Post on 22-Jul-2020
Introduction to TARGET Instant Payments Settlement (TIPS)
Marc Bayle
Helmut Wacket
Karen Birkel
Sandro Gorini
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Table of Contents
TIPS Main Pillars 1
TIPS as Part of a Vision 2
TIPS Functional Overview 3
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
24/7/365
operating hours
Operated on a full
cost-recovery basis
Multi-currency
technical 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
TIPS TARGET2
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 Settlement Access 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 ‘17
Submission of a draft User Requirements Document
(URD) version to the Market
• January – February ‘17
7 weeks of consultation with the Market on the draft URD
• June ‘17
Decision to develop the service based on the results of
the Investigation phase
• May ’18
Start of Eurosystem internal system testing
• August ’18
Start of pilot testing involving users
• November ‘18
TIPS 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 Overview 3
Introduction to TARGET Instant Payments Settlement 11
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Future of Eurosystem Market Infrastructure
Eurosystem Collateral Management System (ECMS)
Shared system for the mobilisation and management of collateral
used in Eurosystem credit operations
• reducing market fragmentation
• allowing easy and efficient mobilisation of collateral to the Eurosystem
both domestically and across borders
• contributing to the European Capital Markets Union
Back-office tool for monetary policy counterparty operations
Common service for central banks to manage eligible collateral
Central platform to implement monetary policy
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 LVPS SF
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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 generate a consolidated invoice 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 Overview 3
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 messages
Out 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 instruction
2. 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 behalf
4. TIPS receives a positive confirmation
5. TIPS settles the payment
6. TIPS confirms the settlement to the originator participant or the party acting on its behalf
7. TIPS confirms the settlement to the beneficiary participant or the party acting on its behalf
Originator
Participant /
Instructing
Party
Beneficiary
Participant /
Instructing
Party
TIPS
1 Instructs
6 Service
confirms
2 Service validates and
makes reservation
4 Accepts
instruction
3 Forwards
instruction
5 Service settles
7 Service
confirms
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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 adhere to the SCT Inst
scheme, but do not want to
open a TIPS account
• 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
• CMB functionality allows Reachable Parties that do not have a
cash account in TIPS, to send and receive payment instructions
using a participant’s TIPS account
• CMBs allows Participants to set maximum limits for the Reachable
Party
TIPS
Participant
Account
CMB1 CMB2
Reachable
Party 1
Participant
Reachable
Party 2
• Settlement in Central
Bank money
• Efficient limit
management without
splitting liquidity
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Use Case 1/2 – Defaulted Accounts/CMBs
TIPS Functional Overview
Introduction to TARGET Instant Payments Settlement 24
Participant P1 IP for Reachable Party R1 TIPS
P1 Account
TIPS account structure of P1 TIPS account structure of P2
P2 Account
CMB1
User: R1
CMB2
User: R2
CMB3
User: R3
Originator BIC = BIC P1
Beneficiary BIC = BIC R1
Amount = 100
Payment Transaction
• TIPS communicates with Participant P1 and
Instructing Party IP on behalf of Reachable
Party R1
• R1 uses one CMB provided by Participant P2
• TIPS account/CMB identifiers are defaulted
from the BICs
Settlement process:
1. Account of P1 is debited with 100
2. CMB of R1 is increased by 100
3. Account of P2 is credited with 100
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Use Case 2/2 – Explicitly Provided Accounts/CMBs
TIPS Functional Overview
Introduction to TARGET Instant Payments Settlement 25
TIPS account structure of P1
P1 Account
CMB1
User: R1
CMB2
User: R1
CMB3
User: R1
CMB4
User: R1
CMB5
User: R2
IP2 for Participant P2 IP1 for Reachable Party R1 TIPS
Originator BIC = BIC R1
Beneficiary BIC = BIC P2
Amount = 100
Acc/CMB = CMB2
Payment Transaction
P2 Account
TIPS account structure of P2
• TIPS communicates with Instructing Parties
IP1 on behalf of Reachable Party R1 and IP2
on behalf of Participant P2
• R1 uses multiple CMBs provided by
Participant P1
• Payment transaction contains explicit CMB
identifier
Settlement process:
1. CMB2 of R1 is decreased by 100
2. Account of P1 is debited with 100
3. Account of P2 is credited with 100
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Liquidity management
• You may use TARGET2 to fund liquidity to TIPS
• 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
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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
• Available 24/7/365
• 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
Service
is restored
Decision to restart
TIPS Functional Overview
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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
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