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De Nederlandsche Bank TARGET2 Nynke Doornbos 3rd Macedonian Financial Sector Conference on Payments and Securities Settlement Systems 29 June 2010 De Nederlandsche Bank Eurosysteem Agenda TARGET2 TARGET Scope and framework TARGET2 TARGET2 operational day Single Shared Platform De Nederlandsche Bank Eurosysteem TARGET TARGET Trans-European Automated Real-time Gross settlement Express Transfer system De Nederlandsche Bank Eurosysteem History: the ESCB payment system European Central Bank NCB-A NCB-B Interlinking bank A bank B bank C bank D De Nederlandsche Bank Eurosysteem History: TARGET(1) ECB NCB ILC NCB ILC NCB ILC NCB ILC ILC NCBILC NCBILC ILC TARGET Interlinking Network • Expensive NCB • Inflexible • Different pricing NCB • Different products / NCB services • Different standards ILC ILC NCBILC ILC ILC NCB NCB ILC ILC ILC NCB NCB NCB De Nederlandsche Bank Eurosysteem From TARGET to TARGET2 Swift Net Services Bank A Bank B Interlinking via FIN NCBs Ancillary systems De Nederlandsche Bank Eurosysteem TARGET2 Platform 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 NCB´s (3CB): Bundesbank, Banque de France and Banca d´Italia The platform offers some mandatory and some optional modules. Operational per 19 November 2007 (in 3 groups) De Nederlandsche Bank Eurosysteem TARGET2 in Europe Countries on TARGET2 ---- of which € Other EU-countries De Nederlandsche Bank Eurosysteem Functionalities in T2 De Nederlandsche Bank Eurosysteem TARGET2 TARGET2 offers: High availability Uniform pricing Uniform functionality Harmonisation Advanced tools for liquidity management Ready for new countries De Nederlandsche Bank Eurosysteem TARGET2: Operations All RTGS operations may be processed in TARGET2 All types of operations 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 credit transfers direct debits (limited usage) mandated payments All types of business payments between market participants central bank operations settlement operations of ancillary systems De Nederlandsche Bank Eurosysteem TARGET2 Operational day 18:45 19:30 22:00 01:00 06:45 07:00 17:00 18:00 18:45 business day (d+1) TARGET business day (d) Calendar day (d-1) Calendar day (d) 9 1 2 3 4 3 5 6 7 8 1 De Nederlandsche Bank Eurosysteem 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) De Nederlandsche Bank Eurosysteem Payment interface - FIN Copy SWIFTNet FIN Bank A MT 103(+) / 202 / 204 Participant Interface (Y-copy) mandatory Booking instruction Bank B SSP country MT 097 MT 096 SSP country MT 011 MT 012 MT 103(+) / 202/204 MT 019 PM Acknowledgement either / or optional Payment Processing De Nederlandsche Bank Eurosysteem Single Shared Platform Centralized solution: single platform, no interlinking central payments processing: DE, IT (workload distribution between regions) central datawarehouse and customer services: FR Region 1 Region 2 Region 3 SITE A SITE C SITE E SITE B SITE D SITE F payments and accounting services customer related services De Nederlandsche Bank Eurosysteem Single Shared Platform REGION 1 Live SITE A SITE B Test & Training (T&T) P P Asynchronous remote copy Synchronous remote copy Hot back-up Periodic Region Rotation S REGION 2 SITE C Synchronous remote copy S SITE D Hot back-up De Nederlandsche Bank Eurosysteem Ancillary systems settlement For integrated model: liquidity transfer SSS For interfaced model: real-time settlement SSS Securities accounts Other NCB Cash settlement accounts RTGS Securities accounts NCB environ ment RTGS NCB environ ment De Nederlandsche Bank Eurosysteem Stakeholders TARGET2 De Nederlandsche Bank Eurosysteem TARGET2 user testing Objective Check readiness from business, operational and procedural viewpoints Implementation Usage of a separate user test environment Several testing phases with different purposes Connectivity testing Interoperability testing Country testing Business Day testing Changeover Go live User Testing De Nederlandsche Bank Eurosysteem 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 between EUR 0.80 and 0.125. Optional services (e.g. liquidity pooling and services related to ancillary systems) are priced separately De Nederlandsche Bank Eurosysteem Liquidity pooling - Virtual account Credit institution e.g. Bank A1 Credit institution e.g. Bank A2 Credit institution Bank A3 Group 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 De Nederlandsche Bank Eurosysteem Volume and value turnover T2 De Nederlandsche Bank Eurosysteem Actual volume and value turnover T2 De Nederlandsche Bank Eurosysteem Main indicators in 2009 De Nederlandsche Bank Eurosysteem NL Summary Commercial banks directly benefit of a technically centralized platform (legally it is a decentralized system) One pool of liquidity, one window for info on all TARGET payments De Nederlandsche Bank Eurosysteem