Denmark wants to join the Target system

D.Denmark’s central bank wants to join the clearing system of the European Central Bank (ECB), which is used to process payment flows between commercial banks and central banks in Europe. The ECB announced this on Tuesday. The process is also remarkable because Denmark, with its own currency, the Danish krone, does not belong to the euro area – and also because there is always criticism of the Target system and the so-called Target balances, especially in Germany.

The ECB announced that the Danish krone should be connected to the “T2” payment platform by November 2025. This letter abbreviation is the name of the successor system for the European accounting system “Target 2”. It will replace the old system in November 2022. According to the ECB, the Danish central bank has also expressed interest in joining a clearing system in the euro area for very fast payments called “Tips”. This enables companies and private customers to transfer funds to recipients around the clock within a few seconds via their bank. By joining both systems, market participants in Denmark will in future be able to use both clearing systems to make payments in both euros and Danish kroner, writes the ECB.

System “multi-currency capable” in future

The background: So far, central banks from EU countries that do not have the euro have been able to connect to the Target system; but at the same time with a limited program. Bulgaria, Croatia, Denmark, Poland and Romania make use of this. So far, however, billing in euros has only been possible for these countries. What should also be possible for Denmark in the future is clearing in its own currency, the krone. The system will be “multi-currency capable”, as the experts call it. Denmark would then, as it were, outsource its own kroner clearing system to the Eurosystem. Other countries have not yet asked for this. According to the ECB, Great Britain and Sweden have not yet had any Target accounts. The settlement of securities, which is also possible via Target, this is the so-called T2S system, has also been open to non-euro countries since 2015; but only Denmark uses it.

German target balance increased again

In the meantime, the Target 2 balance of the Deutsche Bundesbank has risen slightly again. At the end of November it was 1.060 trillion euros, around 13 billion euros more than at the end of October. However, this is not yet a new record: at the end of September the balance was 1.15 trillion euros. The trillion mark was exceeded in August. This balance describes the Bundesbank’s claims against the ECB resulting from the Target 2 payment system. In October, a breakdown in the Target system caused transfers to be delayed for hours; that had brought the system back into the headlines. Bundesbank President Jens Weidmann recently pointed out that this experience continues to preoccupy the Bundesbank.


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