Special Interest Session. Sibos 2004 Atlanta

Transcription

1 Special Interest Session Sibos 2004 Atlanta

2 Overview I. Introduction and TARGET2 status report Koenraad De Geest - Moderator II. Features of TARGET2 Part 1 - Siegfried Vonderau Part 2 - Alfons Vaes III. TARGET2 - User perspective Part 1 - Peter Twilhaar Part 2 - Joël Mérère IV. Panel discussion and Q&A

3 Introduction and status report Koenraad De Geest European Central Bank (ECB)

4 Introduction and status report Overview I. Why TARGET2? II.TARGET2 project milestones III. TARGET2 features and functionalities IV. Importance of the project beyond LVPS 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 4

5 I. Why TARGET2? Rationale for TARGET2: Strategic move to overcome drawbacks of TARGET1 and to be prepared for the future October 2002 ECB - Governing Council decision 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 5

6 I. Why TARGET2? Reasons for building TARGET2: Users request for more harmonised service level Cost recovery problem Adaptability problem EU enlargement AMPLIFIES Credibility of the Eurosystem 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 6

7 II. TARGET2 project milestones Definition phase General functional specifications (GFS) User detailed functional specifications (UDFS) Development phase (technical implementation) Testing phase Customer Migration Process Tests with users: - Credit institutions - Ancillary systems - NCBs = country window (wave) 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 7

8 II. TARGET2 project milestones Main activities in the definition phase: TARGET2 features and functionalities Public consultation of TARGET users (Dec.02 - Apr.03) Definition of (internal and external) user requirements Drafting the general functional specifications (GFS) and the user detailed functional specifications (UDFS) for TARGET2 Governance and financing Cost and pricing Joint proposal of Banque de France, Deutsche Bundesbank and Banca d Italia to develop and operate the single shared technical platform on behalf of the European System of Central Banks (ESCB) 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 8

9 III. TARGET2 features and functionalities What will remain? Direct business contacts between central banks and their banking community SWIFT-based messaging No upper or lower value limits Broad customer base / access criteria 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 9

10 III. TARGET2 features and functionalities What will be new? Single platform system More robust and resilient system Harmonised interfaces to connect users to TARGET2 Same core service for all TARGET2 participants, irrespective of their location Single price structure Flexible liquidity management 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 10

11 IV. Importance of the project beyond LVPS TARGET2 seen as a consolidation forerunner beyond large-value payments (e.g. for retail payments, securities transactions) TARGET2 to boost consolidation of business practices and financial integration in the EU TARGET2 = backbone of the euro market infrastructure. It is integrated 100% and creates strong expectations for the rest of the market business. 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 11

12 IV. Importance of the project beyond LVPS Practical example of consolidation: The settlement in central bank money of all ancillary systems (AS) can be done in a single RTGS account with the single shared platform (SSP). This allows for optimisation of the treasury facility of banks. Practical example of integration: TARGET2 system with a single technical platform (integrated 100%) as catalyst for further integration of the securities markets (one of the major objectives of the Financial Services Action Plan put forward by the European Commission) 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 12

13 Features of TARGET2 Siegfried Vonderau Deutsche Bundesbank

14 Features of TARGET2 Overview I. System overview II. Special features - Liquidity management - Ancillary systems settlement - Information and control module (ICM) III. Participants IV. TARGET2 directory 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 14

15 I. System overview Services for NCBs Data warehouse/ Customer Relationship Management Payments Module (PM) - Payments processing - RTGS accounts Standard interface - Y-copy - Ancillary systems Optional Modules - Home Accounting Module (HAM) - Standing Facilities - Reserve Management Static Data Management Contingency Module Information and Control Module (ICM) Credit Institutions NCBs (internal accounting, collateral management, proprietary home accounts, etc.) Ancillary Systems 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 15

16 II. Special features: Liquidity management Accounting SSP RTGS accounts (PM) Ancillary systems Banks NCB4 NCB3 NCB2 NCB1 Home accounts (HAM, optional) Proprietary Home Accounts (NCB1) CB customers 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 16

17 II. Special features: Liquidity management Liquidity management: a comprehensive set of tools at the users disposal Pooling of accounts Prioritisation (highly urgent, urgent and normal) Liquidity reservation (highly urgent, urgent and dedicated liquidity) Limits (bilateral and multilateral) 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 17

18 II. Special features: Liquidity management Pooling of accounts Basis: Group of account structure domestic level cross-border level Two different scenarios Pooling of information: consolidated information Virtual account: single payment queue Conditions vis-à-vis the virtual account ESCB framework must be respected (also special framework for outs ) Liquidity pooling only intraday Reservations vis-à-vis the virtual account Legal feasibility and operational issues under investigation 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 18

19 II. Special features: Ancillary systems settlement Peculiarities of Ancillary system (AS) settlement processing: settlement process is managed by the AS debits/credits sent by the AS on behalf of their participants cash settlement in central bank money Harmonisation: Messages (SWIFT standard messages) Network and services (SWIFTNet services) Settlement processing (generic settlement procedures) Advantages: Broad range of advanced and streamlined services More efficient liquidity management Easier remote participation in AS High availability of TARGET for settlement services 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 19

20 II. Special features: Ancillary systems settlement Generic settlement procedures Ancillary systems: a limited number of generic models for the settlement of more than 100 ancillary systems 1 - Liquidity transfers to / from AS (SSS: integrated model) 2 - Real-time settlement (SSS: interfaced model) Real time 3 - Bilateral settlement 4 - Standard multilateral settlement 5 - Simultaneous multilateral settlement 6 - Dedicated liquidity (SSS: pre-funded model) Batch 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 20

21 II. Special features: Information and control module (ICM) ICM: a user-friendly interface that will provide numerous functionalities Offering SSP participants comprehensive online information tools Availability of easy-to-use control mechanisms Responding to different business needs Single window access to different groups of participants Information on the current business day only Information delivered on request (pull mode) Broadcasts displayed in pop-up windows in exceptional circumstances Two technical modes for using the ICM 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 21

22 II. Special features: Information and control module (ICM) SSP Payments Module Home Accounting Module ICM server Standing Facilities Reserve Management local home accounting system SWIFTNet InterAct/ FileAct SWIFTNet InterAct/ Browse/ (FileAct) participants HOST Adapter ICM Client ICM Client back office Application-to-application mode SWIFT Alliance WebStation User-to-application mode ICM live 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 22

23 II. Special features: Information and control module (ICM) For further information on ICM: Eurosystem stand number C October Special Interest Session on TARGET2 - SIBOS Atlanta 23

24 III. Participants Feature Direct participant Indirect participant Sending and receiving payments Using own SWIFT interface Via a service bureau (shared) Own RTGS account Yes No Via direct participant Liquidity provision RTGS account By direct participant Liquidity control By direct participant By direct participant Access to ICM Yes No Addressability Direct Via direct participant Publication in BIC-/ TARGET2 directory As a direct participant (TGT) As indirect participant (TG+) 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 24

25 IV. TARGET2 directory Note: Indirect participants will only be listed once in the TARGET2 directory. 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 25

26 Features of TARGET2 Alfons Vaes Nationale Bank van België - Banque Nationale de Belgique

27 Features of TARGET2 Overview I. Business continuity II. Migration III. Governance and project organisation 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 27

28 I. Business continuity TARGET security requirements and controls critical payments within 30 minutes and all other payments with the same value date the operational day ends with a maximum delay of two hours the sites have different risk profiles the secondary region has to restart within two hours

29 I. Business continuity Model for the central processing system: two regions / four sites REGION 1 Periodic REGION 2 Live region rotation Test & Training (T&T) Hot back-up SITE A Synchronous remote copy SITE B P S Asynchronous remote copy P S SITE C Synchronous remote copy SITE D Hot back-up 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 29

30 II. Migration TARGET2 is one of the most demanding changes in the European financial sector a lot of projects must be synchronised Individual migration - CB, CI, AS National migration - CB SSP - 3CB ESCB-wide migration - Migration + 3CB Task Force- 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 30

31 II. Migration Migration scenario No European-wide Big Bang... Not all participating countries and their banking communities should migrate together on the same day! Conclusions: Interlinking for migration purposes only Pilot group Country windows 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 31

32 II. Migration Migration scenario... but a country Big Bang! Not feasible to connect one country with two RTGS components! One major possible exception to country Big Bang: settlement of ancillary systems might be transferred to the SSP at a later stage this implies the use of the local system (home accounting) for this transition period 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 32

33 II. Migration Useful notes Set up an individual project organisation Decide on the type of participation Build up or adjust the national communication platform Involvement of vendors Increase knowledge of SWIFTNet payment interface ICM infrastructure 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 33

34 III. Governance and project organisation Main tasks Level 1 Level 2 Level 3 Governing Council (assisted by Payment and Settlement Systems Committee -PSSC-) Central banks of the Eurosystem (execution by PSSC) Central banks, developing and operating the system overall direction, management and control ownership / control rights on the SSP services establishment and followup of contractual arrangement with level 3 development and operation of the SSP, according to contractual arrangement with level 2 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 34

35 III. Governance and project organisation Interaction with the market at European level TARGET Working Group (TWG) / European Payments Council (EPC) Contact Group on Euro Payments Strategy (COGEPS) European Central Bank (ECB) National Central Banks (NCBs) Contact Group on Euro Securities Issues (COGESI) Local banking community 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 35

36 III. Governance and project organisation Interaction with the market at central bank level General principle: Preservation of decentralised framework Accounts at central bank level Business relations at central bank level 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 36

37 III. Governance and project organisation Interaction with the market at central bank level Role of NCBs in TARGET2: General: exchange of information and support for banks and ancillary systems In migration: planning and structuring of domestic migration In operation: - inclusion / exclusion of participants - monitoring of activity - intraday liquidity - local contingency -etc. 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 37

38 EUROPEANSAVINGS BANKS GROUP GROUPEMENT EUROPEENDES CAISSES D EPARGNE UROPÄISCHESPARKASSENVEREINIGUNG FEDERATION BANCAIRE DE L'UNION EUROPEENNE BANKING FEDERATION OF THE EUROPEAN UNION BANKENVEREINIGUNG DER EUROPÄISCHEN UNION EUROPEANASSOCIATIONOFCOOPERATIVEBANKS GROUPEMENTEUROPEENDES BANQUES COOPERATIVES EUROPÄISCHEVEREINIGUNGDERGENOSSENSCHAFTSBANKEN User perspective Peter Twilhaar TARGET Working Group (TWG)

39 User perspective Overview I. TARGET2 user perspective II. TARGET2 user requirements III. TARGET2 user involvement IV. TARGET2 communication 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 39

40 I. TARGET2 user perspective Centralised system Efficiency» Basic infrastructure» No cross-border constraints» Fulfil user needs» Level playing field» Automation»Costs 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 40

41 II. TARGET2 user requirements Main features and requirements» Centralised payment platform» Centralised liquidity management» Decentralised service via NCBs» Management of RTGS accounts from location of choice» Settlement of ancillary systems on RTGS account of choice» SWIFT-based messaging 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 41

42 III. TARGET2 user involvement Strong involvement so far Response to the consultation of December 2002 General functional specifications (GFS) version 1.0 based on TWG response to the consultation GFS version 1.13 based on the consultation on version 1.0 Tripartite task force on ancillary systems (Trip- TF) 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 42

43 III. TARGET2 user involvement Involvement going forward User detailed functional specifications (UDFS) version 1.02 Trip-TF Migration All further requests User preparations 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 43

44 IV. TARGET2 communication Input, comments and questions from users At national level Local TARGET user group (TUG) National banking association National central bank At European level TARGET Working Group» 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 44

45 User perspective Joël Mérère ECSDA

46 User perspective Overview I. Securities settlement systems in the ancillary systems landscape II. TARGET2 - A simplified architecture III. The ancillary systems IV. TARGET2 A step towards rationalisation V. TARGET2 - A step towards harmonisation 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 46

47 I. Securities settlement systems in the ancillary systems landscape More than 100 ancillary systems Retail payment systems Large value payment systems FX systems Money markets systems Central counterparts Securities settlement systems (SSSs) SSSs have a particular position that needs to be taken into account in the TARGET2 design Users of the single shared platform (cash leg of DVP transactions) Service provider of the Eurosystem (and TARGET2) 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 47

48 II. TARGET2 A simplified architecture From TARGET1 to TARGET2 SSS 1 NCB 1 NCB NCB NCB ILC ILC ILC ILC NCB SSS 2 NCB 2 ILC ILC ILC NCB ECB ILC ILC ILC TARGET Interlinking SSS 3 NCB NCB 3 ILC ILC NCB ILC ILC ILC ILC NCB NCB NCB NCB NCB SSS SSS SSS SSS SSS ASI Ancillary System Interface SSP TARGET2 NCB 1 NCB 2 NCB 3 NCB 4 A multitude of specific interfaces with specific procedures and specific timeframe between national central banks and local SSSs A unique standardised ancillary system interface with multiple generic settlement procedures and standard tools to manage the schedule 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 48

49 III. The ancillary systems 2 basic models Integrated for SSSs Interfaced 6 generic settlement procedures for daytime and night settlement 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 49

50 III. The ancillary systems Integrated model Liquidity transfer procedure SSP TARGET2 SSS RTGS A/c Settlement bank A/c NCB DuringTARGET2 operating hours Liquidity transfers upon settlement banks request at any moment Automated sweeps at specific times Night settlement Liquidity transfers ahead of SSS night settlement (next value date) 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 50

51 III. The ancillary systems Interfaced model - During TARGET2 operating hours Real time transfers Bilateral settlement Multilateral settlement SSP TARGET2 RTGS A/c NCB feedback Mandated payments (direct debits, credit transfers) Trade for trade SSS SSP TARGET2 RTGS A/c NCB feedback Direct debits, credit transfers SSS - Batch -Individual Dts/Cts SSP TARGET2 RTGS A/c NCB feedback Direct debits, credit transfers - Batch linked dts & cts SSS Dedicated liquidity (Night & Day) SSP TARGET2 SSS Standard multilateral settlement Simultaneous multilateral settlement RTGS A/c Sub A/c Reservation Notification «Memo Accounts» Booking & release of liquidity End of procedure (used liquidity) 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 51

52 III. The ancillary systems 2 basic models for SSSs Bilateral settlement 6 generic settlement procedures for daytime and night settlement Optional connected mechanisms Batch Real time Standard multilateral settlement Simultaneous multilateral settlement Dedicated liquidity Liquidity transfer Real-time settlement Control period, settlement period, guarantee mechanism, 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 52

53 IV. TARGET2 A step towards rationalisation From fragmented pools of liquidity to A centralised liquidity pool Today With TARGET2 SSS 1 SSS 2 SSS 3 ASI SSS SSS SSS Bank A RTGS Account SSP/TARGET2 NCB1 NCB2 NCB3 Bank A Bank A Bank A or Centralisation on a single RTGS Account SSS 1 SSS 2 SSS 3 TARGET Interlinking ASI SSP/TARGET2 NCB 1 Bank A NCB 2 Bank A NCB 3 Bank A Pooling of liquidity across accounts 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 53

54 V. TARGET2 A step towards harmonisation TARGET day and timetable Daylight settlement Do we need a coordinated timetable across ancillary systems to optimise the liquidity usage? Night time settlement with dedicated reserved liquidity on TARGET2 Which technical window to finalise SSS night settlement? ECSDA report on barriers 4 and 7 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 54

55 V. TARGET2 A step towards harmonisation SSSs getting ready for TARGET2 which migration path? Preparatory phase SSSs adapt their procedure to the full TARGET2 environment Migration phase Progressive move of participants and SSSs to the SSP of TARGET2 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 55

56 ?????? Questions & Answers??????? 12 October Special Interest Session on TARGET2 - SIBOS Atlanta 56