TARGET2

TARGET2

Graph showing ECB data related to TARGET2

TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System 2) is a real-time gross settlement (RTGS) system owned and operated by the Eurosystem. It is used for the settlement of large-value payments in euros and is a critical component of the European financial system.

Overview

TARGET2 is the second generation of the TARGET system, which was launched in 1999 to facilitate the integration of the European Union's financial markets. TARGET2 was introduced in November 2007, replacing the original TARGET system, to provide enhanced services and efficiency.

The system is designed to process payments in real-time, ensuring that transactions are settled immediately and irrevocably. This is crucial for maintaining the stability and efficiency of the financial markets within the Eurozone.

Functionality

TARGET2 offers a range of services to its participants, including:

• Real-time processing: Payments are settled in real-time, reducing the risk of settlement delays.
• Liquidity management: Participants can manage their liquidity efficiently, with tools to monitor and control their cash positions.
• Cross-border payments: TARGET2 facilitates cross-border payments within the Eurozone, supporting the integration of European financial markets.

Participants

The system is used by a wide range of financial institutions, including central banks, commercial banks, and other financial entities. Participation in TARGET2 is mandatory for all central banks in the Eurozone, while commercial banks can choose to participate directly or indirectly through a correspondent bank.

Importance

TARGET2 plays a vital role in the functioning of the Eurozone's financial system. It ensures the smooth operation of monetary policy by providing a reliable platform for the settlement of large-value payments. Additionally, it supports the integration of European financial markets by facilitating cross-border transactions.

Related pages

• Eurosystem
• European Central Bank
• Real-time gross settlement
• Eurozone
• European Union