The Governing Council of the ECB decided to legally construct TARGET2 as a multiple system with the highest degree of harmonisation of the legal documentation used by the central banks within the constraints of their respective national legal framework.
All ECB legal acts related to TARGET2 can be found on a dedicated website.
The TARGET2 Guideline provides the basis on which the national central banks of the euro zone (“IN-countries”) establish and design their TARGET2 participation, in line with their national legislation.
The TARGET2 Guideline contains:
- the main legal elements of TARGET2, including governance arrangements and audit rules;
- and harmonised conditions for participation in TARGET2 to ensure the maximum legal harmonisation of the rules applicable to TARGET2 participants in all jurisdictions concerned.
These TARGET2 conditions allow the national central banks to implement them in an identical manner, with certain derogations only in the event that national laws require other arrangements.
The TARGET2 Agreement provides the legal basis for central banks that are connected to TARGET2 but which countries have not adopted the euro ("OUT countries").
Settlement Finality Directive
Apart from the TARGET2 specific legal acts, TARGET2 has to comply with the general EU legislation. Most relevant in this context is the Settlement Finality Directive (SFD). The SFD is the European Union’s response to the need to minimise systemic risk and ensure the stability of payment and securities settlement.
It applies to all payment, clearing and settlement systems in the European Union. It also applies to all participants in such systems and the collateral provided in connection with participation in such systems or provided to the central banks of the Member States or the ECB.
The SFD allows systems designated as being covered by the SFD to operate within a safe legal environment in all Member States. It thereby also contributes to the establishment of a well-founded, clear and transparent legal basis as required by the CPSS Core Principles for Systemically Important Payment Systems