ECB system off-target

LONDON/FRANKFURT – The eurozone’s Target system for real-time payment and settlement suffered its third set of technical problems in a month yesterday, but traders said the outages caused no major disruptions. This time the Italian arm of Target went down briefly just before 7 a.m. GMT (9 a.m. Greek time), just a day after Greece suffered two separate outages and after Germany’s system went down for six hours on Jan. 18. «The technical problem in Italy this morning had no impact on trade, given it was solved so swiftly,» an Italian dealer said. «It is only if and when the system is blocked for several hours that there can be problems for trade.» The ECB, which runs the Target system linking all 12 eurozone central banks and handling around 1.7 trillion euros daily, said all Target problems are investigated as part of the ECB’s risk management strategy. Target reliability in fact has steadily improved, delivering 99.81 percent reliability in 2004, up from 99.79 percent in 2003 and 99.77 percent in 2003. Additionally, 95.78 percent of 2004 payments were processed within five minutes, the ECB said. The Italian market appeared unruffled by the glitch. The interbank overnight rate, which increases when banks are unsure they will receive payments in time, softened slightly to 2.06 percent at noon GMT, from 2.07 percent earlier. In contrast, at the German outage in January, eurozone overnight rates were squeezed up to 2.12 percent from under 2 percent as banks tried to settle their books to meet reserve requirements on the last day of the reserve maintenance period. «If we have a normal day like today or yesterday then it is not a problem if it (Target) fails in one or another country,» said a German trader, who asked not to be named. «If we have minimum reserve day like on January 18 and the system has a breakdown, then we can have problems with payments and therefore we can have a problem with liquidity. «But I think the system is a good system. I don’t have any problem with that system, except for that one day.» Upgrade coming The Target system provides real-time settlement of high-value payments and 40 percent of them are between eurozone countries. The network was set up at the launch of the euro in 1999 by linking discreet central bank computer systems, and is due to be replaced by an updated system in 2007. The Bundesbank blamed external computer systems for its outage, while unspecified technical problems were cited in Italy and Greece. «In our bank the system set us out twice for 30 minutes each time – we couldn’t take or send payment orders,» said one trader at a Greek bank. «As far as I know, the Central Bank of Greece had a problem in that they couldn’t take payments (orders) from outside Greece and the data was passing very slowly through the system.» The Bank of Greece declined to comment. A Bank of Italy official said Italy rarely had technical mishaps. «This morning’s episode was caused by a minor technical hitch which was solved in 15 minutes and did not have an impact on the market or on operations,» the official said. An Italian monetary source said there were backup systems in place between central banks to compensate for any problems. Target stayed open for an extra hour after the German outage to process the payment backlog. «A certain number of technical problems are normal in a European system as complex as this and in some countries they happen fairly frequently,» the source said. «And even then, the Target system has a 97.97 percent reliability rate, above that of the US payment system.» A Dutch-based trader said the disruptions were minor. «Target is working almost perfectly always. I don’t see many problems,» the trader said. «There is no big issue if a country is stuck for a couple of hours. For some people it becomes a little tense when a big country is out for 80 percent of the day. But I cannot remember an occasion besides the last time with Germany that it was a situation like that.»

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