Overview

TARGET2 was the real-time gross settlement (RTGS) system for the Eurozone from its phased introduction in 2007-2008 until its replacement with T2 in March 2023. As such, it was one of the Eurosystem's TARGET Services, replacing the original TARGET (Trans-European Automated Real-time Gross Settlement Express Transfer System) RTGS introduced in 1999. Like the other TARGET Services, it was developed and owned by the Eurosystem.

Overview

TARGET2 was based on an integrated central technical infrastructure, known as the Single Shared Platform (SSP). SSP was operated by three providing central banks: France (Banque de France), Germany (Deutsche Bundesbank) and Italy (Banca d'Italia). It started to replace the predecessor system TARGET in November 2007.

TARGET2 was also an interbank RTGS payment system for the clearing of cross-border transfers in the eurozone. Participants in the system were either direct or indirect. Direct participants held an RTGS account and had access to real-time information and control tools. They were responsible for all payments sent from or received on their accounts by themselves or any indirect participants operating through them.

Indirect participation meant that payment orders were always sent to and received from the system via a direct participant, with only the relevant direct participant having a legal relationship with the Eurosystem. Finally, bank branches and subsidiaries could choose to participate in TARGET2 as multi-addressee access or addressable BICs.

The Eurosystem in March 2023 switched its real-time gross settlement from TARGET2 to T2, which follows ISO 20022. The switch involved transactions for settling payments related to the Eurosystem's monetary policy operations, as well as bank‑to‑bank and commercial transactions. TARGET2 previously handled transactions for over €2.2 trillion per day.

History

Since the establishment of the European Economic Community in 1958, there has been movement towards an integrated European financial market. This movement has been marked by several events: In the field of payments, the most visible were the launch of the euro in 1999 and the cash changeover in the euro area countries in 2002. The establishment of the large-value central bank payment system TARGET was less visible, but also of great importance. It formed an integral part of the introduction of the euro and facilitated the rapid integration of the euro area money market.

The implementation of TARGET2 was based on a decision of the ECB Council of autumn 2002. TARGET2 started operations on 19 November 2007, when the first group of countries (Austria, Cyprus, Germany, Latvia, Lithuania, Luxembourg, Malta and Slovenia) migrated to the SSP. This first migration was successful and confirmed the reliability of SSP. After this initial migration, TARGET2 already settled around 50% of overall traffic in terms of volume and 30% in terms of value.

On 18 February 2008, the second migration successfully migrated to TARGET2, comprising Belgium, Finland, France, Ireland, the Netherlands, Portugal and Spain.

Participation

The use of TARGET2 was mandatory for the settlement of any euro operations involving the Eurosystem, consisting of the European Central Bank (ECB) and the national central banks of the 20 European Union member states that were part of the Eurozone by the end of the TARGET2 period. Participation in TARGET2 was mandatory for new member states joining the Eurozone.

TARGET2 services in euro were available to non-Eurozone states. National central banks of states which have not yet adopted the euro could also participate in TARGET2 to facilitate the settlement of transactions in euro. Central banks from four non-Eurozone states Bulgaria, Denmark, Poland and Romania also participated in TARGET2.

In 2012, TARGET2 had 999 direct participants, 3,386 indirect participants and 13,313 correspondents.

Activity

There was no upper or lower limit on the value of payments. TARGET2 had to be used for all payments involving the Eurosystem, as well as for the settlement of operations of all large-value net settlement systems and securities settlement systems handling the euro. TARGET2 was operated on a single technical platform. The business relationships were established between the TARGET2 users and their national central bank. In terms of the value processed, TARGET2 was one of the largest payment systems in the world.