Liquidity efficiency

By operating on a net basis, EURO1 enables participants to significantly reduce the liquidity required to support their payments business; there is no requirement to pre-fund at the start of the day. The availability of a Debit Cap allows for participants to have immediate sending capacity and to send payments without having to wait for incoming funds. This considerably lowers the liquidity and capital support costs for participants.

In order to further recycle liquidity, EURO1 offers a Liquidity Bridge, which enables participants to proactively and independently manage their liquidity:

  • Participants that have reached the maximum level of their Debit Cap can pay in funds from their TARGET2 account (pre-fund), against which their position in EURO1 is adjusted upwards. The participant has, as a result, acquired increased sending capacity against pre-funded liquidity.
  • Participants that have incoming payments queued because they have reached the maximum level of their Credit Cap can authorise EBA CLEARING to withdraw liquidity from their credit position in EURO1 (liquidity distribution), which is then credited to the participants’ TARGET2 accounts.
  • Pre-funding takes place throughout the day and liquidity distributions take place at the seven most critical times to ensure the processing of the maximum number of queued payments.
  • The liquidity distribution algorithm allows for the pre-funded liquidity to be recycled.

As a result of the liquidity management tools available, the EURO1 System is able to achieve a high Liquidity Efficiency Ratio (LER).

Participants can further exploit the liquidity-saving benefits of EURO1 by including branches as well as consolidated affiliates within the European Economic Area (EEA) under the single liquidity position of the participant.

 

EURO1 Liquidity Bridge

EURO1 is geared at assisting participants in keeping cost down by enabling them to optimise their liquidity use. The system's Liquidity Bridge makes it possible for participants to withdraw excess liquidity from the system through seven daily liquidity distribution windows. The Liquidity Bridge also enables the participants to inject additional funds into EURO1 throughout the business day in order to allow for additional payments to be processed. This functionality supports the participants in resolving any queuing situations.

EURO1 Overnight Return

EBA CLEARING offers EURO1 Participants the possibility that the cash deposit representing the participant’s share in the Liquidity Pool is only held with the ECB during the operating hours of EURO1 and until successful end-of-day settlement, after which it is returned to the participant until the opening of the next TARGET2 day. The function is provided for in the rules governing the system. Participants that wish to use the function must respect certain operational and technical requirements.