Bank wins Treasury support to develop Crest share system

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The Independent Online
THE Bank of England has won Treasury backing to build and provide initial finance for Crest rather than put development of the new share settlement system out to tender, in order to avoid a repeat of the Taurus fiasco.

Once the new system is running, the Bank wants to sell it off to a broad-based consortium of stock market participants and recoup its development costs.

The Bank took on responsibility for developing Crest last year when the Stock Exchange's Taurus system collapsed after years of overspending and over-complication.

A spokeswoman for the Bank said: 'We looked at the possibility of tendering out. But we need to keep momentum. The project must be carefully managed, kept within budget and it must actually work. It needs to be done by the Bank.'

The Bank called for stock market players to respond to plans for Crest, outlined in two reports on the system's design and ownership sent out by the Bank yesterday.

The ownership report, which has Treasury backing, says: 'The authorities . . . believe that the Bank of England should continue to act as project manager in the build phase, to avoid the delays that would be involved in installing alternative project management, both in administering any tender process and while tenderers become adequately familiar with the Crest design.'

The Bank feels it could only undertake this role it if built the system itself.

The report continues: 'There is, however, considerable scope for computer firms to be involved in the competitive provision of networks and associated services, to connect customers, registrars and banks to Crest; and in the parallel development of customers' and registrars' systems.'

If the Bank gains support for its ideas, it will choose a software house and start building Crest in May. 'The Bank will seek commitments in principle to use Crest from an adequate quorum of issuers, investors and intermediaries of all sorts,' the ownership report says.

Deciding what an adequate quorum is will be a matter of judgement, the Bank spokeswoman said. 'If there is wide-scale unhappiness, we won't do it.'

The initial cost of designing software for Crest will be pounds 5m to pounds 7m over two years, and the earliest completion date will be summer 1996.

The Bank suggests that ultimate ownership of Crest should be given to Crestco, a company set up for the purpose. A maximum of 10 per cent of Crestco's shares would be held by any single company, and not more than 30 per cent by any sectoral group such as market makers or fund managers.

The idea is that the industry should own Crestco and that most of the shareholders should be from the private sector.

The owners would decide what hardware to use in Crest, what accommodation it would have, and who would operate it as an agent.

It would cost pounds 10m to pounds 12m to build the system. The hardware and the site would take the final price to pounds 20m- pounds 30m.

The Bank wants hands-on responsibility for maintenance and for transfer to the new owners. It suggests smoothing this process by taking on agency computer staff who could then be used by Crestco.

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