TARGET2 is a single point of access to central bank liquidity, offering users a range of high-quality tools for optimising and managing their euro liquidity.
TARGET2 participants can obtain an intraday credit facility that is automatically secured against the assets and securities pledged to the Banque de France via the overall collateral management system (3G).
Implemented in 2008, the 3G system allows participating banks to manage all the financial instruments and assets they have pledged to the Banque de France. The guarantees are pooled together and can be used in three different ways:
Participating institutions can use this intraday credit facility as often as needed throughout the day, giving them extra flexibility in their liquidity management.
However, if the credit facility is not reimbursed at the end of the day, or the participant’s account balance is negative, the intraday loan is converted into an overnight marginal lending facility, which charges interest at the marginal lending rate.
TARGET2-Banque de France is a gross real time settlement system (RTGS) which means that transactions are settled order by order, on a continuous basis, without netting. One of the key advantages of this system is that it reduces systemic risk: all payments are final as soon as they are settled by the system. However, prompt finality can only be achieved if there is sufficient liquidity available and efficient settlement mechanisms are implemented.
To this end, TARGET2 provides its users with high-performance liquidity management tools:
Optimisation procedures and algorithms to save liquidity. These identify queued payments intended for the same counterparty, and pair or group them together so they can be executed simultaneously.
TARGET2 consists of a single shared platform and a harmonised legal, organisational and payment framework. This architecture allows credit institutions to centralise their liquidity management and account relationship with the central bank that best suits their needs and activities.
It also allows banks based in more than one European country to consolidate their different accounts into groups so they can be managed centrally and in a harmonised manner. There are 2 types of account groups:
Updated on: 12/13/2016 16:27