TARGET2, the new payment system of Eurosystem central banks for large-value and urgent payments, was successfully launched yesterday, on 19 November 2007. TARGET2 is based on a single technical platform that is shared by all users and will progressively replace the decentralised TARGET system, which has been in operation since 4 January 1999. The latter consists of a network of individual different national real-time gross settlement (RTGS) systems. TARGET is the payment system with the highest turnover in Europe. Each business day, more than 350,000 large-value payments between banks as well as urgent customer payments with a total value of €2.4 trillion are executed in TARGET Europe-wide and in a matter of seconds. TARGET was a precondition for the integration of the euro money market, which is essential for the smooth implementation of the Eurosystem monetary policy. TARGET2, now, is a further contribution of the Eurosystem for the integration of financial infrastructures in Europe.

The first operating day of TARGET2 on 19 November went smoothly; in total, 171,000 payments with an overall value of €833 billion were settled. In the first stage, 259 banks from eight countries are participating in TARGET2. 13 more countries of the European Union will follow in two migration steps until 19 May 2008.

At a Eurosystem press conference, the Deutsche Bundesbank, the Banca d'Italia and the Banque de France, which together developed TARGET2 and operate it on behalf of the Eurosystem, and the European Central Bank drew a positive balance of the project implementation and the first operating day.

Mr Hans Georg Fabritius, a member of the Deutsche Bundesbank's Executive Board, praised the introduction of TARGET2 “as an historic step forward on the way to an integrated financial infrastructure in Europe”. He said: "We have succeeded in transforming the decentralised network of payment systems into a centralised system with a single technical platform. TARGET2 provides harmonised services at consistent prices for both national and cross-border payments, and we expect significant cost reductions for the participating central banks and accordingly lower prices on a European average." According to Mr Fabritius “TARGET2 makes the liquidity management of banks much more efficient. They will, all over Europe, benefit from multiple liquidity management options and from Europe-wide transparency on payment ‘queues’ showing all pending incoming and outgoing payments of a bank.”

Ms Gertrude Tumpel-Gugerell, Executive Board member at the European Central Bank, emphasised that TARGET2 “will lead to a level playing field for users across Europe, and will be a driver for more harmonisation and efficiency of business practices, which in turn promotes cost-effectiveness of post-trade services in euro.” She added: „The new functionalities of TARGET2 enable its users, in particular the multi-country ones, to advance in the consolidation of internal functions such as treasury and back-office functions, and to better integrate their euro liquidity management.” Ms Tumpel-Gugerell continued: “We at the Eurosystem are certainly convinced that TARGET2 will not only bring the process of integration to a higher speed, in particular by further streamlining euro payment and liquidity management, as well as the banks’ internal business processes but is also expected to be the backbone for other, newer Eurosystem initiatives around market integration in the field of securities settlement, namely TARGET2-Securities, and collateral management, namely CCMB2.”

Owing to TARGET2’s great importance for financial stability, business continuity planning plays a major role. A key element is the intra-day rotation between Banca d’Italia and Deutsche Bundesbank for operations. Mr Antonio Finocchiaro, Member of the Governing Board of the Banca d’Italia, elaborated on this: "The platform is aimed at fulfilling the business continuity requirement through an unparalleled technical and organisational structure. TARGET2 will guarantee a continuous service both in the event of malfunctions and of disasters affecting the regional site and/or the entire ‘region’."
TARGET2 is the first project to be developed and implemented jointly by three national central banks (known as "3CB") on behalf of the whole Eurosystem. Mr Finocchiaro added that "the success of the project was possible thanks to organisational structures which allowed harmonising a single vision, within the 3CB environment, with a clear internal separation between the roles of service provider and system participant in order to avoid possible conflicts of interest. Such an approach could be used as a model in similar projects, such as TARGET2-Securities, aimed at bringing a functional specialisation model into the Eurosystem."

Mr Didier Bruneel, Director General of the Banque de France, said the following about the project: "TARGET2 was developed over four years. The project organisation was set up in October 2003. One of the main challenges of the project stemmed from its European and ‘multicultural’ character. At the Eurosystem level, around 500 people have been involved in the project. Within the 3CB and under the responsibility of the project management assumed by Banque de France, approximately 200 experts have been involved in the development of the single platform." He went on to remark: "From the earliest stages of TARGET2, the European banking industry worked hard, in a highly pro-active and supportive manner, to define the user requirements. In this context, transparency, frank exchanges of views and open debates with the European banking industry were of the utmost importance."