T+1 settlement in Europe: Update and Strategic Recommendations for Financial Institutions
T+1 settlement refers to the settlement of securities transactions one business day after trade date. With this move, the EU is aligning with global trends and setting a new standard in capital markets. But T+1 is far more than a regulatory change. In this article, we explain why this shift is strategically significant, which risks financial institutions may be underestimating, and how to respond effectively.
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Open collection
CRR III disclosure: Now comes the processing of Pillar III
T+1 settlement in Europe: Update and Strategic Recommendations for Financial Institutions
Efficient mapping of stress scenarios
Variable business - proven model, new implementation
Recalibration of IRRBB interest rate shocks - new developments
CRR III - New regulations for off-balance sheet items
Corporate Treasury Management in the Interest Rate Environment
SRTs: The Future of Capital Relief - But Who is Absorbing the Risk?
How Asset-Backed-Securities Can Optimise Balance Sheets
Operational Excellence in Asset Management and Bank Treasury
T+1 in Europe – The Transition Has Begun
Europe is on course to implement a T+1 settlement cycle — bringing securities settlement to just one day after the trade date. What has already been adopted in the U.S. is now advancing in Europe as well.
While the timeline may appear generous at first glance, time is of the essence. The implementation effort is substantial, spanning technological, operational, and organizational dimensions. T+1 is not merely a regulatory compliance project — it’s a fundamental transformation with wide-reaching implications.
Timeline for Implementation
Global developments toward T+1 settlement are progressing steadily. Following the successful implementation in the U.S. in May 2024, the UK confirmed its decision in February 2025, and the EU reached a political agreement in November 2024.
In June 2025, European market authorities — coordinated by ESMA — are expected to issue formal recommendations for implementation. Full adoption of the T+1 regime in the EU is anticipated in 2026, with the rules officially coming into effect on October 11, 2027.
Figure 1: Timeline for the Transition to T+1 in Europe
Despite this apparent lead time, the complexity of the required changes should not be underestimated.
How Are Market Participants Preparing?
The current market response is mixed. Some banks, central securities depositories (CSDs), and large asset managers are actively preparing. Others continue to underestimate the scale of change, relying heavily on service providers without a thorough review of their end-to-end value chain.
Several key areas for action have already emerged:
- Automation and Straight-Through-Processing (STP): End-to-end automation across the trade lifecycle is becoming critical.
- Cut-off Times: Trading, allocation, and settlement processes must be significantly accelerated.
- Pre-Settlement Services: New platforms for matching, confirmation, and triparty services are being actively developed.
- Liquidity Management: Intraday liquidity — for both cash and securities — is now a top priority.
- IT infrastructure: Many firms are investing in scalable, modular system architectures with an eye on a future T+0 environment.
However, the European post-trade infrastructure remains fragmented. A one-to-one transfer of the U.S. approach is not feasible. National differences across settlement frameworks call for tailored, market-specific solutions.
Key Challenges in the implementation of T+1
T+1 affects nearly all segments of the capital markets and brings with it significant challenges:
- Settlement Fails & Penalties: The shortened timeline increases fail rates. CSDR penalty mechanisms apply from day one.
- Late Trades & Allocations: Compressed timelines demand faster internal reconciliation and affirmation.
- FX Settlement: With FX transactions still largely settled on T+2, this introduces timing mismatches. A move to T+0 for FX will be necessary.
- Collateral Management: More frequent substitutions and recall activity require active, real-time management. Demand for third-party collateral solutions is rising.
- Fund Operations: NAV calculation and publication must be accelerated. Existing direct debit collection cycles may need to be redesigned or replaced.
- IT Systems: Many current systems are not built for intraday processing, making short-term retrofitting nearly impossible without major overhaul.
Asset managers are particularly affected — not only in the secondary market, but also in primary issuance processes. The so-called “funding gap” between fund unit values and the valuation of underlying assets may create strategic conflicts of interest.
Figure 2: T+1 Impacts from an Asset Management Perspective
What Should Institutions Do Now?
Given the complexity and scope of change, we recommend a structured, phased approach:
a) Comprehensive Value Chain Assessment
- Identify all impacted processes across trading, clearing, and settlement.
- Review dependencies on outsourcing partners and service providers.
- Prioritize required changes based on regulatory risk and operational impact.
b) Establish a T+1 Program Steering Committee
- Set up a cross-functional project team (front office, operations, IT, legal, risk).
- Involve custodians, CSDs, and other key partners from the outset.
- Leverage U.S. market experience — but adapt for European structures.
c) Define a Technology and Investment Roadmap
- Assess current IT landscape and pain points.
- Invest in STP capabilities and modular, future-ready architectures.
- Align T+1 planning with longer-term T+0 readiness strategies.
d) Redesign Operational Processes
- Bring forward cut-off times for order intake, matching, and settlement.
- Expand the use of pre-matching platforms and real-time monitoring tools.
- Introduce intraday NAV calculation and communication capabilities.
e) Engage in Change & Communication Management
- Provide staff training and internal awareness programs.
- Communicate proactively with clients on new deadlines and workflows.
- Conduct regular scenario planning and readiness assessments.
Figure 3: Trading Processes in focus for T+1 transition
Figure 4: Settlement processes in focus for T+1 transition
Conclusion: T+1 Is a Strategic Inflection Point
The shift to T+1 is far more than just a technical implementation project – it is a symbol of the increasing acceleration and complexity in the capital market environment.
This transition marks a fundamental redefinition of post-trade processes.
Anyone who sees T+1 merely is not merely a technical adjustment — it reflects the broader trend toward speed, efficiency, and complexity in capital markets.
Institutions that view T+1 purely as a compliance requirement risk missing its true potential. At stake are:
- Operational efficiency
- Risk mitigation
- Strategic responsiveness
Now that T+1 is live in North America and moving ahead in Europe, the time for preparation — and leadership — is now. The move from next-day to same-day settlement forces banks, asset managers, custodians, and infrastructure providers to re-evaluate legacy processes — while creating a unique opportunity to break down silos, eliminate manual interventions, and modernize outdated interfaces.
T+1 is a wake-up call:
The capital market infrastructure of the future must be faster, more transparent, more automated — and more collaborative.
Those who invest in systems, processes, and partnerships today will lead the capital markets of tomorrow.
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