TARGET2

1

• TARGET2
• Richard Derksen Conference Financial
  Sector of Macedonia on Payments and
  Securities Settlement Systems
• Ohrid 24 June 2008

2
Contents

• TARGET
• Scope and framework TARGET2
• Single Shared Platform
• Project planning
• Migration

3
TARGET

• TARGET
• Trans-European
• Automated
• Real-time
• Gross settlement
• Express
• Transfer system

4
The ESCB payment system
NCB-A
NCB-B
Interlinking
bank A
bank D
bank B
bank C
5
TARGET1

• Expensive
• Inflexible
• Different pricing
• Different products / services
• Different standards

6
From TARGET to TARGET2
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TARGET2 platform
NL

• One central platform for NCBs for the real time
  gross settlement of large value payments
• The central TARGET2 platform, called Single
  Shared Platfom (SSP), is built by 3 NCBs (3CB)
• Bundesbank, Banque de France and Banca dItalia
• The platform offers some mandatory and some
  optional modules.
• Operational per 19 November 2007 (group 1)

8
TARGET2 in Europe
Countries on TARGET2
---- of which
Other EU-countries
9
TARGET2
NL

• TARGET2 offers
• High availability
• Uniform pricing
• Uniform functionality
• Harmonisation
• Advanced tools for liquidity management
• Ready for new countries

10
TARGET2 Operations

• All RTGS operations may be processed in TARGET2
• individual operations settled in real-time and in
  central bank money
• no exclusion according to amount or type of
  operations
• Wholesale payments are a main goal for TARGET2
• All types of operations
• credit transfers
• direct debits (limited usage)
• mandated payments
• All types of business
• payments between market participants
• central bank operations
• settlement operations of ancillary systems

11
TARGET2 operational day
12
TARGET2 operational day

• Purpose of the different phases
• Start-of-day (1 2)
• Night-time processing (3)
• Technical maintenance window (4)
• Preparation for day trade phase (5)
• Day trade phase I (6)
• Day trade phase II (7)
• End-of-day (8 9)

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Payment interface- FIN Copy -
SWIFTNet FIN
MT 011
Bank B SSP country
Bank A SSP country
MT 012
MT 103() / 202/204
MT 103() / 202 / 204
MT 019
MT 096
MT 097
PM
Participant Interface (Y-copy)
Booking instruction
mandatory
Acknowledgement
either / or
Payment Processing
optional
14
Single Shared Platform

• Centralized solution single platform, no
  interlinking
• central payments processing DE, IT
  (workload distribution between regions)
• central datawarehouse and customer services FR

15
Single Shared Platform
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Ancillary systems settlement
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Stakeholders TARGET2
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Migration groups

• Group composition aimed at minimising project
  risk, reducing effect on level playing field and
  limiting the costs for central banks and users
• Data migration 19 November 2007, 18 February
  2008, 19 May 2008

Not needed
19
Migration DNB
NL

• Big Bang!
• No fall-back, as current systems will be
  terminated
• Extensive testing (June 2007 until January 2008)
• Importance of providing information to Clearing
  members, Ancillary systems, DNB itself and all
  the customers
• Website
• Meetings (involvement SWIFT)
• Monitoring of progress
• Involvement CIearing members in drafting test
  scenarios
• but some changes before or after TARGET2
  migration
• change of AS settlement model
• terminating of domestic payment products

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Objective
TARGET2 user testing

• Check readiness from business, operational and
  procedural viewpoints

Implementation
Usage of a separate user test environment
Several testing phases with different purposes
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Pricing

• Objectives cost recovery, competitiveness and
  broad access
• Pricing of transactions pricing scheme with a
  monthly fee (100 euro or 1.250 euro) plus
  transaction fee of between EUR 0.125 and 0.80
• Optional services (e.g. liquidity pooling and
  services related to ancillary systems) are priced
  separately

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Summing up
NL

• TARGET2 is a sort of 3rd wave of Euro
• Impact for national markets is big, but provides
  them (and foreign banks) directly with all
  benefits of a technically centralized platform (
  legally it is a decentralized system)
• One pot of liquidity, one window for info on all
  TARGET payments
• Migration will be challenging and require a lot
  of testing and hard work

23

Thank you
24
Liquidity pooling - Virtual account

• virtual balance balance on (single) accounts
  credit lines
• possibility to use this position by each group
  account holder
• booking on the single accounts (not on the
  virtual account)
• only intra-day levelling off at the end of
  day mandatory