400 million euro; for what?

At a recent conference a senior member of the T2S development team said that to date €350m had been spent on development and this was likely to rise to about €400m due to the 9 months delay announced at SIBOS. Let me say it again €400m!

When T2S was devised in pre 2006, the world was a very different place and in those days a technology platform to harmonise settlement in the Eurozone was seen as a good thing. However, even in then there were plenty of reservations about the viability of such a system. Especially as it cut into operational strangle holds of a number of key players in the settlement space. Euroclear was one such player and had its reservations but today are a supporter of the project, if not entirely convinced.

As I understand it T2S is an entirely internal development project for the ECB and shared between the 17 Eurozone central banks. This looks like a project nightmare, but does not explain how such high costs have been accumulated. With the jump from €350m to €400m for a nine month delay that averages out at €75m per year. They must be paying some huge salaries!

As they are ploughing on regardless of the economic crisis, which could become a lot worse before it gets better and may result in a breakup of the Eurozone, there must be some thought to the future viability of this project. Certainly the support for this project right now is mixed. Banks certainly have far greater priorities and even those staunchly advocating T2S implementation will have to justify the value to their business in revenue growth, as well cost cutting.

Although the world is in austerity mode at the moment the need to seed growth has never been more urgent. Will T2S supply growth requirements? There has to be some doubt.

Right now €400m looks pretty expensive and 2015, when it’s due, a long way off. For this reason and the uncertainty that abounds concerning the future of the Eurozone, a fresh look at T2S is needed. In 2015 will the market structure look the same as in 2006? I am reasonably certain it will not.