But the reason why so many of us now have a smartphone in our pockets is because the innovation did not end there – someone had the idea to combine these tools into a single device. The Eurosystem’s vision for 2020 is not so different. Over the coming years, we will seek to draw on the synergies between TARGET2 and T2S. One idea is to consolidate some components of the technical infrastructure and maybe even form a single platform. This will allow TARGET2 to benefit from some of the state-of-the-art features of T2S, such as the implementation of ISO 20022 standards. Migration to ISO 20022 in TARGET2 was originally planned for November 2017, but upon the banks’ request, we have postponed implementation and will work together with the market, under the umbrella of our Vision 2020, to find the most appropriate method and timing for migration. The enhancements we envisage for Europe’s financial market infrastructure will benefit users from a technical perspective in that they will have access to all available services via a single gateway. Moreover, these enhancements will provide an opportunity to further increase the resilience of the system. As regards the business benefits for users, we will seek to enhance the services currently provided by TARGET2, for example by further optimising liquidity-saving mechanisms. In addition, it could be possible to add statistical tools to support banks with their regulatory reporting.
Experience suggests that asset price cycles continue to be very substantial In the last two decades market forces have indeed tended to cause misalignments between equilibrium and actual asset prices. Stock markets in particular have experienced this phenomenon. But in foreign exchange markets as well, prices have also a tendency to diverge substantially from their “equilibrium level”, although those divergences have been contained through fruitful G7 co-operation during the last 15 years. In addition, some markets have seen an increase in volatility and frequent volatility peaks. Although cyclical moves should be clearly distinguished from volatility, the latter may in some circumstances exceed what can be considered optimal, making the price determination mechanism less efficient and thus contributing to misalignments. Moreover, as demonstrated by a number of financial crises during the last two decades, contagion among countries and across financial markets has been frequent. As a result, investors have faced asset price fluctuations that might be more synchronised than before. Lastly, the connections between credit, asset price and business cycles have tended to amplify cyclical swings. Credit, in particular, is playing an important role in asset price fluctuations. Observed in particular during the “speculative bubbles” of the 1980s and early 1990s, this trend has persisted. Another example is provided by boom-bust cycles in asset prices which have often been associated with sharp economic contractions. Several factors are in play when financial asset prices experience amplified moves I shall give a few examples.