Press release - Meeting of the Governing Board of the Bank of Slovenia-25 February 2014 (payment systems)
1) The Governing Board of the Bank of Slovenia approved the report on the operations of payment systems for the final quarter of 2013.
The report discusses the developments in the volume of payment transactions cleared and settled in the payment systems operating under Slovenian law, and any deviations or disruptions in the functioning of these systems. Over 54 million transactions with a total value of EUR 141 billion were cleared and settled in the aforementioned payment systems in the final quarter of 2013. In terms of total transaction value, the largest proportion is accounted for by the TARGET2-Slovenija system operated by the Bank of Slovenia, which is designed primarily for the settlement of large-value payments. In terms of the number of transactions, payment systems in which retail transactions such as payment card transactions and SEPA credit transfers and SEPA direct debits are cleared and settled account for significant proportions of the total. Effective and reliable payment systems ensure that the non-cash transfer of funds between economic entities proceeds smoothly and promptly, and provide the backbone and key attributes of the efficient functioning of any advanced economy. There were no significant disruptions during the aforementioned quarter that would have affected the smooth functioning of payment systems.
Payment systems operating under Slovenian law
There are eight payment systems operating under Slovenian law in Slovenia, including the key TARGET2-Slovenija system. This is the Slovenian component of the “system of systems”, the TARGET2 pan-European payment system for payments in euros operated by the Eurosystem and based on a single technical platform. It is primarily designed for the settlement of large-value transactions and time-critical transactions in euros, the settlement of the monetary claims and obligations of participants in systems for the settlement of financial instruments in euros, the settlement of participants’ monetary claims and obligations of participants arising from participation in other payment systems in euros, and the execution of payments related to monetary policy operations. Transactions are settled on an individual basis in real time.
The SEPA interna kreditna plačila (SEPA internal credit transfer (SEPA ICT)), the SEPA interni direct debit po osnovni shemi SEPA (SEPA internal direct debit payment system under the core SEPA scheme (SEPA IDD Core)) and the SEPA interni direct debit po B2B shemi SEPA (SEPA internal direct debit payment system under the business-to-business SEPA scheme (SEPA IDD B2B)) payment systems allow the execution of credit transfers and direct debits in accordance with the standards of the Single Euro Payments Area (SEPA). The settlement of net monetary claims and obligations between participants in these systems arising from the aforementioned types of payments is carried out by the Bank of Slovenia, while Bankart d.o.o. provides for the exchange of SEPA transfers between system participants and for the calculation of the monetary claims and obligations of participants.
Three payment systems in which payment card transactions are cleared and settled operate in Slovenia. Two of these are operated by Bankart d.o.o., namely the Poravnava bankomatov (ATM Settlement system) and the Poravnava kartic (Card Settlement system), while one, the Multilateralni kliring Activa (Activa Multilateral Clearing payment system), is operated by Banka Koper d.d. In each of these payment systems the two aforementioned entities calculate the net monetary claims and obligations between participants in the systems that arise from card payments credited to or debited against their clients (cardholders and points of sale) or from cash withdrawals at ATMs. The Bank of Slovenia executes the settlement of claims and obligations between participants in these payment systems. A payment system that is comparable to the card payment systems is that in which transactions from mobile phone payments are processed: the Moneta Payment Systemoperated by Nova Kreditna banka Maribor d.d. The volume of transactions discussed for the purposes of this report does not correspond to the total volume of payment card transactions in Slovenia, as a significant proportion of the transactions in question are processed in other ways and via other channels (e.g. payments where the payer and payee are clients of the same bank).
A total of 54,072,697 transactions with a total value of EUR 140,876.41 million were cleared and settled in all the payment systems operating under Slovenian law in the final quarter of 2013. This was down on the third quarter in terms of the number (by 0.16%), but up in terms of value (by 8.34%), while it was down on the final quarter of 2012 in terms of both number (by 0.75%) and value (by 9.94%). To prevent any possibility of the identification of individual payment systems and their operators, and the corresponding disclosure of commercial information of a confidential nature, no indication is given below of the absolute figures (the number and value of transactions in an individual payment system) and the proportions of the totals given above that individual payment systems account for. An exception is made for the TARGET2-Slovenija payment system operated by the Bank of Slovenia.
There is a large seasonal component in the number of transactions in the final quarter of 2013 and its change relative to the third quarter, which is reflected differently in different payment systems, as described below. The smallest seasonal component is the volume of direct debit transactions, which are mostly transactions that repeat on a monthly basis (e.g. electricity bills, RTV licence fee, utilities). In retail credit transfers (SEPA ICT system), the number of transactions significantly increases in the later months of the year (increased economic activity relative to the summer and increased consumption before the holiday season).
The payment systems in which payment card transactions are cleared and settled saw a slight fall in the number of transactions in the final quarter of 2013 relative to the third quarter, which is the customary seasonal trend. The peak during December’s shopping fever does not outweigh the increased use of payment cards during the summer holidays, particularly in July and August. Other individual developments on the card payments market, such as major retailers switching from one bank to another (a participant of another system) or the replacement of the card products offered by individual banks, have an impact on the number (and proportionately on the value) of transactions in individual card payment systems, and the relative proportions that they account for.
The number of transactions in the TARGET2-Slovenija payment system was up 4.13% on the previous quarter (at 142,831), but this had no impact on the fact that it accounts for one of the smallest proportions of the total number of transactions in the systems under discussion, at just 0.26%. This is in keeping with the design and primary purpose of this payment system, which is primarily intended for the settlement of (a small number of) large-value payments in real time.
In terms of the change in the number of transactions relative to the final quarter of 2012, it is notable that the largest relative increase was recorded by the SEPA IDD Core system. The reason for the increase was that in late 2012 and early 2013 the Slovenian banking system completed the migration of direct debit transactions from the previous national arrangements to the standard direct debit scheme applied across the SEPA.
Although the number of transactions settled is relatively small, in value terms TARGET2-Slovenija is by far the most important payment system. Transactions totalling EUR 125.37 billion were settled in the system in the final quarter of 2013. TARGET2-Slovenija accounts for 88.99% of the total value of transactions cleared and settled in payment systems operating under Slovenian law.
TARGET2-Slovenija is thus characterised by a small number of payments of relatively large values (the average transaction value was EUR 877,769 in the final quarter of 2013), while there are three main categories of payments that generally affect the total value of transactions settled: (i) deposit facilities (virtually nil since the introduction of the zero interest rate in the third quarter of 2012), (ii) overnight loans (the volume has been in a declining trend since the end of 2011, with the exception of the increase in the final quarter of 2013), and (iii) transactions connected with overnight deposits by central and local government, which account for the largest proportion of central and local government transactions in value terms. There was an increase relative to the third quarter of 2013 in both the number of transactions (by 4.13%) and the value (by EUR 10.12 billion or 8.78%). During this period there was a decline in the value of transactions by central and local government, but an increase in the value of transactions related to monetary policy instruments (auctions of loans and deposits) and overnight loans. The number of transactions settled in TARGET2-Slovenija was up on the final quarter of 2012 (by 0.99%), while the total value was down (by EUR 16.00 billion or 11.32%). There were two main factors with opposing effects: a decline in the value of transactions by central and local government, and an increase in the value of transactions related to monetary policy instruments (auctions of loans and deposits).
There were no outages in the final quarter of 2013 in the payment systems operating under Slovenian law. This means that none of the systems experienced any operational disruptions of a type that operators of payment systems are obliged to report promptly to the Bank of Slovenia. The latter is responsible for issuing authorisations in connection with the functioning and operation of payment systems, and conducts oversight and supervision to contribute to the robustness, reliability and efficiency of these systems.
Participation in pan-European payment systems
A total of 38,134 outward cross-border transactions with a total value of EUR 19.62 billion and a total of 80,341 inward cross-border transactions with a total value of EUR 22.17 billion were settled between participants in the TARGET2-Slovenija payment system and other participants in the pan-European TARGET2 payment system in the final quarter of 2013. Relative to the third quarter of 2013, the number of transactions was reasonably stable on both the outward side (up 0.77%) and the inward side (up 0.90%). While there was a similarly small increase in the total value on the outward side (by 0.54%), there was a sharper increase in the value of inward transactions (by 15.73%). Alongside other factors, there has recently been a significant positive impact on the number and value of the aforementioned transactions from the operations of a certain Slovenian bank, which via Slovenian payment infrastructure provides a “window to Europe” for several banks in central and south-eastern Europe that submit and receive settlement orders in the TARGET2-Slovenija payment system via the aforementioned Slovenian bank.
Similarly, in recent months the aforementioned bank has had a positive impact on the number of transactions in the SEPA eksterna kreditna plačila (SEPA external credit transfer (SEPA ECT)) system operated by Bankart d.o.o., via which system participants achieve reachability for cross-border SEPA credit transfers, i.e. access to the pan-European payment system for SEPA credit transfers (STEP2 SCT), via which more than 4,700 payment service providers in Europe, and consequently all of their clients, can be reached (payments can be sent to them and received from them). The decision by certain foreign banks to achieve reachability and access the STEP2 SCT system via Slovenian payment infrastructure is an indication of its operational and cost efficiency. Another factor that had a positive impact on the volume of transactions on the inward side is the migration of foreign banks to the use of payment instruments compliant with SEPA rules and with Regulation (EU) No. 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro (the initial deadline for compliance was 1 February 2014), and the resulting increased use of the STEP2 SCT payment system for the execution of credit transfers by foreign participants in this payment system, crediting participants in the SEPA ECT system and their clients.
Finally, mention should also be made of the SEPA Eksterni Direct Debit po osnovni shemi SEPA (SEPA external direct debit payment system under the core SEPA scheme (SEPA EDD Core)) and the SEPA Eksterni Direct Debit po medpodjetniški shemi SEPA (SEPA external direct debit payment system under the business-to-business SEPA scheme (SEPA IDD B2B)) systems, which are operated by Bankart d.o.o. and allow system participants to participate indirectly in the pan-European systems for the processing of SEPA direct debits (STEP2 M-PEDD Core and STEP2 M-PEDD B2B), with reachability for more than 4,100 and 3,300 payment service providers in Europe respectively. Their relative importance depends primarily on trends in the use of direct debit payments at a cross-border level.
2) The Governing Board of the Bank of Slovenia discussed several banking supervision reports.