Interbank Payments

The clearing process comprise the compiling of claims of two or more parties. Funds for the payment made by the bank customer is reserved on the payer's account. Then the payment is transferred to the beneficiary bank. Banks collect payments from different payment channels and calculates the total of all payments. The total sum is the liquidity needed for settlement, i.e. the bank's liability.

Financial institutions manage liquidity for their outgoing payments on their accounts in the Target2 system. Target2 is a central payment system within the EU area. The system is maintained basically by the national central banks on a single shared platform (SSP). Claims between financial institutions are settled in the system. After the final settlement banks receive information about incoming payments which can be credited to the receiver's acoount. Banks operating in Finland settle their payment transactions in Bank of Finland's Target2 system.

Financial institutions transmit their payments directky, indirectly through another bank or through a payment institution to an EU wide clearing system (EBA Clearing). From the clearing system information about the required liquidity is transmitted to the Target2 system for settlement.

In Finland clearing and settlement is processed during night time settlement. Payments from other European banks are received a couple of times during daytime.

Before the payment is credited to the receiver's account, the needed liquidity between banks need to be transferred. According to the act on payment services the payment shall be registered immediately to the receiver's account when the interbanks liquidity is transferred.