BANKS struggled to process payments on Friday (Feb 28), after an unprecedented day-long breakdown in the European Central Bank’s machine underpinning trillions of euros of money movements.
The ECB said late on Thursday it had fixed the roughly seven-hour outage in its payment system, which had left transactions likely worth trillions of euros from firms, consumers and investors up in the air.
The breakdown, which has dealt a blow to the international standing of the central bank behind one of the globe’s most important currencies, continued to reverberate on Friday.
The malfunction of the so-called Target two system (T2), used to settle more than 3 trillion euros (S$4.2 trillion) of daily payments and financial trades, meant transactions between banks could not go through.
The breakdown meant some ordinary bank payments, such as wages, pensions and social welfare transfers, have been delayed and could take several hours longer than usual to arrive, said a spokesperson for Germany’s central bank, the Bundesbank.
Deutsche Boerse’s Clearstream, which processes the trading of securities such as company stock, and handles around 500,000 transactions daily, also reported delays.
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The company said that there was still a residual impact on Friday, although it had largely restored services.
The incident lasted until early on Friday morning, delaying money sent in the night for about six hours, said a person familiar with the breakdown, and upsetting the system for what is likely to be a number of days.
While it remained unclear whether the mishap would be felt by regular bank customers, it has raised a question mark over the transactions between lenders that underpin the very functioning of the eurozone’s economy.
In its statement late on Thursday, the ECB said T2 was again functioning normally but that all the deadlines to settle the day’s payment flows had been postponed by several hours.
It said the outage was caused by a “hardware defect” and had not involved “malicious (or) foul play”.
“This is a wake-up call that all serious digital payment and currency systems need … backups,” said Rebecca Christie of Bruegel, a Brussels-based economic think tank. “Outages dent … credibility.”
Banks, which depend on the system to settle their accounts with one another, had been instructed to keep placing their payments in the queue until the issue was finally fixed. REUTERS
