The step had been postponed last year, among other things, because of the "geopolitical uncertainty" but also all sorts of technical difficulties – now it was apparently carried out in the middle of the banking quake: The European Central Bank announced on Tuesday that the European payment system Target 2, which, among other things, processes cross-border payments between banks and central banks in the euro area, has been replaced by a successor.
Christian Siedenbiedel
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The successor system is called "T2" for short. "The Eurosystem has successfully implemented the new T2 large payment system," the ECB statement said: "The migration to the new system took place between 17 and 20 March." According to the ECB, the first day of T2 operations went smoothly despite a delayed closure, the cause of which had been identified and remedied.
Bundesbank: "Herculean task accomplished"
Bundesbank Executive Board member Burkhard Balz commented: "I am delighted that the migration to the new T2 system has been successful. With the new system, the Eurosystem has ensured an efficient long-term infrastructure for European payments." A Herculean task for the entire European banking community has been accomplished, said Balz: "After more than six years of intensive work, we have successfully put T2 into operation as the successor to Target 2."
Many discussions about risks of Target 2
The Target-2 system had repeatedly been the subject of discussions, including with regard to the high German balance. This was most recently at 1.1 trillion euros. A few years ago, there had been debates among economists about the question of whether this could result in losses if a country were to leave the euro. In general, the interpretation of the target balances had been at least controversial.
The ECB's annual financial statements had recently been burdened by the interest paid on the ECB's liabilities to national central banks under the Target 2 system. These had been consequences of the interest rate turnaround.
The liabilities have something to do with the Eurosystem's bond purchases in the past. And with the fact that commercial banks from all over the world hold accounts with the national central banks of the Eurosystem, but not with the ECB itself. So if a federal bond was bought by the ECB from an American commercial bank in recent years, the payment was made, for example, via an account at the Bundesbank. The bond was subsequently found on the ECB's books. The financing of the purchase, however, ran through the respective national central bank. The Target-2 system acted as a balancing item between the two central banks; the ECB then had a liability from the Target system vis-à-vis the national central bank on its books.
The ECB's net interest income amounted to around 2022 million euros in 900, after 1.566 billion euros in the previous year. The main reason was the interest expense on the Target 2 liabilities, which amounted to 2.075 billion euros. In the previous year, a small interest income of EUR 22 million had stood at this point.