Danmarks Nationalbank: Future-Proofing the Danish Payments Infrastructure

The Danish krone will be the first non-euro currency to be connected to all TARGET Services for payments and securities settlement

Introduction

The settlement of the Danish krone (DKK) is scheduled to migrate to the European payment and securities settlement platform TARGET Services in 2025.

In 2020, the Danish central bank, Danmarks Nationalbank, decided to launch a project aimed at migrating the settlement of the Danish krone to the European payment and securities settlement platform. The decision was based on extensive analysis and dialogue with the financial sector in Denmark. The decision is in line with the main objectives of Danmarks Nationalbank. One objective is to ensure that payments can be effected in a secure and efficient manner. In addition, efficient and stable payments and settlement systems are crucial prerequisites for ensuring financial stability in Denmark — another main objective of Danmarks Nationalbank.

Signe Krogstrup, Governor of Danmarks Nationalbank, states: “A successful migration of the Danish krone to TARGET Services is a top priority for Danmarks Nationalbank. It will put us at the front of the development of payment systems together with other European countries and central banks. We appreciate the strong cooperation we have with the financial sector in Denmark and the European Central Bank on our way to achieving this.”

The Danish krone will be the first non-euro currency to be connected to all TARGET Services for payments and securities settlement. Denmark is not part of the euro area but participates in the European Exchange Rate Mechanism II (ERM II). ERM II is the formal framework for the Danish fixed exchange rate policy, where the Danish krone is kept stable against the euro and by which Danmarks Nationalbank contributes to stable prices in Denmark.

Denmark conducts its own monetary policy, and the Danish monetary policy will not be affected by the migration of the Danish krone to TARGET Services. However, in parallel with shifting to TARGET Services, Danmarks Nationalbank is also developing the future payments infrastructure in Danish kroner, referred to as TARGET DKK. TARGET DKK comprises both TARGET Services and Danmarks Nationalbank’s System for Monetary Policy Instruments and Collateral Management (SPI).

Benefits of migrating to TARGET Services

Though the Danish payment and settlement systems are efficient and stable, and payments can be effected securely, the migration of the Danish krone to TARGET Services is a way to future-proof the Danish payments infrastructure. There are several benefits to migrating the Danish krone to TARGET Services. These include:

• Ensuring a single platform for all settlements in Danish kroner (since 2018, most Danish securities transactions have been settled in Danish kroner in TARGET2-Securities (T2S) in TARGET Services);
• Strengthened IT security and a united front against cyber threats;
• Harmonised infrastructure with increased ...

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