Links with other payment systems

Clearstream Banking Luxembourg

The BCL has appointed Clearstream Banking Luxembourg (Clearstream) as the national central securities depository for the collateral it requires from counterparties in exchange of credit. Indeed, according to its statutes, any credit granted by the BCL has to be fully collateralised. The intra-day credit facility is an important liquidity management tool in a payment system. It is useful to avoid payments to be blocked in the system due to insufficient liquidity.

Participants in LIPS-Gross with the need to increase their intra-day credit facility may collateralise their eligible securities detained in Luxembourg by a deposit on the BCL’s account with Clearstream. Participants may also provide these guarantees with the securities issued by foreign securities settlement systems by using the links that Clearstream has established with them.

Furthermore, Clearstream and the BCL offer their common customers the “Night-time Link". With to this service, credit institutions can use the liquidity available on their account with BCL to guarantee any credit Clearstream would have to grant them during its night-time settlement processing.

European System of Central Banks (ESBC)

Participants also have the possibility to make use of the Correspondent Central Banking Model (CCBM) organized by the ECB to mobilise eligible securities held elsewhere in the EU. For instance, a Luxembourg participant wants to provide securities held in the Netherlands as guarantee. He deposits them at the Dutch central bank, which will inform the BCL. The BCL is then sure to have eligible collateral as guarantee and may accordingly grant a credit facility to the Luxembourg participant. In this model, the Dutch central bank keeps the securities on behalf of his fellow in Luxembourg and plays indeed the role of correspondent central bank.

Continuous Linked Settlement  (CLS)

CLS has been developed with the aim to mitigate the risks in foreign exchange operations. In a single transaction of this type, different currencies are involved, thus different payment systems, which are not correlated. In some instances, the settlement for each currency happens several hours apart.

The CLS Bank coordinates a payment vs. payment procedure to ensure that the settlement of the two legs of a transaction takes place simultaneously. The Luxembourg participants in CLS use LIPS-Gross for the settlement of their euro positions.