Payment Systems

Interbank payment systems

The smooth flow of funds across a financial system depends on the efficient arrangement for transmission, clearing and settlement of payments in a risk free environment. Hence, central banks across the world have to provide arrangements for the timely and secure settlement of high-value payments.

As a result of Malta's adoption of the euro, the Central Bank of Malta joined TARGET2, a high-value payment system. TARGET2 is the second generation of TARGET and stands for Trans-European Automated Real-time Gross settlement Express Transfer system. TARGET2 transactions are settled in central bank money and are covered with immediate finality.

The Bank operates TARGET2-Malta, which together with all the other national EU central banks components make up TARGET2. Prior to the adoption of the euro, the Central Bank of Malta operated a Maltese Lira real-time gross settlement system with the name of MaRIS.

TARGET2-MALTA

The Central Bank of Malta joined TARGET2 from its "go-live" date on 19 November 2007 as an out-country. When Malta joined the euro area on 1 January 2008, the Central Bank of Malta became part of the Eurosystem, and thus participated in TARGET2 as an in-country. Within the Eurosystem, TARGET2 had replaced the decentralised technical platforms of TARGET, which lacked standardisation in technology and services.

The new fully fledged RTGS runs on a single shared platform (SSP), and is operated by three Eurosystem central banks, namely the Banca d'Italia, Banque de France and Deutsche Bundesbank, on behalf of the Eurosystem.

The credit institutions participating directly may transfer euro-denominated payments in real time from their account on the Single Shared Platform (SSP).  Indirectly connected participants settle their payments via a direct participant, using the direct participant's account on the SSP. The system is available between 7.00 CET and 18.00 CET from Monday to Friday, with the exception of six official holidays, namely, 1 January, Good Friday, Easter Monday, 1 May, and 25 and 26 December. The Eurosystem settles its monetary policy operations in the TARGET2 system.

The main benefits of TARGET2 include:

  1. higher cost efficiency gains from implementing a centralised system, which results in a substantial reduction in operational and maintenance costs;
  2. system flexibility which is easily adaptable in future;
  3. generation of economies of scale, which give sizeable cost reductions, together with standardised prices for domestic and cross-border payments;
  4. a level playing field among users;
  5. wide flexible liquidity management services to cope with users' demands;
  6. a high level of availability and business continuity.