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Understanding TARGET 2: The Eurosystem’s Euro Payment System from an Economic and Balance Sheet Perspective


Author Info

  • Martin Handig

    (Oesterreichische Nationalbank, Financial Statements and Treasury Risk Monitoring Division)

  • Robert Holzfeind

    (Oesterreichische Nationalbank)

  • Clemens Jobst

    (Oesterreichische Nationalbank, Economic Analysis Division)


TARGET2 – the Trans-European Automated Real-time Gross settlement Express Transfer System 2 operated by the Eurosystem – provides for the efficient settlement of cross-border payments in euro and is thus a key infrastructure component of European monetary union. TARGET2 claims and liabilities in the accounts of the euro area central banks have recently become a subject of public debate. However, TARGET2 balances by definition constitute intra- Eurosystem balances and are as such an integral part of the decentralized implementation of the single monetary policy. Considerable claims and liabilities can arise for various reasons, many of which are related to the normal functioning of the euro area and do not require an economic policy response. Changes in TARGET2 balances also do not imply any direct changes in the risk exposure levels of national central banks. At the same time, there is no denying that the Eurosystem is facing major challenges in its monetary and liquidity policy. TARGET2 balances are indeed currently high owing to the financial crisis, given the need to provide liquidity aid to the European banking system. Yet as soon as such liquidity aid is no longer necessary, following appropriate economic policy measures such as recapitalizing banks or measures to restore confidence in government solvency, TARGET2 balances will also decline.

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Bibliographic Info

Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Monetary Policy & the Economy.

Volume (Year): (2012)
Issue (Month): 1 ()
Pages: 81–91

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Handle: RePEc:onb:oenbmp:y:2012:i:1:b:6

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Related research

Keywords: TARGET2; banknotes; central bank balance sheet; ECB; Eurosystem;

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References listed on IDEAS
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  1. Clemens Jobst, 2009. "Monetary Policy Implementation during the Crisis in 2007 to 2008," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 53–77.
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Cited by:
  1. Philippine Cour-Thimann, 2013. "CESifo Forum Special Issue April 2013: Target Balances and the Crisis in the Euro Area," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 0, pages 05-50, 05.
  2. Stephen Cecchetti & Robert McCauley & Patrick McGuire, 2012. "Interpreting TARGET2 balances," BIS Working Papers, Bank for International Settlements 393, Bank for International Settlements.
  3. Raphael A. Auer, 2013. "What Drives Target2 Balances? Evidence From a Panel Analysis," Working Papers, Swiss National Bank, Study Center Gerzensee 13.03, Swiss National Bank, Study Center Gerzensee.


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