TARGET2

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TARGET2 is the second generation of the TARGET ( T rans-European A utomated R eal-time G ross Settlement E xpress T ransfer System ) payment system . It has been the common real-time gross clearing system of the Eurosystem since November 19, 2007 . On May 19, 2008, Target2 merged the technical infrastructure of the individual payment systems of the national central banks of the Eurosystem and the European Central Bank (ECB).

Gross clearing systems are used for the daily transfer of central bank money between the affiliated banks . “Gross” in this context means that each individual payment is made from the central bank balance of the ordering bank. Central bank operations, transfers from large-value payment systems in interbank transactions and other euro transfers are settled via TARGET2.

Change in TARGET2 balances for a transfer between euro countries

When central bank money is transferred from one Eurosystem national central bank to another, liabilities and claims arise against the European Central Bank, which acts as the clearing house (24:00 hours every day). The TARGET2 balance decreases at the debited central bank (a balance shrinks, a debt increases ) and it increases at the receiving central bank. Interest is paid on the balances at the main refinancing rate of the euro system. In the summer of 2012, the resulting assets and liabilities were the largest items on the balance sheets of most of the Eurosystem's central banks.

TARGET liabilities can only be built up by Eurosystem central banks. All other central banks outside the Eurosystem that participate in the TARGET2 system, as well as all commercial banks that have direct access to the TARGET2 system, must have balanced or positive TARGET2 balances at the end of the day. Intraday loans from the ECB are secured, limited to the day in question and cannot be converted into overnight loans.

prehistory

After the central banks of the participating countries had networked their local clearing systems in the first few years since the introduction of the euro, the old TARGET network was created on November 16, 1998 (ECB / 1998 / NP13) . The international transfers were mostly carried out in large sums between the local clearing systems. In autumn 2002, the ECB Council decided to create a second generation of the common platform for payments in euros (TARGET2), with which smaller amounts could also be transferred directly to national clearing systems without prior offsetting. This had no influence on the amount of the net TARGET balances in international payment transactions.

In the summer of 2003, the three central banks of France ( Banque de France ), Germany ( Bundesbank ) and Italy ( Banca d'Italia ) declared their willingness to install and operate such a uniform platform.

November 19, 2007 was set as the start date for the new platform on April 26, 2007 (ECB / 2007/2). Originally, TARGET2 was supposed to go into operation in early 2007.

TARGET2 participants

The European Central Bank implemented the change of national payment systems to TARGET2 in four stages.

TARGET2 balances in billion euros (rounded)
State \ Ø 12/2006 08/2012 12/2014 12/2015 12/2016 12/2017 12/2018 12/2019
GermanyGermany Germany 9 749 476 597 743 871 932 861
LuxembourgLuxembourg Luxembourg 5 124 104 143 167 192 214 199
FinlandFinland Finland 0 60 14th 32 46 59 47 62
NetherlandsNetherlands Netherlands 3 132 9 66 112 103 113 61
IrelandIreland Ireland -6 -91 -19 -3 -1 4th 15th 37
SlovakiaSlovakia Slovakia - -3 4th 1 -5 10 10 12
Cyprus RepublicRepublic of Cyprus Cyprus - -10 -3 2 6th 7th 8th 8th
MaltaMalta Malta - -1 -2 -1 1 4th 4th 5
SloveniaSlovenia Slovenia - -6 2 0 -1 -1 1 3
EstoniaEstonia Estonia - 1 1 2 1 0 0 1
LithuaniaLithuania Lithuania - - - 1 -2 -4 -5 0
LatviaLatvia Latvia - - -2 -2 -5 -7 -7 -4
FranceFrance France 17th -13 -38 -56 -35 -14 -33 -22
GreeceGreece Greece -11 -106 -44 -95 -72 -60 -29 -26
AustriaAustria Austria -20 -41 -34 -33 -26 -39 -40 -42
BelgiumBelgium Belgium -38 -40 -12 -9 1 -8th -15 -43
PortugalPortugal Portugal -8th -71 -55 -61 -72 -83 -82 -78
European UnionEuropean Union ECB - 13 -23 -82 -163 -229 -249 -237
SpainSpain Spain 24 -429 -191 -256 -333 -374 -403 -376
ItalyItaly Italy 23 -285 -187 -247 -364 -433 -482 -425
Total claims 81 1079 610 844 1077 1250 1344 1249
Total liabilities 83 1096 610 845 1079 1252 1345 1253

Group 1 (November 19, 2007)

Group 2 (February 18, 2008)

Group 3 (May 19, 2008)

Group 4 (September 15, 2008)

Group 4 was intended for the unforeseen, but was not needed because the migration was successfully completed on May 19, 2008.

Slovakia has also been connected since January 1, 2009, Bulgaria since February 1, 2010 and Romania since July 4, 2011 .

Transaction prices

Since May 19, 2008, participants have been offered two models:

  1. Option A: 0150 euros fixed fee per month plus 0.80 euros per transaction
  2. Option B: EUR 1,875 fixed fee per month plus EUR 0.125 to EUR 0.60 per transaction (scale, depending on the number of transactions)

Development of the TARGET balances

TARGET2 balances of selected countries in the Eurosystem from 2001 in billions of euros

Data situation

The target balances offset each other within the Eurosystem, which is why they do not appear on the ECB's balance sheet, but only in the annual financial statements of the affiliated national central banks (NCBs). The ECB has also been providing extensive statistics on the subject since September 2015.

development

Relatively low TARGET balances up to summer 2007 show that cross-border payments were almost balanced by the outbreak of the global financial crisis . Balances are generally settled (also up to 2007) when commercial banks in surplus countries (typically) grant interbank loans to banks in deficit countries and their customers or importers use these loans to pay for imports. With the problems on the interbank market and the European financial and debt crisis, the TARGET balances increased. From 2008 the European interbank market dried up and the European credit institutions, especially in the periphery, began to increasingly refinance themselves with the ECB.

From this, one derived from 2008 major reason for the unbalanced TARGET2 balances: As the refinancing of peripheral banks not from the granting of loans by the banks of the surplus countries took place, the cash flow went on the interbank market only from deficit to surplus countries. The TARGET balances increased in parallel.

As a result, the TARGET demands of the Northern European Euroblock (Germany, the Netherlands, Finland and Luxembourg) peaked in August 2012 with 1056 billion euros. The subsequent temporary decrease in balances can be explained using the European bailout policy: The promise of the ECB to save the euro (statement " whatever it takes " by Mario Draghi ) and unlimited government bonds from the under the Outright Monetary Transactions program (OMT) Buying up crisis countries led to private investors making loans available to the crisis countries again. In addition, the cash inflows from the public rescue funds contributed to falling TARGET balances.

Public and Scientific Debate

The TARGET balances first found their way into the public and academic debate in February 2011, when Hans-Werner Sinn , then President of the Ifo Institute in Munich, referred to the increase in TARGET balances and his interpretation of the same in an article in Wirtschaftswoche . The TARGET claims had increased from 5 billion euros at the end of 2006 to 326 billion euros at the end of 2010. In an article in the Süddeutsche Zeitung , Hans-Werner Sinn pointed out Germany's alleged liability risk in connection with the TARGET balances: At the end of February 2011, the TARGET liabilities of Greece, Ireland, Portugal and Spain totaled 340 billion euros. In the event of a default by these countries, Germany would be liable for 33% or 104 billion euros in line with its capital share in the ECB.

Sinn was the first to show the relationship between TARGET balances on the one hand and balance of payments imbalances within the euro zone, intra-European capital flows and the distribution of central bank money on the other. He explained how the ECB system countered the dwindling private capital inflow into the crisis countries by building up refinancing credits in the crisis countries and reducing them in the giving countries. These findings found their scientific expression u. a. in a joint article with Timo Wollmershäuser.

One of Sinn's points of criticism is that the TARGET system automatically generates loans in the event of balance of payments imbalances. Neither the lending central bank is active, nor are parliamentary bodies involved. This is largely going unnoticed by the public. Sinn claimed that from an economic point of view, TARGET loans and public rescue facilities have the same function and involve similar liability risks. A special edition of the CESifo Forum brings together a series of statements on the TARGET discussion that largely support Sinn's interpretation. Peter Burgold and Sebastian Voll from the University of Jena replied to Sinn and Wollmershäuser, however, to the conclusion that Target2 balances in a currency union are not loans and should therefore not be viewed as such. The economists Willem Buiter, Karl Whelan and Martin Hellwig also contradicted Sinn's assessment.

The Bundesbank explained the increasing TARGET balances with the changing distribution of central bank money within the Eurosystem, which in turn can be explained by the distortions in the money market. In 2011, the Bundesbank declared that the Target balances did not pose an independent risk. In February 2012, however, the President of the Deutsche Bundesbank Jens Weidmann warned the ECB President Mario Draghi in a letter of the growing risks within the Target system. Weidmann proposed collateral for the claims, which at that time amounted to over 800 billion euros from the financially weak central banks of the euro system (547 billion euros of which for the German Bundesbank alone).

Paul De Grauwe and Yuemei Ji postulated in 2012 that there was no risk associated with the Target balances. In particular, a failure of the Target claims does not mean a financial loss, since the value of the central bank money is independent of the claims of the central bank. In a reply from 2012–2013, Sinn argued against this risk-free postulate. He stated that De Grauwe and Ji's arguments would not apply in the event of the Eurosystem collapse. A failure of the Target claims would trigger a loss of income at the central bank, which mainly generates its seigniorage from refinancing loans and the associated interest payments. If they were to be eliminated, the Bundesbank would lower the transfers to the federal budget, especially in Germany.

Part of the scientific debate related to the question of the extent to which TARGET balances are claims or liabilities in the legal sense. The President of the European Central Bank Mario Draghi stated in a letter to members of the European Parliament that if a country were to leave the Eurosystem, all claims or liabilities of the national central bank (NCB) of the leaving country to the ECB would have to be settled in full. In this hypothetical case, if on-balance sheet losses occur that cannot be settled from the reserves of the ECB, these would be passed on to all remaining NCBs of the Eurosystem according to their respective capital shares. As a result, "the level of the Bundesbank's TARGET2 balance ... in this case is irrelevant for the extent of the losses that the Bundesbank incurred."

Italian economist Roberto Perotti suggested that the concerns raised by critics of the TARGET2 system should be taken seriously, both for theoretical reasons and for their political implications.

See also

  • Settlement (finance)
  • Clearinghouse
  • In the US dollar area, with notable differences in detail,
    • TARGET to the Fedwire system , the member states of the EU with their respective national central banks to the Federal Reserve Districts , but without the regular annual balance adjustment there from 1975 (not legally required, also suspended in the crisis years 2008 to 2010). Until 1975, gold certificates were still necessary to balance the balances in the USA between the districts.
    • the TARGET balances the ISA balances which, in contrast to the TARGET balances, are balanced annually by asset transfers.

Web links

Individual evidence

  1. ↑ a b TARGET2. European Central Bank, Frankfurt am Main, Germany, accessed on March 28, 2011 .
  2. ↑ Migration to TARGET2. European Central Bank, Frankfurt am Main, Germany, accessed November 14, 2008 .
  3. ↑ Euro Crisis Monitor Data. ( MS Excel ; 101 kB) Institute for Empirical Economic Research at the University of Osnabrück, accessed on January 30, 2018 (English).
  4. ↑ punkto.ro of July 4, 2011, accessed on July 4, 2011
  5. ^ Deutsche Bundesbank. Accessed January 27, 2014
  6. ^ European Central Bank: TARGET balances of participating NCBs. Retrieved August 12, 2019 .
  7. ^ Achim Hauck, Ulrike Neyer: The interbank market and the liquidity management of the Eurosystem in the current financial crisis. In: The current financial crisis. Inventory and lessons for the future. Stuttgart 2011, ( online on Google Books ) p. 78 f.
  8. ↑ Deutsche Bundesbank, 2014: Monetary and Monetary Policy , p. 193: “Before the outbreak of the crisis of confidence, the transferring commercial bank from the above example was typically in a position to get the outflowed central bank money back on the money market using an interbank loan. As a result, the TARGET2 balances of the national central banks were rapidly reduced. Due to the crisis of confidence, however, receiving commercial banks increasingly began not to lend amounts of central bank money received but to invest them in the Eurosystem's deposit facility. The transferring commercial bank therefore had to get the money by expanding its refinancing operations with its national central bank. This behavior on the part of commercial banks has resulted in ever higher TARGET2 balances. At the end of 2013, the Bundesbank's claims on the ECB amounted to around 510 billion euros. "
  9. ↑ Sinn, Hans-Werner, New Abysses , Wirtschaftswoche , No. 8, February 21, 2011, p. 35.
  10. ^ Sinn, Hans-Werner, Ticking Time Bomb , "Süddeutsche Zeitung", No. 77, 2 April 2011, p. 24.
  11. ^ Sinn, Hans-Werner, TARGET balances, foreign trade and money creation , Ifo Schnelldienst 64, No. 9, 2011.
  12. ^ HW Sinn, T. Wollmershäuser: TARGET loans, current account balances and capital flows: The ECB's rescue facility . In: International Tax and Public Finance . 19, No. 4, 2012, pp. 468-508. doi : 10.1007 / s10797-012-9236-x .
  13. ^ Sinn, Hans-Werner and Timo Wollmershäuser TARGET Loans, Current Account Balances and Capital Flows: The ECB's Rescue Facility , NBER Working Paper 17626, November 2011
  14. ^ Sinn, Hans-Werner and Timo Wollmershäuser TARGET Loans, Current Account Balances and Capital Flows: The ECB's Rescue Facility , CESifo Working Paper No. 3500, June 2011
  15. ^ Sinn, Hans-Werner, Helmut Schlesinger, Wilhelm Kohler, Charles B. Blankart, Manfred JM Neumann, Peter Bernholz, Thomas Mayer, Jochen Moebert and Christian Weistroffer, Georg Milbradt, Stefan Homburg, Friedrich L. Sell and Beate Sauer, Ingo Sauer , Jens Ulbrich and Alexander Lipponer, Christian Fahrholz and Andreas Freytag, Ulrich Bindseil, Philippine Cour-Thimann and Philipp Koenig, Franz-Christoph Zeitler, Klaus Reeh, in: Sinn, Hans-Werner (ed.), The European Balance of Payments Crisis ( Memento of the original from September 23, 2015 in the Internet Archive ) Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. , CESifo Forum, Special Issue, January 2012. @1@ 2Template: Webachiv / IABot / www.cesifo-group.de
  16. ↑ Peter Burgold and Sebastian Voll: The myth of TARGET2 - a payment system under fire . Working Papers on Global Financial Markets. No. 29th 2012
  17. ^ Willem Buiter, Ebrahim Rahbari and Jürgen Michels: “TARGETing the wrong villain: TARGET2 and intra-Eurosystem imbalances in credit flows” in Global Economics View, Citigroup Global Markets, June 9, 2011
  18. ^ Karl Whelan: " Professor Sinn Misses the Target ", Institute of International and European Affairs (IIEA), June 7, 2011
  19. ↑ Martin Hellwig: Against the German Target Hysteria. In: FAZ.net . Retrieved July 29, 2018 .
  20. ↑ Deutsche Bundesbank, TARGET2-Balden der Bundesbank ( Memento of the original dated February 2, 2014 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. , Press release, February 22, 2011. @1@ 2Template: Webachiv / IABot / www.bundesbank.de
  21. ^ Deutsche Bundesbank, Development of the Bundesbank's TARGET2 balance , Monthly Report 63, March 2011, No. 3, pp. 34-37.
  22. ↑ The Bundesbank is demanding better collateral from the ECB. In: FAZ. February 29, 2012, accessed July 6, 2020 .
  23. ↑ Weidmann warns Draghi of balance sheet risks. In: Spiegel Online. March 1, 2012, accessed July 14, 2018 .
  24. ↑ spiegel.de: "German savings capital flows into Mediterranean countries" (a contribution to the debate by Hans-Werner Sinn)
  25. ↑ Paul De Grauwe, Yuemei Ji: What Germany shoulderstand fear most is its own fear What Germany shoulderstand fear most is its own fear. In: VOX CEPR Policy Portal. September 18, 2012, accessed July 14, 2018 .
  26. ↑ Hans-Werner Sinn: The Target Losses in the Case of the Breakup of the Euro. A replica to De Grauwe and Ji . In: ifo Schnelldienst . No. 1 , January 17, 2013 ( Online [PDF; 280 kB ; accessed on July 14, 2018]).
  27. ↑ Mario Draghi: Letter from the ECB President to Mr Marco Valli and Mr Marco Zanni, MEPs, on TARGET2 operations. In: ecb.europa.eu. Retrieved April 4, 2020 .
  28. ^ Statement by the Deutsche Bundesbank on the occasion of the public hearing of the Finance Committee of the German Bundestag on June 5, 2019. Accessed on August 11, 2019 .
  29. ^ Roberto Perotti : Understanding the German Criticism of the Target System and the Role of Central Bank Capital . Discussion paper, Center for Economic Policy Research (CEPR), London 2020
  30. ↑ Gerald Braunberger : Italian support for Hans-Werner sense . Article from August 13, 2020 in the blogs.faz.net portal , accessed on August 14, 2020
  31. ↑ Sebastian Voll (2014): ISA vs. TARGET2: A comparison of the requirements for the effective settlement of payment transfer balances, series / no .: Working Papers on Global Financial Markets 51. P. 11
  32. ↑ Alexander L. Wolman, "Federal Reserve Interdistrict Settlement", Federal Reserve Bank of Richmond Economic Quarterly, Volume 99, Number 2ó Second Quarter 2013, pp. 117-141, p. 129
  33. ↑ Sebastian Voll (2014): ISA vs. TARGET2: A comparison of the requirements for the effective settlement of payment transfer balances, series / no .: Working Papers on Global Financial Markets 51. P. 11
  34. ↑ On the differences between TARGET balances and ISA balances, taking into account the annual rebalancing, see: Alexander L. Wolman, "Federal Reserve Interdistrict Settlement", Federal Reserve Bank of Richmond Economic Quarterly, Volume 99, Number 2ó Second Quarter 2013, pp. 117-141, p. 128