christian noyer : the contribution of payment infrastructures to the european financial integration and to the establishment of the sepa ( single euro payments area ) speech by mr christian noyer, governor of the bank of france, at the 20th anniversary of the european banking association ( eba ), paris, 23 june 2005. * * * ladies and gentlemen, i am very pleased to join you today to celebrate the 20th anniversary of the european banking association ( eba ), here in paris at palais brongniart. first of all, i would like to give credit to the eba for its strong commitment in favour of the european financial integration. this commitment has led the eba to set up the large value payment system euro 1 and the retail payment systems step 1 and step 2. central banks of the eurosystem, like any central bank, have a keen interest in securing that the financial system falling under their monetary competence is unified, competitive and stable. this is essential for the european economy, considering that a high degree of financial integration enables an efficient transmission of the monetary policy, a better allocation of financial resources, a minimisation of cost of capital, as well as a fast and safe execution of payments across the so called sepa, that is to say the single euro payments area. different factors support the development of a fully integrated financial system at the european level. today, i will emphasise a key driver of this process - payment infrastructures. in particular, i will focus on what has already been done in this area and on what remains to be done. i will start by underlining the importance, for the european financial integration, of the development of efficient and safe payment infrastructures. then, i will assess progress made in this field since the launch of the euro. i should mention immediately that my assessment is mixed. on the one hand, i consider that the situation is favourable for large - value payment systems. on the other hand, i can ’ t yet make the same positive assessment concerning retail payment systems. as a consequence, i will end my presentation by elaborating on the further developments needed to strengthen the integration of retail payments. 1. payment infrastructures are a necessary driver for financial integration payment infrastructures cover all procedures and systems used by financial intermediaries to exchange payment orders issued by economic agents. accordingly, they play a fundamental role for the smooth functioning of the economy as a whole. indeed, provided that they allow financial transfers to take place between

of the basic statutory tasks of the eurosystem. therefore, the eurosystem has participated so far in the process of integration under three roles. firstly, as a service provider for clearing and settlement of large value payments, with the operation of the target system. secondly, as a catalyst of market participants ’ efforts for the creation of a sepa for retail payments. thirdly, as an overseer of the functioning of systems processing payments in euro. 2. the present situation display a significant discrepancy in the integration of payment infrastructures let me now assess the achievements of the integration process of payment infrastructures. the degree of integration depends on the segment of the payment infrastructures market. while the large value payments segment has already reached a high level of streamlining and consolidation and will further progress with the launch of the target 2 system, the retail payments segment is still very fragmented. in the area of large value payment infrastructures, the degree of integration has increased very quickly. we should bear in mind that euro 1 and target have been clearly set up to face the challenge of the emu. it was of great importance for large value payments, in particular those linked to the money market, to rely on systems handling efficiently and safely cross border transactions. moreover, target was a prerequisite for the effective conduct of the single monetary policy, because it ensures the settlement of monetary policy operations. the timeframe was particularly tight to build up the target system. therefore, the design of target 1 was based on the principle of minimum harmonisation and on a decentralised architecture, with an interlinking of the national rtgs ( real - time gross settlement systems ). target 2, which is due to go live in 2007, will further improve the degree of integration of wholesale payment infrastructures. it will provide fully harmonised settlement services across europe in real - time in central bank money, supported by a single price structure for domestic and cross - border payments and a single processing platform. this single platform will be used by all central banks of the escb to provide services to their banking community. target 2 will enhance cost - efficiency and meet stateof - the - art business continuity procedures. as a result, in less than ten years since the launch of the euro, the number of large value payment systems in euro operating in the eu will have been dramatically reduced : this number is to drop from 21 ( i. e the 16 components of target1 plus 5 privately - owned systems )