The Telsat application used by Agence France Trésor has been selected by the European Union. EUR 800 billion of securities are to be issued from September onwards to finance the recovery plan. The explanations of Jean-Michel Boucarut, director of the implementation of the monetary policy of the Banque de France.
The European Union has chosen to use Telsat, a technology developed by the Banque de France, for its auctions of short-term Treasury bills (EU-bills) and long-term bonds (EU-bonds).
The stakes are high. 800 billion by the end of 2026 to finance the NextGenerationEU recovery plan. This corresponds to borrowing volumes of around €150 billion per year on average as of September.
The preferred auction technique
The European Union has already issued several tranches under the SURE programme (Support to mitigate Unemployment Risks in an Emergency) to finance the short-time working schemes of the Member States in the context of the health crisis. However, it had proceeded by syndication, calling on a group of banks to place its securities.
For NextGenerationEU, both issuance methods (syndication and auction) have been retained, but auctions (or Dutch auctions) should be the preferred method in the European issuance programme, according to Jean-Michel Boucarut, Director of Monetary Policy Implementation at the Banque de France. This technique ensures the conditions of transparency between the various subscribers.
The selection of an auction platform was therefore an important step in the implementation of this strategy.
Functionality and technical criteria
"This choice is the result of a call for tenders launched in the first quarter with precise demands in terms of functionality and technical criteria. We responded and the result was made public last week", he explains.
"We were chosen for the reliability of our system as well as for our experience, as we have been providing this service to Agence France Trésor for some 30 years. The French debt agency has been surveyed by the European Commission on the efficiency of the Telsat application which is fast, transparent and highly secure.".
Telsat allows the 15 primary dealers to submit their bids for desired amounts and prices. It also allows the issuer to set its price and issue quantity according to its needs, which results in an automatic allocation of securities. All this is done in a matter of seconds.
Close to cost price
"Telsat is also very cost efficient as we do not charge commissions unlike banks in a syndication process"adds Jean-Michel Boucarut.
The service provided by the Banque de France is contractualized and will be invoiced to the European Commission but at a level close to cost price, as is already the case for the French Treasury.