RESOURCES
https://www.banque-france.fr/system/files/2023-04/payments_market.pdf
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How a counterparty established in Spain can use eligible assets issued and held in Italy to obtain a credit from Banco de España:
Step 1 – The Spanish credit institution contacts Banco de España (central refinancing bank) to request the credit and to announce its intention to use the correspondent central bank method – CCB – to post marketable assets that it holds in Italy as collateral.
Step 2 – Based on the information provided by the counterparty, Banco de España sends a message to Banca d’Italia asking it to receive Italian securities from the counterparty on its behalf. At the same time, the counterparty issues instructions for the marketable assets to be transferred (or instructs its custodian in Italy to transfer them) to the account of Banca d’Italia with Monte Titoli, the Italian CSD. Therefore, in this example, Banca d’Italia acts as correspondent central bank for Banco de España, the central refinancing bank.
Step 3 – After receiving the message from the Spanish central bank, Banca d'Italia ascertains that the marketable assets have been transferred to its account with Monte Titoli. The counterparty (or its custodian) will have previously delivered the marketable assets to the account of Banca d'Italia in accordance with Monte Titoli's delivery procedures.
Step 4 – When the delivery has taken place, Monte Titoli sends a confirmation message to Banca d'Italia.
Step 5 – As soon as the latter receives the confirmation message from Monte Titoli, it performs certain internal procedures (for example, determining the price of the assets). It then sends an acknowledgment of receipt to Banco de España. Banca d'Italia holds the assets on behalf of Banco de España, thus effectively acting as its custodian.
Step 6 – After receiving the acknowledgment of receipt of the assets, Banco de España credits the funds to the credit institution.