Son of Taurus faces poor reception: City spurns Bank of England's Crest project as hasty solution to Stock Exchange's settlement problem

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The Independent Online
THE Bank of England faces a rough ride from City share dealers, investors and companies today when it champions its plans for an automated share settlement system, Crest, to replace the Stock Exchange's aborted Taurus system.

The Bank is making a presentation to City representatives in the Barbican Centre in London outlining its plans for Crest.

Pen Kent, chairman of the Crest project team, said as he unveiled the plans yesterday that the City's continuing attachment to the existing Talisman settlement system was a 'non-story'.

'Talisman is like an aircraft from the propeller age, it just won't do for the jet age,' he said. 'We have to get ready for the next century.'

But many market makers are sceptical about Crest and would prefer a modified Talisman system. They fear that the Bank's deadline for a finalised design for Crest next May is too early, considering the years of development that Taurus went through.

One head of settlements at a City market maker said: 'We've heard rumours that Crest is not going well. Is it wise to throw the whole Taurus project away? There are doubts that the time parameters for Crest are achievable. There is not a strong commitment for Crest from market makers.'

A key City criticism of the Bank's working paper, 'Crest principles and requirements', is that it retains the role of the registrars, who maintain the record of legal ownership of shares. The market is dominated by three UK clearing banks. Market makers think this role could have been reallocated with a big cost saving.

Mr Kent said that the controversy over the future role of the Stock Exchange in share settlement was also a 'non-story'.

'The future ownership, management and control of Crest is open to debate,' he said. 'There may well be a role for the Stock Exchange some way or other. This is still an open question.' He also said that the Stock Exchange was not necessarily the automatic choice to be the regulator of Crest.

Martin Hall, director of public policy at the Stock Exchange, told a conference in Frankurt yesterday: 'The future ownership, management and operation of Crest are as yet to be determined. The London Stock Exchange may well have a significant role to play in that continuing structure.'

Mr Kent said that the Bank's plan for Crest could be built within a timescale of 18 months to two years at a cost of pounds 25m- pounds 30m.

Who would build Crest is undecided, but the Bank pointed out that it had designed and built three settlement systems recently, within deadline and to budget. These were the gilts settlement system, the money markets system and a European bond system.

Mr Kent said that the Bank's plan tackled worries by companies that they will not be able to keep track of their shareholders, particularly as there is likely to be a big growth in the use of nominee accounts under Crest. This could be solved by allowing companies to talk directly to registrars in order to track shareholders, even if they were part of nominee accounts.

Private investors will also be able to maintain their voting rights and access to meetings and perks, by requesting their nominee account operators to talk with the companies.

Mr Kent said Crest would be a cheaper form of settlement for everyone as central transactions between retail brokers and market makers will all be automated.

'It will offer investors faster, cheaper and more efficient settlement than present systems,' he said. 'It will allow listed companies to get swifter, more up-to-date information on their shareholders, and it will reduce the paper-chase in back offices.'

The first step towards Crest will be the move to rolling settlement next April. The final blueprint must be fixed by May 1994, when the Bank will be able to say just how much cheaper share dealing will become. The project team will then have detailed engineers' plans, which will enable designers to start building the system the next day.

View from City Road, page 32

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