It represents the financial system’s interface with the general public and is crucial for preserving confidence in the financial system and, ultimately, in the euro as the single currency. Two issues relating to the retail business and the current turmoil are noteworthy. First, the retail business – with its cornerstones of saving, lending, and payment services – has successfully withstood the financial crisis. Second, banks with a balanced business model have been best equipped to cope with the current challenges. Therefore, retail services offer two major opportunities at the present time: first, to revive confidence in the banking sector in the eyes of the general public; second, to strengthen banks’ balance sheets. However, one important – sometimes overlooked – issue seems a key prerequisite: in the same way as the large value infrastructures mentioned before, stable and efficient retail infrastructures are needed throughout Europe in order to alleviate systemic risk and safeguard financial stability. However, despite 50 years of European economic integration, Europe is still lacking an integrated retail payments market. Therefore, the further realisation and completion of the Single Euro Payments Area project is a crucial element for the retail banking and payments market beyond the turmoil. Without doubt, SEPA is the largest payment initiative undertaken in Europe, following the euro cash changeover. Major milestones have already been achieved: only recently, regulators have addressed the uncertainties surrounding interchange fees and the reachability of the SEPA Direct Debit. Nevertheless there are still a number of further topics on our common agenda, e.g.
We have also seen some peaks in transaction volumes as well as more frequent and higher margin calls. Furthermore, many infrastructures have had to cope with the default of a major participant, notably in the context of the demise of Lehman Brothers in September 2008 and the corresponding spill-over effects on its subsidiaries. Fortunately, EU market infrastructures were able effectively to overcome these challenges without any major operational disruptions. In particular, the Eurosystem’s TARGET system – which is not only the backbone of the large-value payment infrastructure for the euro, but also plays a central role in providing settlement services for 36 retail payment systems and 33 securities settlement systems that are connected as ancillary systems – has proven to be  BIS Review 74/2009  1  stable and resilient. Nonetheless, I would like to mention three key stylised facts which illustrate the impact of the current turmoil: First, the values processed in TARGET in the last quarter of 2008 showed an unusually high increase of 13% compared to the first three quarters (see Chart 1). When looking at the average values settled in different time bands during the day, the main difference between the third and the fourth quarter of 2008 relates to the values settled in the last hour of operations.