De Nederlandsche Bank Eurosysteem TARGET2 Richard Derksen Conference Financial Sector of Macedonia on Payments and Securities Settlement Systems Ohrid 24 June 2008 De Nederlandsche Bank

Eurosysteem Contents TARGET Scope and framework TARGET2 Single Shared Platform Project planning Migration

De Nederlandsche Bank Eurosysteem TARGET Trans-European Automated Real-time Gross settlement Express Transfer system

De Nederlandsche Bank Eurosysteem The ESCB payment system bank Abank Dbank Bbank C NCB-ANCB-B bank Abank Dbank Bbank C European Central Bank NCB-ANCB-B Interlinking

De Nederlandsche Bank Eurosysteem TARGET1 Expensive Inflexible Different pricing Different products / services Different standards ILC NCB NCB NCB NCB ILC NCB NCB NCB NCB ECB NCB NCB NCB NCB NCB NCB NCB NCB TARGETInterlinkingNetwork

De Nederlandsche Bank Eurosysteem From TARGET to TARGET2 Interlinking via FIN Bank A Bank B Swift Net Services NCBs Ancillary systems

De Nederlandsche Bank Eurosysteem TARGET2 platform NL One central platform for NCBs for the real time gross settlement of large value payments The central TARGET2 platform, called Single Shared Platfom (SSP), is built by 3 NCB´s (3CB): Bundesbank, Banque de France and Banca d´Italia The platform offers some mandatory and some optional modules. Operational per 19 November 2007 (group 1)

De Nederlandsche Bank Eurosysteem TARGET2 in Europe TARGET2 Countries on TARGET of which € Other EU-countries

De Nederlandsche Bank Eurosysteem TARGET2 NL TARGET2 offers: High availability Uniform pricing Uniform functionality Harmonisation Advanced tools for liquidity management Ready for new countries

De Nederlandsche Bank Eurosysteem TARGET2: Operations All RTGS operations may be processed in TARGET2 individual operations settled in real-time and in central bank money no exclusion according to amount or type of operations Wholesale payments are a main goal for TARGET2 All types of operations credit transfers direct debits (limited usage) mandated payments All types of business payments between market participants central bank operations settlement operations of ancillary systems

De Nederlandsche Bank Eurosysteem TARGET2 operational day 18:4519:3022:0001:0006:4507:0017:0018:0018:45 TARGET business day (d) business day (d+1) Calendar day (d-1)Calendar day (d)

De Nederlandsche Bank Eurosysteem TARGET2 operational day Purpose of the different phases: Start-of-day (1 & 2) Night-time processing (3) Technical maintenance window (4) Preparation for day trade phase (5) Day trade phase I (6) Day trade phase II (7) End-of-day (8 & 9)

De Nederlandsche Bank Eurosysteem Payment interface - FIN Copy - PM Participant Interface (Y-copy) Payment Processing SWIFTNet FIN MT 103(+) / 202/204 MT 096 MT 097 Booking instruction Acknowledgement MT 012 MT 019 MT 011 MT 103(+) / 202 / 204 mandatory either / or optional Bank A SSP country Bank B SSP country

De Nederlandsche Bank Eurosysteem Centralized solution: single platform, no interlinking central payments processing: DE, IT (workload distribution between regions) central datawarehouse and customer services: FR Region 1Region 2 Region 3 payments and accounting services customer related services SITE A SITE B SITE C SITE D SITE E SITE F Single Shared Platform

De Nederlandsche Bank Eurosysteem Asynchronous remote copy SITE A SITE B Hot back-up SITE C SITE D Hot back-up LiveTest & Training (T&T) Synchronous remote copy REGION 1 REGION 2 Periodic Region Rotation Synchronous remote copy P P S S Single Shared Platform

De Nederlandsche Bank Eurosysteem Ancillary systems settlement RTGS SSS Securities accounts Other NCB Cash settlement accounts NCB environ ment For integrated model: liquidity transfer SSS Securities accounts NCB environ ment For interfaced model: real-time settlement RTGS

De Nederlandsche Bank Eurosysteem Stakeholders TARGET2

De Nederlandsche Bank Eurosysteem Migration groups Group composition aimed at minimising project risk, reducing effect on level playing field and limiting the costs for central banks and users Data migration: 19 November 2007, 18 February 2008, 19 May 2008 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 Not needed

De Nederlandsche Bank Eurosysteem Migration DNB Big Bang! No fall-back, as current systems will be terminated Extensive testing (June 2007 until January 2008) Importance of providing information to Clearing members, Ancillary systems, DNB itself and all the customers  Website  Meetings (involvement SWIFT)  Monitoring of progress  Involvement CIearing members in drafting test scenarios but some changes before or after TARGET2 migration:  change of AS settlement model  terminating of domestic payment products NL

De Nederlandsche Bank Eurosysteem Check readiness from business, operational and procedural viewpoints Change- over Country testing User Testing Go live Connectivity testing Inter- operability testing Business Day testing TARGET2 user testingObjective Usage of a separate user test environment Several testing phases with different purposes Implementation

De Nederlandsche Bank Eurosysteem Objectives: cost recovery, competitiveness and broad access Pricing of transactions: pricing scheme with a monthly fee (100 euro or euro) plus transaction fee of between EUR and 0.80 Optional services (e.g. liquidity pooling and services related to ancillary systems) are priced separately Pricing

De Nederlandsche Bank Eurosysteem Summing up TARGET2 is a sort of 3 rd wave of Euro Impact for national markets is big, but provides them (and foreign banks) directly with all benefits of a technically centralized platform ( legally it is a decentralized system) One pot of liquidity, one window for info on all TARGET payments Migration will be challenging and require a lot of testing and hard work NL

De Nederlandsche Bank Eurosysteem De Nederlandsche Bank

Eurosysteem Liquidity pooling - Virtual account Credit institution e.g. Bank A2 Credit institution Bank A3 Credit institution e.g. Bank A1 Group account virtual balance : balance on (single) accounts + credit lines possibility to „use“ this position by each group account holder booking on the single accounts (not on the virtual account) only intra-day: „levelling“ off at the end of day mandatory