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From TARGET to TARGET2

From TARGET to TARGET2

Reasons behind its development

TARGET went live when the euro was introduced on 4 January 1999 and was based on a network of, in some cases, fairly different RTGS systems. At the time, TARGET was 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 proved to be a success, two disadvantages became 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 are 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.

Advantages common to both TARGET and TARGET2

  • TARGET2 processes large-value payments and urgent transactions in secure central bank money with immediate finality, even across borders, and thus reduces the risks inherent in payment transactions.
  • With over 1,000 direct and around 51,500 indirect participating banks (including branches and subsidiary institutions), an extremely large number of banks are accessible.
  • TARGET2 is open for the execution of payments on working days from 07.00 to 18.00 CET.
  • Liquidity is widely available in TARGET2. Minimum reserve holdings are available for settlement purposes during the day and the Eurosystem provides its counterparties with unlimited intraday credit free of interest against collateral.

Additional advantages of TARGET2 over TARGET

  • TARGET2 is even more efficient, secure and stable than TARGET.
  • It has many liquidity management options, such as liquidity reservation and liquidity pooling.
  • National and cross-border payments are processed in the same way, with participants being addressed directly.
  • The single shared platform results in harmonised services that are provided at standardised prices.
  • TARGET2 also processes interbank direct debits.
  • In TARGET2, payment orders can be “pre-submitted” – that is up to five working days in advance.
  • TARGET2 enables the financial settlement of ancillary systems (eg securities clearing systems, retail payment systems and large-value payment systems) during night-time processing.

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 had not yet migrated were operated in parallel.

Germany migrated in the first country window together with Austria, Cyprus, Latvia, Lithuania, Luxembourg, Malta and Slovenia on 19 November 2007. 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. The United Kingdom 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.
Other countries joined TARGET2 even after the migration was completed.

  • January 2009 Slovakia
  • February 2010 Bulgaria
  • July 2011 Romania
  • February 2016 Croatia


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