Circular 1/2008 of the Bank of Spain on the compensation system for TARGET system malfunction and repeal of SLBE circulars

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Circular 1/2008, of January 25, of the Bank of Spain, on the compensation system in case of malfunction of the TARGET system and repeal of circulars of the Settlement Service of the Bank of Spain (SLBE) (BOE of February 13)

The current automated trans-European rapid transfer system for real-time gross settlement (TARGET) has a decentralized structure in which national real-time gross settlement systems (RTGS) and the ECB payment mechanism are connected.

In accordance with the provisions of the Guideline of the European Central Bank of April 26, 2007, on the automated trans-European rapid transfer system for real-time gross settlement (TARGET2) (Guideline ECB/2007/2), the TARGET system is replaced by the new TARGET2 system, which is characterized by a single technical platform called the "Single Shared Platform".

With regard to the Bank of Spain, the replacement of TARGET by TARGET2 will entail the extinction of the Settlement Service of the Bank of Spain (SLBE) as an RTGS participant in TARGET, from February 18, 2008 - the planned date for the migration of the SLBE to the Single Shared Platform -, and the entry into operation of the new Spanish system participant in TARGET2, "TARGET2-Banco de España".

In compliance with the provisions of Guideline ECB/2007/2, in order to apply the uniform participation conditions in TARGET2 established in its Annex II, the Bank of Spain has approved the "General Clauses regarding the uniform participation conditions in TARGET2-Banco de España (TARGET2-BE)", published in the BOE on December 20, 2007, and in force from the day of its publication.

As a consequence of the disappearance of the SLBE on February 18, 2008, it is necessary to repeal, with effect from that date, the circulars of the Bank of Spain that regulate the operation of said service and its functionalities.

Likewise, as a consequence of the provisions of paragraphs 8 and 9 of Article 15 of Guideline ECB/2007/2 - pursuant to which the definition of "failure of a national RTGS" established in Article 1, paragraph 1, is modified, and letters b) and c) of paragraph 4 of Article 8 are given new wording, all of Guideline ECB/2005/16, of December 30, 2005, on the automated trans-European rapid transfer system for real-time gross settlement (TARGET) -, it is necessary to partially modify Circular 2/2003, of June 24, in order to adapt its wording to the modifications of Guideline ECB/2005/16.

By virtue of all the foregoing, the Bank of Spain has issued this Circular.

FIRST REGULATION.

TARGET Compensation System

The following modifications are introduced in Circular 2/2003, of June 24, "Participating Entities in TARGET-SLBE. Compensation system in case of malfunction of the TARGET system and other modifications to the regulations of the Settlement Service of the Bank of Spain" [ 1 ] :

1 New wording is given to the second paragraph of letter a) of paragraph 1 (General Principles) of the first regulation (TARGET Compensation Systems), which shall read as follows:

"A malfunction of TARGET shall be understood to occur when the existence of technical problems, defects or failures in the technical infrastructure or in the computer system of any of the national payment systems integrated or connected to TARGET, of the payment mechanism of the European Central Bank, of the electronic interconnection network between them ("Interlinking" system) or of the bilateral correspondent relationships for connection to TARGET, or the existence of any other circumstance affecting any of the aforementioned components of TARGET, prevents the execution and completion, on the scheduled date, of the processing of payment orders through said system; the aforementioned definition of TARGET malfunction shall also include cases where, prior to migration to TARGET2, the malfunction occurs on the Single Shared Platform of TARGET2 defined in Guideline ECB/2007/2."

2 New wording is given to letters b) and c) of paragraph 4 (Procedure) of the first regulation (TARGET Compensation Systems), which shall read as follows:

"b) Participants in the SLBE shall, if applicable, submit their claim forms to the Bank of Spain, regardless of which component of TARGET the malfunction occurred in. Claims shall be submitted within a maximum period of four weeks, counted from the date on which the malfunction occurred. Any additional information requested by the Bank of Spain from the claimant must be provided within a period of two weeks from said request.

c) The Governing Council of the European Central Bank shall evaluate the claims submitted and decide in which cases it is appropriate to make a compensation proposal. Unless the Governing Council decides otherwise, which shall be communicated to the participants, said evaluation and decision shall take place within fourteen weeks following the date on which the system malfunction occurred."

[1]

Texts incorporated in Circular 2/2003, of June 24.

SECOND REGULATION.

Repeal of SLBE Circulars

The following circulars are repealed, with effect from February 18, 2008:

• Circular 5/1990, of March 28, "Deposit Institutions and Other Financial Intermediaries. Money Market Telephone Service".

• Circular 14/1992, of June 26, "Regulatory Rules of the Interbank Deposit Market".

• Circular 7/1995, of October 31, "Regulatory Rules of the Money Market Telephone Service".

• Circular 4/1997, of April 29, "Deposit Institutions and Other Financial Intermediaries. Money Market Telephone Service. Continuous Settlement Process".

• Circular 11/1998, of December 23, "Credit Institutions. Update of STMD regulations".

• Circular 3/2000, of May 31, "Adaptation of the general operating rules of the Settlement Service of the Bank of Spain and of the Central Book Entry of the Public Debt Market to Book Entries to Law 41/1999, of November 12, on payment systems and securities settlement systems".

• Circular 8/2000, of December 2, "Participating Entities in TARGET-SLBE. Reimbursement system and other modifications to the regulations of the Settlement Service of the Bank of Spain".

• Circular 2/2003, of June 24, "Participating Entities in TARGET-SLBE. Compensation system in case of malfunction of the TARGET system and other modifications to the regulations of the Settlement Service of the Bank of Spain".

• Circular 2/2004, of July 23, "Participating Entities in TARGET-SLBE. Update of the compensation system in case of malfunction of the TARGET system".

• Circular 1/2005, of February 25, "Participating Entities in TARGET-SLBE. Adaptation of SLBE regulations to the modification of the Guideline on TARGET of the European Central Bank, to allow connection to TARGET by means other than the "Interlinking" network".

THIRD REGULATION.

Technical Applications

The Bank of Spain shall approve any technical applications necessary for the development of this Circular.

FOURTH REGULATION.

Transitional

Notwithstanding the provisions of the final regulation below, claims for a TARGET malfunction occurring in the period between the entry into force of this Circular and February 18, 2008, shall be processed in accordance with the TARGET compensation system.

FINAL REGULATION.

Entry into Force

Without prejudice to the provisions of the previous second regulation (Repeal of SLBE Circulars), this Circular shall enter into force on the day of its publication in the Official State Bulletin.

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