The Role of the OeNB in the European Payment System

Upon Austria's entry into Stage Three of Economic and Monetary Union (EMU), the Oesterreichische Nationalbank (OeNB) took on new tasks in the field of payment systems. January 4, 1999, marked the launch of the cross-border real-time gross settlement (RTGS) system TARGET. This system, in which EU-wide some 5,000 credit institutions participate, is composed of the national RTGS payment systems operated in the EU countries, the ECB Payment Mechanism (EPM) and an interface component called Interlinking. Austria's RTGS system, ARTIS, is integrated into TARGET. TARGET was designed as a real-time system, i.e., in normal circumstances payments reach their destination within a few seconds or minutes after being debited from the account of the sending participants, with all payments treated equally, irrespective of their value and destination. As a gross settlement system, TARGET guarantees intraday finality of payments, since transactions are settled individually. Throughout a business day, TARGET enables participating credit institutions to flexibly manage their liquidity, as they may use their minimum reserves for settlement purposes during the day. Banks may obtain unlimited intraday credit free of charge by providing adequate collateral, namely tier-one and tier-two assets. Euro 1 set up by the Euro Banking Association (EBA), Euro Access Frankfurt (EAF) and the Paris Net Settlement (PNS) system, among others, provide key alternative channels for processing payments in euro. Compared with centralised systems, TARGET with its multitude of interfaces is more susceptible to technical incidents. Even though its fees are higher, the majority of euro-denominated payments are processed via TARGET. Starting with the January 1998 reporting period, the OeNB introduced a new balance-of-payments presentation scheme. Transactions associated with the settlement of TARGET payments are recorded under "Currency and deposits" of monetary authorities (liabilities side) under the other investment sub-account of the financial account. In the first half of 1999, such transactions ran to ATS 66.4 billion net. This item may not, however, be explained as an opposite position of the structural current account deficit of Austria vis-à-vis the EU 15, since TARGET transactions fall predominantly under the interbank category. The capital imported via central bank payment traffic is tantamount to borrowing by the "Austrian economy" that is basically financed at most favourable (tender rate) conditions.