Tomcat
Professional
- Messages
- 2,687
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- 113
In the mid-1990s, in preparation for the creation of the euro area and the introduction of a new currency, the need arose for a payment system that would ensure cross-border settlements and operations to carry out a single monetary policy. Since the central banks of most European countries already had their national RTGS, the new payment system, dubbed TARGET (Trans-European Automated Real-Time Gross Settlement Express Transfer System), was supposed to act as a liaison and ensure the smooth transfer of funds within the euro area. At the same time, due to time constraints, only the minimum requirements for the harmonization of uniform standards in the field of cross-border transfers were developed.
TARGET became operational at the same time as the introduction of the euro, on January 4, 1999. The system had a decentralized structure and served as a technical platform for remittances in euros with the participation of the national RTGS of the eurozone countries and the European Central Bank. In its original form, TARGET existed until 2007, when it was reorganized in order to enhance the integration of the participating countries and harmonize settlement terms. This stage was named TARGET-2. By the end of 2008, 17 RTGS countries of the eurozone participated in the system, including a number of countries that retained their own currencies and did not introduce the euro (Denmark, Estonia, Poland) [ECB, 2009b] [1].
All credit institutions and other financial institutions registered in the indicated countries are allowed to settle in TARGET. At the end of 2008, the number of direct participants who had accounts for settlements in TARGET-2 amounted to 747, indirect participants acting through direct ones - 3806. If we add the branches, subsidiaries of these institutions, as well as correspondent banks participating in calculations of TARGET around the world, the total number of organizations reaches 56 thousand | ERUs, 2009b |.
Initially, it was assumed that TARGET would conduct large and time-critical payments in euros, including transactions related to the monetary policy of the ECB, final transfers to settle settlements between systemically important settlement systems, etc. However, during the operation of TARGET, the flow of medium-sized payments of a commercial nature increased. This was facilitated by attractive terms of settlements in the system, their speed and reliability. Thus, 64% of all transfers in TARGET do not exceed 50 thousand euros in amount, and payments over 1 billion euros make up 1% of all transfers | ERU, 2009b |.
The liquidity required for settlements in TARGET is provided, firstly, by reserve balances held in the accounts of participants in national RTGS, as well as overdraft loans from the ECB, which are provided without limit and free of charge, but with full backing with securities.
The decision to switch to TARGET-2 and change the principles of the structure of the system was made by the ECB leadership in 2002. The main goal of the reform was to create a single technical platform (Single Shared Platform - SSP) and introduce unified principles of payment for services. A single technical platform is provided by the central banks of the three countries - Germany, France and Italy.
A unified scale of payment for services was introduced for domestic and cross-border transfers. In addition, the provision of services for settlement of settlements of various categories of payment systems in the eurozone - retail payment systems, clearing institutions, securities settlement systems - was expanded. These systems have direct access to TARGET using standard interfaces. Measures were also envisaged to improve settlement conditions for large international banks. They could combine reserve accounts and create a single pool of liquidity for branches in different countries.
In 2004-2008. the volume of TARGET payment transactions increased by 10% per year. In 2008, the total amount of transactions carried out by the system amounted to 682.8 trillion euros, of which 216.2 trillion accounted for cross-border transfers and 466.6 trillion - for internal payments of the participating countries. The average daily amount of transfers for TARGET-2 is 2.7 trillion euros | ERUs, 2009b, p. 15].
TARGET became operational at the same time as the introduction of the euro, on January 4, 1999. The system had a decentralized structure and served as a technical platform for remittances in euros with the participation of the national RTGS of the eurozone countries and the European Central Bank. In its original form, TARGET existed until 2007, when it was reorganized in order to enhance the integration of the participating countries and harmonize settlement terms. This stage was named TARGET-2. By the end of 2008, 17 RTGS countries of the eurozone participated in the system, including a number of countries that retained their own currencies and did not introduce the euro (Denmark, Estonia, Poland) [ECB, 2009b] [1].
All credit institutions and other financial institutions registered in the indicated countries are allowed to settle in TARGET. At the end of 2008, the number of direct participants who had accounts for settlements in TARGET-2 amounted to 747, indirect participants acting through direct ones - 3806. If we add the branches, subsidiaries of these institutions, as well as correspondent banks participating in calculations of TARGET around the world, the total number of organizations reaches 56 thousand | ERUs, 2009b |.
Initially, it was assumed that TARGET would conduct large and time-critical payments in euros, including transactions related to the monetary policy of the ECB, final transfers to settle settlements between systemically important settlement systems, etc. However, during the operation of TARGET, the flow of medium-sized payments of a commercial nature increased. This was facilitated by attractive terms of settlements in the system, their speed and reliability. Thus, 64% of all transfers in TARGET do not exceed 50 thousand euros in amount, and payments over 1 billion euros make up 1% of all transfers | ERU, 2009b |.
The liquidity required for settlements in TARGET is provided, firstly, by reserve balances held in the accounts of participants in national RTGS, as well as overdraft loans from the ECB, which are provided without limit and free of charge, but with full backing with securities.
The decision to switch to TARGET-2 and change the principles of the structure of the system was made by the ECB leadership in 2002. The main goal of the reform was to create a single technical platform (Single Shared Platform - SSP) and introduce unified principles of payment for services. A single technical platform is provided by the central banks of the three countries - Germany, France and Italy.
A unified scale of payment for services was introduced for domestic and cross-border transfers. In addition, the provision of services for settlement of settlements of various categories of payment systems in the eurozone - retail payment systems, clearing institutions, securities settlement systems - was expanded. These systems have direct access to TARGET using standard interfaces. Measures were also envisaged to improve settlement conditions for large international banks. They could combine reserve accounts and create a single pool of liquidity for branches in different countries.
In 2004-2008. the volume of TARGET payment transactions increased by 10% per year. In 2008, the total amount of transactions carried out by the system amounted to 682.8 trillion euros, of which 216.2 trillion accounted for cross-border transfers and 466.6 trillion - for internal payments of the participating countries. The average daily amount of transfers for TARGET-2 is 2.7 trillion euros | ERUs, 2009b, p. 15].
- [1] The Bank of England ceased operations through TARGET in 2008.
