The UK’s sterling Real-Time Gross Settlement (RTGS) system is being developed to accommodate the euro, so that from the beginning of 1999 euro wholesale payments may be made in a safe, efficient and cost-effective way as sterling payments can now, even though the UK will not be a participant in the monetary union at the outset. That development remains on schedule, and it is encouraging that the UK system (CHAPS) has had expressions of interest recently from a number of overseas banks wishing to join. 23. The UK euro system -- CHAPS euro -- will allow payments to be made both between parties within the UK and cross-border from and to the UK through its link to TARGET. Using the knowledge and expertise we have acquired through developing and operating by far the largest RTGS system in Europe -- with average daily volumes of some 70,000 payments, worth some £ bn -- we are contributing a great deal to the technical development of TARGET. Because it extends the benefits of RTGS systems, in reducing the risk in payments, for the first time cross-border, it is a project we wholeheartedly support. 24. But we also want to see TARGET as efficient and effective as possible, so that it becomes the payment system of first choice for banks, in order to maximise its benefits in reducing systemic risk. We have to recognise that TARGET will be competing with alternative euro payments mechanisms, including correspondent banking and the European Banking Association’s net end-of-day settlement systems.
However, there are notable differences across the region: the Baltic states (especially Latvia and Estonia) and South-East European countries (especially Croatia and Bulgaria) seem to have approached or even reached the equilibrium by 2004 or 2005, whereas in the case of the Visegrad countries (especially the Czech Republic and Poland) the credit-to-GDP ratio seemed to remain below its estimated equilibrium level at that time. Of course, it might well be that some of the CEE economies have overshot the  1  Kiss, G., Nagy, M., Vonnák, B.: Credit Growth in Central and Eastern Europe: Trend, Cycle or Boom?, MNB Working Paper No. 2006/10, November 2006 and Egert, B., Backé, P., Zumer, T.: Credit Growth in Central and Eastern Europe: New (Over)Shooting Stars?, ECB Working Paper No. 687, October 2006. BIS Review 137/2007  1  equilibrium only recently, but one has to wait for a while until the relevant data become available before this overshooting can be captured in empirical analyses. The general upshot of these papers is that the rapid credit expansion in CEE economies has mainly been fuelled by demand factors: the buoyant economic growth and the ensuing increases in disposable incomes, rising expectations with regard to future income prospects related to EU accession, remarkable decreases in interest rates, and falling or low and stable inflation rates.