A comparative analysis of the US and EU retail banking markets - Wsbi
A comparative analysis of the US and EU retail banking markets - Wsbi
A comparative analysis of the US and EU retail banking markets - Wsbi
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It should be noted that two <strong>of</strong> <strong>the</strong> largest countries<br />
in terms <strong>of</strong> payment transactions i.e. France <strong>and</strong> <strong>the</strong><br />
United Kingdom (which respectively represent 21.2%<br />
<strong>and</strong> 21.5%, or toge<strong>the</strong>r nearly half <strong>of</strong> all <strong>EU</strong> cashless<br />
payment transactions) do not appear in ei<strong>the</strong>r category,<br />
because <strong>the</strong>y still boost a significant number <strong>of</strong><br />
cheques transactions, as well as credit or debit card<br />
transactions, <strong>and</strong> electronic credits or debits (each<br />
representing close to one third <strong>of</strong> each respective<br />
country’s total national payment transaction volume).<br />
It is clear that <strong>the</strong>re are ra<strong>the</strong>r different patterns <strong>of</strong><br />
payment instrument usage across <strong>the</strong> various <strong>EU</strong><br />
countries. These patterns are caused by a number <strong>of</strong><br />
reasons, including legislation, habits, history <strong>and</strong> culture.<br />
One may however query whe<strong>the</strong>r <strong>and</strong> how <strong>the</strong>se<br />
patterns would evolve, if <strong>the</strong> principle <strong>of</strong> payments<br />
instruments (including cash) competing for customer<br />
acceptance on <strong>the</strong> basis <strong>of</strong> transparent pricing, <strong>and</strong><br />
in a context <strong>of</strong> similar rules <strong>and</strong> consequences, was<br />
generally accepted <strong>and</strong> implemented.<br />
6.3.2.3 Settlement <strong>of</strong> high value transactions<br />
in <strong>the</strong> European Union<br />
6.3.2.3.1 Real time gross settlement systems<br />
Currently in every Member State <strong>the</strong> National<br />
Central Bank owns <strong>and</strong> operates a real time gross<br />
settlement system which provides settlement finality<br />
to <strong>banking</strong> institutions supervised by that Central<br />
Bank. These independent systems are interlinked (for<br />
eurozone <strong>and</strong> non-eurozone countries as well) by<br />
<strong>the</strong> TARGET system, which allows <strong>the</strong> provision <strong>of</strong> –<br />
almost – real time settlement for participants operating<br />
within two national Real Time Gross Settlement (RTGS)<br />
systems. There are over 10,000 direct participants in <strong>the</strong><br />
initial 15 Member State RTGS systems. During 2004<br />
<strong>the</strong>se national RTGS systems toge<strong>the</strong>r processed<br />
over 69 million payment instructions (an increase <strong>of</strong><br />
3,9% over 2003) for a combined value <strong>of</strong> €444 trillion<br />
(an increase <strong>of</strong> 6,4% over 2003).<br />
Plans for migration in <strong>the</strong> last quarter <strong>of</strong> 2007 <strong>and</strong><br />
<strong>the</strong> first quarter <strong>of</strong> 2008 to a “Single Shared Platform”<br />
(also called TARGET2) have been published by <strong>the</strong><br />
Eurosystem. As stated by its name, TARGET2 would<br />
replace <strong>the</strong> current individual national systems, yet<br />
still allow a level <strong>of</strong> flexibility for how National<br />
Central Banks organise <strong>the</strong>ir relationship with banks<br />
under <strong>the</strong>ir jurisdiction (<strong>the</strong> details <strong>of</strong> that flexibility<br />
are currently being finalised).<br />
Fur<strong>the</strong>rmore <strong>the</strong> non-eurozone countries (Denmark,<br />
Sweden, <strong>the</strong> United Kingdom, as well as <strong>the</strong> 10 new<br />
Member States) each operate a real time gross<br />
settlement system to settle <strong>the</strong>ir own national<br />
currencies. Each new Member State is committed<br />
under <strong>the</strong> Adhesion Agreement to introduce <strong>the</strong><br />
euro <strong>and</strong> consequently <strong>the</strong> relevant national Central<br />
Banks will join <strong>the</strong> TARGET system (<strong>the</strong> first one to<br />
do so will be Slovenia on 1 January 2007).<br />
6.3.2.3.2 Net settlement systems<br />
In addition three countries (Finl<strong>and</strong>, France, <strong>and</strong> Spain)<br />
each operate a large value settlement system in euro<br />
for (in total over 680 direct <strong>and</strong> indirect) participants<br />
<strong>of</strong> <strong>the</strong>ir respective national <strong>banking</strong> communities.<br />
These systems are ei<strong>the</strong>r strict net settlement systems<br />
(Spain), or combine features <strong>of</strong> multilateral netting<br />
<strong>and</strong> gross settlement (Finl<strong>and</strong>), or features <strong>of</strong><br />
bilateral netting <strong>and</strong> real time gross settlement<br />
(France). During 2004 <strong>the</strong>se three systems in total<br />
processed 8,63 million payment instructions (a<br />
decrease <strong>of</strong> 16% compared to 2003) for a (stable)<br />
combined value <strong>of</strong> €18,2 trillion.<br />
On a non-national basis <strong>the</strong> <strong>EU</strong>RO1 system <strong>of</strong> <strong>the</strong><br />
Euro Banking Association (EBA) provides settlement<br />
in euro on <strong>the</strong> basis <strong>of</strong> a “single obligation” contract to<br />
over 70 direct participants. In 2004 <strong>EU</strong>RO1 processed<br />
over 44 million payment instructions for a combined<br />
value <strong>of</strong> €44 trillion.<br />
6.3.2.4 Clearing <strong>of</strong> <strong>retail</strong> <strong>and</strong> commercial<br />
transactions in <strong>the</strong> European Union<br />
Across <strong>the</strong> 15 initial Member States <strong>the</strong>re are some<br />
18 <strong>retail</strong> <strong>and</strong> commercial payment clearing systems,<br />
owned <strong>and</strong> operated ei<strong>the</strong>r by <strong>banking</strong> communities,<br />
or by a National Central Bank, or jointly. In addition<br />
<strong>the</strong> EBA operates a <strong>retail</strong> clearing capability (STEP2)<br />
which currently h<strong>and</strong>les cross-border payment<br />
instructions within <strong>the</strong> <strong>EU</strong> yet is expected to process in<br />
<strong>the</strong> near future some “national” transactions as well,<br />
when smaller national clearing houses cease operation<br />
as <strong>the</strong> Singel Euro Payments Area is being established.<br />
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