TARGET2

1. De Nederlandsche Bank TARGET2 Richard DerksenConference Financial Sector of Macedonia on Payments and Securities Settlement Systems Ohrid 24 June 2008

2. Contents • TARGET • Scope and framework TARGET2 • Single Shared Platform • Project planning • Migration

3. TARGET • TARGET • Trans-European • Automated • Real-time • Gross settlement • Express • Transfer system

4. European Central Bank NCB-A NCB-B bank A bank B bank C bank D The ESCB payment system NCB-A NCB-B Interlinking bank A bank B bank C bank D

5. ECB NCB NCB ILC ILC ILC NCB TARGET Interlinking Network ILC NCB ILC NCB ILC NCB ILC NCB ILC NCB ILC NCB ILC NCB ILC NCB ILC ILC ILC NCB ILC NCB ILC NCB NCB TARGET1 • Expensive • Inflexible • Different pricing • Different products / services • Different standards

6. Swift Net Services Bank B Bank A SSP Interlinking via FIN NCBs Ancillary systems From TARGET to TARGET2

7. 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)

8. TARGET2 TARGET2 in Europe Countries on TARGET2 ---- of which € Other EU-countries

9. TARGET2 NL TARGET2 offers: • High availability • Uniform pricing • Uniform functionality • Harmonisation • Advanced tools for liquidity management • Ready for new countries

10. 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

11. 18:45 19:30 22:00 01:00 06:45 07:00 17:00 18:00 18:45 Calendar day (d-1) Calendar day (d) TARGET business day (d) business day (d+1) 9 3 2 3 4 6 7 8 1 5 1 TARGET2 operational day

12. 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)

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

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

15. REGION 1 PeriodicRegion Rotation REGION 2 Live Test & Training (T&T) SITE C SITE A P P Asynchronous remote copy Synchronous remote copy Synchronous remote copy SITE B SITE D Hot back-up  Hot back-up S S Single Shared Platform

16. For integrated model: liquidity transfer For interfaced model: real-time settlement SSS SSS Securities accounts Securities accounts NCB environment Other NCB Cash settlement accounts NCB environment RTGS RTGS Ancillary systems settlement

17. Stakeholders TARGET2

18. Group 1 Group 2 Group 3 Group 4 Austria Belgium Denmark Cyprus Finland Estonia France ECB Reserved Germany Ireland Greece for Latvia Netherlands Italy contingency Lithuania Portugal Poland Luxembourg Spain Malta Slovenia 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 Not needed

19. Migration DNB NL • 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

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

21. Pricing • Objectives: cost recovery, competitiveness and broad access • Pricing of transactions: pricing scheme with a monthly fee (100 euro or 1.250 euro) plus transaction fee of between EUR 0.125 and 0.80 • Optional services (e.g. liquidity pooling and services related to ancillary systems) are priced separately

22. Summing up NL • TARGET2 is a sort of 3rd 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

23. De Nederlandsche Bank Thank you

24. Credit institution e.g.Bank A1 Credit institution e.g.Bank A2 Credit institution Bank A3 Group account Liquidity pooling - Virtual 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