Economy of the central depository is developing in positive direction. The economic results show growing trend and in the last year they even reached the historical maximum. The profit increased by 40 percent in 2019 compared to the previous year. We talked on this topic with Mr. Martin Wiedermann, the Managing Director and the Chairman of the Board of Directors of Centrálny depozitár cenných papierov SR, a.s. We wanted to know how he perceives this success also in context of new challenges and the perspective of further development of the central depository.
How do you evaluate the economic results of the last year?
To be open, results of the previous year were quite surprising for us. Good financial figures were influenced mainly by higher activity of the issuers, increase in revenues and decrease in costs. I feel very good about this success, but on the other hand I am aware that to maintain the positive results is a great responsibility. And also that is the reason why we are facing several big challenges. In coming months we want to focus on the implementation of SRD II, the penalty mechanism, to broaden scope of corporate actions provided in compliance with the standards. Important case will be digitisation of services. The current events related to the COVID-19 pandemic proved that the digitisation of services is the right direction. In addition, higher effectiveness and faster internal processes are also the aims in our view.
You have mentioned increase in services. Would you be more specific and tell us in what services of the depository is the highest interest?
In recent times we recorded increased interest of the issuers in issuance of the bond securities. We believe that this trend will continue and that companies shall utilise this method as practical alternative for development and restart of their business. Issuance of covered bonds, which replaced the mortgage bonds, was dominating element of the previous year. Higher interest in our services can be inducted also by changes we are preparing and implementing continuously. We started the project of digitisation and electronization, from which we expect not only faster services of higher quality, but also higher effectiveness. After finalisation of the project and implementation of all modules we will be able to provide our services more flexibly.
A lot have been told about implementation of the penalty mechanism and postponing of its date of entry into force. What is the current status?
In July of this year the European Central Securities Depositories Association (ECSDA) addressed the European Commission with proposal to postpone adoption of the penalty mechanism by one year and implement it from 1 February 2022. The Delegated Regulation postponing implementation of the penalty mechanism has been adopted by the European Commission on 23 October 2020. As regards T2S, the so-called DRY-RUN test related to calculation and reporting of penalties in the production system has been moved to September 2021 as the penalty mechanism implementation has been postponed. Therefore also CDCP is presently updating the penalty mechanism implementation plan in depth as of the new deadline. Despite that we are actively working on implementation of particular changes. Several changes in the settlement were accomplished from 31 August 2020, and in July we have finalised complex proposal of changes in the Rules of Operation and related documents.
The issuers are interested in the corporate actions. It was also the reason why the central depository started to provide information on the corporate actions. Will the information services be broadened by the other types of these events?
The corporate actions are next area we are working on intensively. Up to now we have managed to implement acknowledgments on the corporate actions. The principle is very simple. They are used to inform the issuers on changes related to basic corporate action events via the Information System of CDCP. This can be, for example, a change in the business name of a company. While before the participant was informed about the event usually by e-mail, or had to search for executed events by itself, today a standardised message from the depository with information on specific event is delivered. Nowadays the changes are implemented only for general corporate action, but CDCP intends to extend their types in stages.
According to your opinion, what the year 2020 will be for the central depository? Is it possible that the economic development will keep its positive trend?
Actual figures show that positive trend shall not change neither in this year. However, the economic result shall be influenced by several factors. We have recorded decrease in issuer’s activity from beginning of the corona virus pandemic. Positive fact is that we managed to compensate the dropout by registration of four issues of the government treasury bills, and five new issues of the government bonds. The other reason for moderate optimism is gradual growth of issuers’ interest to issue debt securities. Moreover, we won the long-running legal disputes in our favour. This year the reserves created for this purpose shall be dissolved, what shall display also in the final figures. I believe that also our increasing effectivity, electronisation of internal processes and client-oriented approach shall influence our results positively. So we expect growth in the economic result also this year.