The correspondent central banking model (CCBM) is an arrangement established by the Eurosystem to allow counterparties to mobilise assets eligible for monetary policy and intraday credit operations on a cross-border basis, in which the national central banks (NCBs) act as custodians for and agents of one another. Under this arrangement: (i) the home central bank (HCB) provides credit or liquidity to the counterparty based on eligible assets held by or to the order of the counterparty in an account designated by the correspondent central bank (CCB); (ii) the CCB acts on behalf of the HCB in respect of those eligible assets and provides assistance and advice; and (iii) in specific cases relating to eligible non-marketable assets (credit claims), the assisting central bank (ACB) provides assistance and advice.
The CCBM operates according to the principle of decentralising access to credit, which means that Eurosystem counterparties can only obtain credit from the central bank of the country in which they are based – their home central bank (HCB).
Mobilising marketable assets requires that counterparties agree to use the CCBM, through instructions to one of the following:
- the issuer securities settlement system (SSS): the SSS in which the securities were issued (standard CCBM);
- the investor securities settlement system: the SSS in which the securities are held, provided that an eligible link exists between the issuer SSS and the investor SSS (CCBM with links);
- the triparty agent of the triparty model being used (since 29 September 2014) (triparty CCBM).
Non-marketable assets not governed by the HCB’s domestic law are also mobilised through the CCBM. For counterparties belonging to a Member State other than Spain that wish to mobilise non-marketable assets (credit claims) subject to Spanish law, these assets will in all cases be held, mobilised and demobilised through the Eurosystem Collateral Management System (ECMS). Generally, the CCB is the NCB of the country whose legislation governs these assets.
When using the CCBM, it is important to note that market practices vary across countries. Eurosystem counterparties may use various techniques to mobilise collateral (repo or pledge). If the CCB were to offer more than one technique, the one chosen by the HCB will be used. However, pooling is the only operational method used by the Eurosystem to hold collateral mobilised by counterparties.
