The EIS will shape the landscape of debt capital market as it will change the way debt securities are issued and managed by one of the biggest sovereign issuer of the euro zone. The European Commission currently uses a settlement system comprising commercial suppliers of settlement services. The large increase in the scale of EU issuance has led the European Commission to transition from the current arrangements to a Eurosystem-based settlement infrastructure. The EIS aims to migrate from a private sector International Central Securities Depositary (ICSD, Euroclear and Clearstream) to a public sector national central bank and from a private sector paying agent to a public sector paying agent.

Under the EIS, the Commission deposits EU debt securities with the National Bank of Belgium who plays the role of Issuer-CSD using the National Bank of Belgium Securities Settlement System (NBB-SSS). Only (I)CSDs other than NBB-SSS can act as Investor CSD and will be able to hold EU or Euratom debt in their securities accounts directly at NBB-SSS. Any interested EU (I)CSD wanting to become an Investor CSD can on-board to NBB-SSS in a non-discriminatory manner. The European Central Bank (ECB) acts as paying agent. The goal is to ensure a higher level of operational integrity and allow for the reduction of counterparty risk, neutrality and level-playing field for all central securities depositories and investors across the EU.

The move from the current post-trade management system to a new model under the EIS required to establish new contractual relationships related to the post-trade management system itself and more generally to the borrowing operations carried out by the European Union and the EURATOM.

Our team composed of members from our Luxembourg and Belgian offices, performed an extensive regulatory, debt capital markets and tax analysis on the proposed new structure and its implementation as a whole and they assisted the European Commission and its partners (NBB and ECB) with the implementation of the proposed structure and the establishment of the EIS. We also assisted the issuer for the inaugural issue under the EIS of €2.2 billion of short-term EU-Bills in its first bill auction of the year. The dual tranche transaction consisted of a new €1.3 billion, 6-month bill due in July 2024 and a €0.9 billion tap of the 3-month bill due in April 2024.

For further information please see the press release from the European Commission and the National Bank of Belgium