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Delay TARGET2, T2S project as banks address Covid-19

Delay TARGET2, T2S project as banks address Covid-19


​​​​​​​ESBG joins three EU banking associations asking to push out consolidation project by one year

>> See letter

>> ECB page: earn about TARGET2 

>> ECB page: TARGET2-Securities, T2S

BRUSSELS, 22 May 2020 – ESBG joined three other European banking associations to request the European Central Bank delay by one year the ongoing TARGET2 and the TARGET2 Securities (T2-T2S) consolidation project.

​Jointly signed by ESBG, along with the European Banking Federation, the European Association of Cooperative Banks, and the European Association of Public Banks, the letter calls for postponement of the project, which weaves together the European real-time gross settlement mechanism and securities settlement platform, due to two recent events –  the Covid-19 crisis and the decision by SWIFT to delay migration of cross-border payments to ISO20022 to November 2022. Both have "impacted banks’ ability to achieve completion of their consolidation projects by the current deadline of November 2021," they note, adding: "In light of recent developments, we urge the ECB to consider a delay of one year in the consolidation project and to bring the deadline to November 2022." 

Banks hampered by Covid-19

All four banking bodies remain strongly commitment to the consolidation project and its full implementation that they expect to bring benefits to all parties involved, the letter notes. Members within the associations have been working extensively in the past years to ensure a successful migration within the set dates. Covid-19 changed things.

According to a FinExtra story published Wednesday that reports on the letter, the T2-T2S considiation project faces a major roadblock caused by the ongoing Covid-19 pandemic. The project was initially posited in 2015 with the ECB's Vison20/20 project for the harmonisation and integration of European cash and securities settlement services marking "a major upheaval for European banks. The eurosystem has launched a review of its RTGS services with the aim to consolidate the technical and functional aspects of TARGET2 and TARGET2-Securities, or T2S, with the aim of improving efficiency and reducing operating costs.

The joint banking association letter lists in bullet form how national authorities have requested banks to focus on maintaining their core activities. Those include financing the economy, including SMEs and housholds as well as maintaining the stability and smooth functioning of their payment systems and payment services. Furthermore the lockdown situation, also globally, impacts the availability of resources for IT projects and our members observe that the remote working  has already had  a negative impact on software development projects.​

​Decision needed quickly

"Given the advanced T2-T2S consolidation project status, the decision has to be made as soon as possible in order to allow the market to take time to conduct a proper analysis of the different options available rather than rush into individualised solutions leading to possible unexpected effects on clients and the wider community," the letter states. 

"Since the implementation is to be by means of a 'big bang', failure is not an option which means that the project is dependent on the weakest link in the chain being ready notwithstanding any unexpected and unforeseen events for which adequate contingency is considered to be essential," the letter notes. 

​About TARGET2 

TARGET2 is real-time gross settlemen processed andt (RTGS) system owned and operated by the Eurosystem, Target 2 allows central banks and commercial banks to submit to the settlement system​ payment orders in euro, where they are settled in central bank money – money held in an account with a central bank. ​TARGET2 settles payments related to the Eurosystem’s monetary policy operations, as well as bank-to-bank and commercial transactions.

Source: European Central Bank​

About TARGET2-Securities, or T2S

When investors buy and sell securities the security and payment need to change hands – a process called securities settlement. TARGET2-Securities, or T2S, provides "a safe platform where the exchange can happen simultaneously", such as  where delivery versus payment is possible, notes the ECB infopage, 

"T2S revolutionised securities settlement in Europe because it brought an end to complex cross-border settlement procedures and the problems caused by different settlement practices among countries." ​T2S provides a common platform on which securities and cash can be transferred between investors across Europe, using harmonised rules and practices, they note. Used by 20 European countries, T2S allows banks to pay for securities on the platform using the account they have with their respective central bank, so the funds used to settle transactions is central bank money, which greatly reduces transaction risk.

Source: European Central Bank website


Payment systems; Real-time gross settlement systems; European Supervisory Authorities (EBA-ESMA); European Institutions