TARGET2 (Real-time Automatic Transmission Real-Time Transfer System) is a real-time gross settlement (RTGS) system for Eurozone, and is available to non-Eurozone countries. It was developed by and owned by Eurosystem. TARGET2 is based on an integrated central technical infrastructure, called Single Shared Platform (SSP). The SSP is operated by three central banks that provide: France (Banque de France), Germany (Deutsche Bundesbank) and Italy (Banca d'Italia). TARGET2 began replacing TARGET in November 2007.
TARGET2 is also an interbank RTGS payment system for the clearance of transboundary transfers in the euro zone. Participants in the system either directly or indirectly. Participants directly hold an RTGS account and have access to real-time information and control tools. They are responsible for all payments sent from or received in their own account or any indirect participants operating through them. Indirect participation means that payment orders are always sent and received from the system through direct participants, with only the relevant relevant participants who have a legal relationship with Eurosystem. Finally, bank branches and subsidiaries may choose to participate in TARGET2 as addressable or multi-addressed BIC access.
Video TARGET2
Destination
The objectives of TARGET2 are to:
- support the implementation of Eurosystem monetary policy and enable the euro money market
- minimize systemic risk in payment market
- improve the efficiency of cross-border payments in euros, and
- maintaining the integration and stability of the Euro Zone money market.
Maps TARGET2
Participation
The use of TARGET2 is mandatory for the completion of any euro operation involving Eurosystem. Eurosystem consists of the European Central Bank (ECB) and the national central banks of the 19 EU member states that are part of the Eurozone. Participation in TARGET2 is mandatory for new member countries joining the Euro Zone.
TARGET2 services in euros are available for non-Eurozone countries. National central banks of countries that have not adopted the euro may also participate in TARGET2 to facilitate the settlement of transactions within the euro. The central banks of the four non-Eurozone countries Bulgaria, Denmark, Poland and Romania also participate in TARGET2.
In 2012, TARGET2 has 999 direct participants, 3,386 indirect participants and 13,313 correspondents.
Activity
TARGET2 is a real time gross settlement (RTGS) system with payment transactions completed one by one continuously in central bank money with an immediate finality. There are no upper or lower bounds on the payment value. TARGET2 primarily completed monetary policy operations and money market operations. TARGET2 must be used for all payments involving Eurosystems, as well as for the completion of operations of all major net settlement systems and a securities settlement system that deals with the euro. TARGET2 operates on one technical platform. Business relationships are established between TARGET2 users and their national central banks. In terms of the value processed, TARGET2 is one of the largest payment systems in the world.
TARGET2 is a harmonized RTGS system that includes Eurozone. It operates on Single Shared Platform (SSP), which replaces the first generation decentralized TARGET system. It is designed to provide enhanced services with benefits to economies of scale that enable it to charge lower and offer cost efficiency. All Eurosystem participants, and beyond, can access the same function and interface, as well as a single pricing structure. SWIFT standards and services (ie FIN, InterAct, FileAct and Browse) are used in harmonized communication between the system and its participants.
Prior to the introduction of TARGET2, some central banks held "home accounts" (also called "proprietary home accounting systems") outside their RTGS system. It is used primarily to manage minimum reserves, standing facilities and cash withdrawals, but also to complete transaction support systems.
It was agreed that, in the context of the new system, this type of transaction should ultimately be completed on an RTGS account held in the SSP. However, some domestic arrangements do not allow this operation to be moved quickly to the CNS. As a result, Eurosystem approved a maximum transition period of four years to move the settlement of this payment to the SSP.
The Information and Control Module (ICM) allows users directly to access information and manage parameters related to online balances and payments. Through ICM, users have access to the Payment Module and Static Data Management functions. ICM users can choose what information they receive and when. Urgent messages (eg system broadcasts from central bank and payday warnings with debit time indicator) are automatically displayed on the screen.
TARGET2 provides completion services for various support systems. While each of these is used to have its own completion procedures, TARGET2 now offers six common procedures for completion of support systems and allows this system to access any account in the SSP through a standard interface.
Statistics
In 2012, TARGET2:
- settle the cash position of 82 support systems,
- processing a daily average of 354,185 payments, representing a daily average of EUR2,477 billion,
- the average value of a TARGET2 transaction is EUR7.1 million,
- two thirds of all TARGET2 payments (ie, 68%) have a value of less than EUR50,000 each; 11% of all payments have a value of more than EUR1 million each,
- peak turnover volume is June 29, 2012 with 536,524 transactions and peak turnover on March 1, 2012 with EUR3,718 billion,
- The TARGET2 portion of the total massive payment system traffic in the euro is 92% in terms of value and 58% in volume,
- the SSP technical availability is 100%, and
- 99.94% TARGET2 payouts are processed in less than five minutes.
Liquidity management
Availability and cost of liquidity are two important issues for the smooth processing of payments in the RTGS system. In TARGET2, liquidity can be managed very flexibly and available at low cost because the minimum paid reserves - which the credit agencies need to hold with their central bank - can be fully used for daylight completion purposes. The average provisions applied to minimum reserves allow banks to become flexible in their end-of-day liquidity management. An overnight loan and deposit facility is also possible for sustainable liquidity management decisions. Eurosystem provides intraday credit. This credit must be fully guaranteed and no interest is charged. However, all Eurosystem credits must be fully collateralized, ie secured by other assets. The range of eligible collateral is very wide. Assets eligible for monetary policy purposes also qualify for intraday credit. Under the Eurosystem rules, credits may only be granted by the national central bank of the Member State to which the participant is assigned. Bank treasury managers have an interest in the use of automated processes for optimizing payments and liquidity management. They need tools that will allow them to track activity across accounts and, where possible, make accurate daily and nightly payment decisions from a single location - e.g. their headquarters. TARGET2 users have, through the Information and Control Module, access to comprehensive online information and easy-to-use liquidity management features that meet their business needs.
TARGET2 has features that enable efficient liquidity management, including payment priority, timed transaction, liquidity reservation facility, limit, liquidity collection and optimization procedures.
Access criteria
Access criteria for TARGET2 aims to enable a broad participation level by the institutions involved in clearing and settlement activities. Supervision by competent authorities ensures the health of the institution. The supervised credit institutions established within the European Economic Area are the main participants. Controlled investment companies, clearing and settlement organizations subject to government oversight and cash can also be accepted as participants.
Pricing
There are two pricing schemes:
- Recurring charges and fixed transaction costs:
- Fixed monthly fee: EUR100.00
- Single transaction price: EUR0.80
- Repeats fixed costs and variable transaction costs based on transaction amount:
- Fixed monthly fee: EUR1,250.00
- Variable transaction price: volume based between EUR0.60 and EUR0.125
Holidays
The TARGET2 system is closed on Saturdays and Sundays and on the next public holiday in all participating countries: January 1, Good Friday and Easter Monday (according to the calendar used by Western Christianity), May 1, December 25 and December 26.
History
Since the founding of the European Economic Community in 1958, there has been a progressive movement towards more integrated European financial markets. This movement has been marked by several events: In the area of ​​payments, the most notable was the launch of the euro in 1999 and the cash turnover in the euro area countries in 2002. The establishment of a large central TARGET central bank payment system is less visible, but also very important. This is an integral part of the introduction of the euro and facilitates the rapid integration of the euro area money market.
The implementation of TARGET2 was based on the decision of the ECB Council in the fall of 2002. TARGET2 began operations on 19 November 2007, when the first group of countries (Austria, Cyprus, Germany, Latvia, Lithuania, Luxembourg, Malta and Slovenia) migrated to the SSP. The first migration was successful and confirmed the reliability of the CNS. After this initial migration, TARGET2 has completed approximately 50% of all traffic in terms of volume and 30% in terms of value.
On February 18, 2008, the second migration successfully migrated to TARGET2, which consists of Belgium, Finland, France, Ireland, the Netherlands, Portugal and Spain.
On May 19, 2008, the last group migrated to TARGET2, consisting of Denmark, Estonia, Greece, Italy, Poland, and the ECB. The six-month migration process runs smoothly and does not cause any operational disruption.
Slovakia joined TARGET2 on January 1, 2009, Bulgaria joined in February 2010, and Romania joined on 4 July 2011.
Relationship with Europe's debt crisis
The main subject of criticism is the unlimited credit facility available since the establishment of the TARGET system by the national central bank of the Eurosystem on the one hand and by the ECB on the other.
The issue of increasing Balance Goals was brought to the attention of the public for the first time in early 2011 by Hans-Werner Sinn, president of the Munich Ifo Institute. In an article in Wirtschaftswoche, he drew attention to the massive increase in Target claims held by the German Bundesbank, from EUR5 billion in late 2006 to EUR326 billion by the end of 2010, and to the liability of risk officers. In the German daily SÃÆ'¼ddeutsche Zeitung he entered the entire volume of liabilities Target Greece, Ireland, Portugal and Spain at 340 billion euros at the end of February 2011. In addition, he pointed out that if these countries have to get out of the zone euro and declared bankruptcy, the risk of German responsibility would amount to 33% of that amount, or 114 billion euros, in relation to this amount to other rescue facilities from euro nations and the International Monetary Fund. Before he announces it to the public, the deficit or surplus target is not explicitly detailed, as it is usually buried in an unclear position from the central bank's balance sheet.
Shortly thereafter, Sinn interpreted the Target balance for the first time in the context of the current account deficit, the international private capital movement and the international shift from the refinancing credit that the national central bank of the Eurosystem grants to commercial banks in their jurisdictions. He proved that the ECB system compensates for the interruption and reversal of capital flows triggered by the financial crisis by shifting credit refinancing among the national central banks. Increased liability objectives are a direct measure of cross border net payment orders, which is part of the current account deficit that is not offset by capital imports, or, equivalent, the amount of current account deficit and net capital exports. Indirectly, they also measure the amount of money the central bank of the country made and lent beyond the required for domestic circulation. Since every country needs a relatively stable amount of central bank money for its domestic transactions, payment orders to other countries, which reduce domestic money supply, must be offset by the issuance of new refinancing credits, that is, the creation of a new center of bank money. Similarly, an increase in the balance of money in a country whose central bank respects payment orders reduces the demand for fresh refinancing credits. Therefore, the target liability of a country also indicates the extent to which its central bank has replaced the capital market to finance its account deficit, as well as the possibility of capital flight, by creating new central bank money through appropriate refinancing credits. Sinn illustrates that from an economic perspective, Target credits and official rescue facilities serve the same purpose and involve the risk of similar obligations. Sinn's presentation on May 19, 2011 at the Munich Economic Summit motivated the op-ed column at Financial Times . They reconstruct data based on balance sheets from the national central bank Eurosystem and the International Monetary Fund's balance statistics.
Then, in June 2011, Hans-Werner Sinn and Timo Wollmershaeuser compiled the first panel database of Eurozone Target balances. The authors point out that the creation of additional money by central banks of crisis-stricken countries is given by the decline in standards for assurances that commercial banks should provide to their national central banks to obtain refinancing credits. Further, they show that commercial banks from the core countries of the Eurozone use incoming liquidity to reduce the refinancing credits they withdraw from their national central banks, even lending a surplus of liquidity to this central bank, implying that the Target balance is indirect also measures the reallocation of refinancing credits among euro zone countries. The authors point out that the national central banks of the northern countries became net debtors for their own banking system. Sinn and Wollmershaeuser argue that the euro crisis is a balance of payments, which is essentially the same as the Bretton Woods crisis. In addition, they indicate the extent to which Target credit finances the current account deficit or capital flight in Greece, Ireland, Portugal, Spain and Italy. They also point out that the current account deficits of Greece and Portugal were financed for years by their central bank's central bank refinancing and Target credit together. They also documented Irish capital flight and capital flight from Spain and Italy, which began in earnest in the summer of 2011. Following Sinn, the authors compare the Target balance of Eurosystem with the corresponding balance in the US Settlement System (Interdistrict Settlement Account) and show that the US balance relative to US GDP has declined thanks to a regularly completed settlement procedure in which ownership shares in the general Fed clearing portfolio are reallocated among the various FED Districts comprising the US Federal Reserve System. They advocated the creation of a similar system in Europe to end the role of the ECB as an international public credit provider that cuts private market conditions. Hans-Werner Sinn discusses the subject of balance again in the special issue of 'ifo Schnelldienst' and makes it the main topic of his book 'Die Target-Falle' ("Target Trap"), published in early October 2012.
A number of economists took a stand on the issue of Target balance in a publication of the Ifo Institute, justifying Sinn's analysis. Financial commentator David Marsh, writing in early 2012, notes that TARGET2 provides "automatic central bank financing for EMU countries that suffer capital outflows provided through it" and that balances will be "to be shared by central banks throughout the Eurosystem. if the EMU breaks down into its constituent parts, so the pressure on Germany is to keep the balance growing, to avoid crystallizing the losses that would be devastating not only for Berlin but also for the central banks and governments in Paris and Rome. "
The official reaction to Sinn's research findings is mixed. Initially, in February and March 2011, the Bundesbank shrank the Target balance as an irrelevant statistical position. However, in early 2012, Bundesbank chief Jens Weidmann wrote to the head of the ECB Mario Draghi on the matter that "found its way into the conservative newspaper column Frankfurter Allgemeine Zeitung." It seems to suggest a safer collateralization of overall ECB credits for more EMU central banks weak, which now amounts to more than EUR800 billion under the ECB's electronic TARGET2 payment system, "Marsh said in the next column.
Jens Ulbrich and Alexander Lipponer (economists at Bundesbank) justify the ECB's policy during the European balance of payments crisis as follows: In the crisis, the Eurosystem consciously assumes a greater intermediary function given the massive inter-bank interruption. market by expanding its liquidity control instruments. With a larger role in central bank money provision - basically by converting to full rationing procedures in refinancing operations and extended long-term refinancing operations - the total volume of refinancing loans provided has increased (even temporarily). At the same time, quality requirements for underlying guarantees are reduced in a crisis. Higher risk is accepted to keep the financial system functioning in more difficult conditions.
The Ifo Institute regularly updates the "Exposure level indicator" ('Haftungspegel') shows the potential for Germany's financial burden if the crisis-stricken euro-countries out of the currency union and declare bankruptcy. In another development, the Empirical Economic Research Institute at the University of Osnabrueck collects and publishes Target2 data from all euro countries on the balance sheet of every central bank.
Nevertheless, there are also some economists who oppose some Sinn analysis points. Paul De Grauwe and Yuemei Ji contend that the claims of German and other countries' targets can be made null and void, since the value of the central bank's money, fiat money, does not depend on central bank assets. Sinn, in his answer, points out that the Target balance represents a shift in refinancing credits to crisis-stricken countries, representing claims for interest payments from these countries. Eliminating the Target balance will result in a real loss of resources at the present value of this interest income, which is accurately reflected by the number of Target claims. This loss will result in a smaller transfer of Bundesbank revenues to the German budget and, if the situation arises, in the need to recapitalize the Bundesbank through increased taxation. Sinn uses the same reason in his book 'Die Target-Falle'. Sinn pointed out that the option of escaping for the crisis-hit countries by drawing the credit power of the German Targets to approve the official rescue facility and finally to receive Eurobonds as well. He considers the road dependence generated in policymaking as a "trap". Analysis of TARGET2 balances against Ifo's conclusions has been raised by economist Karl Whelan at University College Dublin. In the summer of 2012, Thomas A. Lubik, a senior economist and research advisor, and Karl Rhodes, a writer, both at the Federal Reserve Bank of Richmond (Virginia, USA), cite Whelan's work and also draw parallels and differences between the US Fed. and ECB in analyzing balances. Lubik and Rhodes argue that "TARGET2 reflects only a continuous imbalance in checking accounts and capital accounts, which does not cause them... [and does not represent] 'stealth bailout' from peripheral countries". Sinn replied that he was misinterpreted at this point as far as he was only "saying that the current account deficit is backed up with extra refinancing credits behind TARGET balances" and this would be "not the same as claiming that the current account deficit and TARGET deficit are positively correlated".
Again at the end of 2016, after several years of relative improvement but with increasing concerns over Italy, TARGET2's intra-eurozone balance rate at the ECB has surpassed record levels in 2012. The claims represent half of Germany's overseas assets and are on the immediate track to reach EUR1 trillion if the trend continues uncontrollably.
See also
- TARGET2 Securities
- SWIFT
- Fedwire
- European Central Bank
References
This article combines the text of the related German Wikipedia article on TARGET and TARGET2 as of April 4, 2008. More texts are also from the European Central Bank website that provides and maintains information about TARGET2 both for the general public and for professional users of TARGET2
External links
- Sinn, Hans-Werner, Euro trap. About Porridge, Budget, and Faith Abundant, Oxford University Press, July 2014.
- ifo Policy Issue: Target Balance
- European Central Bank on TARGET2
- Empirical Economic Research Institute, University of OsnabrÃÆ'¼ck: Regularly updated data set on Target2 balance of Euro area
Source of the article : Wikipedia
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