20 December 2021

The Debt Issuance Market Contact Group (DIMCG) produced an advisory report outlining ways to improve the efficiency of the debt issuance and initial distribution process in the European Union. . The report focuses on further harmonizing certain aspects of the pre-trade and commercial debt issuance process, which could make the current largely manual processes more efficient and improve risk mitigation.

The report is structured around three pillars.

Pillar 1 studies the potential risks, costs and inefficiencies of the debt issuance process. Based on the issuance of a standard debt instrument (“plain vanilla”), members of the DIMCG identified potential operational risks, such as documentation errors, manual interventions, ambiguity in the identification of investors during the phase of constitution of the accounting book, inefficiencies in the good, the multiplicity of tools and the absence of direct processing. These risks arise from the lack of harmonization of the pre-negotiation and commercial stages of the debt issuance process.

To meet these challenges, Pillar 2 presents the possible ways to harmonize the stages of pre-issuance and initial distribution. DIMCG members recommend that stakeholders involved in debt issuance establish common requirements, standards, data and models in order to digitize procedures. For these efforts to become effective, DIMCG members agreed that further market-oriented work would be needed to implement the report’s recommendations.

Pillar 3 focuses on ongoing initiatives to improve the overall efficiency of emissions in Europe. The creation of a European issuance framework with common rules and procedures would be a way to encourage existing and future initiatives and to support harmonization throughout the chain of issuance operations. On the idea of ​​a European infrastructure to potentially support the conclusions of the DIMCG, the group failed to reach a consensus as some members believed that it could promote the integration of European financial markets, while others believed that it could lead to increased fragmentation.

The DIMCG encourages industry to adopt the report’s recommendations, given their close link with ongoing European harmonization initiatives in the area of ​​capital markets. The Eurosystem will closely monitor market reactions to the DIMCG report and the progress made by the industry in implementing the report’s recommendations. The Eurosystem plans to meet the stakeholders represented within the DIMCG in a year to take stock of related developments.