Overview of TARGET Services 

The current market infrastructure of the Eurosystem comprises TARGET2 for high-value payments and ancillary system settlement, TARGET2-Securities (T2S) for securities settlement, and TARGET Instant Payment Settlement (TIPS) for the settlement of instant payments. TARGET/T2S consolidation will see the current range of services integrated even more deeply and packaged on a common platform – creating TARGET Services. 

Specifically, with the TARGET2/T2S consolidation the current TARGET2 payment system will be shut down in November 2022 and simultaneously replaced by the new T2 service in a big bang approach. T2 consists of the central liquidity management (CLM) and the real-time gross settlement (RTGS) components. In future, the central liquidity management component will pool the central bank liquidity of participants in one location. From there, the treasurer can assign it flexibly and on a needs-based basis for the individual settlement purposes – high-value payments and ancillary system settlement (RTGS), securities settlement (T2S) and instant payments (TIPS). The central liquidity management component thus forms the liquidity pool of the future TARGET Services.

The existing T2S and TIPS services will remain in place. However, some modifications have to be made to T2S and TIPS in order to embed them in the new integrated market infrastructure landscape of TARGET Services. The Eurosystem Collateral Management System (ECMS) will be added as an additional TARGET service in November 2023. Overall, the TARGET Services will thus comprise T2 (consisting of CLM and RTGS), T2S, TIPS and ECMS.

TARGET Services will be supported by several common components, such as common reference data management (CRDM), the Eurosystem Single Market Infrastructure Gateway (ESMIG), and a data warehouse for T2 and T2S. These common components form the joint foundation of the integrated market infrastructure landscape of TARGET Services.

TARGET2 becomes T2 – central liquidity management and RTGS

TARGET2 is currently used to settle central bank operations as well as for high-value payments and ancillary system settlement. In the future T2 service, these two aspects will be clearly separated and mapped in the central liquidity management and the RTGS settlement services. This is also reflected in a new account structure.

• In future, central bank operations will be settled via main cash accounts (MCAs) in the central liquidity management component. These include, among other things, the settlement of open market operations and the use of standing facilities. Minimum reserves will also be held via main cash accounts, whereby the balances of DCAs and potentially other MCAs can be considered automatically to fulfil minimum reserve requirements. Similarly, an institution’s credit line will be attached to one of the main cash accounts. 
• High-value payments and ancillary system settlement will be processed via RTGS dedicated cash accounts (RTGS DCAs) in the RTGS settlement service. These accounts will be supplied with liquidity from the MCAs.

The PM and HAM accounts familiar from TARGET2 will no longer exist.

Another key innovation in high-value payments – i.e. in the RTGS settlement service – is the significant extension of the settlement window for customer and interbank payments. While payments in TARGET2 can only be settled from 7:00 a.m. onwards at present, this will be possible from 2:30 a.m. onwards in future. Global participants can thus offer their customers an even better and more time-zone-independent service for settling euro payments.

Service-wide introduction of ISO 20022-compliant messages

Another key innovation is the use of ISO 20022-compliant messages across the board for all TARGET Services. While T2S and TIPS already use ISO 20022-compliant messages, communication with the current TARGET2 payment system continues to be based on the SWIFT MT standard. With the TARGET2/T2S consolidation, all communication in the T2 service will also be switched to the ISO 20022 standard. The changeover will take place as a big bang on the migration weekend. There will be no transitional period during which the SWIFT MT standard can be used in parallel with the ISO 20022 standard.

In the ISO 20022 message formats, T2 will, as far as possible, follow the HVPS+ (high-value payment systems plus) guidelines. In addition, there will be close coordination between HVPS+ and CBPR+ (cross-border payments and reporting plus) in correspondent banking. 

Eurosystem Single Market Infrastructure Gateway (ESMIG) 

The common ESMIG interface is the single access point to the Eurosystem’s market infrastructures. It is one of the core elements of the common components of TARGET Services: ESMIG has already been available for TIPS since November 2018. T2S will follow in June 2022 and T2 in November 2022. ECMS will be connected from November 2023. Each participant - i.e. all banks, investment firms and ancillary systems as well – must establish a connection via ESMIG if they wish to communicate directly with the TARGET Services. The two network service providers SIA-Colt and SWIFT, licensed by the Eurosystem, are available for this purpose and have been awarded the ESMIG concession as part of a Europe-wide tender procedure. 

The network-agnostic access to TARGET Services requires a switch from Y shape to V shape. This means that, in future, two payment messages will be generated per transaction. In the first step, the TARGET platform receives the original payment message from the sending participant. In the second step, T2 generates a new message which is transmitted to the payment recipient (V-shape). By contrast, in the current Y copy model used in TARGET2, the receiving participant is technically addressed directly by the sending participant. TARGET2 only receives a copy of the message.

Participants can communicate with TARGET Services and the common components in both U2A (user-to-application) and A2A (application-to-application) mode. In particular for participants with low transaction volumes, “U2A-only” access will be provided. This will replace the current internet-based access, which will be discontinued with the introduction of TARGET2/T2S consolidation. As part of the “U2A-only” access, communication with T2 will take place exclusively via a graphical user interface. The application-side implementation of messages is therefore not necessary.

Common reference data management (CRDM)

Common reference data management (CRDM) is the central reference data administration component for TARGET Services. The purpose of CRDM is to store all necessary master data once at one central location and to manage the data from there. This includes, for example, creating and maintaining the records of institutions participating in TARGET Services and institutions’ accounts for the individual settlement services (including MCAs and DCAs), as well as managing access rights.

CRDM is based on the static data module currently used for T2S and is already in use for TIPS. As part of TARGET2/T2S consolidation, CRDM is being developed further and fitted out to serve as a common component for CLM, RTGS, T2S and TIPS. As a result, current T2S participants will be largely familiar with the future reference data management system as well as with the allocation and administration of access rights.

Data warehouse 

Another common component that is relevant to participants is the common data warehouse for T2 (CLM and RTGS) and T2S. The new data warehouse allows institutions themselves to access their own historical data for the first time. Until now, in TARGET2 only central banks were authorised to access these data. Using predefined reports, institutions can access and download comprehensive collections of their data up to the previous business day.
TIPS data is not stored in the data warehouse. There will be a separate data warehouse for ECMS.