Payments and bank transfers are the result of many coordinated actions. When a payment or transfer is made between accounts at the same bank, the bank will move the money from one account to another. But when it is made between accounts at two different banks, additional tools are needed to ensure that it is carried out successfully. The money is not physically transferred from one bank to another; instead, as several transfers will likely be made between bank “A” and bank “B” in one day, all the transfers between accounts at the two banks will be recorded. At the end of the day, bank “A” may have a positive balance with bank “B”, or vice versa.
The procedure for settling balances between banks involves bank reserves. In Spain, the Banco de España is tasked with settling these balances between different banks. The most frequently used system is the National Electronic Clearing System (SNCE), which is managed by Sociedad Española de Sistemas de Pago (IBERPAY), a private company whose shareholders are the banks participating in the SNCE. The Banco de España is responsible for approving the rules of the system and for its oversight. It is structured into various sub-systems where the banks exchange all the relevant information on the payments.
Likewise, there is a similar settlement system for all payments and transfers between accounts in different euro area countries: TARGET2 (see also the ECB’s website, What are TARGET2 balances?). The TARGET2 system can be used by Eurosystem central banks and by commercial banks. As with clearing through the SNCE, in the TARGET2 system bilateral balances are simplified into a single end-of-day balance vis-à-vis the ECB in the respective accounts.