TARGET2 turns ten: forging a single European money market

Bundesbank Executive Board member Carl-Ludwig Thiele dubbed the TARGET2 (T2) payment system a “success story”, telling industry representatives at a gathering to mark its tenth anniversary that “TARGET and TARGET2 signalled the birth of a single money market in the Eurosystem”.

Since November 2007, the TARGET2 computer system has ensured that electronic individual payments within the EU are settled swiftly and securely. Commercial banks use TARGET2 to transfer large sums of money in seconds, enabling the rapid exchange of central bank money between the national money markets. The Bundesbank shares the task of developing and operating the system with the Banque de France and the Banca d’Italia.

A pan-European infrastructure

Thiele also pointed to the political dimension of the payment system. “TARGET2 meant the creation of a pan-European infrastructure. In that sense, TARGET2 also paved the way for SEPA,” he said, referring to the Single Euro Payments Area.

Thiele told his audience that T2 has been running smoothly ever since its launch and marked a significant step forward for the Eurosystem. He also spoke about the Eurosystem’s plans for the future of market infrastructures: Vision 2020 will see instant payments – real-time money transfers, around the clock – become a reality. The planned consolidation of TARGET2 and TARGET2-Securities will, he added, be accompanied by the creation of another platform, TARGET instant payment settlement, or TIPS. This integrated infrastructure will, it is hoped, provide users with a superior service, optimise the range of services on offer, and help to further foster financial market integration. Thiele closed his speech by reaching out to his audience with the words: “We are working in a network industry and must pull together to succeed. That is why we are banking on continued close collaboration with the market as we work to make Vision 2020 a reality”.

Anja Hartmann, who was closely involved in the T2 launch ten years ago, then took to the podium to speak about the challenges associated with the new system. She explained that T2 was the first time that a Eurosystem service centre had been created. The payment systems expert commended both the cooperation between the central banks and the contribution of others, emphasising that “the success of TARGET2 owes much to the close partnership with credit institutions”.

Criticism and looking forward

The event closed with a panel discussion involving selected market participants. Topics included the success of T2 and what the future might hold for payment systems. Commenting on the way forward for the TARGET platform, banking industry representatives criticised the fact that the planned TIPS system for instant payments and the private Euro Banking Association’s existing RT1 instant payment system use different communication standards. This prompted one representative to call for harmonisation of the RT1 and TIPS standards.