Exchange offered 6% of Crest: Taurus collapse haunts the market as Bank of England rejects larger share plans

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The Independent Online
THE BANK of England yesterday offered the Stock Exchange a stake of less than 6 per cent in the new Crest share settlement system, rather than the 30 per cent for which it asked.

The decision puts the exchange in its place after it failed to get the ill-fated Taurus settlement system off the ground. That was abandoned last year at heavy cost to the City.

The exchange is being offered a place on an advisory committee that will help to organise Crest. Pen Kent, a Bank director, said it could be one of the candidates to manage the system once it was running.

But the exchange gave a frosty response to the offer of a small shareholding, saying it would continue its review of how best to contribute and discuss at a board meeting on 26 May whether the stake would be appropriate.

Detailed plans for implementing Crest reject the exchange's proposal for a significant minority stake. The plans favour a broader ownership in which the exchange would be one of about 18 principal investors in the new settlement system.

These 'Tier 1' investors would be asked to subscribe between pounds 500,000 and pounds 750,000 towards Crest's initial capital of pounds 12m. The higher figure would be 6 per cent of Crest's capital.

But Mr Kent made it clear the level of City interest was such that Tier 1 investors were likely to get less than 6 per cent.

There are now 48 potential investors, divided into four tiers according to size of stake they would like. But the deadline for applications has been extended and Mr Kent suggested another dozen could arrive.

Altogether there are likely to be 50 to 60 large and small investors as part of the Bank's strategy of having the broadest possible ownership.

After investigation by consultants, a cap of pounds 35m has been put on spending on Crest up to its inauguration, including the initial pounds 12m.

The Bank will build the system and take the lead role in managing it from completion at the end of next year to inauguration in late 1996. But the Bank will withdraw in 1997, leaving Crest - renamed Cresco - to a private sector operator and its own board.

The Crest project team offered an olive branch to private investors and small stockbrokers, who have been concerned their interests will be sidelined, with a promise that they will be able to retain share certificates and will be able to settle shares slower than the professionals at reasonable cost. Market dealings are to move from 14-day settlement to 10 and then five days.

Private investors will also be allowed to become sponsored members of Crest through their brokers or market-makers, acting as agents.