelevantaccountingandregulatoryissues.
TheCommitteesconductedtheirannualin-depthreviewoftheeffectivenessofthesystemofinternalcontrol,afulldescriptionofwhichissetoutonpage75.
During2007,theheadofinternalaudit,inaccordancewiththeEurocleargrouppolicysettingoutstepstoensuretheexternalaudi-tor’sindependenceandobjectivityaremain-tained,reportedtotheAuditCommitteeswithanoverviewofallfeespaidtotheexter-nalauditorforthegroup,togetherwithalistofallnon-coreauditservicesperformedbytheexternalauditor.Basedonthisassess-ment,theexternalauditor’scompliancewiththeindependencerequirementwasconfirmedbytheCommittees.
euroclearIannual report 2007I71
Furthermore,in2007,theAuditCommitteesundertookaformalassessmentoftheexternalauditorforallEuroclearentities.ThisassessmentwascarriedoutbycompletionofadetailedquestionnairebythemembersoftheAuditCommitteeandtheManagementCommitteeofeachEuroclearentity.TheresultswerecollatedalongwithasynopsisandpresentedfirsttotheAuditCommitteeofeachentityfordiscussion,andthentotheAuditCommitteesofEuroclearplcandEuroclearSA/NV.Thisassessmentwillbeundertakenonanannualbasis.
TheAuditCommitteeofEuroclearplcmetalonethreeadditionaltimesduring2007toreviewunauditedfinancialresultspriortothesebeingpostedontheBulletinBoard.
TheAuditCommitteeofEuroclearSA/NVmetaloneoncein2007todiscusstheUKFinancialServicesAuthority(FSA)riskassessmentofEuroclearUK&IrelandLimited,asrecommendedbytheFSA.
TheCommitteesundertooktheirannualeffectivenessreview,theresultsofwhichdemonstratethattheCommitteesarefunctioningwell.TheCommitteeshaveagreedcertainfollow-uppointsarisingoutoftheassessmentaswellasaplantoaddressthesepointsduring2008.
TheNominations and Remuneration CommitteesofEuroclearplcandEuroclearSA/NVarechairedbyMr.MarkS.Garvin.In2007,theCommitteesmetseventimesinajointsession.
InadditiontotheirannualreviewofcompliancewiththeCombinedCode,theCommitteesreviewedandproposedtotheBoardspersonsforelectionasdirectorsasvacanciesarosethroughouttheyear.TheCommitteesreviewedandagreedonanamendedtextfortheletterofappointmentofBoardmembersinlinewithbestpracticeingoodgovernance.
TheCommitteesfollowedupondiscus-sionsheldlastyearontheremunerationofBoardmembers.Subsequently,theCommitteesrecommendedforadoptionbytheBoardsanewremunerationpolicyforallitsuser-affiliatednon-executivedirectorsthatisinlinewiththeirroleandrespon-sibilitiesaswellaswithgoodpractice.
Furthermore,during2007,inordertocomplywithrecentBelgianregula-toryrequirementsongoodgovernance,theNominationsandRemunerationCommitteeofEuroclearSA/NVrecom-mendedtotheBoardtheadoptionofdif-ferentmeasuresoncorporategovernance.Amongitsnewobligationsoncorporategovernance,EuroclearSA/NVisrequiredtoprepareagovernancememorandumde-scribingitsshareholdingstructure,policiesonthecompositionofboardandmanage-mentorgans,itsmanagementstructureandcorporatepolicies,allassessedagainsttherecommendationssetoutintheBelgianregulation.ThisgovernancememorandumissubjecttoapprovalbytheCBFAin2008.TheNominationsandRemunerationCommitteeofEuroclearSA/NVoversawthepreparationofthisdocumentthrough-outtheyear.TheNominationsandRemunerationCommitteesalsoadopteda
policyonthecompositionoftheBoardandBoardcommitteesandreviewedthestruc-ture,roleandcompositionoftheBoardanditscommittees,asexplainedabove.TheCommitteesreviewedthetermsofreferenceoftheManagementCommittee.Theyalsoreviewed,asexplainedonpage74,thecur-rentlinesofcommunicationbetweentheBoardandtheshareholders.
AnevaluationoftheeffectivenessoftheCommitteesundertakenduring2007,andtoberepeatedeveryyear,foundthattheCommitteesarefunctioningwellandinaccordancewiththeirtermsofreferenceandbestpracticeguidelines.
EuroclearplcCommittee
TheOperations CommitteeofEuroclearplc,chairedbySirNigelWicks,whichisresponsibleforhandlingoperationalandadministrativemattersarisingbetweenBoardmeetings,metfivetimesduringtheyear,andoneachoccasionitapproved,interalia,theopeningofanewBulletinBoardsession.
EuroclearSA/NVCommittees
TheStrategy Committee ofEuroclearSA/NV,chairedbySirNigelWicks,assistsinpreparingastrategicagendafortheBoardandensuringthattheBoardisgiventheinformationnecessaryformakingstrategicdecisions.TheStrategyCommitteemetoncein2007andpreparedcertainstrategicitemsfordiscussionbythewholeBoardincludinganagendaforthefull-daystrategyBoardmeetingheldinearly2007.
72I Responsibility
TheRisk Policy CommitteeofEuroclearSA/NV,whichischairedbyMr.RichardC.S.Evans,providesadvicetotheBoardontheriskpoliciesofthegroup,reviewsmajorriskissuesfacedbyEuroclearandadvisesontheirmitigation.Severalmem-bersoftheCommitteeareexpertsintheareaofriskmanagement.
TheCommitteemetfourtimesduring2007.ItrecommendedtotheBoardforapprovaltheharmonisationoftheadmissioncriteriaoftheESESCSDsaswellastheongoingmonitoringofadherencetothecriteria,assetoutintheOperationalRiskBoardPolicy.ItalsoreviewedtheAnti-MoneyLaunderingBoardPolicyinfurtheranceoftheimplementationoftheThirdEuropeanDirective.TheCommitteereceivesaquar-terlyreportonbankingriskswhichincludesperiodicreportingrequiredbyanumberoftheriskpoliciesinplaceinthegroup.TheCommitteealsoreviewedandprovidedadvicetotheboardsofsubsidiarycompaniesonspecificriskissuesandrecommendedthe2007uppertolerancelevelstothoseboardsforapproval.TheRiskPolicyCommitteealsohaddiscussionsaboutthefinancialmarketdisruptionslinkedtothesubprimecrisisandtheirimpactonEuroclear.
TheRiskPolicyCommitteehostsanannualriskforumwhereleadingindustryriskexpertsareinvitedtoexchangeideasonrisktopicsrelevanttotheEurocleargroup.In2007,theforumwasdevotedtoanin-depthdiscussiononenterpriseriskmanagement.
TheRiskPolicyCommitteeundertookitsfirstannualselfassessmentin2007.
AdetailedquestionnairewascompletedbyeachCommitteemember.TheCommitteereviewedtheresponsesanddiscussedfollow-upactionsaswellasaCommitteetrainingplanforthecomingyear.
MeetingsoftheBusiness Model Implementation CommitteeofEuroclearSA/NVareopentoalldirectors(andgener-allyattendedbyalmostall).TheCommitteeischairedbySirNigelWicks.Itmonitorstheprogresstowardsimplementationofthevariousprogrammesformingthebusi-nessmodel.
TheCommitteemetfourtimesin2007andoneachoccasionwasgivenadetailedupdateontheprogressofthemainpro-grammesthatarepartoftheimplementa-tionofthebusinessmodel.TheCommitteealsoreceivedaquarterlyscorecardforeachoftheprogrammes.Thescorecardassessestheinternalcontrolsystemofthepro-grammes,inordertoascertainwhethertheprogrammescopeislikelytobedeliveredwithintheestablishedqualityinstructions,deadlinesandbudgetswithaknownandacceptedriskprofile.TheCommitteewaskeptinformed,bothaspartofitsmeet-ingsandbywayofcommunicationsfrommanagementoutsideofthemeetingcycles,oftheprogressoftheESESimplementationduring2007,aswellastheotherphasesoftheprogramme.
In2007,theBusinessModelImplementa-tionCommitteedecidedtoperformanannualeffectivenessreviewconsistingoftheassessmentoftheCommittee’sownper-formanceagainstadocumentedbenchmarkthatreflectstheobjectivesoftheCommit-
teeandrelevantgoodpracticeandguid-ance.Theresultswillbeassessedin2008.
TheExecutive Committee (toberenamedtheInterimBusinessCommittee)ofEuro-clearSA/NVischairedbytheChairmanoftheBoardandhasasmemberstheDeputyChairmanandelevenofthecompany’snon-executivedirectorsplusthemembersoftheManagementCommittee.
TheCommitteemettwicein2007.ItconsideredgeneralupdatesfromtheCEO.Italsoapprovedseniormanagementcom-pensation,reviewedpensionfundmatters,anddealtwithvariousadministrativebusi-nessmatters.TheExecutiveCommitteehasestablishedasub-committee,theExecutiveCompensationCommittee,whichmakesrecommendationstotheExecutiveCommitteeregardingremunerationandothertermsofemploymentformembersoftheManagementCommittee,aswellasremunerationpoliciesforEuroclearemployeesingeneral.
MarketAdvisoryCommittees
TheEurocleargrouphasestablishedfiveusercommitteesknownasMarket Advisory Committees (MACs)forBelgiumandTheNetherlandsjointly,France,Ireland,theUnitedKingdom,aswellasaCross-borderMarketAdvisoryCommittee.ThesecommitteesarenotBoardcommitteesandtheirmembersarenotdirectorsofEuroclear.TheMACsareaprimarysourceoffeedbackandinteractionbetweentheusercommunityandEuroclearmanagementonsignificantmattersaffect-ingtheirrespectivemarkets.
euroclearIannual report 2007I7�
2
2
2
2
2
2
Euroclearplc&EuroclearSA/NVdirectors’attendance20071
Board Audit Business Executive Nominations& Operations RiskPolicy Strategy Committee Model Committee Remuneration Committee Committee Committee4 Implementation Committee Committee
Sir Nigel Wicks 14 (15) 10 4 (4) 2 (2) 6 (7) 5 (5) 3 (5) 1 (1)
Jean-Jacques Verdickt 2 (2) 1 1 (1) 0 (0) 1 (1) 3 (5) 1 (1)
Joseph C. Antonellis 8 (15) 3 (7) 1 (1)
Charlotte Black 5 (5) 0 (0)
Paul Bodart 13 (15) 6 (10) 1(2) 3 (5) 1 (1)
Alain Closier 13 (15) 4 (4) 0 (2) 1 (1) 0 (1)
Sue Concannon 15 (15) 4 (4) 1 (1)
Frank J. DeCongelio 13 (15) 9 (10) 1 (2) 5 (5)
Richard C.S. Evans 12 (15) 1 (2) 5(5)
Mary M. Fenoglio 13 (15) 10 (10) 0 (0) 5 (5)
Clara Furse 9 (15)
Mark S. Garvin 14 (15) 1 (1) 2 (2) 7 (7) 2 (2)
John S. Gubert 5 (5) 1 (1) 2 (2) 1 (1) 0 (0)
Hiroaki Harada 13 (15) 6 (7)
Naomi Harada 12 (15)
Simon M. Haslam 4 (6)
William Higgins 8 (15) 2 (2)
Tim Howell 10 (10) 4 (4) 0 (1)
Peter T. Johnston 14 (15) 7 (7)
François Marion 12 (15) 3 (4) 0 (0)
Lieve Mostrey 13 (15) 3 (4)
David Nicol 13 (15) 9 (10) 4 (4) 0 (2) 4 (5)
Alain Papiasse 3 (15)
Herschel Post 14 (15) 2 (2) 5 (7) 0 (1)
John M. Schofield 5 (5) 1 (1) 3 (4)
Jean-François Théodore 3 4 (15) 0 (6) 0 (2)
M. Andrew Threadgold 10 (10) 5 (5)
Robert C.M. Wigley 8 (12) 0 (1)
Charles F. Winters 3 (3) 0 (0) 0 (1)
1 The figure in brackets indicates the maximum number of meetings the director could have attended as a member of the relevant committee.2 Indicates attendance either as invitee (without a figure in brackets) or as ex-officio member.3 Director nominated by the ‘S’ shareholders.4 Pierre Francotte as a member of the Strategy Committee attended the Strategy Committee meetings.
74I
Relationswithshareholders
How does the Board ensure the share-holders’ views are heard?ThelargemajorityofthedirectorsontheBoardsofEuroclearplcandEuroclearSA/NVareindividualswhoareemployedbyfirmsthatuseEuroclear.AllthesefirmsarealsoshareholdersinEuroclearplc.Attheyearenddirectorsweredrawnfromfirmswhosegroupsprovide54.43%oftheusageofEuroclearfacilitiesandhold58.71%ofthesharesofEuroclearplc.Theuser-governancestructureofEuroclearmeansthatthemajorityofdirectorsareregularlyaccessibletothestakeholdersofthegroup(shareholdersandclientsalike),becausetheyareactivelyworkinginthesameindustry.
Inthecourseof2007,theNominationsandRemunerationCommitteeofEuroclear
plcconsideredthequestionofwhetherEuroclearshouldfurtherreinforceitscommunicationwithshareholders.TheCommitteereviewedthecurrentlinesofcommunicationtakingintoaccounttheCombinedCodeguidanceonrelationswithshareholdersandputtingthatguidanceintotheperspectiveoftheEuroclearusergovernanceframework.
TheCommitteeconcludedthatthecurrentarrangementsconcerningthecontentsanddistributionoftheannualreportandaccounts,thehandlingofshareholders’enquiriesbytheChairmanand/ortheBoardofEuroclearplc,theChairman’sregularvisitstoshareholdersandhisavail-ability,aswellasthatofotherdirectorsandseniormanagement,todiscussshareholdersqueriesduringoraftertheconclusionoftheproceedingsofAnnualGeneralMeetings,ensureasatisfactorydialoguebetweenthe
BoardasawholeandtheshareholdersofEuroclearplc.TheBoardendorsedtheseconclusions.
AlistofalltheshareholdersofEuroclearplc,asofregistrationscompletedatCompaniesHouseon29February2008,canbefoundontheenclosedCD-ROM.
Asinthepast,Euroclearplcsharescon-tinuenottobetradedonanyexchange.Inordertopromoteliquidityintheshares,theBoardofEuroclearplchasestablishedaBulletinBoardserviceaccessibletoshareholdersandcertainotherusers.TheBulletinBoardprovidesamechanismformakingbid/offerpricesavailabletopoten-tialbuyersandsellerswhocan,iftheysowish,contacteachotherinordertonegoti-ateatradeoutsideofthefacilityprovidedbyEuroclear.During2007,theBulletinBoardwasopenedforfivesessions.
euroclearIannual report 2007I75
Asoundsystemofinternalcontrolisrequiredtosafeguardshareholders’invest-ments,Euroclear’sassetsandmarketneeds.EachBoardisresponsiblefortheestablish-ment,supervisionandreviewofthesystemofinternalcontrols.Theroleofgroupman-agementistoimplementBoardpoliciesonriskandcontrols.
Theeffectivenessofthesystemofinternalcontrolsisreviewedannuallybymanage-mentoftheoperatingentities,andtheconsolidatedresultsofthatreviewarediscussedwiththeAuditCommitteesofEuroclearSA/NVandEuroclearplc.TheAuditCommitteesreporttheresultsoftheirassessmenttoeachBoard.
ThesystemofinternalcontrolsadoptedbytheEurocleargroupisdesignedtoensure:• well-orderedandprudentconduct
ofbusinessfollowingclearlydefinedobjectives;
• effectiveandefficientuseofEuroclear’sresources,maintainingtherightbalancebetweenrisk,servicequalityandcost;
• thesafeguardofEuroclearandclientassets,protectingEuroclear’sreputa-tion,financialstabilityandoperationalcontinuity;
• highqualityfinancialandreportinginformationforusebymanagementandexternalstakeholders;and
• compliancewithregulatoryrequire-ments.
TheEuroclearsystemofinternalcontrolshasbeendesignedbearinginmindtheguidancesetoutintheTurnbullReport,andwithreferencetoguidancepro-videdbytheCommitteeofSponsoring
OrganizationsoftheTreadwayCommis-sion(COSO),theBankforInternationalSettlement’sproposalsforarevisionofbankcapitaladequacyregulation(BaselII)andtheCBFAcircularonInternalControlandInternalAudit.Toenableitsmanagement,EurocleardevelopedanERMframework.
Inkeepingwithitsroleasaproviderofservicesthatarepartofthefinancialmarketinfrastructure,Euroclear’sbenchmarksforcontrollevelsaresetveryhighandarereviewedregularly.Itshouldbenoted,however,thatsuchasystemisdesignedtomanage,ratherthaneliminate,theriskoffailuretoachievebusinessobjectives.Inestablishing,supervisingandreviewingthesystemofinternalcontrols,thedirectorshaveregardtothenatureandextentofrelevantrisks,thelikelihoodofalossbeingincurredandthecostsofcontrol.
Itfollows,therefore,thatthesystemofinternalcontrolscanprovideonlyreason-able,butnotabsolute,assuranceagainsttheriskofmaterialloss.Thekeyelementsofoursystemsofinternalcontrolsaredescribedbelow.
Strategy:ourapproachtoriskmanagementEurocleariscommittedtoimplement-ingstrongriskmanagementprocesses.AuthorityisdelegatedbytheBoardofEuroclearSA/NVtotheManagementCommitteeofEuroclearSA/NVfortheimplementationofthebusinessstrategyandotherdecisionstakenbytheBoard.TheBoardapprovesthekeyriskpoliciesanditscommitteesreviewriskandcontrolareasregularlyandthoroughly.
EuroclearmaintainsaRiskRegister–acriticalcomponentoftheERM–whichclearlyidentifiesanddescribesthedifferentrisktypesthatEuroclearfaces.APolicyControlFrameworkisalsoinplacetohar-monisepoliciesandmapthemtotheserisktypes.Allnewandmostexistingpoliciesarenowcompliantwiththisframework.
Euroclearusestheconceptof‘riskappetite’and‘tolerancelevel’formarket,creditandoperationalrisk.RiskappetitesarearticulatedbytheappropriateManagementCommittee,withinthelimitsdefinedfortheuppertolerancelevelsapprovedbytheBoard,andbaseduponadvancedandrela-tivelymaturecapitalmodellingtechniquesthatthemselvesaresubjecttodetailedinternalandexternalreview.
Finally,theBalancedScorecardisanimportanttooltotranslatetheEuroclearvisionandstrategyintotangibleobjectivesandmeasures.Itsetsoutclearprioritiescascadeddownthroughthegrouptohelpmeetexpectationsintermsofday-to-dayoperations,strategicprogrammedeliveryandworkingefficiencies.
Cultureandcompetence:anactiveapproachtoriskmanagementbyappropriatelyskilledpeopleThegroupvaluesarticulatethecoreareasthatarecrucialtotheorganisationandtheexpectedcorrespondingbehaviours.Escalationprocessesuptoseniormanage-mentencouragereportingaboutissuesandtheneedtolearnfromexperience.TheManagementCommitteeoperatesatrust-basedculture,stressingtheresponsibilityandaccountabilityofseniormanagement
Internal control system
76I
euroclearIannual report 2007I77
membersandcompetentstaff.InformationispasseddownasnecessaryfromtheBoardandtheManagementCommitteetothedivisionheadsandtheirteams.
Individualobjectivesdefinewhatisexpectedatemployeelevel.Theclimatesurveysofstaffopinionsensureopenfeedbackonthequalityofcommunicationacrossthegroup.Euroclearhasadoptedan‘EthicalConduct,LegalandCompliance’policyand,dur-ing2007managementhasenhancedthecomplianceprogrammethroughacompli-ancequizforallemployeesandcontrac-tors.Theintroductionofthesemi-annualmanagementassertionsonriskandcontrolsandtheongoingattentiongivenbytheManagementCommitteetoaquarterlyhighriskreporthasalsofacilitatedunderstandingoftheimportanceofthedifferentriskandcontrolprocesses,andtheimportanceofdisclosingrisksproactively,ratherthanwait-ingforexternalreviewsorinternalauditorstoraisethem.
Governance:assigningresponsibilityandauthorityTheroleoflocalmanagementoftheindi-vidualoperatingentitiesofthegrouphasbeenclarifiedandreinforcedbythecurrentcorporatestructure,throughthealignmentoffunctionsacrossthegroupandtheestab-lishmentofdivisionheadswithgroup-wideresponsibilities.
ThegovernancestructurehasbeenbetterarticulatedwiththecreationoftheRiskAccountabilityMatrix,whichdocumentsrolesandresponsibilitiesforthedifferentrisktypes.Moreover,risk,controlandcom-pliancearepartofmanagement’sobjectives.
Thisensuresthatdelegationofresponsibil-ityformanagingrisksandimplementingcontrolsiswellunderstoodandactedupon.
TheManagementCommitteehasestab-lishedseveralCommitteestoassistinitsoversightandmanagementrole.
Measurementandassessment:understandingourrisksRiskidentificationoccurscontinuouslybythedifferentbusinessunits.Inaddition,formalriskassessments(twiceannually)reviewtheentireEuroclearriskuniverse.Controlweaknessesidentifiedareloggedandproperlyprioritisedandactionplansaretrackedbymanagementandindepend-entlyvalidated.Allnewservicesorlaunchesofnewsystems/productsaresubjecttoariskassessmentthatisreviewedbyaRiskAssessmentCommittee.
Riskresponseandcontrol:addressingourrisksinanappropriatewayOperationaldepartmentshavewell-entrenchedandextensivecontrolsinplace,rangingfromthedefinitionofprocedurestoautomatedreconciliations.
Adiverserangeofcontrolactivitiesisappliedatalllevelsandtoallfunctions.Reactiontoday-to-dayoperationalinci-dentsisgenerallygoodandtimely,andpost-mortemanalysisiswidelyappliedtoidentifylessonslearned.
Reporting:gettingtherightinformationtotherightpeopleattherighttimeManagementinformationisgenerallyadequateanditsintegrityisatagoodlevel.Therearenumerousspecificperiodic
reports.Inaddition,therearewiderreports,suchastheannualemployeeclimatesurvey,providinginformationonstaffviews,andarangeofdocumentsforexternalstake-holdersincludingnewsletters,operationalbulletins,consultationpapers,andtheannualclientsurveys.ASAS70reportismadeavailabletocustomersofEuroclearBank,EuroclearFranceandEuroclearUK&Ireland.
Monitoringprocesses:assessingtheeffectivenessofourriskmanagementstrategiesMonitoringreportsandprocessesareusedtohelpmanageoperationsandcommit-tees.Theseformalprocessesaresupple-mentedbyinformalsharingofinformation,whichiswidelypractisedandencouraged.Outstandingissuesaremonitoredregularlyandoutstandingescalationsarereviewedonamonthlybasis.
KeyRiskIndicatorshavebeendevelopedfor(I)CSDsandaremonitoredregularly.
ImprovementsManagementiscommittedtothecontinu-ousimprovementofthesystemofinternalcontrolsandanumberofimprovementsmadeduring2007arereflectedabove.In2008,EuroclearwillcontinuetostrengthenITchangemanagementandassociatedactivities,inviewoftheimportantlaunchschedulesforourmajorstrategicdevelop-mentprogramme.
78I
Strong figures speak for themselves Strong financial results are both a vindication of Euroclear’s strategy, and
a platform for even more ambitious objectives. They give us the capacity
to innovate, to work for the long term and to cut costs further for our
clients. So while we’re proud of what we achieved in 2007, we can look
forward to even better performances to come.
Finance
euroclearIannual report 2007I79
80I Finance
Financial review
The Euroclear group is a market infrastructure
service provider to the international financial
industry. We are a user-owned, user-governed
organisation providing settlement and settlement-
related services to financial institutions in more
than 80 countries for a wide range of securities.
The Euroclear group’s financial performance is
measured in terms of net fee income and net
interest income set against operating costs. These
were influenced by several key drivers in 2007:
• Net fee income is mainly a function of the
value of securities deposited in our systems,
the number of settlement transactions and the
daily value of collateral provision outstanding.
These areas saw significant growth over the
year under review as detailed in the ‘Perform-
ance highlights’ section on page 6.
• Net interest income is derived from the
prevailing interest rates and the level of cash
balances deposited by clients, both of which
showed positive trends in 2007 (see also
the ‘Financial performance highlights’
section below).
• Operating expenses increased due to the
higher staffing and equipment levels needed
to support business growth and our planned
investment in our strategic projects.
Strongperformanceachievedin2007In2007,theEurocleargroupachievedstrongperformanceacrossallbusinessactivities,reflectingmarketconditionsdur-ingtheyearandthesuccessofthegroupinattractingnewbusiness.Weended2007inanexcellentfinancialposition,havingprocessedarecordnumberoftransactions.Profitfortheyearroseby4%to €331million.
TheEurocleargroupremainscommittedtoitsuser-owned,user-governedphilosophy.Asaresultofitsstrongbusinessperform-ance,togetherwiththeeconomiesofscaleachieved,thegroupfurtherreduceditstariffs.Overthecourseof2007,EuroclearBankintroducedmajorfeereductionsesti-matedat €100millionindifferentproductareas(i.e.internationaldebtanddomesticsafekeeping,collateralmanagement,com-municationfees).Inlinewiththepolicydefinedin2006,EuroclearBankremuner-atedclients’cashbalances,representinga
benefittothemarketof€82millionfortheyear2007.
Againstthisbackdropofcommercialsuc-cess,theaverageheadcountwasincreasedbynearly240toenableustomakespecificenhancementsinclientserviceandtohandlehigherbusinessvolumes(inEuroclearBankinparticular).Expertswerealsorecruitedforourmajorinvestmentprogrammeofplatformconsolidation,contributing,interalia,tothelaunchofsomeofthekeycomponentsofourSinglePlatform(i.e.theintroductionofnewdatacentresandESES).
FinancialperformancehighlightsThedetailedresultsfortheyeararesetoutonpage12oftheEuroclearplcfinancialstatements,whichisavailableontheen-closedCD-ROM.
Profit for the year: inspiteoftheunstablemarketsin2007,theEurocleargroup
deliveredstrongfinancialresultswithprofitfortheyearupby4%to€331millionnotwithstandingtheimpactofnewpricereductionsandcashbalanceremuneration.
Operating income roseby15%to €1,244millionfrom €1,085millionin2006,reflectinggrowthinthelevelsofsecuritiesheldforclientsandtransactionvolumesacrossalloperatingentitiesofthegroup.
Net interest income increasedby20%to€324millionandwasfavourablyinfluencedbytherisingtrendinUSDandEURinterestrates.Theserose,onaverage,from4.9%and2.8%in2006to5.0%and3.8%respectivelyin2007.Averagedepositsgrewby9%andaverageoverdraftsby23%,reflectingincreasedsettlementactivitylevels.Inlinewiththepolicydefinedin2006,EuroclearBankremuneratedlongbalancesleftondepositbyclientsovernight.
Ourbusinessenvironment
euroclearIannual report 2007I81
InterestincomeinEuroclearstemsfromEuroclearBank’sovernightredepositsofclients’cashbalances.ItalsostemsfromtheinvestmentofEuroclearBank’scapital,retainedearningsandtheproceedsfromsubordinateddebts.
Net fee and commission income increasedby12%to€901millionafterfeereduc-tions,demonstratingEuroclear’scontinuedorganicgrowthandsignificantbusinessgains.Increasedlevelsofdepotandhighersettlementvolumesacrossallthe(I)CSDspromptedthisgrowth,reflectingvolatilemarketconditions.Thevalueofsecuritiesheldindepotgrewby5%inthegroup,reachingalevelofabout€19trillionatyearend.EMXCoalsocontributedtothegroup’sexcellentperformanceadding€15milliontoconsolidatednetfeeandcom-missionincome.Netfeeandcommissionincomerepresents72%oftotalincome.
Administrative expensesroseby21%to€808millionin2007asaresultofcontinuousdevelopmenteffortandarelatedincreaseinstaffinglevels.Additionalpersonnelwereneededtohandleincreasedsettlementactivityandtomeettargetsforenhancedservices.
Operating profit before tax reached€435million,anincreaseof€17million(4%)on2006,reflectingstrongincomegrowthinalloperatingentities.Thisincreasealsoincludesa€7.1millioncontributionfromEMXCo.
Dividend: thedirectorsrecommendadivi-denddistributiontoordinaryshareholdersof€98million,representing€25.58per
share(comparedwith€24.20persharein2006).Wedecidedtofurtherincreasethedividendthisyearinlightofthespecificconditionsthatprevailedduringtheyear,takingintoaccountourobjectivesregardingcapitalstrength,profitabilityandbusinessgrowth.Thisdividendincreasereflectsourcontinuedcommitmenttoensuringthatshareholdersareadequatelyremuneratedfortheircapitalinvestment.
Balance sheet:totalassetsstoodat€16,328millionon31December2007,up€2,271milliononthepreviousyear.Depositsroseby€1,967million(21%),to€11,530millionandloansincreasedby22%to€12,808million.
Inthe2006financialstatements,financialinstrumentswerevaluedata‘clean’price.Inthe2007financialstatements,financialinstrumentshavebeenvaluedata‘dirty’price,i.e.includingaccruedinterest.Accordingly,thecomparativeamountsrelatingto2006havebeenrevised.Theimpactofthischangeisshowninthe‘Comparatives’paragraphofAccountingpoliciesonpage17oftheEuroclearplcfinancialstatements,availableontheen-closedCD-ROM.
Thegroupcontinuedtostrengthenitscapitalbase.Totalshareholders’equityin-creasedby8%to€3,126millionin2007.Togetherwiththeimplementationofourstrategicprogramme,theseexcellentresultsplaceusinastrongcompetitivepositionforthefuture.Asfrom1January2007,theregulatorycapitalrequirementsforthegrouphavebeendeterminedinaccordancewiththeBaselIIframework.Thegroup
enjoysstrongregulatorycapitallevelswithaTier1ratioof63%attheendof2007(comparedwith81%underBaselIattheendof2006).Thetotalcapitaladequacyratio(afterdividend)reached63%attheendof2007,comparedwith91%underBaselIattheendof2006,andtherequiredminimumof8%.
InOctober2007,ourLuxembourgsub-sidiary,EuroclearFinanceSA,exerciseditsoptiontoreimbursethe€250millionofundatedsubordinateddebt.
82I Finance
Euroclearplcsummarisedconsolidatedprofit(€ million)
2007 2006
Net interest income 323.9 271.1
Net fee and commission income 901.5 802.1
Dividend income 0.2 0.2
Realised gains on available-for-sale financial assets 0.0 0.2
Net losses on financial assets or liabilities held for trading (6.6) (6.2)
Net gains on foreign exchange 6.1 2.1
Other operating income 18.9 15.9
Operatingincome 1,244.0 1,085.4
Administrative expenses (808.2) (666.7)
Impairment (0.5) (0.5)
Operatingprofitbeforetax 4�5.� 418.2
Taxation (104.8) (99.6)
Profitfortheyear ��0.5 �18.6
euroclearIannual report 2007I8�
Euroclearplcsummarisedconsolidatedbalancesheet(€ million)
2007 2006
Assets
Cash and balances with central banks 182.8 11.8
Loans and advances 12,625.3 10,499.2
Available-for-sale financial assets 1,266.3 1,188.9
Held-to-maturity financial assets 353.0 559.7
Financial assets held for trading 15.5 12.5
Derivatives used for hedging 3.7 2.2
Current income tax assets 2.4 2.8
Deferred income tax assets 145.7 124.4
Other assets 440.0 440.7
Pre-payments and accrued income 109.1 67.5
Property, plant and equipment 132.3 127.7
Goodwill and intangible assets 1,052.4 1,019.6
Totalassets 16,�28.5 14,057.0
Liabilities
Deposits from central banks 461.3 156.1
Deposits from banks and customers 11,068.8 9,407.0
Financial liabilities held for trading 13.4 13.0
Derivatives used for hedging 0.0 1.9
Other liabilities 1,042.3 712.3
Accruals and deferred income 230.6 226.0
Current income tax liabilities 37.7 46.8
Deferred income tax liabilities 0.8 0.5
Provisions for liabilities and charges 8.1 7.7
Pension deficit 34.7 40.5
Subordinated liabilities 304.8 558.5
Shareholders’equity 3,126.0 2,886.7
Totalliabilitiesandshareholders’equity 16,�28.5 14,057.0
84I Finance
2007 2006
Contingentliabilities 6,579.9 5,058.8
Euroclearplcconsolidatedoff-balancesheetitems(€ million)
Authorised Issued
Number Nominal value Number Nominal value
(€ denominated)
Ordinary shares of €1 each 3,330,556 3,330,556 3,330,556 3,330,556
‘S’ shares of €1 each 500,120 500,120 500,120 500,120
Unclassified shares of €1 each 169,324 169,324 - -
Total 4,000,000 4,000,000 �,8�0,676 �,8�0,676
(£denominated)
Preferred non-voting redeemable sterling shares of £1 each1 50,000 50,000 50,000 50,000
SharecapitalofEuroclearplcon26March2008
Short-term Long-term
Fitch-IBCA F1+ AA+
Standard & Poor’s A-1+ AA+
EuroclearBankcreditratings
1 Although qualifying as capital under UK law, IFRS requires that these redeemable shares are treated as a liability.
euroclearIannual report 2007I85
Mainoperatingentities
1 Includes dividend income, realised gains/(losses) on available-for-sale financial assets, gains/(losses) on financial assets held for trading, gains/(losses) on foreign exchange and other operating income (excluding cost recharged to group entities).
ICSD CSDs
Euroclear Euroclear Euroclear Euroclear Euroclear Bank Belgium France Nederland UK&Ireland
(e million)
2007incomestatement(underIFRS)
Net interest income 311.4 0.7 2.8 0.3 11.2
Net fee and commission income 528.8 29.2 137.2 25.7 166.8
Other operating income 1 3.2 1.0 6.9 3.7 (0.6)
Operatingincome 84�.4 �0.9 146.9 29.7 177.4
- Operating expenses (290.9) (14.0) (22.2) (14.3) (18.8)
- Costs charged to group entities 0.0 0.4 0.5 0.1 0.1
- Costs recharged by group entities (290.9) (12.5) (101.7) (13.1) (111.9)
Netoperatingexpense (581.8) (26.1) (12�.4) (27.�) (1�0.6)
Profitbeforetax 261.6 4.7 2�.5 2.4 46.8
Taxation (73.1) (1.5) (8.2) (0.6) (14.1)
Profitfortheyear(underIFRS) 188.5 �.� 15.� 1.8 �2.7
Effect of adjustments to comply with
group accounting policies and IFRS (8.0) 0.1 2.6 (0.0) 0.1
Profitfortheyearinstatutory
accountsunderlocalGAAP 180.5 �.4 17.9 1.8 �2.8
Shareholders’equityinstatutoryaccounts
underlocalGAAP 1,459.8 16.8 77.� 10.4 146.5
86I Finance
CapitalmeasurementandallocationTheCBFAinBelgiumisthemainsuper-visorofEuroclearBankandtheleadregula-torforEuroclearSA/NVandEuroclearplc.Inaddition,individualCSDsareregulatedbytheirownlocalsupervisors,whichsetandmonitorcapitaladequacyandliquidityrequirementsforthem.
InaccordancewiththeBaselIIframework,theCBFArequireseachbankandbankinggrouptomaintainaratiooftotalcapitaltorisk-weightedassetsthatcannotfallunderathresholdof8%,andaratioofTier1capitaltorisk-weightedassetsthatmustalwaysexceedathresholdof4%.
Furthermore,asacompanycloselyassoci-atedwithasettlementinstitution,EuroclearSA/NVissubjecttocertainspecificrequire-mentsregardingitssolvencyandliquidityposition.
Risk-weightedassetstakeintoconsidera-tionbalancesheetassetsandoff-balance-sheetexposuresthatmaygiverisetocreditrisk,ascalculatedforbothEuroclearBankandthegrouponaconsolidatedbasis.Collateralandothereligibleguaranteesaretakenintoaccountappropriately.
Totalcapitalisdividedintotwotiers:Tier1ismadeupessentiallyofshareholders’capital,sharepremium,consolidatedreservesandretainedearnings,whileTier2comprisesundatedsubordinatedloans.InOctober2007,theTier2ofthegroupwasreducedby€250millionasaresultofthereimbursementoftheUpperTier2debtissuedbyEuroclearFinancein2000.Inaccordancewithcapitaladequacyregula-
tions,EuroclearmonitorstheproportionoftheHybridTier1instrument(issuedin2005)thatcanbeconsideredasTier1,andreclassifiestheremaindertoTier2.Thankstothegradualgrowthofitsequitybase,EuroclearcancurrentlyqualifythetotalofitsHybridcapitalasTier1capital.GoodwillandintangiblefixedassetsaredeductedinfullfromTier1capital.ThecurrentregulatoryframeworkrequiresthatTier2capitaldoesnotexceedTier1capi-tal.Thisrequirementisverycomfortablymetbythegroup.
Thegroup’spolicyistomaintainastrongcapitalbaseandtodiversifyitssourcesofcapitalappropriately,sothatanadequaterelationshipbetweentotalcapitalandtheunderlyingrisksofthegroup’sbusinessexistsatalltimes.
Asanentitythatperiodicallyissuesdebtinstruments,EuroclearBankhasbeenassignedanAA+ratingbybothFitchandStandard&Poor’s.
Witheffectfrom1January2007,theregu-latorycapitalrequirementsforEuroclearBankbegantobedeterminedbytheBaselIIframework,bothonastand-aloneandconsolidatedbasis,aswellasforallconsoli-datedlevelsaboveEuroclearBank.Withinthisframework,Eurocleardeterminesregu-latorycapitalrequirementsbothforcreditandoperationalrisk.
Asfarascreditriskisconcerned,EuroclearhasbeenusingtheFIRBAasof1January2007,inaccordancewiththeaccreditationreceivedfromtheCBFAattheendof2006.Euroclearhasalsocomputeditscapi-
talneedsunderBaselIthroughout2007,inparallelwiththeBaselIImethodology,inordertobeabletoapply,ifnecessary,theso-calledBaselIfloorssetoutinthecapitaladequacyregulation.
Withrespecttooperationalrisk,EuroclearBankintendstoadopttheAMAin2008.AtallconsolidatedlevelsaboveEuroclearBank,Euroclearintendstoadoptahybridapproach–theso-calledAMAwithpartialuse–wheretheAMAforEuroclearBankwillbecombinedwithaStandardisedorBasicIndicatorApproachforthegroup’sotherentities.Inthatrespect,EurocleardeliveredanaccreditationfiletotheCBFAinDecember2006,anditstartedaparallelrunon1January2007.Asfarasthe2007operationalriskchargesareconcerned,thesehavebeendeterminedbasedontheBIAforallentitiesofthegroup.
Thetableontheoppositepagesetsoutthegroup’stotalcapital,whichverycomfort-ablyexceedsitsregulatoryrequirements,bothunderBaselI(2006figures)andBaselII(2007figures).Asalreadyanticipatedatthetimeoftheparallelrunforcreditrisk,Eurocleardidnotexperienceasignifi-cantchangeinitssolvencypositionasaconsequenceoftheadoptionoftheBaselIIframework,despitethenewcapitalreserva-tionrelatedtooperationalrisk.
UnderBaselII,adecreaseinthecapitalrequirementrelatedtocreditriskwasmorethancompensatedforbyanincreaserelatedtooperationalrisk,althoughthelatterisexpectedtodecreasewhenEuroclearadoptstheAMAin2008.
Capital management
euroclearIannual report 2007I87
Regulatorycapitalposition(€ ‘000)Thefollowingtableanalysesthegroup’sregulatorycapitalresourcesattheperiodend:
Euroclearplcconsolidated �1December2007 �1December2006
Risk-WeightedAssets �,575,19� 2,542,9�6
Requirement (RWA*8%) 286,015 203,435
Capitalbase1 2,264,758 2,�21,4�9
Tier 1 1,956,421 1,759,593
Hybrid Tier 1 297,909 297,683
Tier 2 10,429 264,163
Riskassetratios
Tier 1 63.05% 80.90%
Total 6�.�5% 91.29%
1 After proposed dividend
In the table above, the proposed dividends have been taken into account. Despite the increase in Tier 1 capital during 2007, higher risk-weighted assets under Basel II resulted in a decrease in the Tier 1 risk asset ratio compared to the situation at the end of 2006. This, combined with decrease in the Tier 2 capital following the redemption of the Undated Guaranteed Notes in October 2007, resulted in a lower total risk asset ratio at the end of 2007.
88I
TheattachedCD-ROMcomprisestheconsolidatedfinancialstatementsandParentcompanyfinancialstatementsofEuroclearplc.
Asrequiredbylaw,thestatutoryannualaccounts,theBoardofDirectors’reportandtheStatutoryAuditors’reportarefiledwithUKCompaniesHouse(Euroclearplc).
Apapercopyofthesedocumentsisavail-ableonrequestfrom:
The Company SecretaryEuroclearplcBaarermatte6340Baar,Switzerland
TheauditorshavedeliveredanunqualifiedauditopiniononthestatutoryannualaccountsofEuroclearplc.
Themanagement’sassertionstatement,togetherwiththeauditorstatementontheInter-companyTransactionPolicyimple-mentedbytheEurocleargroupisavailableonpages64and65.
Annual accounts and auditors’ opinion
euroclearIannual report 2007I89
Annexes
90I Annexes
13-21-7 9-18-14 16-10-12
1. SirNigelWicks Chairman
2. Jean-JacquesVerdickt1
Deputy Chairman
�. JosephC.Antonellis State Street Corporation
4. MichelBerthezène2
Caisse des Dépôts et Consignations
5. PaulBodart The Bank of New York Mellon
6. AlainClosier Société Générale
7. SueConcannon Halifax Share Dealing Limited
8. FrankJ.DeCongelio Credit Suisse Securities (USA) LLC
9. RichardC.S.Evans Deutsche Bank AG
10. MaryM.Fenoglio Citigroup
11. ClaraFurse London Stock Exchange plc
12. MarkS.Garvin�
JPMorgan plc
1�. HiroakiHarada Bank of Tokyo - Mitsubishi UFJ,
(Luxembourg) SA
14. NaomiHarada Mizuho Trust & Banking
(Luxembourg) SA
15. WilliamHiggins ABN AMRO Bank NV
16. TimHowell4
HSBC Holdings plc
17. PeterT.Johnston Goldman Sachs & Co
18. FrançoisMarion CACEIS
19. LieveMostrey Fortis Bank SA/NV
20. DavidNicol Morgan Stanley
21. HerschelPost
22. Jean-FrançoisThéodore NYSE Euronext
2�. M.AndrewThreadgold4
UBS AG
24. RobertC.M.Wigley5
Merrill Lynch International
LionelloFalconi Executive Secretary
BoardofDirectors
Board and Board Committees composition (as at 26 March 2008)
Euroclearplc
1 Appointed 29 October 20072 Appointed 26 March 20083 Senior Independent Director4 Appointed 1 June 20075 Appointed 28 March 20076 Ex-officio member
euroclearIannual report 2007I91
6-20-3 15-23-217-1-8
OperationsCommitteeSir Nigel Wicks, ChairmanFrank J. DeCongelioMary M. FenoglioDavid Nicol
Jean-Jacques Verdickt6
AuditCommitteeFrank J. DeCongelio, ChairmanPaul BodartMary M. Fenoglio François MarionDavid Nicol
NominationsandRemunerationCommitteeMark S. Garvin, ChairmanJoseph C. AntonellisAlain ClosierHiroaki HaradaPeter T. JohnstonHerschel Post
Jean-Jacques Verdickt6
Sir Nigel Wicks6
BoardCommittees
• Charlotte Black, Brewin Dolphin Securities Limited, resigned on 1 June 2007• John S. Gubert, HSBC Holdings plc, resigned on 1 June 2007• Simon M. Haslam, Fidelity International Limited, resigned on 28 June 2007• Alain Papiasse, BNP Paribas, resigned on 1 February 2008• John M. Schofield, UBS Investment Bank, resigned on 1 June 2007• Charles F. Winters, Merrill Lynch, resigned on 28 March 2007 • Executive Committee was disbanded on 30 September 2007
92I Annexes
SirNigelWicksChairman
Jean-JacquesVerdickt1
Deputy Chairman
JosephC.AntonellisState Street Corporation
MichelBerthezène2
Caisse des Dépôts et Consignations
PaulBodartThe Bank of New York Mellon
AlainClosierSociété Générale
SueConcannonHalifax Share Dealing Limited
FrankJ.DeCongelioCredit Suisse Securities (USA) LLC
RichardC.S.EvansDeutsche Bank AG
MaryM.FenoglioCitigroup
ClaraFurseLondon Stock Exchange plc
MarkS.Garvin�
JPMorgan plc
HiroakiHaradaBank of Tokyo - Mitsubishi UFJ, (Luxembourg) SA
NaomiHaradaMizuho Trust & Banking (Luxembourg) SA
WilliamHigginsABN AMRO Bank NV
TimHowell4
HSBC Holdings plc
PeterT.JohnstonGoldman Sachs & Co
FrançoisMarionCACEIS
LieveMostreyFortis Bank SA/NV
DavidNicolMorgan Stanley
HerschelPost
Jean-FrançoisThéodoreNYSE Euronext
M.AndrewThreadgold4
UBS AG
RobertC.M.Wigley5
Merrill Lynch International
LionelloFalconiExecutive Secretary
BoardofDirectors
EuroclearSA/NV
1 Appointed 29 October 20072 Appointed 26 March 20083 Senior Independent Director4 Appointed 31 May 20075 Appointed 28 March 20076 To be renamed Interim Business Committee7 Ex-officio member
• Charlotte Black, Brewin Dolphin Securities Limited: mandate ended on 31 May 2007
• John S. Gubert, HSBC Holdings plc: mandate ended on 31 May 2007
• Simon M. Haslam, Fidelity International Limited, resigned on 28 June 2007
• Alain Papiasse, BNP Paribas, resigned on 1 February 2008
• John M. Schofield, UBS Investment Bank: mandate ended on 31 May 2007
• Charles F. Winters, Merrill Lynch, resigned on 28 March 2007
euroclearIannual report 2007I9�
ExecutiveCommittee6
Sir Nigel Wicks, ChairmanPaul BodartWim ClaeysAlain ClosierIgnace R. CombesFrank J. DeCongelioRichard C.S. EvansMary M. FenoglioPierre FrancotteMark S. GarvinFrederic HannequartWilliam HigginsFrançois MarionDr. Tim MayJoël MérèreDavid NicolHerschel PostAndré RollandJean-François Théodore Jean-Jacques Verdickt
ManagementCommitteePierre Francotte, ChairmanWim ClaeysIgnace R. Combes Frederic HannequartDr. Tim MayJoël MérèreAndré Rolland
StrategyCommitteeSir Nigel Wicks, ChairmanJoseph C. AntonellisPaul BodartAlain ClosierSue ConcannonPierre FrancotteTim HowellHerschel PostRobert C.M. Wigley
Jean-Jacques Verdickt7
RiskPolicyCommitteeRichard C.S. Evans, ChairmanPaul BodartTim HowellM. Andrew ThreadgoldJean-Jacques Verdickt
Sir Nigel Wicks7
AuditCommitteeFrank J. DeCongelio, ChairmanPaul BodartMary M. FenoglioFrançois MarionDavid Nicol
BusinessModelImplementationCommitteeSir Nigel Wicks, ChairmanAlain ClosierSue ConcannonMark S. GarvinLieve MostreyDavid NicolJean-Jacques Verdickt
NominationsandRemunerationCommitteeMark S. Garvin, ChairmanJoseph C. AntonellisAlain ClosierHiroaki HaradaPeter T. JohnstonHerschel Post
Jean-Jacques Verdickt7
Sir Nigel Wicks7
ExecutiveCompensationCommitteeSir Nigel Wicks, ChairmanPaul BodartAlain ClosierFrank J. DeCongelioMark S. GarvinWilliam HigginsHerschel Post
Jean-Jacques Verdickt7
BoardCommittees
94I Annexes
BoardofDirectors
FredericHannequart1
ChairmanYvesPoullet1
Chief Executive OfficerIgnaceR.CombesPierreYvesGoemans2
Dr.TimMayAndréRolland�
LucVantomme4
YannicWeber1
Jean-JacquesVerdicktIndependent
SusanY.StensonCompany Secretary
BoardCommittees
ManagementCommitteeYves Poullet, ChairmanAndré RollandLuc VantommeYannic Weber AuditCommitteeJean-Jacques Verdickt, ChairmanIgnace R. CombesDr. Tim May
Fabien Debarre5
Fernando Díaz5
NominationsCommittee6
Frederic Hannequart, ChairmanJean-Jacques Verdickt
RemunerationCommittee6
Pierre Francotte, Chairman7
Jean-Jacques Verdickt
Frederic Hannequart5
BoardofDirectors
IgnaceR.CombesChairmanStéphaneBernardChief Executive Officer AnneSwaelus2
PaulTaylor2
FrancisRemacleIndependent
MarcDeJaegerCompany Secretary
BoardCommittees
ManagementCommitteeStéphane Bernard, ChairmanMarc De Jaeger3
Pierre-Paul Stacanov
AuditCommitteeFrancis Remacle, ChairmanFabien DebarrePaul TaylorAnso Thiré
NominationsandRemunerationCommitteeIgnace R. Combes, ChairmanFrancis Remacle
BoardofDirectors
IgnaceR.Combes1
ChairmanJoëlMérèreVice ChairmanPierreSlechtenChief Executive OfficerAndréRolland2
ValérieUrbain1
GérardSoularueIndependentAlainPochet�
BNP Paribas
NadineMollier4
GrazynaThébault4
VeroniqueJehanCompany Secretary
BoardCommittees
AuditCommitteeGérard Soularue, ChairmanFabien DebarreValérie Urbain
AdmissionCommitteePierre Slechten, ChairmanJohan ArendalPhilippe BertholleBrigitte DaurelleJérôme Ladousse
NominationsCommitteeIgnace R. Combes, ChairmanGérard Soularue
RemunerationCommittee5
Pierre Francotte, Chairman6
Ignace R. CombesGérard Soularue
EuroclearBankSA/NV EuroclearBelgium1 EuroclearFranceSA
1 Appointed 23 June 20072 Appointed 20 March 20083 Appointed 14 May 20074 Appointed with effect 1 January 20075 Committee observer6 Committees created on dissolution of Nominations
and Remuneration Committee7 Function held by the Euroclear SA/NV Chief Executive Officer
• Paul Taylor resigned with effect 1 January 2007 • Pierre Francotte resigned with effect 22 June 2007• Martine Dinne resigned with effect 23 June 2007• Wim Claeys resigned on 20 March 2008
1 Trade name for Caisse Interprofessionnelle de Dépôts et de Virement de Titres/Interprofessionele Effectendeposito -en Girokas (CIK) SA/NV
2 Appointed 20 June 20073 Appointed 4 July 2007
• Hugo Spanjer resigned with effect 31 October 2007• Yves Poullet resigned with effect 20 June 2007• Yannic Weber resigned with effect 20 June 2007
1 Appointed 22 March 20072 Appointed 10 March 20083 Censeur4 Members of the Euroclear France SA Works Council whose
attendance at Board meetings is a legal requirement5 Committee created on dissolution of Nominations and
Remuneration Committee6 Function held by the Euroclear SA/NV Chief Executive Officer
• Pierre Francotte resigned on 24 May 2007• Martine Dinne resigned on 24 May 2007• Frederic Hannequart resigned on 10 March 2008• Fernando Díaz resigned from the Audit Committee
on 10 March 2008
euroclearIannual report 2007I95
BoardofDirectors
IgnaceR.CombesChairmanGuySchuermansChief Executive OfficerWimClaeysAnsoThiré�
JosdeWitIndependent
GerardHartsink4
HugoSpanjerCompany Secretary
BoardCommittee
AuditCommitteeJos de Wit, ChairmanFabien DebarreFernando DíazAnso Thiré
BoardofDirectors
PierreFrancotteChairmanDr.TimMayChief Executive Officer RichardCrewsJohnTrundle2
YannicWeber
HerschelPostIndependentMikeWilliamsIndependent
DavidWhiteheadCompany Secretary
BoardCommittees
AuditandComplianceCommitteeHerschel Post, ChairmanFabien DebarreMike Williams
Geoffrey Mitchell3
NominationsandRemunerationCommitteePierre Francotte, ChairmanHerschel PostMike Williams
BoardofDirectors
Dr.TimMayChairmanMaxWrightChief Executive OfficerDavidBurkeTomChallenorThreadneedle Asset Management LimitedPierreYvesGoemansYannicWeberTonyWood
DavidWhiteheadCompany Secretary
BoardCommittee
AuditCommitteeTom Challenor, ChairmanDavid BurkeFabien DebarreMartin Ingell
EuroclearNederland1andEuroclearNIEC2
EuroclearUK&IrelandLimited1
EMXCompanyLimited
1 Trade name for Nederlands Centraal Instituut voor Giraal Effectenverkeer (NECIGEF) BV
2 Trade name for Nederlands Interprofessioneel Effectencentrum (NIEC)
3 Appointed 26 June 20074 Observer
• Yves Poullet resigned on 26 June 2007
1 On 2 July 2007 CRESTCo Limited changed its name to Euroclear UK & Ireland Limited
2 Appointed 18 June 20073 Independent
• Frederic Hannequart resigned with effect 18 June 2007• Martine Dinne resigned with effect 18 June 2007
96I Annexes
Market Advisory Committees (MACs)
Belgium-TheNetherlands
EricHollanders,ChairmanING BankGerardHartsink,Vice-ChairmanABN AMRO Bank NVGautierBatailledeLongpreyBank Degroof SANicoBlomKas Bank NVGerardFransenRabobank NederlandPeterHannesKBC NVMarcelJongmansFortis Bank NVBettyMulder-MosmanDeutsche BankErwinReyesCitiDamienRoegiersNYSE EuronextEricStruyePetercam SAAlfonsVaesNational Bank of BelgiumHennyvanderWielenDe Nederlandsche Bank NV
ObserversRepresentative Belgian MECPatrick DrognéFebelfin
Representative Dutch ACSIRuud SleenhoffABN AMRO Bank NV
France
AlainPochet,ChairmanBNP ParibasRobertBaconnierEmetteursRolandBellegardeNYSE EuronextPierreYvesBerthonAFGMichelBoisCACEISXavierBonneruLCL Le Crédit LyonnaisPhilippeCastelanelliHSBC FranceNorbertCronNatixisAdrienDeckerCrédit Mutuel/CIC
EmmanueldeFournouxAFEIEricdeGaydeNexonSociété GénéraleGuydeLeusseEntreprises d’InvestissementDominiqueDeWitGroupe Crédit Agricole SAJean-MarcEyssautierCACEIS BankChristopheHemonLCH.Clearnet Jean-MichelLeclercqSociété GénéraleYvonLucasBanque de FranceJean-FrançoisReynaudGestitresMarcelRoncinAFTIJeanTricouFédération Bancaire FrançaiseJean-FrançoisViouAFSF
ObserversCorinne LambertAMTEJacques VanhautèreCRI
Ireland
BrianHealy,ChairmanIrish Stock ExchangeEamonnDoyleDavy StockbrokersAlbertFarrellBastow CharltonEileenKellyGoodbody StockbrokersAudreyKinsellaBank of Ireland Securities ServicesGrahamO’BrienNCB StockbrokersPatO’DonoghueCapita Corporate Registrars plcPaulShielsNational Treasury Management Agency GrahamShuttlewoodThe Royal Bank of ScotlandHelenYoungCentral Bank and Financial Services Authority of Ireland
UK
PenKentCBEChairmanChrisAddenbrookeCapita RegistrarsAndrewBaldockAbbey StockbrokersRichardBarberCitibank NARobertBarnesUBSPhilippeCastelanelliHSBC Bank plcVictoriaClelandBank of EnglandMikeHinesWinterflood Securities LtdRobertHowardCharles StanleyJaneLeviMerrill LynchNeilMartinCredit SuisseVerityPeelTullett Prebon NickScottDeutsche Bank AGDavidShrimptonLondon Stock ExchangeRobertStheemanUK Debt Management Office
Cross-BorderMAC
AlainPochet,ChairmanBNP ParibasCharlotteBlackBrewin Dolphin SecuritiesMichelBoisCACEIS SteveDaviesMerrill LynchDianaDijmarescuJPMorgan Chase & Co GerardFransenRabobank NederlandGerardHartsinkABN AMRO Bank NVBrianHealyIrish Stock ExchangeEricHollandersING BankPenKentCBE
euroclearIannual report 2007I97
Euroclearplc
Registeredoffice2 Lamb’s PassageLondon EC1Y 8BB, UK
ExecutiveofficeBaarermatte6340 Baar, Switzerland
EuroclearSA/NVEuroclearBankSA/NVCalarBelgiumSA/NV1 Boulevard du Roi Albert II1210 Brussels, Belgium
EuroclearBelgium1
6, Avenue de Schiphol1140 Brussels, Belgium
EuroclearFranceSAEuroclear Properties France SAS115, Rue Réaumur75081 Paris, Cedex 02, France
EuroclearNederland2
EuroclearNIEC�
Herengracht 459-469, 1st Floor1017 BS Amsterdam, The Netherlands
EuroclearUK&IrelandLimited33 Cannon StreetLondon EC4M 5SB, UK
EuroclearFinance2SA5, Rue Guillaume Kroll1882 Luxembourg, Luxembourg
EuroclearInvestmentsSAEuroclearReSA12, Rue Eugène Ruppert2453 Luxembourg, Luxembourg
EMXCompanyLimited2nd Floor NorthCharrington’s HouseThe CausewayBishop’s StortfordHertfordshire CM23 2ER, UK
EuroclearLatinAmericaLtda
RegisteredofficeRua Boa Vista, 254São Paulo, SP, Brazil
AdministrativeofficeAv Brigadeiro Faria Lima, 37295° Floor/CEP 04538-905São Paulo, SP, Brazil
EuroclearSA/NVBranchOffices
AmsterdamHerengracht 459-469, 1st Floor1017 BS Amsterdam, The Netherlands
London33 Cannon StreetLondon EC4M 5SB, UK
Paris115, Rue Réaumur75081 Paris, Cedex 02, France
EuroclearBankRepresentativeOffices
FrankfurtEuroclear Bank Representative OfficeBörsenplatz 560313 Frankfurt, Germany
HongKongEuroclear Bank Representative Office Room 2301-2304Citic Tower1 Tim Mei Avenue Central, Hong Kong
NewYorkEuroclear Bank Representative OfficeOne Battery Park Plaza, 24th FloorNew York, N.Y. 10004, USA
SãoPauloEuroclear Latin America LtdaAv Brigadeiro Faria Lima, 37295° Floor/CEP 04538-905São Paulo, SP, Brazil
SingaporeEuroclear Bank Representative Office80 Raffles Place # 30-22UOB Plaza 2Singapore 048624
TokyoEuroclear Bank Representative OfficeThe Imperial Hotel Tower 9F1-1 Uchisaiwaicho 1-chome,Chiyoda-KuTokyo 100-0011, Japan
1 Trade name for Caisse Interprofessionnelle de Dépôts et de Virement de Titres/Interprofessionele Effectendeposito- en Girokas (CIK) SA/NV
2 Trade name for Nederlands Centraal Instituut voor Giraal Effectenverkeer (NECIGEF) BV
3 Trade name for Nederlands Interprofessioneel Effectencentrum (NIEC) BV
Euroclear group principal offices
98I
WimVanlessen,BelgiumWimtrainedattheRoyalBalletSchoolofAntwerp,andbecameaprincipaldancerin2004.Overhis10-yearcareer,hehasappearedinnumerousimportantworksandhaswonseveralinternationalawards.
Thanks to the Royal Ballet of Flanders
Thedancers
AkiSaito,JapanAkitrainedattheTomokoKurosawaBalletStudio(Japan)andtheRoyalBalletSchoolofAntwerp.Aprin-cipaldancersince2004,shehasplayedthetitlerolesinnumeroushighprofileproductionsandin2007receivedthe‘LesEtoilesdeBallet’CriticsAward.
AlainHonoré,BelgiumAlaintrainedattheRoyalBalletSchoolofAntwerpandbecameaprincipalin2004.HehasplayedkeyrolesinimportantworkssuchasRomeo&Juliet(Mercutio,Romeo),ThèmeetQuatreVariations,TheNutcracker(PrinceDrosselmeyer)andGiselle(Albrecht).
ClairePascal,France
AgraduateoftheConservatoireSupérieurdeLyon,Clairehasper-formedwiththeGrandThéâtredeGenèveandtheSanFranciscoBalletbeforejoiningtheRoyalBalletofFlandersasaprincipalin2006.ShewonaGoldMedalattheEugeniaPoliakovInternationalCompetition.
MikelJurequi,Spain
AftertrainingattheIonBeitiaschoolinBilbaoandtheJohnCrankoschoolinStuttgart,MikeljoinedtheRoyalBalletofFlandersin2006andbecameleadsoloistin2007.HisrecentperformancesincludeTheReturnofUlysses,SleepingBeauty,HermanSchmerman,InsidersandLostbyLast.
EvaDewaele,BelgiumEvatrainedattheRoyalBalletSchoolofAntwerpandtheAmericanBalletNewYork.Shehasperformedaroundtheworldandin2005becametheRoyalBalletofFlanders’firstsoloist.Inadditiontodance,shehaspursuedherinterestsinchoreography,filmandfashion.
KathrynBennetts,Australia
BorninSydney,KathrynBennettshasstudied,performedandtaughtaroundtheworld.AprotégéofMarciaHaydeeandWilliamForsythe,herinternationalcareerhastakenhertoeverycontinent.ShejoinedtheRoyalBalletofFlandersasArtisticDirectorin2005.
euroclearIannual report 2007I99
Thephotographer
TheRoyalBalletofFlanders
TheKoninklijkBalletvanVlaanderen(RoyalBalletofFlanders),establishedinAntwerpin1969,isthelargestclassicaldancecom-panyinBelgium.TheBallettoursgloballyanditsworkconsistsmainlyofrepertoireproductions.
JohanPersson,SwedenBeforebecomingafull-timephotographer,Swedish-bornJohanPerssonwasaprincipaldancerwiththeNationalBalletofCanadaandtheBritishRoyalBallet.Johanspecialisesintheatreadvertisingandproductionphotography,andhisworkhasbeenwidelyexhib-itedinEuropeandJapan.
AMAAdvanced Measurement Approach
BIABasic Indicator Approach
CBFACommission Bancaire, Financière et des Assurances - Belgian Banking, Finance and Insurance Commission
CCICommon Communication Interface
CCPCentral Counterparty
CSDCentral Securities Depository
DBVDelivery By Value
DVPDelivery Versus Payment
ECBEuropean Central Bank
ERMEnterprise Risk Management
ESESEuroclear Settlement of Euronext-zone Securities
FIRBAFoundation Internal Ratings Based Approach
FIXFinancial Information eXchange
FSAUK Financial Services Authority
GAAPGenerally Accepted Accounting Principles
GDPGross Domestic Product
ICSDInternational Central Securities Depository
(I)CSDThe CSDs and the ICSD of the group
IFRSInternational Financial Reporting Standards
ISMAGInternational Securities Market Advisory Group
ISOInternational Organisation for Standardisation
JGBJapanese Government Bond
MAC Market Advisory Committee
MiFIDMarkets in Financial Instruments Directive
OECDOrganisation for Economic Co-operation and Development
ORMOperational Risk Management
OTCOver-The-Counter
SAS 70Statement on Auditing Standards No 70
SBISociétés de Bourses Intermédiaires - ESES pre-settlement trade confirmation platform
SETSLondon Stock Exchange Electronic Trading System
SSESingle Settlement Engine
STPStraight-Through Processing
T2STARGET2-Securities, proposal by the ECB to offer securities settlement services to CSDs in central bank money in euro
SSEThe Single Settlement Engine consolidates the core settlement applica-tions of the (I)CSDs of the Euroclear group. Today, Euroclear Bank, Euroclear France and Euroclear UK & Ireland are connected to the SSE. Euroclear Belgium and Euroclear Nederland will connect to the SSE as part of their move to ESES.
ESESEuroclear Settlement of Euronext-zone Securities is an important intermedi-
ary step towards the Single Platform. ESES provides the Euronext-zone market CSDs (Euroclear Belgium, Euroclear France and Euroclear Nederland) with an integrated settlement solution and harmonised custody services. ESES is being implemented gradu-ally as of November 2007.
CCIThe Common Communication Interface is Euroclear’s single inter-face for accessing the serv-ices offered by the group.
Clients will be able to use the STP channel AutoFlow and the screen-based inter-face ScreenFlow.
Single PlatformEuroclear’s single applica-tion platform, delivering harmonised group custody and settlement services, among others, to the clients of all the (I)CSDs of the group. All clients will use the CCI to connect to the Single Platform.
Glossary
Acronyms
Perform
ing on the biggest stage there isEuroclear annual report2007
Euroclear plcExecutive officeBaarermatte6340 BaarSwitzerland
Euroclear plc is incorporated in England and Wales under registered number 1060802, with registered address at 2 Lamb’s Passage, London EC1Y 8BB, United Kingdom
Euroclear SA/NV1 Boulevard du Roi Albert IIB-1210 Brussels, BelgiumTel. +32 (0)2 326 1211RPM Brussels number 0423 747 369www.euroclear.com
EuroclearEuroclear is the marketing name for the Euroclear System, Euroclear plc, Euroclear SA/NV and their affiliates
© 2008 Euroclear SA/NV
Performing onthe biggest stage there is
Euroclear annual report 2007