IMF Seeks ECB Supervision for Clearstream Banking Luxembourg

The International Monetary Fund (IMF) has recommended that Clearstream Banking Luxembourg, currently classified as a less significant institution, should be directly supervised by the European Central Bank (ECB) due to its global systemic importance and operational complexity.

In a recent report, the IMF highlighted Clearstream Banking Luxembourg’s crucial role in the financial system, suggesting that the institution’s status might warrant a shift from oversight by Luxembourg’s Financial Sector Supervisory Commission (CSSF) to the ECB. The IMF’s “technical note on selected issues in banking supervision” argued that Clearstream’s global interconnectedness and structural complexity justify direct ECB supervision.

The IMF report, issued on June 24, 2024, stated, “CBL’s global systemically important interconnectedness and substitutability characteristics, as well as its structural and operational complexity, may justify an ECB decision” to supervise the bank. This decision could be initiated by the ECB or requested by the CSSF.

A representative from the CSSF acknowledged that the issue of Clearstream’s supervisory status is longstanding, noting that CBL was part of the ECB’s comprehensive assessment. Despite CBL’s significant role, the CSSF emphasised that specialized institutions like CBL are subject to limited powers under the SSM regulation and there are arguments to maintain its current LSI classification. However, the CSSF also admitted that CBL’s systemic relevance might place it under direct ECB supervision.

Clearstream Banking responded by stating that the choice of supervisory setup is a matter for the relevant authorities. The institution is already supervised as another systemically significant institution (O-SSI) and a central securities depository under EU regulation.