De Nederlandsche Bank Eurosysteem The Eurosystem, the Dutch payment system and the Macedonian payment system 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 Objective of the presentation The Dutch payment system  overview  roles of DNB  large value payments  retail payments  securities settlement Payments in the euro area  large value payments  retail payments  payment systems of EBA 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: the main concepts of the EU and the Dutch payments and securities system; an overview of the important similarities and differences with the Macedonian payment and securities system.

De Nederlandsche Bank Eurosysteem Overview: infrastructure in the Netherlands 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 (TARGET2) Securities: trading: Euronext Amsterdam clearing: LCH.Clearnet, EMCF settlement: Euroclear Nederland

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

De Nederlandsche Bank Eurosysteem Payments: different roles DNB Operator - Cash - Large value payment system: TARGET2 - Settlement of cash leg in securities settlement systems Overseer - Payment systems - Payment products Catalyst

De Nederlandsche Bank Eurosysteem TARGET2 Large value payment system: Large interbank payment transactions Settlement services retail payments Securities transactions Domestic and Cross border (TARGET2)  TARGET2 is real-time gross settlement system (RTGS)

De Nederlandsche Bank Eurosysteem Retail payments – major players Equens - processing and clearing of retail payments - EFTPOS-network service Currence: licensing joint products (brands: PIN, Chipknip, direct debit, inpayment transfer, iDEAL), 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 POS payment instruments - banknotes and coins - debit / credit card - electronic purses - cheques (until end 2001) - iDEAL (payment for internet purchases) Low value remote payment instruments: - credit transfers - direct debit - inpayment transfers

De Nederlandsche Bank Eurosysteem Payment pyramid Nr of payments 2007 (billion) Cash Non cash - retail Non cash - wholesale

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

De Nederlandsche Bank Eurosysteem Statistical data (I) Share in non-cash retail payments Credit transfers32%29% Direct debits29%26% Inpayment transfers 9% 4% Debit cards28%35% Credit cards 2% 1% E-purse 1% 4% Share in total number of payment transactions Non-cash35-45% Cash55-65% (POS 75-85%)

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

De Nederlandsche Bank Eurosysteem Statistical data (II) End of 2005 Population the Netherlands16.3 mln Bank accounts23.2 mln Payment cards with debit function17.7 mln Number of ATMs 7,520 Number of EFTPOS terminals237,308 Bank accounts per inhabitant 1.4 Payment cards per inhabitant 1.1 ATMs per 10,000 inhabitants 4.6 EFTPOS terminals per 10,000 inhabitants145.3

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

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 EURO1: EU-wide reach; MNS PNS: France; hybrid POPS: Finland; bilateral netting Two systems have recently closed: EAF (Germany) 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 15 retail payment systems e.g. STEP2 (EU-wide), Equens (NL-DE), SIT (FR) Cards clearing and settlement mechanisms e.g. MasterCard settlement service, national card schemes E-money schemes e.g. Kalibra, Proton, Moneo, Geldkarte, Chipknip

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

De Nederlandsche Bank Eurosysteem Payment systems of Euro Banking Association (EBA) EURO1 STEP1 STEP2

De Nederlandsche Bank Eurosysteem EURO1 (1) Basic facts Second largest euro payment system trx. daily with turnover of EUR 189 mln (2006) Multilateral net settlement system Owner/manager: EBA Clearing Company (owned by the banks) Participants 71 clearing banks (financial criteria apply) 8 pre-funded participants

De Nederlandsche Bank Eurosysteem EURO1 (2) Payment processing SOS = Single Obligation Structure Recalculation of the participant’s single position after each payment Unwinding not allowed Settlement At the end of the day in TARGET Via settlement account with ECB

De Nederlandsche Bank Eurosysteem EURO1 (3) Protected net settlement system Limit system  Bilateral and multilateral limits  Sender and receiver limits  Maximum limit: EUR 1 billion Liquidity pool held at the ECB to cover the single largest possible position Loss-sharing agreement for clearing banks

De Nederlandsche Bank Eurosysteem STEP2 (1) Basic facts ACH (PEACH) – reach ability across euro area trx. daily, turnover EUR 1.4 billion (2006) Owner/manager: EBA Clearing Company Participants 107 direct participants EURO1/STEP1 banks of prefund-participants >1000 indirect participants

De Nederlandsche Bank Eurosysteem STEP2 (2) Payments processing Submission of payments in batches on D-1 STEP2 mechanism:  Resorting of payments by recipient bank  Production of output files Settlement Gross settlement in the morning in EURO1 Payments are returned to sender if not settled Settlement in TARGET2 under preparation

De Nederlandsche Bank Eurosysteem Overview similarities/differences MacedoniaNetherlands Number of inhabitants (2007) GDP/capita (USD,2007) Surface (sq. km) Banks29 ( ) 102

De Nederlandsche Bank Eurosysteem Overview similarities/differences MacedoniaNetherlands Number staff NCBCirca 400Circa 1800 Stock Exchange11 CSD1 1 (Euroclear) CCP12 (LG Clearnet, EMCF ) ACH1 (KIBS) 1 (CSS of Equens)

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

De Nederlandsche Bank Eurosysteem Overview similarities/differences MacedoniaNetherlands Legal basis payment operations YesNo Functions NCB  Payment operations XX  Supervision XX Separate supervisory authority for the supervision on securities institutions X (MSEC) X (AFM)

De Nederlandsche Bank Eurosysteem Questions