From February 2020 the Bank of Lithuania (Central Bank) has extended the capabilities of CENTROlink system previously used only for the transferring of Euro (EUR) payments withing Single Euros Payment Area (SEPA). Upgraded system goes beyond SEPA zone and opens a gateway to TARGET2 accessing more than 55,000 banking institutions in EU/EEA area and worldwide.
TARGET2 system owned and operated by the Eurosystem consisting from Euro zone central banks and the European Central Bank (ECB). Euro is widely used as national currency in most of EU member states and became world’s second most widely spread currency after the USD. Payments between different states within SEPA zone are considered as domestic payments while EUR payments in TARGET2 outside SEPA zone considered as international payments.
Payment and electronic money institutions get access to TARGET2
Upgraded CENTROlink allows non-banking payment service providers such as Payment Institutions (PI) and Electronic Money Institutions (EMI) send and receive real-time payments via the TARGET2. System is based on an integrated central technical infrastructure, called the Single Shared Platform (SSP). EU/EEA banks have clearing accounts in TARGET2. Other international banks access TARGET2 through their branches in EU/EEA states or through their correspondent banking network. More than 55,000 banks worldwide can be reached via TARGET2. Lithuanian licensed credit institutions, as well as PI’s and EMI’s allowed to access the system and settle EURO-denominated domestic and international payments.
Individual IBAN format client account generation and safeguarding of client funds
Even before the upgrade CENTROlink Lithuanian Fintech’s enjoyed the possibility to process EUR payments in SEPA zone at low cost and possibility generate individual IBAN format client accounts. Moreover, system allows to safeguard client funds in the Bank of Lithuania – Central Bank of Euro Zone state. CENTROlink connection made Lithuanian EMI’s and PI’s equal to the commercial banks in EUR payment processing and do not require additional segregated client funds account with commercial banks. Only the banks in other EU/EEA jurisdictions usually are allowed to join SEPA.
As the Bank of Lithuania announces, in 2019, nearly 43 million payments were made within CENTROlink, a payment system operated by the Bank of Lithuania, with their value reaching EUR 88 billion.
CENTROlink managed by the Bank of Lithuania grants global reach
“TARGET2 allows transfer EUR funds using single interface, permits a high degree of cost-effectiveness and inexpensive single pricing system. Formally remaining the European system TARGET2 gives the global reach going beyond the European borders and non-banks are welcome to use it”, says Kęstutis Kvainauskas, attorney at law of ECOVIS ProventusLaw firm specializing in servicing of financial institutions.
TARGET2’s technical infrastructure relies on a single platform. This is the reason why the platform is subject to very strict requirements in terms of security and efficiency. From the outset, the platform’s architecture was designed to meet these requirements, which were subsequently confirmed and codified by the ECB regulation on systemically important payment systems. Access to CENTROlink is granted only to financial institutions of impeccable reputation.
Finance institution licensing in single European market.