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Payments in TARGET2/TARGET2-GR

TARGET2 is the leading European and one of the world’s biggest large-value payment systems, processing 90% of the total value settled by large-value payment systems in euro. In 2018, its direct participants exceeded 1,000, while its total turnover amounted to almost €432,5 trillion (see TARGET2 Annual Report 2018). TARGET2 processes the bilateral settlement of payment orders submitted by direct participants, as well as orders from ancillary systems (AS) resulting from the clearing and net settlement process. In the case of direct participants, the originator (payer) is either a CI customer (customer payment) or the CI itself (interbank payment), whereas in the case of ancillary systems, the AS transmits a net settlement file to be processed in TARGET2 according to a specific settlement model. Furthermore, TARGET2 is used for the settlement of national central bank payments connected to key Eurosystem-related functions, such as payments related to monetary policy operations. TARGET2 is based on a Single Shared Platform (SSP) for payments managed by the Eurosystem according to a decentralised design, i.e. each NCB is responsible for the management of the respective national TARGET2 component system. Thus, TARGET2-GR is the Greek component of TARGET2 operated by the Bank of Greece (BoG) and is comprised by the BoG, credit institutions and ancillary systems operating in Greece.

 

Key figures of TARGET2 / TARGET2-GR

2018

Participation types


 

TARGET2

TARGET2-GR

Direct participants


 

1,056

28​

of which

Central banks

25

1


 

Retail payment systems

31​


 

Securities settlement systems

23

1


 

Central counterparties

4

-


 

Other participants (mainly CIs)

973

24

Indirect participants


 

659​

5


 

Total payments


 


 


 

Volume

millions

88.4

0.7

Share (in volume terms)

%


 

0,8

Value

€ billion

432,508.35

938.4

Share (in value terms)

%


 

0.2


 

Breakdown of payments

(%, in volume terms)


 


 

Customer - Interbank


 

81.5​

67

Central bank


 

7

20

Ancillary systems


 

8.5

12

Liquidity transfers


 

3

1


 

Breakdown of payments

(%, in value terms)


 


 

Customer - Interbank


 

44​

15​

Central bank


 

11

44​

Ancillary systems


 

18​

34​

Liquidity transfers


 

27

6​

Sources: ECB and Bank of Greece.


 

 

In the figure below, active icons provide links to an overview of individual types of payments to TARGET2-GR.

 

 


  

Open market operations
Open market operations are conducted on the initiative of the ECB, which determines the instruments to be used and the terms and conditions for their execution (see Open Market Operations). The most common instrument is the main refinancing operations, which are conducted on a weekly basis and normally have a maturity of one week. Main refinancing operations provide liquidity to CIs and are executed by the BoG in the form of reverse transactions. The settlement of the cash leg of such transactions is carried out against collateral put forward by the CI for this purpose. Upon maturity, principal and accrued interest are repaid to the BoG, which simultaneously releases the collateral.

Standing facilities
In the context of the monetary policy conducted by the Eurosystem, the BoG offers to domestic CIs the deposit and marginal lending facilities. Under the deposit facility, a CI may deposit overnight part of its liquidity in an account held with the BoG. Under the marginal lending facility, CIs may receive overnight credit from the BoG against eligible assets, in the event that the balance on their RTGS accounts is expected to be negative at the system’s closing time (marginal lending on request). If a requirement for the participant’s request has not been met, automatic marginal lending is provided, whereby intraday credit is transformed into overnight credit at the end of the day.

Interbank payments
TARGET2-GR participants may access markets across the Eurosystem and in particular the euro area money market. Payments between CIs in this context, as well as all payments between CIs which are carried out for their own account (as opposed to payments on behalf of their customers) are defined as interbank payments. Interbank payments between CIs belonging to the same parent entity are identified as intra-group liquidity transfers.

 

Ancillary systems settlements

Retail payment systems
Retail payment systems use the TARGET2-GR system for the settlement of their final positions.

  • DIAS S.A.
    On a daily basis, nine settlement cycles take place in TARGET2-GR for both domestic and cross-border payments of the interbank system of DIAS S.A. For cross-border payments DIAS S.A. co-operates with EQUENS (a clearing house based in the Netherlands), while it also provides a technical facility to CIs that are participants in the STEP2 platform operated by EBA Clearing (a pan-European clearing house).
  • Athens Clearing Office (ACO)
    ACO clears bank drafts and private cheques denominated in euro or foreign currency, drawn on banks operating in Greece (see Athens Clearing Office). With respect to euro-denominated cheques, TARGET2-GR provides same-day settlement of the net positions resulting from ACO clearing.

 

Securities settlement systems

  • System for Monitoring Transactions in Book-entry Securities (BOGS)
    Through BOGS, book-entry Greek government and other agencies securities are issued, registered and monitored. Also, the system provides clearing and settlement services for transactions in book-entry securities held in participants’ accounts (see System for Monitoring Transactions in Book-entry Securities (BOGS)). The Bank of Greece, as Manager of the System, has participated in TARGET2-Securities (T2S), the single pan-European technical platform for securities settlement, since 22 June 2015 (see TARGET2-SECURITIES (T2S)). Within T2S, the cash leg of securities transactions is settled in central bank money through Dedicated Cash Accounts (DCAs) in TARGET2.

Settlement of transactions on the Athens Exchange (HELEX)
Hellenic Exchanges S.A. (HELEX) operates the securities depository and settlement system for all transactions on the Athens Exchange. The Central Securities Depository (CSD) is a member of TARGET2-GR as an ancillary system; it also provides securities settlement services, the cash leg of which is settled to TARGET2-GR.

 

Retail payments in TARGET2-GR

Customer payments
In addition to the settlement of retail payment system net positions, TARGET2-GR also settles customer payments, i.e. retail payments of typically low value initiated by CI customers and executed, on their behalf, by CIs.
The choice of using TARGET2-GR rather than a retail payment system for customer payments is mainly associated with the time aspect of the payment, given that TARGET2-GR provides real-time final settlement during its operating hours. The share of customer payments in total payments settled to TARGET2-GR in 2017 amounted to 56,2% in terms of volume and 2.7% in terms of value.

  • Cross-border customer payments
    Cross-border customer payments refer to customer payments between direct participants of different national components of TARGET2. Such payments generate claims and corresponding liabilities (bilateral balances) for the respective NCBs (see TARGET2 account balance). Moreover, TARGET2 is used as a channel for payments to and from CIs established outside the EU through their TARGET2 correspondents, with the largest share of CIs acting as TARGET2 correspondents being accounted for by the TARGET2 components of Germany, Spain, France, the Netherlands, and Belgium (ECB data). Thus, an estimated number of more than 55,000 CIs worldwide can initiate and receive payments, making TARGET2 a global hub for processing payments in euro. A geographical breakdown analysis of TARGET2 payments by originator (payer) and recipient (payee) allows for a mapping of payments of euro payments in a world scale (see TARGET2: a global hub for processing payments in euro).

 

Instant payments
The Eurosystem is currently developing an innovative settlement infrastructure for instant payments in euro, the TARGET2 Instant Payment Settlement (TIPS), which is scheduled to commence operations in November 2018. The new scheme will offer 24/7/365 availability and pan-European reachability and will co-exist with other instant payment solutions available in the market.The Eurosystem is currently developing an innovative settlement infrastructure for instant payments in euro, the TARGET2 Instant Payment Settlement (TIPS), which is scheduled to commence operations in November 2018. The new scheme will offer 24/7/365 availability and pan-European reachability and will co-exist with other instant payment solutions available in the market.

Liquidity management
The Eurosystem has approved the technical and functional consolidation of the TARGET2 and T2S platforms, which will enable TARGET2 end users to benefit from the state-of-the-art functionalities of T2S. An important advantage arising from the TARGET2/T2S consolidation will be the Central Liquidity Management (CLM) feature, allowing for a clear allocation of liquidity for the different settlement purposes (i.e. Τ2, Τ2S, TIPS).


Contact
Payment and Settlement Systems Department
Funds Transfers and Infrastructure Study Section
341 Mesogion Ave., 152 31 Chalandri

Yorgos Korfiatis                              Ilias Grivas
+30 210 6799 781                         +30 210 6799 783
ykorfiatis@bankofgreece.gr            igrivas@bankofgreece.gr

 

 

Open market operations Standing facilities Interbank payments Ancillary systems settlements Securities settlement systems Customer payments Instant payments Liquidity management Open market operations Standing facilities Interbank payments Ancillary systems settlements Securities settlement systems Customer payments Instant payments Liquidity management