TARGET
TARGET (Trans-European Automated Real-time Gross Settlement Express Transfer System) was replaced in November 2007 by TARGET2. TARGET was and TARGET2 is an interbank payment system for the real-time processing of cross-border transfers throughout the European Union.
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[edit] TARGET2
TARGET2 or Target-2[1] is the joint gross clearing system of the ESCB[2] that unifies the technical infrastructure of the 26 central (note-issuing) banks of the European Union. It went live on 19 November 2007. However, Sweden and the UK have elected not to participate in TARGET2 – banks in these two countries will have to use alternative means to make large cross-border euro payments. Indeed, Lloyds TSB, Standard Chartered and HSBC have decided to participate through the Dutch central bank DNB.
[edit] Migration to TARGET2
The implementation of TARGET2 was based on a decision of the ECB Council of Autumn 2002 and was maintained by the three central banks of France (Banque de France), Germany (Deutsche Bundesbank) and Italy (Banca d'Italia). For the migration, the following four groups of participating countries were defined:
[edit] Group 1 (2007-11-19)
- Austria
- Cyprus
- Germany
- Latvia
- Lithuania
- Luxembourg
- Malta
- Slovenia
[edit] Group 2 (2008-02-18)
- Belgium
- Finland
- France
- Ireland
- Netherlands
- Portugal
- Spain
[edit] Group 3 (2008-05-19)
- Denmark
- Estonia
- ECB
- Greece
- Italy
- Poland
[edit] Group 4 (2008-09-15)
- for unforeseen circumstances
On 19 May 2008 the third and final group connected successfully to TARGET2.
[edit] TARGET2 2009–2010
Slovakia joined Target2 on 1 January 2009. Bulgaria joined in February 2010.
[edit] Transaction prices for TARGET2
There are two parallel schemes:[3]
- Recurring fixed charges and a fixed transaction fee
- Monthly fixed charge: €100.00
- Single transaction price: €0.80
- Recurring fixed charge and a variable transaction fee based on number of transactions
- Monthly fixed charge: €1,250.00
- Variable transaction price:
[edit] Relation to European sovereign debt crisis
Target-2 provides "automatic central bank funding for EMU countries suffering capital outflows provided through" it. In the context of the European sovereign debt crisis (2009- ), these Target-2 balances have grown, and gained attention. Financial commentator David Marsh, writing in early 2012, noted the balances would "have to be shared out by central banks throughout the Eurosystem ... if EMU fragments into constituent parts. So the pressure on Germany is to keep the balances growing, in order to avoid crystallization of losses that would be hugely damaging not just to Berlin but also to central banks and governments in Paris and Rome".[1] According to a study of the German Ifo Institute for Economic Research IFO the Target-2 system may be one of the mechanisms by which Eurozone deficit countries have been fighting their financing problems during the debt crisis. [4] In early 2012, Bundesbank chief Jens Weidmann wrote a letter to ECB head Mario Draghi on the subject which "found its way into the columns of the conservative Frankfurter Allgemeine Zeitung newspaper[. It] appeared to suggest more secure collateralization for the overall ECB credits to weaker EMU central banks, which now amount to more than €800 billion under the ECB’s Target-2 electronic payment system," Marsh noted in his subsequent column.[5]
[edit] TARGET
TARGET included 16 national real-time gross settlement (RTGS) systems and the ECB payment mechanism (EPM). TARGET provided access to more than 1,000 direct participants and more than 48,000 credit institutions (including branches and subsidiaries).
[edit] Infrastructure
TARGET itself was not, strictly speaking a funds transfer system, in that transfers were not fed into TARGET directly; it merely linked existing national systems. TARGET provided interlinking and security components via which the national systems could communicate.
TARGET was mainly used for individual payments between banks, but it was also used for urgent transfers between companies, or even individuals, at the discretion of the banks involved. Communication between the national systems mainly used the SWIFT network.
[edit] Participants
As of November 2006, the participants were the EU15 countries and the ECB, plus Poland, Slovenia, and Estonia. The Polish and Estonian systems were connected indirectly via the Italian system, New BIREL. Slovenia (20 banks plus the Slovenian central bank) were connected direct to the German RTGSplus system.
[edit] Volume
In June 2006 there were over 7 million TARGET payments,[6] with a total value of over 47,000 billion euros.[7] In December, 2011, under a new collection and reporting methodology for TARGET2 data to improve quality, the number of TARGET2 payments was over 8 million[8] with a total value of over 58,000 billion euros.[9]
[edit] TARGET holidays
The TARGET system was closed on Saturdays and Sundays and on the following public holidays in all participating countries: New Year (1 January), Good Friday, Easter Monday, Labour Day (1 May), and the first and second days of Christmas (25 December and 26 December).
| Band | Number of monthly transactions | Price | |
|---|---|---|---|
| between | and | ||
| 1 | 1 | 10,000 | €0.60 |
| 2 | 10,001 | 25,000 | €0.50 |
| 3 | 25,001 | 50,000 | €0.40 |
| 4 | 50,001 | 100,000 | €0.20 |
| 5 | more than 100,000 | €0.125 | |
[edit] References
This article incorporates text translated from the corresponding German Wikipedia articles on TARGET and TARGET2 as of 4 April 2008.
- ^ a b Marsh, David, "10 myths about the European quagmire", MarketWatch, February 27, 2012. Myth #9 addresses Target-2. Retrieved 2012-02-27.
- ^ TARGET2, ECB webpage. Retrieved 2012-01-26.
- ^ "TARGET2 - Prices", Deutshe Bundesbank webpage.
- ^ Sinn, Hans-Werner and Timo Wollmershaeuser, "Target Loans, Current Account Balances and Capital Flows: The ECB's Rescue Facility", NBER Working Paper No. 17626 (November 2011).
- ^ Marsh, David, "Weidmann reawakens debate on Bundesbank’s power", MarketWatch, March 5, 2012. Retrieved 2012-03-07.
- ^ "Payment instructions – 2006" Table 1, ECB webpage. Statistics cover transactions processed by TARGET and other selected large-value payment systems (LVPS). Retrieved 2012-02-27.
- ^ "Payment instructions – 2006" Table 2, ECB webpage. Retrieved 2012-02-27.
- ^ "Payment instructions – 2011" Table 1, ECB webpage. Retrieved 2012-02-27.
- ^ "Payment instructions – 2011" Table 2, ECB webpage. Retrieved 2012-02-27.
