Payment systems in a multinational currency union – is a reform of TARGET2 necessary?

Since 2011 a heated debate about TARGET2 balances has been waging. Although most arguments have been exchanged multiple times, a central bank-based approach is still missing. This paper contributes an integrated perspective on the interwoven issues of the choice of settlement asset, structures and economics of large-value payment systems, central bank governance and accounting. Finally, alternatives to the current architecture of large-value payment systems and to the setup of the TARGET claims and liabilities between the Eurosystem’s central banks will be discussed.