Each day, millions of financial transactions are processed in a very short time thanks to the proper functioning of the payment system, which is a set of instruments, market players, procedures and regulations that are designed to transfer money from one entity to another.
Transferring money, for a bank, just as for a private citizen, a company or a government authority, is a frequent but nevertheless delicate process. Each payment that has to be processed quickly, with very high levels of safety and at an affordable cost, thereby guaranteeing that the economy functions efficiently. This is why one of the main tasks of the European System of Central Banks (ESCB) - composed of the national central banks and the European Central Bank (ECB) - is to promote the smooth operation of payment systems (Article 127.2 (formerly Article 105) of the Treaty on the Functioning of the European Union and Articles 3 and 22 of the Protocol on the Statute of the ESBC/ECB). In Italy, the Consolidated Law on Banking (TUB) entrusts specific tasks to Banca d’Italia regarding payment systems (Article 146 of Legislative Decree 385/1993).
The Eurosystem – that is the ECB and the national central banks of the countries that have adopted the euro as their currency – promotes the efficiency, stability and safety of the payment system in various ways, ranging from the direct provision of payment services, to the fostering of cooperation between market players and the activities of moral suasion, regulation and control that typify the oversight of payment systems.
Direct provision of payment services
To ensure monetary and financial stability, the Eurosystem needs safe and efficient payment and settlement infrastructures. Banca d’Italia, as a Eurosystem national central bank, plays a role in achieving these goals by developing strategic polices for euro-area payment systems and by committing a significant amount of human and technological resources to construct and manage these infrastructures.
The term 'TARGET Services' refers to the Eurosystem's infrastructures that ensure the transfer of cash and securities across Europe. These infrastructures include:
TARGET2 (T2), for settling in particular gross payments,
TARGET2-Securities (T2S), for settling securities transactions, and
TIPS, for settling instant payments.
In all three of these infrastructures, payments are settled in central bank money.
The TARGET2 system is used for the real-time gross settlement (RTGS) of interbank payments and monetary policy operations. It has been in operation since 2007 and was created on behalf of the Eurosystem by Banca d'Italia, Deutsche Bundesbank and Banque de France (3CB). By settling central bank money, TARGET2 helps to reduce systemic risk in the euro area and, by enabling market players to exchange funds in real time, contributes to levelling interest rates on the interbank market and to providing a uniform transmission of monetary policy impulses throughout the euro area.
Together with the central banks of France, Germany and Spain (4CB), Banca d'Italia has also developed TARGET2-Securities (T2S), the pan-European, multi-currency platform for the settlement of securities transactions, in operation since 2015. This project has made it possible to remove the technical and operational barriers to cross-border settlement that were hindering the integration of the European financial market, and that were identified in the report of the Giovannini Group set up within the European Commission.
TIPS (TARGET Instant Payment Settlement) is a pan-European, multi-currency platform operating 24/7/365, for the settlement, in real time and in central bank money, of instant payments. There is no limit on the payment amount for transactions carried out through TIPS and the cost to participating providers is very small. In 2017, the ECB Governing Council entrusted Banca d'Italia with the tasks of developing and managing the TIPS platform, operational as from November 2018. This project has reinforced Banca d'Italia's role in managing and developing the infrastructures providing financial services not only to banks, as in the case of TARGET2 and TARGET2-Securities, but also to individuals and firms all over Europe, namely retail transactions involving modest amounts.
At the national level, Banca d'Italia manages the retail payment system BI-Comp, where multilateral payments are netted (multilateral netting) in multiple daily cycles and settled in TARGET2. BI-Comp handles the retail payments processed by the clearing systems managed by ICCREA, Nexi Payments, SIA and Centro Applicativo of Banca d'Italia (CABI).
CABI is the system managed by Banca d'Italia to clear both its own payments and those pertaining to general government (such as paying salaries and pensions) in SEPA format.
Alongside the provision of payment services, Banca d'Italia also issues declarations in lieu of cheque protest. These are formal statements of non-payment of a cheque which make it possible, in the same way as the protests registered by other public officials (notaries, municipal secretaries and so on), to take action or 'exercise recourse' pursuant to the Legge Assegni or 'Cheques Law' (Royal Decree 1736/1933).
For each bank that is a monetary policy counterparty and or/participant in the TARGET2 system, Banca d'Italia holds and manages the pool account in which its eligible financial assets (securities or bank loans) are recorded. These assets serve as collateral for credit granted by the Eurosystem through financing monetary policy operations or intraday liquidity (which must be repaid at the end of the business day).
Banca d'Italia provides a broad range of euro reserve management services to international organizations and non-euro-area central banks, in compliance with the standardized terms and conditions as defined by the ECB Governing Council for all the Eurosystem national central banks that offer these services (Eurosystem Reserve Management Services - ERMS). This activity facilitates and promotes access to euro-area markets and the spread of the euro as an international currency.
The evolution of payment systems: Eurosystem projects
For more than a decade TARGET2 has ensured that large-value payments within the euro area can be made safely and efficiently. However, since TARGET2 was introduced, the world of payment systems has undergone significant transformation because of recent technological developments and demand for new products and services from market players.
Near the end of 2017, the Eurosystem, within the context of its broader development strategy, approved three projects to develop market infrastructures in order to:
- identify new services in support of financial markets, financial intermediaries, citizens and firms in Europe;
- provide incentives for innovation in cash and securities settlement services and for the modernization of Eurosystem market infrastructures;
- promote the further integration and harmonization of cash and securities-based financial services.
The first project focused on the creation of TIPS, which, as mentioned, was launched in November 2018.
The second project concerns technical and functional T2 and T2S consolidation in order to develop a new real-time gross settlement system capable of offering advanced services, in part to satisfy the demand expressed by financial market operators. The project, which will be launched in November 2022, will integrate the functions now performed by TARGET2, T2S and TIPS. The changeover to the new platform will require significant technological adjustments to be made to the existing infrastructures.
The third project regards the development of a single system for managing the collateral for Eurosystem credit operations (Eurosystem Collateral Management System - ECMS) which will replace the systems now used by the individual national central banks. The ECMS will be launched in November 2023 and will expand the scope of the TARGET Services.
 'Gross' refers to wholesale payments, generally involving interbank transactions and monetary policy operations.
 Settlement in the accounts held with their respective central banks by the participants in such infrastructures.
 'Gross settlement' refers to the settlement of each transaction one by one, without netting, in the accounts held with their respective central banks.
 The gross settlement of TARGET2 transactions between two market players makes it possible to mitigate the risk that the failure of one participant could set off a chain reaction affecting other participants, thereby threatening the stability of the entire financial market (the 'domino effect').
 Instant payments (SEPA Instant Credit Transfer - SCT Inst) are electronic retail payments that have to be settled within a few seconds of being sent.
 These involve transactions using 'domestic' instruments, such as electronic cheques and debit cards, and those made in SEPA format, such as credit transfers, instant payments and direct debits.
 Clearing systems manage the exchange of payment information and calculate individual financial positions based on bilateral netting between participants.
 These projects are consistent with the European Commission's Capital Markets Union (CMU) plan to fully integrate EU financial markets. In the CMU, the role of the Eurosystem is to stimulate and guide the process of harmonizing the operational practices of the European capital markets, complementing the Commission’s task of addressing the legislative and regulatory aspects.