TARGET 2 and the Risks for the National Bank of Slovakia
TARGET 2 and the Risks for the National Bank of Slovakia

Summary/Abstract: The objective of this paper is to clarify the real impact of the TARGET 2 imbalances that emerged for the eurozone as a whole and reveal its consequences for the National Bank of Slovakia. The main aim of this study is to try to finally close the discussion among well-known European economists about the real effects of disproportional flows of funds (in central bank money) between eurozone states. Opinions on this issue have been amended a few times and we should first make clear whether rising TARGET balances are accompanied by increasing risk for the stability of the monetary union. We understand the term “risk” to mean the prospect of loss. After introductory remarks on the fundamentals of payment settlement via a correspondent bank and via a payment system, we will review the conclusions of specialists discussing the problem of payments. These diverse outcomes also motivated the author to exhaustively specify the risks to the eurozone as well as the National Bank of Slovakia. That is why we analyse the fundamentals of payments in the first place. After closing the debate with a prospective loss analysis, we dismantle the real implications of imbalanced payments, evaluating the experience of the National Bank of Slovakia.

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