How Euroclear manages the interoperability with the different markets

Agenda

The Euroclear group

Creating a “European Domestic Market”, an exemple of cooperation and consolidation among the CSD’s of the Euroclear group

Euroclear Bank’s links with the different markets

Euroclear Group structure

As of Jan 2005

219 User Shareholders Euroclear Plc Sicovam Holding

Euroclear SA/NVAmsterdam branch

Paris branchLondon branch

Euroclear Nederland

Euroclear France SA

CRESTCo LtdEuroclear

Bank SA/NV

Q2 2005Turnover

Euroclear BankCRESTCo Euroclear France

ST005

€ trillion

0

50

100

200

250

350

150

300

6 months2002

241.9

2003

256.2

2004

307.1

2005

171.4

61

36.3

74.1

85.4

53

103.5

85.5

52.6

118.1

114.4

60.1

132.6

Value of securities held

Euroclear BankCRESTCo

Euroclear FranceEuroclear Nederland

ST006

Q2 2005

14.6

€ trillion

0

2

4

6

8

10

12

14

30 June

2002 2003 2004

10.911.9

13.1

2005

0.7

2.2

3.2

4.8

0.7

2.4

3.5

5.35.9

3.8

4.1

2.6

30.8

0.8

6.7

Agenda

The Euroclear group

Creating a “European Domestic Market”, an exemple of cooperation and consolidation among the CSD’s of the Euroclear group

Euroclear Bank’s links with the different markets

Consolidation of settlement is necessary to make European capital markets competitive

for issuers and investors

European capital markets infrastructureThe problem of fragmentation

Settlement is a key component of capital markets efficiency

– National markets not a European market

– At least one CSD per country

– fragmentation has a major impact on efficiency, cost and risk

Both Harmonisation and Consolidation enable efficiency gains,

and reduction of costs and risks

Our vision is full consolidation of markets within Euroclear Group

Full integration of legacy systems and functionalityFull integration of legacy systems and functionality

Single Settlement EngineSingle Settlement Engine

Common User InterfaceCommon User Interface

CRESTCREST EuroclearFrance

EuroclearFrance

EuroclearNetherlands

EuroclearNetherlands CIKCIK Euroclear

Bank

EuroclearBank

Customer

Domestic ServiceDomestic Service Full ServiceFull Service

Agent

Central Banks

&

Payment systems

From today’s fragmentation towards consolidation

CIK E NL E F CREST E B

Current situation

Positioning & booking

Legal record

Core Processing

Client Communication Interface

Legacy

Country boundary

Step 1 SSE (2006)

CIK E NL E F CREST E B

SSE

ESES-CCI – e-RGV - E2A

ESES - SP component

ESES - RGV upgrade

SSE

CIK E NL E F CREST E B

Step 2 ESES (2007)

Step 3 Single Platform

(in phases from 2008)

SSE

CIK E NL E F CREST E B

CCI

Single ApplicationPlatform

Legend

ConclusionEuroclear’s business model meets the challenges facing the European markets

Creating efficiency (e.g. reduce costs) and reduce risks while retaining choice and competition

Eliminating differences in technology – both standards and processes

Harmonising market practices and legal/regulatory framework

Offering a settlement model that allows choice of service levels to meet the needs of all issuers investors, and intermediaries

Agenda

The Euroclear group

Creating a “European Domestic Market”, an exemple of cooperation and consolidation among the CSD’s of the Euroclear group

Euroclear Bank’s links with the different markets

GE014B

Euroclear Bank’s services

Money Transfer

Settlement

services

Custodyservices

Credit and Banking Services

Tri-Party

services

Lending &

Borrowing

FundSettle

Com

mu

ni c

ati

on

s

Clien

t S

er v

ices a

nd

S

up

por t

.

Mi g

rat i

on

Team

Domestic debt

Austria

Belgium

Denmark

Finland

France

Germany

Ireland

Greece

Italy

Luxembourg

theNetherlands

Norway

South Africa

Spain

Portugal

Sweden

the United Kingdom

Russia

Switzerland

CS205

Australia

Indonesia

Malaysia

the Philippines

Hong Kong

Thailand

Japan

Singapore

Against paymentFree of payment

Argentina

USA

Canada

Mexico

New Zealand

Equities

CS206

Austria

Belgium

Denmark

Finland

France

Germany

Greece

Italy

Ireland

Hong Kong

Malaysia

Singapore

Japan

Norway

Spain

theNetherlands

Portugal

Sweden

Switzerland

Luxembourg

the United Kingdom

Argentina

USA

Canada

Mexico

SE Settlement

Borrowers

Lenders

Seller

Purchaser

52 %

10 %

Broker/dealers8 %

Other participants4 %

26 %

“No client sector stands by itself”

Fixed income

Equities

Derivatives

Activity breakdown by market segment

Accessing new markets1. Issuance of eurobonds

-> acceptance of denomination currency-> acceptance of settlement currency

SETTLEMENT CURRENCI ES IN EB DENOMI NATION CURRENCI ES I N EBCURRENCY I SO CODE CURRENCY I SO CODE

ARGENTINE PESO ARS UAE DIRHAM AED

AUSTRALIAN DOLLAR AUD BULGARIAN LEV (replaced by BGN) BGL

CANADIAN DOLLAR CAD BULGARIAN NEW LEV BGN

SWISS FRANC CHF BAHRAINI DINAR BHD

CZECH KORUNA CZK BERMUDIAN DOLLAR BMD

DANISH KRONA DKK BRAZILIAN REAL BRL

ESTONIAN KROON EEK BOTSWANA PULA BWP

EURO EUR CHILEAN PESO CLP

BRITISH POUND GBP CHINESE YUAN RENMINBI CNY

HONG KONG DOLLAR HKD COLOMBIAN PESO COP

HUNGARIAN FORINT HUF CYPRUS POUND CYP

CROATIAN KUNA HRK EGYPTIAN POUND EGP

INDONESIAN RUPIAH IDR INDIAN RUPEE INR

ISRAELI NEW SHEKEL ILS KAZAKSTAN TENGE (10/10/2005) KZT

ICELANDIC KRONA ISK KOREAN WON KRW

JAPANESE YEN JPY LEBANESE POUND LBP

KUWAITI DINAR KWD MOROCCAN DIRHAM MAD

LITHUANIAN LITAS LTL MALTESE LIRA MTL

LATVIAN LATS LVL MADEDONIA DENAR (10/10/2005) MKD

MEXICAN NUEVO PESO MXN NICARAGUAN CORDOBA NIO

MALAYSIAN RINGGIT MYR PERUVIAN NUEVO SOL PEN

NORWEGIAN KRONA NOK ROMANIAN LEU (will cease to exist end Dec '06) ROL

NEW ZEALAND DOLLAR NZD RUSSIAN RUBLE (replaced by RUB) RUR

PHILIPPINE PESO PHP RUSSIAN RUBLE (RUB=RUR/1000) RUB

POLISH ZLOTY PLN SAUDI RIYAL SAR

ROMANIAN NEW LEU RON TURKISH LIRA (will cease to exist end Dec '05) TRL

SWEDISH KRONA SEK TAIWAN DOLLAR TWD

SINGAPORE DOLLAR SGD UKRANIAN HRYVNIA UAH

SLOVAK KORUNA SKK URUGUAYAN PESO UYU

SLOVENIAN TOLAR SIT VENEZUELIAN BOLIVAR VEB

THAI BAHT THB VANUATU VATU VUV

TURKISH NEW LIRA (TURKISH LIRA as of 01/01/06) TRY CFA FRANC BEAC (Cameroon) XAF

UNITED STATES DOLLAR USD GOLD XAU

SOUTH AFRICAN RAND ZAR SDR INTERNATIONAL MONETRARY FUND XDR

CFA FRANC BCEAO (Sénégal, Côte D'ivoire) XOF

Last update: 23 August 2005 ZAMBIAN KWACHA ZMK

2. Access to the national domestic securities marketsMajor determining factors guiding the decision toservice a market

International flows

Operational Risk

Reputation Risk

Liquidity Risk

Legal Risk

Sufficient international demand from international investors justifying a link

Operational procedure

Service level agreements

Contractual relationship external agents

Choice of agents – depositories

(settlement + payments, asset servicing)

Free access to the currency

Credit Lines with cash correspondents (settlements + payments)

Asset protection

Enforceability of contracts