mr mehdi manaa introduction to mr sylvain debeaumont mr ... · components from t2s/tips impacts:...
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Introduction to TARGET Instant Payments Settlement(TIPS)
Mr Mehdi Manaa Mr Sylvain DebeaumontMr Ignacio Terol Mr Andrea Dimartina
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Table of Contents
TIPS Main Pillars 1
TIPS as Part of a Vision 2
TIPS Functional Overview3
Introduction to TARGET Instant Payments Settlement 2
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What is TIPS?
The Eurosystem decided in September 2016 to launch an investigation phase for TIPS
• TIPS extends the availability of central bank money (CeBM) settlement to 24/7/365, to facilitate the emergence of instant payments
The investigation phase will, among others:
• Elaborate the user requirements for TIPS
• Define the business case
Objectives of the Eurosystem:
• Euro area not to lag behind in speed of payments
• Promote efficiency and ensure market integration in the settlement of instant payments
Why TARGET Instant Payments Settlement?
Introduction to TARGET Instant Payments Settlement 3
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What is TIPS?
Instant payments settlement in Central
Bank Money
Same participation criteria as for
TARGET2
24/7/365operating hours
Operated on a full cost-recovery basis
Multi-currencytechnical capability
Supports participants to comply with the SCT Inst scheme
Principles: Foundation of the Service
Introduction to TARGET Instant Payments Settlement 4
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What is TIPS?
• Technical solution for providing instant payments settlement services
• Offers final and irrevocable settlement
• Participation in TIPS is not mandatory
• To be developed and operated by the Eurosystem assuming full ownership
• Lean, harmonised and standardised pan-European service
Additional Principles
Introduction to TARGET Instant Payments Settlement 5
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What is TIPS?
Integrated TARGET Services
TARGET2 Participants
TIPSTARGET2
Settlement in Central Bank Money
Value added RTGS Services
Network Services
Communication Management
Introduction to TARGET Instant Payments Settlement 6
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What is TIPS?
Co-existence of Payment Services
TARGET2
TIPS
Support for Instant Payments Through Instant SettlementAccess to RTGS Services
PSPs PSPs
Support for Instant Payments Through Clearing
Settlement backed by CeBM
ASI 6
PSPs
ACHs
Funding / Defunding
ACHs
Individual Instant Payment Instructions
Introduction to TARGET Instant Payments Settlement 7
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Connectivity for TIPS
Connecting to TIPS
• TIPS will be a network vendor agnostic service
• The intention is to let TIPS Participants decide the network vendor they each intend to use, as long as this network vendor is certified by the Eurosystem
TIPS
Vendor 1 Vendor 2 Vendor 3
Introduction to TARGET Instant Payments Settlement 8
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Pricing Indication
How much will TIPS cost?
• Considering the principle of full cost recovery, we are assessing the possibilities of achieving full cost recovery with from 0.5 to 1 cent per instruction
• We want to gather the interest of market participants in using the service at this price
• This is not at this stage a commitment, but rather an exploration of market interest
Introduction to TARGET Instant Payments Settlement 9
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Time Plan
10
• Early January ‘17Submission of a draft User Requirements Document (URD) version to the Market
• January – February ‘177 weeks of consultation with the Market on the draft URD
• June ‘17Decision to develop the service based on the results of the Investigation phase
• May ’18Start of Eurosystem internal system testing
• August ’18Start of pilot testing involving users
• November ‘18TIPS Go-live
2016 2017 2018
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
TIPS Realisation phase Investigation phase
High-Level Time Plan
Introduction to TARGET Instant Payments Settlement 10
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Table of Contents
TIPS Main Pillars 1
TIPS as Part of a Vision 2
TIPS Functional Overview3
Introduction to TARGET Instant Payments Settlement 11
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Future of Eurosystem Market Infrastructure
Eurosystem Collateral Management System (ECMS)
Common system for the mobilisation and management of collateral used in Eurosystem credit operations• reducing fragmentation and heterogeneity within the Eurosystem• allowing for efficient mobilisation and management of collateral • contributing to the European Capital Markets Union
Back-office tool for monetary policy counterparty operations
Common system for Eurosystem central banks to manage eligible collateral
Central platform providing harmonised Eurosystem services to counterparties
Introduction to TARGET Instant Payments Settlement 12
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Consolidation of TARGET2 and T2S
Technical consolidation
Enhanced RTGS services
• Improve efficiency• Cut down operational costs • Increase cyber resilience• Align messaging standards
(ISO20022)• Integrate newest technology• Multiple Network Service Providers
• Multi-currency services• Liquidity management services• Data analysis and business
intelligence services• Services related to supporting
regulatory compliance
• Future of Eurosystem Market Infrastructure
Introduction to TARGET Instant Payments Settlement 13
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Modularising Eurosystem Market Infrastructure
Consolidate Eurosystem Market Infrastructure into a more modular structure
• Liquidity Management• Reference Data• Billing
Future of Eurosystem Market Infrastructure
Central Liquidity Management
TIPS T2S ASI HVPSSF
Introduction to TARGET Instant Payments Settlement 14
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Expected Benefits:
• Credit lines need to be handled only in one place, but the generated liquidity becomes available in all areas
• Clear segregation of monetary policy related activities (marginal lending, overnight deposits) from normal payment activities
• The individual, dedicated pots of liquidity can be managed by different settlement engines, thus allowing the reuse of existing components from T2S/TIPS
Impacts:
• Will require changes in the way banks interact with the market infrastructure
Future of Eurosystem Market Infrastructure
Modularising Eurosystem Market Infrastructure
Introduction to TARGET Instant Payments Settlement 15
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Consolidated Reference Data
Expected Benefits:
• Reduced maintenance effort for reference data items that are used by more than one market infrastructure services (e.g. BIC directory, accounts information, party information, users)
• Reduced duplication of information avoids inconsistencies
• Reduced number of software modules required for maintaining reference data in the different market infrastructures
• Consistent data maintenance process across different market infrastructures
Impacts:
• Will require changes on how reference data is accessed from the different existing market infrastructures
Future of Eurosystem Market Infrastructure
Introduction to TARGET Instant Payments Settlement 16
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Common Billing Module
Aggregate all billable events across different Eurosystem market infrastructures and have a consistent billing process for Banks, CSDs and other counterparties
Expected Benefits:• Reduction of scope and thus costs for the individual market
infrastructures
• Consolidated process eliminates the risk of inconsistencies in the invoicing
Future of Eurosystem Market Infrastructure
Introduction to TARGET Instant Payments Settlement 17
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Table of Contents
TIPS Main Pillars 1
TIPS as Part of a Vision 2
TIPS Functional Overview3
Introduction to TARGET Instant Payments Settlement 18
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TIPS Functional Overview
TIPS Service Scope
SCT Inst scheme compliant settlement service for participants to allow the transfer of funds instantly from an originator to a beneficiary
In Scope• Routing services to forward the SCT Inst instructions from the
originator participant to the beneficiary participant • Instant settlement of the SCT Inst instructions accepted by the
beneficiary participant• Immediate transmission of status messages after settlement• Liquidity transfers between RTGS systems and TIPS using
camt.050 messagesOut of Scope• Liquidity transfers between TIPS accounts• Additional services (e.g. mapping of mobile numbers to IBANs)
Introduction to TARGET Instant Payments Settlement 19
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TIPS Functional Overview
Compliant with SCT Inst Scheme
1. TIPS receives an instant payments instruction2. TIPS validates and reserves the amount (conditional settlement)3. TIPS forwards the instruction for acceptance to the beneficiary participant or the party acting
on its behalf4. TIPS receives a positive confirmation5. TIPS settles the payment6. TIPS confirms the settlement to the originator participant or the party acting on its behalf7. TIPS confirms the settlement to the beneficiary participant or the party acting on its behalf
1. TIPS receives an instant payments instruction2. TIPS validates and reserves the amount (conditional settlement)3. TIPS forwards the instruction for acceptance to the beneficiary participant or the party acting
on its behalf4. TIPS receives a positive confirmation5. TIPS settles the payment6. TIPS confirms the settlement to the originator participant or the party acting on its behalf7. TIPS confirms the settlement to the beneficiary participant or the party acting on its behalf
OriginatorParticipant / Instructing
Party
BeneficiaryParticipant / Instructing
Party
TIPS
1 Instructs
6 Service confirms
2 Service validates and makes reservation
4Accepts instruction
3 Forwards instruction
5 Service settles
7 Serviceconfirms
Introduction to TARGET Instant Payments Settlement 20
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Become a Participant?
• Participation rules same as those applied in TARGET2
• You may open either one account or many accounts to service your clients
• You may let other parties (ACHs, technical service providers) instruct on your behalf
TIPS Functional Overview
Introduction to TARGET Instant Payments Settlement 21
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Do not want to open a TIPS account?
• Be a Reachable Party in TIPS if you do not want to open a TIPS account
• You can assume the role of an Instructing Party and connect to TIPS directly
• You can have a contractual agreement with a Participant to use its TIPS account for settlement
• Participants may set limits for clients using the Credit Memorandum Balance functionality
TIPS Functional Overview
Introduction to TARGET Instant Payments Settlement 22
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Credit Memorandum Balance (CMB) Limits
TIPS Functional Overview
• CMBs allow Reachable Parties that do not have a cash account in TIPS, to send and receive payment instructions using a participant’s TIPS account
• CMBs allow Participants to set maximum limits for Reachable Parties
TIPS
ParticipantAccount
CMB1 CMB2
Reachable Party 1
Participant
Reachable Party 2
• Settlement in Central Bank money
• Efficient limit management without splitting of liquidity
Introduction to TARGET Instant Payments Settlement 23
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Use Cases
24
Participant P1 TIPS Instructing Party IP for Participant P2
Situation:• TIPS communicates with Participant P1 and Instructing
Party IP on behalf of Participant P2• Both Participants use their own accounts• Inference of accounts:
• BIC-P1 → ACC1• BIC-P2 → ACC2
Settlement process:1. Debit ACC12. Credit ACC2
Participant P1 Account Structure Participant P2 Account StructurePayment Transaction
ACC1BIC-P1
ACC2BIC-P2
Originator BIC = BIC-P1Beneficiary BIC = BIC-P2
Payment Transaction
Case 1/2 – Two Participants
Introduction to TARGET Instant Payments Settlement
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Use Cases
Introduction to TARGET Instant Payments Settlement 25
Situation:• TIPS communicates with one Instructing Party IP on
behalf of the Reachable Party R1 and the Participant P2• R1 uses a CMB provided by Participant P1, P2 uses its
own account• Inference of accounts/CMBs:
• BIC-R1 → CMB1• BIC-P2 → ACC2
Settlement process:1. Decrease CMB12. Debit ACC13. Credit ACC2
Instructing Party IP for Reachable Party R1
TIPS Participant P2
Payment Transaction
Participant P1 Account Structure Participant P2 Account StructurePayment Transaction
ACC1BIC-P1
ACC2BIC-P2
Originator BIC = BIC-R1Beneficiary BIC = BIC-P2
CMB1BIC-R1
CMB2BIC-Rx
Case 2/2 – Reachable Party and Participant
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Liquidity management
• You may use TARGET2 to fund liquidity to TIPS
• TIPS will have the same business date as TARGET2
• TIPS account balances will be counted in minimum reserve computations
• Usage of collateral and automated liquidity management could be available in the context of T2-T2S consolidation
Minimum reserve TARGET2 end of day balance
TIPS balance at the time of TARGET2
end of day
TIPS Functional Overview
Introduction to TARGET Instant Payments Settlement 26
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Non-Functional Highlights
27
• State of the art technology architecture scalable enough to support future pan-European instant payments volumes
• Meets timing and speed requirements of the SCT Inst scheme
• Operational 24/7/365, with 99.9% availability, measured on a quarterly basis
• Advanced disaster recovery objectives: Recovery Point Objective of zero data loss and Recovery Time Objective of 15 minutes
Time
RTO = 15 minutes
Major failure or regional disaster
Unavailability
Serviceis restored
Decision to restart
TIPS Functional Overview
Introduction to TARGET Instant Payments Settlement 27
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Information Services
28
• Real-time statuses of transactions
• Configurable daily reports
• Statement of all transactions to support you in reconciliation
• Queries to support you in investigations
• Daily raw data to support archiving, billing, advanced queries & reports and statistics
TIPS Functional Overview
Introduction to TARGET Instant Payments Settlement 28