TARGET2 is the real-time gross settlement (RTGS) system owned and operated by the Eurosystem. Central banks and commercial banks can submit payment orders in euro to TARGET2, where they are processed and settled in central bank money, i.e. money held in an account with a central bank.
TARGET2 settles payments related to the Eurosystem’s monetary policy operations, as well as bank-to-bank and commercial transactions.
Every five days, TARGET2 processes a value close to the entire euro area GDP, which makes it one of the largest payment systems in the world. More than 1,000 banks use TARGET2 to initiate transactions in euro, either on their own behalf or on behalf of their customers. Taking into account branches and subsidiaries, more than 52,000 banks worldwide and all their customers can be reached via TARGET2.
In response to changing market demands, the Eurosystem has launched a review of its RTGS services. The objective is to consolidate the technical and functional aspects of TARGET2 and T2S, with the aim of improving efficiency and reducing operating costs.
By meeting these objectives, TARGET2 enables payments to flow safely and efficiently across Europe, and contributes to the stability of the euro.
Payment orders are submitted to the platform for processing and are settled one by one on a continuous basis in central bank money, with immediate finality. There is no upper or lower limit for their value. TARGET2 is used by central banks and commercial banks for monetary policy transactions, interbank payments and commercial payments.
The availability and cost of liquidity are two crucial issues for the smooth processing of payments in RTGS systems. TARGET2 has a range of features allowing efficient liquidity management, including payment priorities, timed transactions, liquidity reservation facilities, limits, liquidity pooling and optimisation procedures.
TARGET2 is open for the processing of payments every working day from 07:00 to 18:00 CET. The system is closed on the following days:
TARGET2 is used to carry out monetary policy operations in the euro area. The central banks of EU Member States which have not yet adopted the euro also have the option to participate in TARGET2 and settle transactions in euro via the platform.
Other financial institutions can connect to TARGET2 via a participating central bank. They can choose from several different access options:
TARGET2 replaced the first-generation RTGS system for the euro. TARGET commenced operations on 4 January 1999, a few days after the launch of the euro. The single currency needed a payment service to support monetary policy operations and to settle euro payments across national borders in the EU.
TARGET was built by linking together the different RTGS structures that already existed at national level as there was not sufficient time to develop a single system. However, this decentralised structure proved inefficient and costly in the long term. TARGET2 came into being as a redesign of TARGET and offers harmonised core services on a single technical platform. The Banque de France, Deutsche Bundesbank and Banca d'Italia – known as the 3CB – were given the tasks of developing the new platform and acting as a service provider on behalf of the Eurosystem. TARGET2 was launched on 19 November 2007 and fully replaced the first-generation TARGET by May 2008.