T2S Leads BNY Mellon to Expand European Settlement Data Capability

The standardization provided by Target2-Securities (T2S) has fundamentally changed the way BNY Mellon does business in Europe, says its head of product management for custody, cash and foreign exchange.

Tom Casteleyn tells Inside Reference Data that the bank, which is the world's largest custodian, wouldn't have made the upgrade to its infrastructure that allowed it to support ISO 20022 had it not been for T2S.

T2S is a centralized securities settlement platform for the European Union. Casteleyn says the platform is now very much a reality, with migration wave three completed just weeks ago. This means that central securities depositories in Belgium, France and the Netherlands are now on the system.

"We still have more than 50% to go but we can already say that this is the new reality. There is no turning back from it—it's an inevitability."

Casteleyn says BNY Mellon had to upgrade systems supporting the ISO 15022 messaging standard to support ISO 20022.

"This is a very significant improvement for us. T2S was a catalyst for making that investment. We wouldn't have done this if it was just for one market, but because it was for the whole of the eurozone it became something that we felt was worthwhile."

Upgrading to ISO 20022 also meant building a dedicated "pipe" into T2S. "We had selected Swift as our provider of those ISO 20022 messages to T2S and to get the messages back into our systems. That is significant because your internal systems talk a language that is Swift-like, and you have to build connectors to ensure you have translated in the right format to outgoing messages, and so on. So a big chunk of our project was involved in that."

But Casteleyn says this only has to be done once, because as soon as communication with T2S is established so is communication to all central securities depositories.

The standardization project has had major strategic implications for BNY Mellon. "T2S is a step towards creating a Capital Markets Union because it's a structure on which the union will operate. Equally, for us as a bank it has been a catalyst to change the way we look at custody in Europe," he says.

"We used to be a US bank operating in Europe, looking at custody as such. Now we are becoming a real European bank that is connected into the European market infrastructure, and that is because of T2S. We will soon be directly connected to the six largest markets in Europe, which is 90% of the volume we process."