TARGET1 and TARGET2 & Implementation of monetary policy Bernard de Groes Payments and Securities 13...
-
Upload
clifton-powers -
Category
Documents
-
view
216 -
download
0
Transcript of TARGET1 and TARGET2 & Implementation of monetary policy Bernard de Groes Payments and Securities 13...
TARGET1 and TARGET2&
Implementation of monetary policy
Bernard de GroesPayments and Securities
13 April 2007
1. General overview TARGET2
2. Implementation of monetary policy
Agenda
1. General overview TARGET2
Back to TARGET1
• TARGET2 platform
• Participation in TARGET2
• Liquidity Management
• Timeline and status for TARGET2
•Decentralised system built under tight constraints for being ready on 2 January 1999.
Back to TARGET1
TARGET1
Domesticnetwork
• Decentralised system built under tight time constraints for being ready on 2 January 1999.
Back to TARGET1
• One of the two biggest systems in the world, very high market share in euro large value payments.
On Central Banks’ side
• Adaptability problems
• Cost recovery problems
• EU enlargement process
• Credibility of the Euro system
On Participants’ side
• Non harmonised services
• Non harmonised prices
• Multiple accesses
• Fragmentation of liquidity
but…
What changes with TARGET2
• Full technical consolidation on a single shared platform
• Same core services for all participants
• Single price structure
• Advanced liquidity saving features available EU-wide
• Harmonised technical interface for the connection
• Enhanced robustness and resilience
For payment activities in generalFor payment activities in general
What changes with TARGET2
• Settlement of ancillary systemsSingle interface for ancillary systems settlement based on 6 different models.Settlement of participants’ positions in different systems settled via a single RTGS account.
Night time settlement possible from 7:30pm until 6:45am.
For specific settlement operationsFor specific settlement operations
• Central Banks operationsOptional modules for home accounting, reserve management and standing facilities.
Possibility to keep payment activities in proprietary home account systems for 4 years after the start of TARGET2
What remains with TARGET2
• Holding of RTGS accounts and business relationship remain with National Central Banks.
• Execution of monetary policy operations and collateral management remain decentralised.
• Granting of intraday liquidity, holding of reserves and access to standing facilities still via National Central Bank.
Overview of core and optional services offered by the SSP
Optional services for CBs(CRISP, CRAKS1, CRAKS3)
ParticipantInterface(Y-copy)
TARGETInterlinking
Ancillarysystemsinterface
Payment processing
Monitoring
Information and Control Module
(ICM)
PaymentsModule(PM)
mandatory services for CBs (CROSS)(Storage,
Archiving, Files forbilling
calculation)
HomeAccounting
Module (HAM)
Standard interfaces
Standing Facilities(SF)
Reserve Management
(RM)
CBs
(internal accounting, collateral management,
proprietary home accounts, etc.)
Credit
institutions(CI)
Ancillary
systems (AS)
Static DataManagement
(SD)
ContingencyModule
(CM)
Participation: business overview
Sources of liquidity in T2
The availability of sufficient liquidity is of high importance for the execution of payments
The following sources of liquidity can be used:•balances on RTGS accounts
•provision of intraday liquidity•offsetting payment flows (ie using algorithms to settle a number of queued payments)
Provision of intraday liquidity
• Intraday credit will be granted to the single accounts of credit institutions against eligible collateral by the respective CB
• Depending on the decision of the CB the following procedures can be used:– Implementing credit lines on RTGS accounts– Implementing credit lines on proprietary home
accounts– DVP-processing of intraday repo transactions
Group composition aimed at minimising project risk, reducing effect on level playing field and limiting the costs for central banks and users
Group 1 Group 2 Group 3 Group 4
Austria Belgium Denmark
Germany
Finland Estonia
Lithuania
France ECB Reserved
Luxembourg
Ireland Greece for
Slovenia
Netherlands Italy contingency
Portugal Poland
Spain
Cyprus
Malta
Latvia
Migration group allocation
19 Nov 2007 18 Feb 2008 19 May 2008 15 Sep 2008
2. Implementation of monetary policy
Reserve Management Module
• Standing Facilities Module
• From a technical point of view, RM is fully integrated in the SSP operational environment (SWIFTNet interface)
• RM can interact with PM, HAM and proprietary home accounts
• RM does not manage any kind of accounts
• Management of indirect reserve
• Pool of reserve accounts of a MFI
Reserve Management Module
HAM /PM
Module
Reserve
Management
Module
End-of-day balances
€
NCB
Entry of minimum reserve
Entry of remuneration rates
Entry of penalties
Payment order (at the end of
the maintenance period)
• interest
• penalties for infringements after CB validation process
Reserve Management Module
• The RM offers the possibility of managing indirectly the reserve requirement (the minimum reserve of a credit institution is deposited by another credit institution)
• On the basis of this information the RM is able to verify the fulfilment of minimum reserves.
Indirect reserve
Indirect reserve
• The central banks can manage:
- the list of banks that decide to fulfil indirectly minimum reserves
- the indication of the bank selected for its management
• The function "pool of reserve accounts of Monetary Financial Institutions (MFI)" envisages the fulfilment of reserve requirements for a group of participants (which are part of the same MFI).
• The fulfilment is evaluated on the basis of the total balance, irrespective of the distribution of the balances among the different accounts of the same MFI in PM, in HAM or in PHA.
Pool of reserve accounts of a MFI
Pool of reserve accounts of a MFI
• Participants using the pooling functionality cannot use the indirect reserve management
• No consolidation is envisaged on a cross-border basis
• At the end of the maintenance period the accrued interest is credited on the account associated to the minimum reserve indicated by the MFI
• CIs have access (via ICM) to the following information:– Amount of minimum reserve– End-of-day balances of the previous business day– Running average up to the previous business day– Balance necessary to fulfil the minimum reserve
Interaction and Administration
Interaction and Administration
• CBs access the same information and are able to:
- Manage the list of banks subject to minimum reserve
- Enter the value of compulsory reserve
- Manage the validation process for infringements
- Enter minimum reserve remuneration and penalties rates
- Access summarised information (monitoring)
• From a technical point of view, SF is fully integrated in the SSP operational environment (SWIFTNet interface)
• SF is able to manage:– overnight deposit accounts
– marginal lending “on request”, in general needed for the fulfilment of minimum reserve
– automatic marginal lending, available only in connection with PM since no intraday credit is available in HAM
• CI with account both in PM and HAM have to indicate the account to be used for the settlement of SF operations
Standing Facilities Module
End-of-day transfers to SF (day d)
€
NCB
Overnight Deposit
Account
Overnight Deposit
Account
Marginal Lending
Account
Transfers of capital and interests
to HAM/PM (start of day d+1)
Standing Facilities
Module
HAM /PM
Marginal Lending
Transfers to SF and debiting of interest in HAM/PM (start of day d+1)
Transfers to HAM/PM (day d)
Collateral Management
for Marginal Lending
Standing Facilities Module
SSP
ICM
PM(HAM)
CI
SF
Refunding + Interests(at Start of Day)
SSP
ICM
PM(HAM)
CI
SF
Reverse Transaction[SF debits the Overnight Deposit Account]
SSP
ICM
PM(HAM)
CI
SF
Setting Up[SF credits the Overnight Deposit
Account]
Overnight Deposit Overnight Deposit
MT900
4
ACK
4
DirectDebit
3
TransferOrder
2
MT910
4
ACK
4
LiquidityTransfer
3
TransferOrder
2
MT910
2
ACK
2
LiquidityTransfer
1
Modify
1
Modify
1
Marginal Lending Facility Marginal Lending Facility - “On Request- “On Request” -” -
SSP
ICM
PM(HAM)
CM
SF
Setting Up[SF debits the Marginal Lending Account]
CI
SSP
ICM
PM(HAM)
CM
SF
Refunding + Interests(at Start of Day)
CI
MT910
4
ACK
4
LiquidityTransfer
3
TransferRequest
2
Modify
1
DirectDebit
1
ACK
2
MT900
2Notify
refunding
3
Automatic Marginal Lending FacilityAutomatic Marginal Lending Facility
SSP
PM
SF
Setting Up[SF debits the Marginal Lending Account]
CI
SSP
PM
SF
Refunding + Interests(at Start of Day)
CI
MT910
3ACK
3
Credit transfer and
decrease credit limit
2a
Directdebit and increase
credit limit
1
Notifyintraday
credit not returned
1
ACK
2
MT900
2
ICM ICM
Notify decrease credit limit and setting up of
marginal lending
3
CB
Notify spillover
2b
Notify increase credit limit and
refunding marginal lending
2
MT900
3
ColletaralManager
ColletaralManager
• CI have access (via ICM) to the following services:– Liquidity transfers with PM/HAM– Information on the current balance of the overnight
deposit– Information on the current balance of available liquidity
of the marginal lending account • Transaction processing
Interaction and Administration
Interaction and Administration
• CBs access the same information and are able to:− Manage the list of participants eligible to make use of standing facilities − Access summarised information (monitoring)
Questions?
Customer Information about TARGET2General Functional Specifications
Only fo
r centra
l banks
•General concept of the Single Shared Platform
•„Order book“ for the three central banks developing the Single Shared Platform
•Publication August 2004
For Centra
l banks o
nly
Customer Information about TARGET2User Detailed Functional Specifications
Detailed description ofthe Single Shared Platform's features
OperationalTechnical
Basis for preparing participation in theSingle Shared Platform
Current version 2.2, published February 2007
Customer Information about TARGET2User Detailed Functional Specifications
• Book 1 - Core Services
• Book 2 - Optional Services
• Book 3 - For Central Banks only
• Book 4 - XML-specifications
• ICM Book 1 - User guide ICM
• ICM Book 2 - For Central Banks only
TARGET2 websites
ECB-website• Address: https://target2.ecb.int/• User: t2user• Password: VBjmspRR7
DNB-website• Address: http://www.dnb.nl
Payments / Non cash-payments / TARGET2