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From TARGET to TARGET2

Reasons behind its development

TARGET was initially developed to

  • foster the integration of the euro money market, which is essential for the smooth implementation of European monetary policy,
  • speed up the settlement process and improve the security of large-value payments throughout Europe,
  • create the common payment and settlement infrastructure necessary for further financial market integration in Europe.

Although TARGET has proved a success, two disadvantages have become increasingly apparent over time: first, the decentralised technical structure, and second, a lack of consistency with regard to technology and services. It became clear that the system would not be able to meet future demands in terms of efficiency, costs and stability.

With the introduction of TARGET2, the Eurosystem essentially provides

  1. a high degree of standardisation and a common range of services which is provided by means of a single technical platform, thereby creating a level playing field for the financial market players,
  2. standardised prices for domestic and cross-border payments,
  3. decentralisation within the European System of Central Banks (ESCB) whereby the participating central banks retain responsibility for conducting business with their customers,
  4. users with the necessary flexibility to meet the new requirements applying to European banks. This is achieved by means of a single platform which enables them to make use, for example, of an efficient, Europe-wide liquidity management system.

TARGET2 migration

Graphic shows the migration from TARGET to TARGET2 [+] The Eurosystem opted for a phased migration approach, ie in the form of a number of "country windows". In line with this, the central banks, together with their respective national banking communities, were migrated from TARGET to TARGET2 in three groups. This migration process lasted a total of six months. During this period, TARGET2 and the TARGET components of countries that have not yet migrated were operated in parallel.

Germany migrated in the first country window (19 November 2007) together with Austria, Cyprus, Latvia, Lithuania, Luxembourg, Malta and Slovenia. Cyprus, Latvia, Lithuania and Malta had not previously participated in TARGET. Belgium, Finland, France, Ireland, the Netherlands, Portugal and Spain migrated in the second country window (18 February 2008).
In mid-May 2008, the TARGET system was completely replaced by TARGET2. Great Britain decided not to participate in TARGET2. All of the other remaining TARGET countries (Denmark, Estonia, Greece, Italy and Poland), as well as the ECB, migrated to TARGET2 on 19 May 2008.
In January 2009 and February 2010 Slowakia as well as Bulgaria joined TARGET2.