The Eurosystem the Dutch payment system and the

The Eurosystem, the Dutch payment system and the Macedonian payment system De Nederlandsche Bank Thijs Kettenis and Paul Osse Conference Financial Sector of Macedonia on Payments and Securities Settlement Systems Ohrid 23 June 2008 De Nederlandsche Bank Eurosysteem

Contents l l Objective of the presentation The Dutch payment system overview roles of DNB large value payments retail payments securities settlement l Payments in the euro area large value payments retail payments payment systems of EBA l l Important similarities and differences with the Macedonian payment system Questions De Nederlandsche Bank Eurosysteem

Objective presentation In the first part of the presentations the payment system in the Eurosystem and Dutch system will be highlighted. To support the practicable usability of this information this presentation will show: lthe main concepts of the EU and the Dutch payments and securities system; lan overview of the important similarities and differences with the Macedonian payment and securities system. De Nederlandsche Bank Eurosysteem

Overview: infrastructure in the Netherlands l l l Central bank About 100 banks; 3700 branches 1 Automated Clearing House (Equens) for retail payments 1 RTGS large value payment system linked to with other EU central bank payment systems (TARGET 2) Securities: trading: Euronext Amsterdam clearing: LCH. Clearnet, EMCF settlement: Euroclear Nederland De Nederlandsche Bank Eurosysteem

Payment Pyramid DNB-TOP (settlement) Equens (clearing) Bank Bank Non-bank financial institutions/corporates / private persons De Nederlandsche Bank Eurosysteem

Payments: different roles DNB Operator - Cash - Large value payment system: TARGET 2 - Settlement of cash leg in securities settlement systems Overseer - Payment systems - Payment products Catalyst De Nederlandsche Bank Eurosysteem

TARGET 2 Large value payment system: • Large interbank payment transactions Settlement services retail payments • Securities transactions • Domestic and Cross border (TARGET 2) TARGET 2 is real-time gross settlement system (RTGS) De Nederlandsche Bank Eurosysteem

Retail payments – major players l l l Equens - processing and clearing of retail payments - EFTPOS-network service Currence: licensing joint products (brands: PIN, Chipknip, direct debit, inpayment transfer, i. DEAL), certification processing Banks: issuing and acquiring De Nederlandsche Bank: interbank settlement (Others credit card companies, internet payment service providers, etc. ) De Nederlandsche Bank Eurosysteem

Retail payments instruments l POS payment instruments - banknotes and coins - debit / credit card - electronic purses - cheques (until end 2001) - i. DEAL (payment for internet purchases) l Low value remote payment instruments: - credit transfers - direct debit - inpayment transfers De Nederlandsche Bank Eurosysteem

Payment pyramid Nr of payments 2007 (billion) 0. 007 4. 4 Non cash - wholesale Non cash - retail Cash 6. 7 De Nederlandsche Bank Eurosysteem

Payment pyramid Value of payments 2007 (billion) 31, 583 Non cash - wholesale 5, 907 Non cash - retail 60 Cash De Nederlandsche Bank Eurosysteem

Statistical data (I) Share in non-cash retail payments 2000 2006 l Credit transfers 32% 29% l Direct debits 29% 26% l Inpayment transfers 9% l Debit cards 28% 35% l Credit cards 2% 1% l E-purse 1% 4% 4% Share in total number of payment transactions l Non-cash 35 -45% l Cash 55 -65% (POS 75 -85%) De Nederlandsche Bank Eurosysteem

Electronic vs. paper in non-cash De Nederlandsche Bank Eurosysteem

Statistical data (II) End of 2005 l Population the Netherlands 16. 3 mln l Bank accounts 23. 2 mln Payment cards with debit function 17. 7 mln Number of ATMs 7, 520 Number of EFTPOS terminals 237, 308 l l l l Bank accounts per inhabitant 1. 4 Payment cards per inhabitant 1. 1 ATMs per 10, 000 inhabitants 4. 6 EFTPOS terminals per 10, 000 inhabitants 145. 3 De Nederlandsche Bank Eurosysteem

Securities settlement Trade: Euronext Amsterdam (Euronext: merger Dutch, French, Belgian exchanges) l Clearing: LCH. Clearnet, central counterparty for Euronext cash and derivatives markets l Settlement: Euroclear Nederland (national Central Securities Depository, now part of the Euroclear group) l Cash leg of securities settlement (Euronext markets and OTC: at delivery-versus-payment at DNB) l De Nederlandsche Bank Eurosysteem

EURO AREA PAYMENTS LANDSCAPE De Nederlandsche Bank Eurosysteem

Distribution of systems De Nederlandsche Bank Eurosysteem

Euro area payment pyramid (1) De Nederlandsche Bank Eurosysteem

Euro area payment pyramid (2) De Nederlandsche Bank Eurosysteem

LVPS in the euro area TARGET: EU-wide reach; RTGS l EURO 1: EU-wide reach; MNS l l l PNS: France; hybrid POPS: Finland; bilateral netting Two systems have recently closed: l EAF (Germany) l SPI (Spain) De Nederlandsche Bank Eurosysteem

Average number of transactions (thousand) De Nederlandsche Bank Eurosysteem

Average daily transaction value (EUR bln) De Nederlandsche Bank Eurosysteem

Retail systems in the euro area l 15 retail payment systems l e. g. STEP 2 (EU-wide), Equens (NL-DE), SIT (FR) l Cards clearing and settlement mechanisms l e. g. Master. Card settlement service, national card schemes l E-money schemes l e. g. Kalibra, Proton, Moneo, Geldkarte, Chipknip De Nederlandsche Bank Eurosysteem

Differences in retail payments systems l Centralised model (e. g. FR, NL) Most retail payments channelled via one payment system high turnover l Decentralised model (e. g. DE) Multiple channels for retail payments low turnover De Nederlandsche Bank Eurosysteem

Payment systems of Euro Banking Association (EBA) l EURO 1 l STEP 2 De Nederlandsche Bank Eurosysteem

EURO 1 (1) Basic facts l Second largest euro payment system l 187. 000 trx. daily with turnover of EUR 189 mln (2006) l Multilateral net settlement system l Owner/manager: EBA Clearing Company (owned by the banks) Participants l 71 clearing banks (financial criteria apply) l 8 pre-funded participants De Nederlandsche Bank Eurosysteem

EURO 1 (2) Payment processing l SOS = Single Obligation Structure l Recalculation of the participant’s single position after each payment l Unwinding not allowed Settlement l At the end of the day in TARGET l Via settlement account with ECB De Nederlandsche Bank Eurosysteem

EURO 1 (3) Protected net settlement system l. Limit system Bilateral and multilateral limits Sender and receiver limits Maximum limit: EUR 1 billion l Liquidity pool held at the ECB to cover the single largest possible position l Loss-sharing agreement for clearing banks l De Nederlandsche Bank Eurosysteem

STEP 2 (1) Basic facts l ACH (PEACH) – reach ability across euro area l 360. 000 trx. daily, turnover EUR 1. 4 billion (2006) l Owner/manager: EBA Clearing Company Participants l 107 direct participants l EURO 1/STEP 1 banks of prefund-participants l >1000 indirect participants De Nederlandsche Bank Eurosysteem

STEP 2 (2) Payments processing l Submission of payments in batches on D-1 l STEP 2 mechanism: Resorting of payments by recipient bank Production of output files Settlement l Gross settlement in the morning in EURO 1 l Payments are returned to sender if not settled l Settlement in TARGET 2 under preparation De Nederlandsche Bank Eurosysteem

Overview similarities/differences Macedonia Netherlands 2. 055. 915 16. 372. 715 GDP/capita (USD, 2007) 3. 659 46. 261 Surface (sq. km) 25. 713 41. 528 29 (18 + 11) 102 Number of inhabitants (2007) Banks De Nederlandsche Bank Eurosysteem

Overview similarities/differences Macedonia Netherlands Circa 400 Circa 1800 Stock Exchange 1 1 CSD 1 1 (Euroclear) CCP 1 ACH 1 (KIBS) 2 (LG Clearnet, EMCF ) 1 (CSS of Equens) Number staff NCB De Nederlandsche Bank Eurosysteem

Overview similarities/differences Macedonia Netherlands X X Supervision by NCB on: Credit institutions Clearing institutions X Investment firms X X Money transaction offices X Insurance companies X Pension funds X Trust offices De Nederlandsche Bank Eurosysteem

Overview similarities/differences Legal basis payment operations Macedonia Netherlands Yes No X X X (MSEC) X (AFM) Functions NCB Payment operations Supervision Separate supervisory authority for the supervision on securities institutions De Nederlandsche Bank Eurosysteem

Questions De Nederlandsche Bank Eurosysteem