News from the MIB ‒ there is nothing permanent except change

The Market Infrastructure Board (MIB) does not only share its catchy acronym with the iconic movie series about agents in black suits and dark sunglasses dealing with threats from outer space. It also succeeds in maintaining an impressive track record over the years despite considerable challenges to its tasks and responsibilities, as well as some changes in the casting.

Since our last MIP OnLine article on the MIB in mid-2019, we have experienced time and again that there is nothing permanent except change. Let’s take stock of what has been happening since then.

As a brief reminder, the MIB is the governance body responsible for technical and operational management tasks in respect of the Eurosystem’s market infrastructure. More specifically, it supports the Governing Council in ensuring that the Eurosystem’s market infrastructures, platforms, applications and related services in the fields of cash settlement, securities settlement and collateral management are maintained and further developed, as well as that projects in these fields are carried out.

The MIB is responsible for three Eurosystem market infrastructure services: TARGET2, the real-time gross settlement system (RTGS) for euro payments related to the Eurosystem’s monetary policy operations, as well as bank-to-bank and commercial transactions; TARGET2-Securities (T2S), the single platform for Europe-wide securities settlement in euro or Danish krone; and TARGET Instant Payment Settlement (TIPS), which enables payment service providers to offer instant fund transfers to their customers, around the clock, every day of the year.

The financial ecosystem has been changing significantly as a result of technological progress, the global adoption of international standards such as ISO 20022, new regulatory requirements on risk management and cyber resilience and changing user demands. The MIB has been put in charge of managing two projects to enhance TARGET Services, with the objective of meeting these challenges:

• T2-T2S consolidation, which will replace TARGET2 with a new RTGS system (T2) and introduce common components between the Eurosystem’s market infrastructure services to benefit from synergies, optimising liquidity management across all TARGET Services.
• The development of the Eurosystem Collateral Management System (ECMS), a unified system for managing assets used as collateral in Eurosystem credit operations.

The MIB is also managing the development of TIPS. Both the project work and the day-to-day running of TARGET2, T2S and TIPS bring new tasks and challenges. Performance, operational risk management, cyber resilience and information security are of key importance in the MIB’s operational management of TARGET Services. As for the performance of the Eurosystem’s market infrastructures during the COVID-19 crisis, no unplanned interruptions or reductions in the quality of the service directly related to the pandemic occurred. However, over 2020 there were a number of serious incidents which led to follow-up action to avoid them happening again. The MIB took the lead in addressing the situation and a strong role in drawing the lessons. After the incident in TARGET2 on 23 October 2020, which caused an outage lasting almost 10 hours, the MIB was put in charge of managing an independent review on the incidents affecting TARGET Services in 2020. The review was strongly supported by the MIB, and its main findings will be shared with market participants and made public by mid-2021.

Two important MIB workstreams are reinforcing TARGET Services risk management and strengthening cyber resilience. Dedicated risk management and cyber resilience and information security frameworks are under development, taking into account new regulatory and oversight requirements. Work in this field will continue beyond the validation, approval and implementation of the frameworks, as they are not being designed to establish static requirements and an end-state of operational risk management and cyber resilience. Rather, they are expected to be dynamic ‒ constantly evolving, advancing and innovating against the continuously changing operational risk and cyber threat landscape.

2020 has been a demanding year for the MIB’s project work. On top of the challenges experienced by Europe’s financial community with regard to the upcoming ISO 20022 migration, the COVID-19 pandemic left its mark. Thus, in July 2020, following discussions with stakeholders, the timeline of the T2-T2S consolidation project was extended by one year. The project is now scheduled to go live in November 2022. Owing to project dependencies, the extension also prompted a review of the timeline for delivery of the ECMS. The ECMS go-live date has been moved from November 2022 to November 2023.

Despite these adjustments, work on the two projects went ahead in full steam. In addition, the MIB was instrumental in launching important developments in TIPS. In July 2020 significant steps were taken to ensure the pan-European reach of instant payments via TIPS by the end of 2021. All Payment Service Providers (PSPs) which have adhered to the SEPA instant credit transfer scheme (SCT Inst) and are reachable in TARGET2 should also become reachable in TIPS. At the same time, all Automated Clearing Houses (ACHs) offering instant payment services should migrate their technical accounts from TARGET2 to TIPS.

On top of that, TIPS is also developing beyond the euro area. Leveraging its multi-currency capability, Sveriges Riksbank and the Eurosystem signed an agreement under which the Swedish central bank can offer a new instant payment service in Swedish kronor (RIX-INST), based on the TIPS platform, to users in Sweden in 2022. Moreover, in 2020 Danmarks Nationalbank applied to join the coming T2 RTGS system and expressed an interest in joining TIPS, by 2025 at the latest. Sweden and Norway are also considering options to rely on (additional) TARGET Services.

Change also features in the MIB’s representation and responsibilities. The end of 2019 saw a new Chairperson, Ulrich Bindseil, who succeeded Marc Bayle de Jessé as Director General Payments and Market Infrastructure at the ECB. Ulrich said that “The MIB is a group with responsibilities which could not be more important: it is responsible for nothing less than the running and evolution of two major European systemic market infrastructures. And 2020 was unbelievably intense, with the rescheduling of all major projects because of COVID-19, and the various incidents – not an easy, but an intense and inspiring year. And I found the discussions in the MIB always open and productive – thanks both to the competent and engaged members, and the great ECB team supporting the MIB and preparing most of the material discussed there. The coming years will not be calm either. The major projects will go live only in November 2022 and November 2023. Lastly the success of TARGET Services has led to more interest from outside the euro area, and with Euroclear Bank and Euroclear Finland joining T2S, the reliance on our services also grows from within. ” With the support of both new and established MIB members, Ulrich will steer the MIB through the upheavals of the pandemic and other challenges.

In 2020, Livio Tornetta, then Deputy Head of the Directorate General for Markets and Payment Systems at Banca d’Italia succeeded Paolo Marullo Reedtz, who retired. After Livio became Deputy Head of the Directorate General for Currency Circulation and Retail Payments, he was succeeded by Giandomenico Scarpelli, Head of the Payment Systems Directorate.

From De Nederlandsche Bank, Inge van Dijk, Director Payments and Market Infrastructure, replaced Petra Hielkema, Director for Insurance Supervision. Petra has recently been appointed as the new Chair of the EU’s insurance and occupational pension fund supervisor, EIOPA.

Last, but not least, taking into account the onboarding of Sveriges Riksbank to TIPS, MIB Chairperson Ulrich Bindseil offered Sveriges Riksbank a seat on the MIB, which has been filled by Christina Wejshammar, Head of the Payments Department.

Some further changes occurred in the first months of 2021. Upon his retirement, Stefan Augustin of Oesterreichische Nationalbank was succeeded by Petia Niederländer both in the position as Director Payments, Risk Monitoring and Financial Literacy and as MIB member. Jochen Metzger of Deutsche Bundesbank, who will become President of the Regional Office in North Rhine-Westphalia, was succeeded by Julian Reischle as Director General Payments and Settlement Systems.

In the coming months, a successor as MIB member will be nominated for Karsten Biltoft of Danmarks Nationalbank, who will leave the MIB by the end of the year as he has been appointed CEO of the resolution authority Finansiel Stabilitet in Denmark.

We thank all outgoing and new members for sharing their expertise and insights in the MIB and wish them the best of luck in the future.