Target2 Explanation and Discussion


German Bank vs. Target2 Debt

German Banks vs. Target2 Debt (source Thompson Reuters) - Click to enlarge


Target2 – Q&A



See new end note! 

During the last months, much has been written about Target2, the payment and settlement system of the euro area. If you have read official documents such as the Target2 Annual Reports for 2010 and 2011, the Bundesbank  Monthly Report of March 2011, the ECB Monthly Bulletin of October 2011, the explanations by Michael Best (Bundesbank), Ulbrich and Lipponer (Bundesbank) and Bindseil et al. (ECB), the clear and lucid contributions of Karl Whelan in Vox-Eu and elsewhere, or even my earlier blog posts you already know a lot about the nature and functioning of the system.


Nevertheless, as the following examples demonstrate (my emphasis in red) there still exist fundamental misunderstandings which let the burdens and risks of Target2 membership appear scarier than they are in reality rendering a meaningful public discourse of the subject difficult to impossible.

Consider, for example, what Peter Boone and Simon Johnson wrote in The End of the Euro: A Survivor’s Guide, May 29th, 2012:

More importantly and currently less obvious to German taxpayers, Greece will likely default on 155 billion euros directly owed to the euro system (comprised of the ECB and the 17 national central banks in the euro zone). This includes 110 billion euros provided automatically to Greece through the Target2 payments system – which handles settlements between central banks for countries using the euro. As depositors and lenders flee Greek banks, someone needs to finance that capital flight, otherwise Greek banks would fail.  This role is taken on by other euro area central banks, which have quietly leant large funds, with the balances reported in the Target2 account. The vast bulk of this lending is, in practice, done by the Bundesbank since capital flight mostly goes to Germany, although all members of the euro system share the losses if there are defaults.


Another recent example is from a widely noticed speech George Soros gave at the Festival of Economics, Trento Italy on June 02, 2012:

If this continued for a few more years a break-up of the euro would become possible without a meltdown – the omelet could be unscrambled – but it would leave the central banks of the creditor countries with large claims against the central banks of the debtor countries which would be difficult to collect. This is due to an arcane problem in the euro clearing system called Target2. In contrast to the clearing system of the Federal Reserve, which is settled annually, Target2 accumulates the imbalances. This did not create a problem as long as the interbank system was functioning because the banks settled the imbalances themselves through the interbank market. But the interbank market has not functioned properly since 2007 and the banks relied increasingly on the Target system. And since the summer of 2011 there has been increasing capital flight from the weaker countries. So the imbalances grew exponentially. By the end of March this year the Bundesbank had claims of some 660 billion euros against the central banks of the periphery countries.

The Bundesbank has become aware of the potential danger. It is now engaged in a campaign against the indefinite expansion of the money supply and it has started taking measures to limit the losses it would sustain in case of a breakup. This is creating a self-fulfilling prophecy.

Once the Bundesbank starts guarding against a breakup everybody will have to do the same. My last example is a text from ZeroHedge about Europe’s Bailout Costs In One Chart: €2 Trillion And Counting, refering to this chart:

Source: Brandywine Global High Yield Perspectives, Ifo. Tyler Durden wrote on June 3rd, 2012:

This chart, better than any we have seen so far, summarizes just how much has been injected already to preserve the Eurozone from collapse. This is what is known as a sunk cost, because last time we checked (and just as we explained back in March at the market highs when everyone was euphoric that Europe is now fixed) nothing has been fixed, and Europe is one ‘rogue’ democratic vote away from an EMU exit, and thus oblivion (or so they said last year, now everyone is prepared for a Greek departure, or so they say now, expect for the Greeks of course – they go straight to the 10th circle of hell and do not pass go). The truth is that by the time the status quo finishes its extend and pretend game, which incidentally has only one real outcome, the €2 trillion spent to date, will be orders of magnitude higher…

What is wrong with these statements? Maybe I can make my point clear answering the following questions.

  1. How is Target2 organised?
  2. Who participates in which way in Target2?
  3. Which role do national central banks (NCBs) fulfil in Target2?
  4. How are payments settled in Target2?
  5. Is liquidity generated in Target2?
  6. Do participating NCBs provide collateral in Target2?
  7. What does the Bundesbank (or any other NCB) do?
  8. What does the Bundesbank not do in Target2?
  9. Which risks do NCBs run participating in Target2?
  10. How do Target2 balances arise?
  11. How are Target2 balances treated for accounting purposes?
  12. To which corporate legal form does Target2 resemble and why does this matter?
  13. What if a country of the euro area abandons the euro?
  14. What happens with Target2 if the euro is abolished?

1. How is Target2 organised?

Target2 is a Real-Time-Gross-Settlement system operated by the Eurosystem, the monetary authority of the euro area. The Eurosystem consists of the ECB and the NCBs of those EU member states that have adopted the euro. Target2 is a system of multiple technically centralised, but legally decentralised autonomous national RTGS systems. For example, the Bundesbank runs TARGET2-Bundesbank.

2. Who participates in which way in Target2?

In 2011, Target2 had 976 direct participants, 3,465 indirect participants and 13,083 correspondents processing a daily average of 348,505 payments, representing a daily average value of €2,385 billion and connecting 23 European countries (ECB). Including branches and subsidiaries, almost 60,000 banks across the world can be adressed via Target2. Direct participation with maintenance of an own RTGS account is restricted to the European Economic Area (EEA). This includes the 27 EU member states plus Iceland, Liechtenstein and Norway. Indirect participants send and receive payment orders via a direct participant. Target2 Froms of Participation Direct Multi Addressee Indirect Adressable BIC Source: Bundesbank

3. Which role do national central banks (NCBs) fulfill in Target2?

All NCBs in the euro are are obliged to connect to Target2.

NCBs of non-euro area EU countries can connect to Target 2 if they conclude an agreement with the euro area NCBs, but they have to maintain a positive balance vis-à-vis the ECB (ECB, p. 35). As of 31 December 2011 there were six non-euro area NCBs participating in TARGET2: Българска народна банка (Bulgarian National Bank), Danmarks Nationalbank, Latvijas Banka, Lietuvos bankas, Narodowy Bank Polski and Banca Naţională a României (ECB).

Connected non-euro area NCBs participate without voting rights. They are required to pay up 3.75% of their share in the ECB’s subscribed capital as a contribution to the operational costs of the ECB. They are not entitled to receive any share of the distributable profits of the ECB, nor are they liable to fund any loss of the ECB. NCBs of member states that are neither euro area NCBs nor connected NCBs have observer status only (details).

The participating euro area and non-euro area NCBs provide payment and settlement services for participants in the EEA via Target2. They are the owners of the ECB and thereby of Target2. The following table shows the subtotal of paid-up ECB capital of euro area NCBs: . Paid-up capital for euro area NCBsSource: ECBAs of December 2011, non-euro area NCBs accounted for about another €121 million paid-up capital.

4. How are payments settled in Target2?

Target2 runs on a Single Shared Platform (SSP) jointly provided by the Bundesbank, the Banque de France and the Banca d’Italia. From there it offers settlement services to all participants, irrespective of the country from which they connect (ECB, p. 18). Further, there is no difference in the treatment of domestic and cross-border euro payments (Bundesbank, p. 72)

Payments in Target 2 are processed centrally via the SSP. As I wrote elsewhere, here the ECB functions as CCP becoming a buyer to the seller and a seller to the buyer.

Target2 is governed by the ECB Governing Council. The division of tasks between the ECB Governing Council, the Eurosystem NCBs and the three NCBs providing the SSP is determined in Annex I of this guideline.

5. Is liquidity generated in Target2?

Target2 balances of NCBs reflect the distribution of central bank liquidity within the euro area. However, liquidity cannot be generated via Target2 becaused it is a closed system which is merely transfering central bank money between accounts (Bundesbank, p. 35). Being processed very fast the funds can be reused several times a day (ECB, p.5).

To cite the Bundesbank in its latest annual report (p. 49): “Providing liquidity is one of the key tasks of any central bank. The exact manner in which this is achieved in the euro area is decided by the Governing Council of the ECB as part of its monetary policy mandate (my emphasis)” – and not as part of its management of the payment and settlement system.

6. Do participating NCBs provide collateral in Target2?

The NCBs that connect to Target2 do not provide collateral. They are running the system and providing the settlement services. As  owners of the ECB and Target2 they paid up their share of capital.

7. What does the Bundesbank (or any other NCB) do?

– Contributing to the provision of liquidity in the euro area on behalf of the ECB.

– Processing payments via its RTGS system.

8. What does the Bundesbank (or any other NCB) not do in Target2?

– Making monetary policy decisions (not in Target2 and not in any other context).

– Borrowing from, or granting loans to, other NCBs.

9. Which risks do NCBs run participating in Target2?

As I described in detail elsewhere, in Target2 there is always a danger that one leg of a transaction is paid and the counterparty is not willing or able to fulfil its part of the business. For this eventuality banks have to provide collateral. If collateral turns out to be insufficient to realize the full amount the resulting loss is shared by the euro area NCBs in line with their capital shares.  However, given existing risk control measures, and the high share of low-value transactions, the risk is minimal.

At this point, it need to be stressed that a claim in Target2 does not in itself reflect an NCB’s exposure to financial risk. This must not be confused with the counterparty risk central banks face when implementing monetary policy and providing central bank liquidity. This counterparty risk – which is wholly unrelated to the payment processes in Target 2 – is met by the Eurosystem’s collateral framework (detailsECB, p. 40).

10. How do Target2 balances arise?

Target2 balances of euro area NCBs reflect the fact that the distribution of central bank liquidity within the Eurosystem is uneven. They arise from the settlement of cross-border payment flows which results in intra-Eurosystem obligations. These are aggregated and netted out at the end of each business day. The sum of all balances of NCBs and the ECB is zero (ECB, p. 35).

11. How are Target2 balances treated for accounting purposes?

Target2 positions of euro area NCBs are established vis-á-vis the ECB. Due to the decentralised nature of the system they are booked twice:

In the balance sheets of the national central banks they are consistently booked as ‘intra-Eurosystem liabilities’ and, at the end of each business day, aggregated Eurosystemwide and consolidated – resulting either in a claim (a positive Target2 balance) or a liability (a negative Target2 balance) of the respective NCB vis-à-vis the ECB as the central counterparty (Bindseil et al.).

In the ECB balance sheet these positions are booked in consolidated form underIntra-Eurosystem claims or liabilities as Other claims (liabilities) within the Eurosystem (net).

These ECB positions also include other items such as the interim profit distributions to NCBs. (These are interim because ECB’s income on euro banknotes in circulation and income arising from securities purchased under the Securities Markets Programme is due to the eura area NCBs in the financial year in which it accrues.)

The positions of non-euro area NCBs vis-á-vis the ECB arising from their participation in Target2 are disclosed as Liabilities to non-euro area residents denominated in euroin the ECB balance sheet.

It needs to be stressed again that this accounting treatment results from the decentralised nature of the Target2 system with its legally independent national RTGS components. In a fully centralised system, similar payment flows would not give rise to these kind of claims and liabilities. Accordingly, in the consolidated balance sheet of the Eurosystem (ECB, p. 200 f.) the respective positions do not appear.

12. To which corporate legal form does Target2 resemble and why does this matter?

I am not an expert of business or corporate law, but an organisation

  • consisting of a multitude of legally independent firms under one common roof,
  • supplying services against payments,
  • with decisions made centrally but carried out decentralised,
  • with profits and losses distributed according to a key of fixed ratios,
  • and a consolidated balance sheet and profit and loss statement

— to me, such a construct resembles a holding company.

I found that this analogy strongly enhanced my understanding of debt and payment issues in the Eurosystem. For instance, coming back to the Target2 balances: In a holding, claims and liabilities arising from business activities of group members, and disclosed in a netted and consolidated form in the balance sheet of the parent company, do not represent individual profits or losses, but intra-group flows of payments.

In my feeling, thinking about what happens if in a holding

  • a firm, either going bust or being sold, is leaving the group or
  • the whole group is broken up and ceases to exist

proved extremely helpful in answering the last two questions.


13. What if a country of the euro area abandons the euro?

If a member country decides, or is forced by circumstances, to abandon the euro, the structure of autonomous national RTGS systems should facilitate an orderly transition and return to the processing of payments in national currency.

The rules state that euro area NCBs are obliged to connect to Target2. A NCB which is no longer part of the euro area may stay connected but only via an agreement with the remaining euro area NCBs and under the condition that it maintains a positive balance vis-à-vis the ECB. (The latter refers  to its liquidity status and not to borrowing/lending relations with the Eurosystem.)

How about claims and liabilities?

If the country in question refrains from staying connected to Target2 and, at the same time, is abandoning the ECB – in my understanding (but we must ask the jurists to find out) its paid-up capital will have to be returned plus its share of profit, or minus its share of loss according to a consolidated closing balance sheet and profit and loss statement.

How much is it?

In 2011, the net profit of the ECB prior to a a transfer of €1,166 million to the risk provision – was €1,894 million (ECB, p. 171). After risk provision €728 million were distributed to the euro area NCBs. Target2 itself is collecting revenues, 98% of which are generated by the SSP, but these are not yet recovering the Target2 costs (ECB, p. 27).

Currently, paid-up capital of Greece and Germany – to name two examples – amount to about €178 million and €1.7 billion respectively. That is, the loss for the Eurosystem of an exit of both countries in 2011 could have been fully absorbed by the system’s annual net profit alone.

Two further exit scenarios are conceivable:

  1.  If the country in question keeps its ECB share and stays connected to Target2 in order to process the euro side of future transactions (which in my view seems the most probable alternative), its changed status as a non-euro area member means that its NCB is no longer entitled to receive any share of the distributable profits of the ECB, nor is it liable to fund any loss of the ECB. On the other hand, like other non-euro area members it probably will have to pay a lower capital share. –
  2.  If the country in question keeps its ECB share without being connected to Target2, which is possible as long it remains an EU member, it will be restricted to observer status only.

14. What happens with Target2 if the euro is abolished?

I can only speculate, but again, several scenarios seem conceivable. So far Target2 is only processing payments in euro. A return to national currencies would require either a system change to process multi-currency payments or a complete dissolution.

The first is largely a technical matter which cannot be discussed here. The second sounds probably more dramatic than it is, given the autonomy of the national RTGS components. As in the case of unilateral exit of countries a consolidated closing balance sheet for the ECB would have to be drawn up, outstanding claims and liabilities would have to be settled and the remaining capital shares plus any profits left would have to be distributed among member countries.

15. Conclusions

The way the issue of Target2 balances is discussed in public is most regrettable. The ever new records of unmanageable bilateral debt allegedly heaping up in the system arouse fears which are wholly unreasonable and stand in the way to finding a viable crisis solution. Two points should be kept in mind: Monetary policy matters such as the creation of central bank money must not be confused with the process of payment and settlement of central bank money, and intra-group payment flows as part of the normal business of the system must not be confused with profits and losses.

At closer inspection, the €2 trillion debt scenario conjured up by some observers in an utterly irresponsible way is evaporating into thin air and the euro crisis – although still a very serious problem and a big challenge – appears as one that probably can be handled. —–


I would like to add two references.

The first is a new excellent paper by Clemens Jobst, Martin Handig and Robert Holzfeind from the Oesterreichische Nationalbank: Understanding Target2: The Eurosystem’s Euro Payment System from an Economic and Balance Sheet Perspective, to which my attention was drawn by Alea’s blog. The most interesting aspect of this paper, in my view, is a short speculative discussion of what would happen in the theoretical case of a country withdrawing from EMU. The paper emphasises the difference between losses in monetary policy operations (which might happen) and losses in Target2 (which would not be incurred).

The second is an ECB Legal Working Paper by Phoebus Athanassiou cited in the above mentioned paper by Jobst et al.: Withdrawal and Expulsion from the EU and EMU. As you can see from the following extract from the abstract its findings cast doubt on the validity of the exit scenarios I described above:

This paper examines the issues of secession and expulsion from the European Union (EU) and Economic and Monetary Union (EMU). It concludes that negotiated withdrawal from the EU would not be legally impossible even prior to the ratification of the Lisbon Treaty, and that unilateral withdrawal would undoubtedly be legally controversial; that, while permissible, a recently enacted exit clause is, prima facie, not in harmony with the rationale of the European unification project and is otherwise problematic, mainly from a legal perspective; that a Member State’s exit from EMU, without a parallel withdrawal from the EU, would be legally inconceivable (my emphasis); and that, while perhaps feasible through indirect means, a Member State’s expulsion from the EU or EMU, would be legally next to impossible.

This is an important paper, which should be widely read, and I will have to think about its implications. However, since I am no legal expert, and still confused by these new findings, I add this without modifying my initial text.

  • Although most details are correct, your introduction and conclusion are wrong and your answers to the last two questions miss the point. Target2 is very risky and should be abolished. See my blog:


    • Thank you for commenting again. Frankly, I cannot see a new argument and have the feeling that responding to you this time would make us end in an infinite loop exchanging the same statements again and again. I advise readers who are interested in where we differ to read your blog and then come back to mine and make up their mind.


  • Okay, but perhaps you can give anyway an answer to the following variation of your last but one question: What happens to the hundreds of billions of Target2 imbalances if a country of the euro area abandons the euro and loses its ability or willingness to pay?


    • There is nothing left to pay. Maybe the German word “Verrechnungssalden” makes clear the nature of these positions. As I mentioned I would prefer to end the exchange on this topic here. But, of course, feel free to ask if you have further questions.


      • Frank Deliquo permalink

        Nothing left to pay implies the debtor gets off without paying. That’s the problem.

  • I tend to agree with Wirtschaftsphilosoph – most details are correct (and very nice!) but I disagree with the conclusions. (This is no defense of Sinn’s arguments which in my opinion is full of errors).

    It’s simple – a country’s net worth is the sum of its nonfinancial assets and the net “international investment position”. If a EA17 loses its TARGET2 claims (i.e., takes a loss), it’s net worth reduces.

    I wrote on this here:

    Of course I do not find Wirtschaftsphilosoph analysis satisfying. The solution is to not abandon target (it’s excellent after all) but to give higher fiscal powers to the European Parliament so that it becomes the bona fide federal government and move to regional policies. Once this is achieved. European integration is a great cause.


    • Thank you for commenting so extensively in your blogpost. I would like to stress one point which in my view is very important. As I emphasised in an earlier article many misunderstandings in this debate stem from the dual role of the ECB as (1) the central bank and provider of liquidity for the euro area and (2) the Central Counterparty of the euro area RTGS system. Talking about debtors and creditors is refering to the former which has nothing to do with the settlement of payments. As Bundesbank and ECB repeatedly stressed, in Target2 no liquidity is created or destroyed. This is a closed system where payments are simply shifted from one account to another. Accordingly, there cannot be losses or gains from the settlement process – with one exception: A bank at one end of the payment chain may become unable to meet its obligation. For this case, the system has a risk management procedure and requires banks to pose collateral, but even then collateral may not suffice to recover the outstanding amount. In this case the NCBs will experience losses according to their capital share. This happens. Sometimes. Rarely. And if you study the references you will find that the losses are minuscule,

      Having said this, it should have become obvious that the settlement process in the euro area is also in no way related to the question of fiscal powers.


  • “As in the case of unilateral exit of countries a consolidated closing balance sheet for the ECB would have to be drawn up, outstanding claims and liabilities would have to be settled and the remaining capital shares plus any profits left would have to be distributed among member countries.”

    “outstanding claims and liabilities would have to be settled”

    In this case, outstanding claims are claims against national banks or banks with negative target2 and outstanding liabilities are liabilities against national banks or banks with positive target2.

    What about, if the outstanding claims against Greece, Spain … cannot be realized ?

    This is the point and this ist the discussion about Target2!

    If the Eurozone remains as it is, there will be no problem about target2. But if the eurozone falls apart, Germany will loose its target2 claims.

    This means, that people of Spain and Greece and others are owners of houses ans so on.. in Germany paid with the money of Germans.


    • Thank you for commenting. In my view, the misunderstanding in many debates so far, and also in your remarks, arises from the habit to regard the ECB and the NCBs as individual actors and not as an entity. They ARE individual actors with regard to certain central bank functions they fulfil in their countries. But not in Target2. And within this entity there are no outstanding claims and liabilities between parts. It is all “one house”. Since money is shifted from account to account the process requires documentation. This is the reason why it is booked. And the two-tier system of ECB and NCBs is the reason why it is booked twice.In a centralised system with only one central bank these balances would not arise. Accordingly, there is nothing for Germany to loose from Target2 if the eurozone falls apart and the ECB is dissolved. The process will be as described and Germany will get its capital back plus/minus its share of ECB profit or loss.


  • Bernd Klehn permalink

    Sie denken betriebswirtschaftlich und nicht volkswirtschaftlich, also in Sicherheiten, Gewinnen und Verlusten einzelnen Banken usw. und kommen somit zu komplett falschen Schlussfolgerungen.

    Die Target2 Salden der Nationalen Zentralbanken des Eurosystems bilden Nettokapitalbewegungen ab, die via Eurosystem organisiert worden sind. Die Target2-Salden der Nationalen Notenbanken sind Teil der Nettoauslandsschulden oder -guthaben des jeweiligen Euromitgliedes und werden mit dem jeweils aktuellen Hautrefinanzierungssatz zwischen den Nationalen Zentralbanken verzinst.

    Bei der Insolvenz eines Staates, einer Volkswirtschaft, werden die Auslandsschulden nicht mehr bedient. So als Argentinien 2001/2002 mit 60% Nettoauslandsschulden Pleite gegangen ist, diese komplett los wurde und somit langsam neu durchstarten konnte. Bei der Deutschlandpleite 1931 hatte Deutschland 70% Nettoauslandsschulden. Die prozentual weltweit größten Nettoauslandsschuldner sind Portugal, Spanien, Irland und Griechenland mit über 100% Nettoauslandsschulden. Deren Pleite und damit notwendigen Streichung der Nettoauslandsschulden ist unausweichlich. Der mittlerweile fast einzige ausländische Gläubiger dieser Länder ist die deutsche öffentliche Hand, via Bundesbank, die EZB ist hier nur Zwischenhändler, da sie kaum über eigene Mittel verfügt. Die anderen Länder abgesehen von Finnland und Holland, die bereits selber hohe Target2 haben, können keine weitere Nettoauslandsschulden übernehmen, da sie dann selber Pleite wären. Bleibt also nur als einzige Lösung, dass Deutschland sein mühsam erarbeitetes Nettoauslandsguthaben von ca. 1Billion abschreibt und in weitere öffentliche Schulden umrubelt. Der westdeutsche Arbeitnehmer dürfte, wie seit 20Jahren, durch Wiedervereinigung, Kapitalabzug durch den Euro, der Weltwirtschaftskrise, Bankenrettung (325Mrd zusätzliche Staatsschulden) durch dieses Konstrukt des Eurosystems ein viertes Mal leer ausgehen. Er soll arbeiten und die anderen drucken Geld, dieses kann nicht wahr sein. Merke Geld ist nie neutral.

    English translation:
    They think economically and not economically, ie securities, gains and losses each bank, etc. and are therefore able to completely wrong conclusions.

    The TARGET2 balances of the National Central Banks of the Eurosystem form from net capital flows, which have been organized via Euro system. The Target2 balances the National central banks are part of the net foreign debt or balances of each euro member and will bear interest at the current lending rate of skin between the national central banks.

    With the bankruptcy of a state of an economy, the foreign debt will no longer be served. So as Argentina 2001/2002, 60% of net foreign debt has gone bankrupt, this was completely loose and was able to slowly start again. When Germany broke 1931 Germany had 70% of net foreign debt. The percentage of the world’s largest net foreign debtor are Portugal, Spain, Ireland and Greece over 100% net foreign debt. Their bankruptcy and therefore necessary deletion of net foreign debt is inevitable. The now almost the only foreign creditors of these countries, the German public, via the Bundesbank, the ECB is only middlemen, because it has little resources of its own. The other countries apart from Finland and the Netherlands, which already have high Target2 itself can not take any further net foreign debt, since they would then bust itself. That leaves only the only solution that Germany depreciates chore-earned net foreign assets of about 1billion and umrubelt in more debt. The West German workers is likely, as has 20Jahren through reunification, disinvestment by the euro, the world economic crisis, bank bailout (325 billion additional debt) go through this construct of the Eurosystem for a fourth time yet. He has to work and the other print money, this can not be true. Remember money is never neutral.


    • Danke für Ihre Anmerkungen, mit denen ich unglücklicherweise nicht übereinstimme. Bitte sehen Sie dazu auch meine vorangegangenen Kommentare. Ich denke, es ist sehr wichtig, zwischen Kreditbeziehungen von Ländern und der Abwicklung von Zahlungsprozessen zu unterscheiden. Target2-Positionen spiegeln ganz verschiedene Arten von Aktivitäten und Zahlungsvorgängen wieder. Diese können kreditfinanziert sein oder durch Eigenmittel der Akteure. Sie können Aktivitäten der Banken sein oder solche von Unternehmen und Privaten, die sich der Banken zur Zahlungsabwicklung bedienen. Sie sind auch nicht nur Positionen gegenüber dem Ausland, sondern beinalten jede Art von Zahlungen in Euro, wie die Bundesbank und die EZB in ihren Erläuterungen betonen. Mir hat das Wort “Zwischenhändler” in Ihrem Text gefallen, weil es in etwa den Grundgedanken einer Central Counterparty wiedergibt. Nur, dass es sich bei Target-Positionen eben nicht um Schulden, sondern um die Abwicklung geleisteter (!) Zahlungen handelt.

      English translation:
      Thank you for your comments, which I agree is not unfortunately. Please see also my previous comments. I think it is very important to distinguish between credit relations of countries and the settlement of payment processes. Target2 positions reflect very different types of activity and payment transactions. These may be credit financed by own funds or the actors. They may be activities of banks or those of companies and individuals who use the banks for payment processing. They are also not only positions to the outside world, but contains old any kind of payments in euro, as the Bundesbank and the ECB stress in their explanations. I liked the word “middlemen” like in your text because it roughly reflects the basic idea of a central counterparty. Only that it is precisely target positions is not debt, but the settlement lasted (!) Payments.


      • Bernd Klehn permalink

        Es ist unerheblich, ob eine Volkswirtschaft durch Staats-, Banken-, Privatüberschuldung oder Geldschöpfung pleite geht und vorübergeht aus der Weltwirtschaft ausscheiden muss. Bei 100% (wie Spanien und co.) Nettoauslandsverschuldung und weiteren Leistungsbilanzdefiziten ist man einfach pleite, wenn nicht jemand, der unbedingt sein Kapital verlieren will, weiteres Geld von außen hineinpumpt. Niemand kann sich, auch nicht durch Geld drucken, an den eigenen Haaren aus dem Sumpf ziehen,

        English translation: It is irrelevant whether an economy goes bust through government, banks, private indebtedness or money creation  and must withdraw from the global economy. At 100% (such as Spain and co.) net external debt and further current account deficits, one is simply bankrupt if not someone who wants to lose his capital, is pumping more money into it from the outside. No one can, not even by printing money, dragging himself out of this mess.

  • Ich denke mal, die wesentliche Frage ist: was bedeutet ‘settlement’ bzw. ‘clearing’!

    In einem zweistufigen Banksystem, wie es aus Bundesbank-Zeiten bekannt ist, ist ‘clearing’ einerseits die Saldierung von Zahlungsansprüchen, aber andererseits die endgültige Begleichung von Zahlungsansprüchen. Das ‘netting out’ am Tagesende unterschlägt, daß “eigentlich” die ganzen Zahlungsvorgänge tatsächlich brutto ausgeführt worden sind. Und damit zwischen den Banken nicht der gesamte tägliche Zahlungsausgleich mit Zentralbankgeld – Banknoten – stattfinden muß, hat man das Zentralbankclearing eingerichtet, wo eine Umbuchung für die Banken auf ihrem Zentralbankkonto eine endgültige Zahlung markiert. Diese Umbuchung ist endgültig, weil eine Forderung gegen die Zentralbank dasselbe ist wie Zentralbankgeld.

    Und nun beginnen die Interpretationsprobleme: Sie schreiben, daß die NZBen ‘on behalf of the ECB’ agieren. Wenn das aber so ist, dann ist eine Forderung gegen z.B. die griechische Zentralbank DASSELBE wie Zentralbankgeld. Denn es gibt soweit ich weiß keinen Unterschied zwischen einer Forderung gegen die EZB und gegen das ESZB! Eine Forderung gegen die Bundesbank oder die zypriotische Nationalbank oder die EZB ist gleichwertig, weil alle EURO-Zentralbanken das Recht haben Zentralbankgeld emittieren zu dürfen. (Sicherlich im Rahmen der Beschlüsse des EZB-Rates, aber auch die Bindung an diese Beschlüsse ist ja auch schon aufgeweicht worden – für meine Begriffe der wesentliche Sündenfall!)

    Daß das formal über die EZB-Zentrale geht ist ja richtig. Und daß damit ein ‘clearing’ erfolgt ist auch. ‘Clearing’ bedeutet aber endgültige Zahlung, so daß mit einer Zahlung der z.B. griechischen Nationalbank an die Bundesbank – via EZB – die Zahlung rechtsgültig erfolgt ist. Auf gut Deutsch: die griechische Nationalbank hat – trotz TARGET-Saldo – an die Bundesbank GEZAHLT! Das liegt daran, daß auch für die griechische Nationalbank das Prinzip gilt, daß eine Forderung gegen eine Zentralbank dasselbe ist wie Zentralbankgeld. Das heißt, daß eine Forderung der Bundesbank an die griechische Nationalbank so behandelt werden kann, als hätte die Bundesbank das Zentralbankgeld tatsächlich physisch erhalten!

    Das ist das wesentliche Spezifikum von Zentralbanken, welches für andere Wirtschaftsakteure nicht gilt. (Deswegen habe ich auch nie verstanden, daß vor einiger Zeit die EZB “rekapitalisiert” werden “mußte” – ein wirtschaftstheoretischer Kopfschuß sondergleichen!) Bei Zentralbanken ist das aber ‘per definitionem’ so! Das ist der kühle Grund für meinen saloppen Post “TARGET und Griechenland – Anmerkungen zu einem fiktiven Problem”.

    Das ist für meine Begriffe die Antwort auf die von Ihnen gestellte Frage: “Which risks do NCBs run participating in TARGET2?”, wo Sie sich ein bißchen um eine definitive Antwort herumdrücken. Doch wo das ‘clearing’ erfolgt ist, KANN es keine offenen Zahlungsverpflichtungen mehr geben! That´s the point!
    Noch kurz zu der Frage, was bei einem Ausscheiden Griechenlands passieren würde: die EZB würde nach wie vor einen TARGET-Saldo gegen Griechenland ausweisen, der jedesmal dann, wenn eine Überweisung nach Griechenland erfolgt zu einer Verrechnung führt. Die griechische Nationalbank würde ihren TARGET2-Saldo entsprechend verringern und dafür irgendwelche Drachmen gutschreiben und die Erhöhung des Drachmen-Umlaufs gegen die Verringerung des TARGET-Saldos buchen. Ganz simpel! Daß der griechischen Nationalbank das nicht gefallen wird, steht auf einem anderen Blatt.

    English translation: I guess the main question is: what does mean ‘settlement’ or ‘clearing’!

    In a two-tier banking system, as it is known from the Bundesbank times, ‘clearing’ is the one hand, the offsetting of payment entitlements, but on the other hand, the final settlement of payment entitlements. The ‘netting out’ at the end of the day under suppresses that all the payments have been made actually “gross”. And so between the banks is not the total daily settlement in central bank money – bank notes – must take place, one has established the central bank clearing, where a transfer to the banks on their central bank account marked a final payment. This transfer is final, because a claim on the central bank is the same as central bank money.

    And now the interpretation problems begin: You write that the NCBs act ‘on behalf of the ECB’. If this is so, then a claim against the Bank of Greece is THE SAME as central bank money. Because there is as far as I know no difference between a claim on the ECB and the ESCB against! A claim against the Bundesbank or the Cypriot national bank or the ECB is equivalent because all euro zone central banks have the right to be allowed to emit central bank money. (Certainly in the context of the decisions of the ECB Governing Council, as well as binding to these decisions is indeed already been watered down – to my mind the substantial shortcoming !)

    That this transfer formally passes via the ECB headquarters is indeed correct. And that is so is a ‘clearing’ also. ‘Clearing’ means but final payment so that a payment of such Greek National Bank to the Bundesbank – via the ECB – the payment is done legally. Means: the National Bank of Greece PAID – despite TARGET balance – to the Bundesbank! The reason is that even for the National Bank of Greece, the principle holds that a claim against a central bank is the same as central bank money. This means that a requirement of the Bundesbank can be treated at the National Bank of Greece as if the Bundesbank, the central bank has got the money actually physically!

    That is the main specific feature of central banks, which does not apply to other economic actors. (That’s why I’ve never understood that some time ago the ECB “must” be “recapitalized” – a stupidity in economic theory) When the central bank is ‘by definition’ like this! That is the reason for my casual cool post “TARGET and Greece – Notes on a fictitious problem.”

    This is to my mind the answer to the question you have: “Which risks run NCBs participating in TARGET2” where you hang around at a definitive answer. But is is once the ‘clearing’ has happened, it CAN be no unfunded commitments more! That’s the point!

    Briefly to the question of what would happen when  Greece exits the euro: the ECB would still report a TARGET balance against Greece, which leads each time a transfer to Greece carried out a settlement. The Greek National Bank would reduce its TARGET2 balance accordingly and credit for any drachmas and book circulation, increasing the drachma against the reduction of the TARGET balances. Very simple! That the Bank of Greece will not like this, is another matter.


  • In dieser Linksammlung / Linkliste wir d die Diskussion um Target2 vollständig dokumentiert:

    English translation:In this link list, we d the discussion Target2 fully documented:


  • “The process will be as described and Germany will get its capital back plus/minus its share of ECB profit or loss.”

    Und was ist mit den Ansprüchen der Banken gegenüber den nationalen Notenbanken, die wie Sie ja sagen, eigentlich ein Teil der EZB ist. Den Bareinzahlungen oder Überweisungen z. B. der Griechen von einer griechischen Bank auf eine deutsche Bank stehen entweder bei der dt. Bank Euroscheine im Tresor gegnüber oder, wenn die dt. Bank das Geld an die EZB weiterreicht hat sie einen Anspruch gegenüber der EZB. Wenn die EZB aber nicht mehr existiert, gegebüber wem hat die dt. Bank dann einen Anspruch ? Ihre Bargeldbestände kann sie dann verfeuern und ihre Forderungen gegen die EZB abschreiben. In Ihrem Modell schaut dann nicht der Staat in den Mond, da es ja keine selbständige nationale Notenbank in Ihren Augen gibt. sondern die einzelnen Banken in den Ländern, die positive Targetsalden haben. Wie werden diese Banken dann entschädigt ? Das kann doch dann nur geschehen, in dem dt. Banken Ansprüche gegen griechische Banken als Ausgleich erhalten. Und wie viel sind dieser wert ? Sehen Sie. Das ist das Problem! Ich denke, Sie haben die ganzen Problematik leider nicht durchdacht. Schade. Bin auf Ihre Antwort gespannt.

    Translation: “The process will be as described and Germany will get its capital back plus/minus its share of ECB profit or loss.”

    And what about the banks’ claims against the national central banks, which as you say, actually are a part of the ECB. The cash deposits or transfers, for example, the Greeks do from a Greek bank to a German bank correspond to euro notes at the German bank in a safe or a claim against the ECB.  If the ECB no longer exists but, against whom the German bank will then have a claim? She can burn its cash holdings, and then write off its claims against the ECB. In your model there are no independent national bank but the individual banks in the countries have positive balances target. How are these banks then compensated? That can be done only in the German banks receive claims on Greek banks as compensation. And how much are these worth? You see. That’s the problem! I think you have not thought through the whole issue unfortunately. Too bad. Waiting for your reply


  • “This counterparty risk – which is wholly unrelated to the payment processes in Target 2 – is met by the Eurosystem’s collateral framework ”

    Es ist richtig, dass die Bundesbank nur mit ihrem Anteil von 27% an den Verlusten aus Target2 haften.

    Gehen wir mal von dem Fall aus, dass die Eurozone ungeordnet auseinanderbricht (denn dieser Fall ist wahrscheinlicher als die geordnete Abwicklung, da unsere Politiker bis zum letzten Cent den Euro verteidigen werden, koste es was es wolle).

    Dann werden bis auf Deutschland, Finnland Österreich usw. alle anderen Länder negative Target2-Salden haben d.h. dass die Banken in diesen Ländern Verbindlichkeiten gegenüber der EZB haben und deutsche Banken u.a. Forderungen gegenüber der EZB.

    Bis zu einem Auseinanderbrechen der Eurozone wird die EZB bis dahin in allen Ländern mit negativen Target2-Salden (wie bereits in Griechenland und Portugal) jeden Fetzen Papier als Sicherheit akzeptiert haben.

    Konsequenterweise werden dann die von den Banken mit Target2-Verbindlichkeiten eingereichten Sicherheiten an die Banken mit Target2-Forderungen übertragen werden.

    Hier wird sich dann zeigen, wieviel die Sicherheiten dann wert sind.

    Das Risiko für Deutschland korreliert dann genau mit der Höhe der Target2-Forderunge und deren Werthaltigkeit.

    English translation:

    “This counterparty risk – which is wholly unrelated to the payment processes in Target 2 – is met by the Eurosystem’s collateral framework ”

    It is true that the Bundesbank is liable only for their 27% share in the losses of TARGET2.

    Let’s assume the case that the euro zone is breaking up unorderedly (because this case is more likely than the orderly liquidation because our politicians will defend to the last cent of the euro, at any cost).

    Then, except for Germany, Finland, Austria, and so all other countries have negative Target2 balances ie that banks in these countries have debt to the ECB and German banks etc. Claims on the ECB.

    Up to a breakup of the euro zone, the ECB is so far in all the countries with negative Target2 balances (as in Greece and Portugal) accept every scrap of paper accepted as collateral.

    Consequently, then the collaterals submitted by the banks with Target2 debt will be transferred o the banks with Target2 claims.

    This will show how much the collaterals were worth.

    The risk for Germany then correlates closely with the level of Target2 claims and their value.

German economist with a solid business background. Many years of marketing experience, both online and offline. Author of scientific and journalistic books and articles . Experience abroad , hiker, nine languages ​​.
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