About its forerunner TARGET1



Composition of TARGET

Composition of TARGET

Source: ECB.

In the mid-1990s, Europe was pursuing a single currency and EU countries were preparing for the change from their national currencies to the euro. There was an urgent need to develop a payment service to serve the needs of what would be the single monetary policy and, at the same time, to facilitate the settlement of euro payments across national borders in the EU.

At the time, the majority of Member States already had their own RTGS systems, but only for the settlement of transactions in their national currencies. Therefore, in March 1995, the Council of the European Monetary Institute (EMI) decided that all current EU national central banks should be ready to connect to TARGET by 1999.

There was not sufficient time to build a fully fledged single RTGS system in time for the introduction of the euro. The most practical and immediate solution was to link the existing RTGS systems and define a minimum set of harmonised features for sending and receiving payments across national borders.

At the national level, central banks continued to function as they did for the settlement of payments within their banking community. This approach kept the changes that the banks and central banks had to undergo to a minimum. This was important at a time when they were already heavily involved in the changeover to the euro and the single monetary policy.

The TARGET system was built by linking together the different RTGS structures that existed at the national level. TARGET, the first-generation RTGS system for the euro, commenced operations on 4 January 1999 following the launch of the euro.


Structure of TARGET

Target logo

The first-generation TARGET system had a decentralised technical structure. The migration to the second-generation system (TARGET2) was started in November 2007. At that time, TARGET consisted of 17 national RTGS. These were interlinked to provide a technical framework for the processing of payments across national borders in the EU.

Availability of TARGET

TARGET was available for all credit transfers in the countries that had adopted the euro, as well as in Denmark, Estonia, Poland and the United Kingdom. As a result of its wide participation criteria, it was possible to reach almost all credit institutions established in the EU via TARGET, and hence all their account holders.

Large-value payments

TARGET was originally intended for the processing of large-value payments in euro with the objective of reducing systemic risk throughout the EU. Payments related to operations involving the Eurosystem or to the final settlement of systemically important payment and settlement systems had to be made via TARGET (now by TARGET2).

Other payments

TARGET users also began to use the system for other types of transaction, including retail payments. Users welcomed the benefits and advantages of TARGET in terms of speed, liquidity management and security. Owing to its attractive pricing scheme, even smaller credit institutions in the EU were now able to offer their customers an efficient cross-border payment service.


The use of the first-generation TARGET system was supported by a transparent pricing structure. Payments between Member States were subject to digressive transaction fees (from €1.75 down to €0.80). Fees for transactions within Member States were not harmonised and were fixed by the individual central banks.

Integration through TARGET

The rapid integration of the euro area money markets was closely related to the establishment of the TARGET system. After its introduction in 1999, TARGET became a benchmark for the processing of euro payments in terms of speed, reliability, opening times and service level. It also contributed to the integration of financial markets in Europe by providing its users with a common payment and settlement infrastructure.



The first generation of TARGET operated successfully over a number of years and met all of its main objectives:

  • It supported the implementation of the single monetary policy;
  • It contributed to reducing systemic risk;
  • And it helped banks to manage their euro liquidity at national and cross-border level.


In a market environment that evolved rapidly and was highly competitive, the first generation of TARGET proved to have some shortcomings.The decentralised structure of TARGET, which multiplied the local technical components increased the maintenance and running costs. In the context of EU enlargement, new Member States were expected to connect to the system, thereby increasing the number of TARGET components.

These challenges called for a redesign of the system. TARGET participants needed an enhanced and more harmonised service offered at the same price across the EU. Cost-efficiency needed to be optimised as the revenues generated did not cover a sufficient proportion of the costs.

Evolution of TARGET

On 24 October 2002 the Governing Council of the ECB decided on the principles and structure of the next-generation TARGET system: TARGET2.

The Governing Council decided that TARGET2 would

  • offer harmonised core services,
  • which would be provided by a single technical platform
  • and would be priced according to a single price structure.

Benefits of TARGET2

The new approach would allow the Eurosystem to reduce prices and to recover the costs of TARGET2 at the same time. A “public good” factor was defined based on the positive effects generated by TARGET2. The new system reduced systemic risk and allowed the settlement of payments in central bank money within one day. The costs for these positive effects would not have to be recovered.

Despite the technical consolidation of TARGET2, the decentralised nature would be maintained on a local level. The relationships that the national central banks had with the counterparties in their respective countries would be preserved, including monetary policy and lender of last resort relationships.

TARGET2 Project and Go-Live

TARGET2 Project and Go-Live

Visualisation of infrastructure change

Visualisation of infrastructure change

Source: ECB.

TARGET2 Project

In TARGET2, the decentralised structure of the first-generation TARGET system was replaced by a single technical platform, the “Single Shared Platform” (SSP). Three Eurosystem central banks – the Banca d’Italia, the Banque de France and the Deutsche Bundesbank – jointly provide the SSP for TARGET2 and operate it on behalf of the Eurosystem.

The TARGET2 project was divided into three phases: (i) pre-project phase, (ii) project phase and (iii) testing & trial phase.

The objectives of the pre-project phase were to identify the user requirements and to establish the concept for the Single Shared Platform (SSP). The future users of the system were closely involved in this phase. The General Functional Specifications (GFS) of the SSP were drafted on the basis of the input received during a public consultation on TARGET2. The draft of the GFS was discussed with the TARGET user community and, taking their comments into account, was then finalised in July 2004. This, together with the completion of the work on structural aspects of the SSP (such as governance, costs and financing), marked the end of the first phase.

The project phase was planned to last until the beginning of 2006. This phase involved drawing up detailed functional and technical specifications, developing the software and establishing the technical infrastructure for the new system.

The last phase, for testing and trial, started in 2006 and was devoted to intensive testing and pre-production trial runs.

Eurosystem decided that the number of migration groups was limited to four. Central banks were only allocated to the first three groups while the fourth one was reserved for contingency. The migration started in the second half of 2007 with the first country wave and there was approximately three months between each subsequent wave. Consequently the overall duration of the migration phase was limited to around 6 months during which both TARGET1 components and the SSP co-existed.


TARGET2 started operations on 19 November 2007, when the first group of countries (Austria, Cyprus, Germany, Latvia, Lithuania, Luxembourg, Malta and Slovenia) migrated to the SSP. This first migration wave was successful and confirmed the reliability of the TARGET2 platform. After this initial migration, TARGET2 already settled around 50% of overall traffic in terms of volume and 30% in terms of value.

On 18 February 2008 the second migration group (Belgium, Finland, France, Ireland, the Netherlands, Portugal and Spain) successfully migrated to TARGET2.

On 19 May 2008 the final group migrated to TARGET2: Denmark, Estonia, Greece, Italy, Poland and the ECB. The six-month migration process was very smooth and did not cause any operational disruptions.

After five years of planning, development and testing, the Eurosystem successfully launched the TARGET2 system in November 2007. The new system replaced the first-generation TARGET system completely in May 2008.

  • The General functional specifications (GFS) were supportive for the migration towards TARGET2. The GFS are kept available as a reference document and for information purposes only.
  • The progress reports on TARGET2 were published regularly during the preparation and migration phases from TARGET to TARGET2. They shared all information on the progress of the TARGET2 project with the TARGET community.