Collateralised Products for the Industry

1. Collateralised Products for the Industry An insight to Clearstream Liquidity Hub

2. Agenda • Features of the Clearstream Liquidity Hub • Current trends • Initiatives • Conclusion

3. Features of the Liquidity HubWhat is Clearstream Liquidity Hub ? Integrated Securities Lending, Borrowing and Collateral Management in cash, fixed-income and equities. 332 participants for an outstanding of EUR 500 bio.

4. Features of the Liquidity HubWhat is Clearstream Liquidity Hub ? A series of services build over time with a network of more than 330 counterparties, operated on the ICSD and CSD platform with full settlement and custody capabilities. • Automated Securities Lending and Borrowing (1979) • Triparty Repo (1992) • Allocation to Bundesbank (1999) • Allocation to the FED (2001) • KAGplus (2004) • Euro GC Pooling (2005) • ASLplus (2006) • Triparty Rehypothecation (Reuse) (2006) • Allocation to Banque Centrale du Luxembourg (2009)

5. Features of The Liquidity HubA focus on Triparty Repo Cash provider Cash taker Clearstream as triparty agent Securities valuation and eligibility check Automatic selection of securities Settlement delivery versus payment (DVP) Daily mark-to-market and reporting Securities Cash DVP settlement Cash provider collateral account Cash taker source account The ease of an unsecured deposit with the security of a repo

6. A focus on Triparty RepoCharacteristics Maintain principal relationship of true money market instrument A "no hassle“, fully collateralised investment A neutral and flexible agency service Principal trading relationship remains between Collateral Receiver (Buyer) and Collateral Giver (Seller) Negotiations only refer to the cash side of the trade (amount, currency, rate, term) Collateral requirements are pre-defined in Appendix A of the Collateral Management Service Agreement Clearstream, 3 April 2014 6

7. A Focus on Triparty RepoThe role of the Agent Clearstream Banking handles the entire administration of your transactions: Deal confirmation and collateral eligibility check Multi-pieces and cross-currency collateralisation Delivery Versus Payment settlement (DVP) Daily mark-to-market Margin calls Substitution (DVP) Custody administration (coupon, redemption, etc.) Deal termination Clearstream Banking acts as the common collateral manager for both parties to ensure security and flexibility Clearstream, 3 April 2014 7

8. A Focus on Triparty RepoA neutral and flexible agency service Counterpart introduction service Dedicated operations support and customer service desk Automatic collateral allocation and substitution (optional) Daily monitoring of the collateral and detailed reporting Principal relationship governed by TBMA (PSA)/ISMA GMRA Bilateral Collateral Management Service Agreement between Customer and Clearstream Banking Triparty Repo gives you the ease of an interbank deposit and the safety of a repo Clearstream Banking acts as the common collateral manager for both parties to ensure both security and flexibility Leaves you with full principal, control over your repo activity but outsources much of the back-office workload “Probably the safest, no hassle money market instrument around” Clearstream, 3 April 2014 8

9. A Focus on Triparty RepoCollateral eligibility “Baskets” pre-defined in Appendix A ‘Counterparty acceptance list and collateral eligibility criteria’ to the CMSA Type of issuer Government and sovereign Supranational Agency Corporate Structured securities Eligible securities’ currency denominations Fixed income credit ratings Haircuts (same currency, cross currency, dynamic) Remaining maturity Clearstream, 3 April 2014 9

10. Securities quotation age per asset class A Focus on Triparty RepoCollateral eligibility • Concentration by country, asset class and structured securities More sophisticated criteria to avoid concentration risk and ensure diversification (since 2006)

11. A Focus on Triparty RepoDaily administration: valuation and reporting Clearstream, 3 April 2014 11

12. Current total collateral under management trends Evolution of Clearstream’s collateral under management (outstanding) in Euro (bn) Per 21.09.09 Euro 500 bn

13. 20 day moving Average Current GC pooling outstanding via EUREX Per 3.9.09 Euro 70 bn

14. Participant trends in the Liquidity Hub 2/3rds of participants are commercial banks, the traditional Customers of Clearstream. Total commercial banks 203.

15. Participant trends in the Liquidity Hub The appetite for secured products has increased since the start of the crisis, bringing risk adverse participants such as Funds, Asset Managers, Central Bankers, etc. 15 asset managers, 16 corporate, 26 funds, 2 insurers, 12 state agencies, and 6 supranational.

16. Features of the Liquidity HubOutlook – further improvements to come • USD cash in Euro GC Pooling (2009) • In addition to EUR cash, using the proven EGCP concept / infrastructure • Further central bank access (collateral management), 2009 • BCL 10/2009, DNB-BUBA Concept 2010 (Pending ECB Governing Council approval) • Equity as collateral in triparty repo / collateral management (2009 / 2010) • In addition to bonds, relying on the existing triparty services • Eurex Clearing AG as CCP, e.g. for lending transactions (2010) • Further reducing risk and in line with market demands / developments

17. A Focus on Further Central Bank AccessTriparty allocation for AT,BE,DE,IT,FR,XS,NL,LU,SI • Central Bank Money Access – Developments • Based on the success of the fully automated “collateral re-use” functionality towards the German Central Bank (limited to account holders at the German Central Bank), Clearstream in cooperation with the Dutch and the German Central Bank intends to implement a “pre CCBM2” service allowing clients of the DBAG Liquidity Hub to “onward pledge” collateral received (e.g. in GC Pooling or Triparty Repo) via the German Central Bank (technical account) towards their “Home Central Bank” to raise domestic Central Bank Money. • Implementation of this service depends on the support of the Governing Council (ECB) towards the first pilot market (Netherlands). Given the positive impact for the money market industry (extended flexibility, collateral optimisation and reuse form Triparty, reduced settlement risk), decision is expected January 2010.

18. Collateral Management System “x” Bank • Collateral received from the CCP could be • ‘re-used’ with the Central Bank “x” vs Euro • Cash Provider in GC pooling product (via a • Central Counterparty) A Focus on Further Central Bank AccessTriparty allocation for AT,BE,DE,IT,FR,XS,NL,LU,SI • Central Bank Money Access (flow) Euro funding in central bank money Home Central Bank “x” a/c for “x” Bank Euro repo transaction Eurex Clearing (CCP) ‘Onward pledge’ / earmarking Collateral Clearstream Liquidity Hub Deutsche Bundesbank Technical a/c for “x” Bank AT,BE,DE,IT,FR,XS,NL,LU,SI ‘Onward pledge’

19. Conclusion • Trust between market actors is not yet back to normal. • Triparty volumes have stabilized and we see many “newcomers” (banks and non-banks) are implementing a Triparty set-up based on a lack of trust towards the ‘old financing models’. • Triparty Collateral Profiles remain very conservative and risk adverse. • Central Bank placements are still highly “en vogue“ although Central Bank Money rates are no longer attractive. • The collateralised products are the way forward, Clearstream will spare no efforts in providing flexible and efficient solutions to serve the entire markets with the Liquidity Hub features and initiatives. • Clearstream Liquidity Hub offers already a series of collateralised products but is also ready today to offer alternative financing when the Central Bank will implement their “exit” strategy. • There is room for everyone in the Liquidity Hub.

20. Questions ?