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Liquidity distribution and settlement in TARGET2

Author

Listed:
  • Duca-Radu, Ioana
  • Polo Friz, Livia

Abstract

This article analyses how liquidity is distributed across jurisdictions in TARGET2 – the payment system owned and operated by the Eurosystem – and the implications for payment settlement. It discusses TARGET2 participants’ reliance on intraday credit and the time of payment settlement, which are important aspects for the payment system operator. The article documents considerable heterogeneity across countries in liquidity holdings, concentration of liquidity among participants, usage of the intraday credit facility and time of settlement. A panel study across countries shows that larger holdings of liquidity are associated with a lower use of the credit line and an earlier time of settlement. JEL Classification: G20, G21

Suggested Citation

  • Duca-Radu, Ioana & Polo Friz, Livia, 2020. "Liquidity distribution and settlement in TARGET2," Economic Bulletin Articles, European Central Bank, vol. 5.
    • Handle: RePEc:ecb:ecbart:2020:0005:3
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    File URL: https://www.ecb.europa.eu//pub/economic-bulletin/articles/2020/html/ecb.ebart202005_03~4a20eae0c8.en.html
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    Citations

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    Cited by:

    1. Aberg, Pontus & Corsi, Marco & Grossmann-Wirth, Vincent & Hudepohl, Tom & Mudde, Yvo & Rosolin, Tiziana & Schobert, Franziska, 2021. "Demand for central bank reserves and monetary policy implementation frameworks: the case of the Eurosystem," Occasional Paper Series 282, European Central Bank.

    More about this item

    Keywords

    intraday credit; Liquidity distribution; payment systems; TARGET2; time of settlement;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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