Which payment system operates alongside TARGET2 for domestic currencies?

EURO1 operates alongside TARGET2 for domestic currencies. TARGET2 is the real-time gross settlement (RTGS) system for the euro which is used for large-value payments in euros, predominantly interbank transactions. EURO1 is a private sector RTGS system used for euro payables and receivables, primarily catering to banks and financial institutions that require efficient processing of cross-border and domestic euro transactions.

By operating alongside TARGET2, EURO1 complements the existing infrastructure by enabling banks to settle payments quickly and efficiently, particularly for smaller amounts that may not reach the thresholds needed for TARGET2. This makes EURO1 an important component in the euro payment landscape, enhancing liquidity management and operational efficiency for financial institutions.

In comparison, the other options serve different functions in the global payment landscape. CHIPS (Clearing House Interbank Payments System) primarily handles U.S. dollar payments, while Fedwire is the U.S. Federal Reserve's RTGS system for processing domestic U.S. dollar transactions. BIS refers to the Bank for International Settlements, which is an international financial institution that serves central banks but does not operate as a payment system itself. Therefore, the choice of EURO1 as the payment system operating alongside TARGET2 specifically for domestic currencies is accurate and