ANNUAL REPORT 2008 - Polymer Bank Notes of the World

2 PAYMENT AND SECURITIES SETTLEMENT SYSTEMSThe Eurosystem has the statutory task ofpromoting the smooth operation of paymentsystems. Its main instrument for carrying outthis task – aside from the oversight function(see Section 4 of Chapter 4) – is the provisionof payment and securities settlement facilities.To this end, the Eurosystem created theTrans-European Automated Real-time Grosssettlement Express Transfer system, knownas TARGET, for large-value and urgentpayments in euro. The technically decentralisedfirst-generation system was progressivelyreplaced by a second-generation system(TARGET2), which is based on a single technicalinfrastructure, the Single Shared Platform(SSP). Three Eurosystem central banks – theBanca d’Italia, the Banque de France and theDeutsche Bundesbank – jointly provide the SSPand operate it on behalf of the Eurosystem. Themigration to TARGET2 started in November2007 and was completed in May 2008.With regard to collateral mobilisation,the Eurosystem and the market offer anumber of channels to facilitate the use ofcollateral across national borders. In 2008 theEurosystem, together with market participants,continued to work on the development ofTARGET2-Securities (T2S), with the objectiveof providing securities settlement services incentral bank money through a single Europeantechnical platform with harmonised processesand procedures. The project was approved bythe Governing Council in July 2008, and thetechnical details of the project are now in theprocess of being defined. T2S will harmonisedomestic and cross-border settlements ofsecurities transactions in central bank moneywithin the euro area.2.1 THE TARGET SYSTEMTARGET plays an important role in theexecution of the single monetary policy andthe functioning of the euro money market.TARGET offers a real-time settlement servicein central bank money and broad marketcoverage. It processes large-value and urgenttransactions and has also attracted a varietyof other payments. TARGET is available forpayments in euro between participating banks,without any upper or lower value limit. Suchtransfers are made both between banks in thesame Member State (intra-Member State traffic)and between those in different Member States(inter-Member State traffic).THE MIGRATION TO TARGET2The TARGET system began operations on4 January 1999, following the introduction of theeuro. It was originally made up of 15 nationalreal-time gross settlement (RTGS) systems andthe ECB payment mechanism (EPM). Despite itssuccess, TARGET had a number of shortcomingsthat stemmed from its heterogeneous technicaldesign and decentralised structure. To addressthese issues and to cater for developments suchas the further enlargement of the euro area, theEurosystem launched the TARGET2 project inOctober 2002.The Eurosystem’s aim in developing TARGET2was to create a streamlined version of theoriginal TARGET system which would bettermeet user needs, providing a harmonised servicelevel with a harmonised pricing scheme andensuring cost-efficiency. TARGET2 was alsodesigned to be able to respond flexibly and in atimely manner to future developments, such aseuro area and EU enlargement.The TARGET2 system started operations on19 November 2007, when the first group ofcountries (Germany, Cyprus, Latvia, Lithuania,Luxembourg, Malta, Austria and Slovenia)migrated to the SSP. This first step was verysuccessful and confirmed the reliability of theTARGET2 platform, which, following thisinitial migration, was already settling around50% of the overall TARGET traffic in terms ofvolume and 30% in terms of value.On 18 February 2008 the second migrationgroup (Belgium, Ireland, Spain, France, theNetherlands, Portugal and Finland) successfullyjoined the SSP, followed on 19 May by the finalgroup (Denmark, Estonia, Greece, Italy, Poland112 ECBAnnual Report2008