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targt
 What is T.A.R.G.E.T?
Trans-European Automated Real-time
 TARGET 1
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
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 euros 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 payments and settlements 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.

Pricing
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.
Main objectives
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.

Challenges
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.
T.A.R.G.E.T 2
Introduction to TARGET2
I. TARGET2 Objectives
The objectives of TARGET2 are to:
support the implementation of the Eurosystem's monetary policy and the functioning of the euro
money market
minimise systemic risk in the payments market
increase the efficiency of cross-border payments in euro, and
maintain the integration and stability of the Eurozone money market.

II. TARGET2 Participation

The use of TARGET2 is mandatory for the settlement of any euro operations involving the
Eurosystem. The Eurosystem consists of the European Central Bank (ECB) and the national central
banks of the 19 European Union member states that are part of the Eurozone. Participation in TARGET2
is mandatory for new member states joining the Eurozone.
TARGET2 services in euro are available to non-Eurozone states. National central banks of
states which have not yet adopted the euro can also participate in TARGET2 to facilitate the settlement
of transactions in euro. Central banks from four non-Eurozone states Bulgaria, Denmark, Poland and
Romania also participate in TARGET2.
In 2012, TARGET2 had 999 direct participants, 3,386 indirect participants and 13,313
correspondents.
 Legal basis

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.

III. TARGET2 Guidelines

The TARGET2 Guideline provides the basis on which the national central banks of the euro zone
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.
 TARGET2 in Figures

settled the cash positions of 82 ancillary systems,

processed a daily average of 354,185 payments, representing a daily average value of 2.477 billion,
the average value of a TARGET2 transaction was 7.1 million,
two-thirds of all TARGET2 payments (i.e., 68%) had a value of less than 50,000 each; 11% of all
payments had value of over 1 million each,
the peak in volume turnover was 29 June 2012 with 536,524 transactions and peak value turnover
was on 1 March 2012 with 3.718 billion,
TARGET2s share in total large-value payment system traffic in euro was 92% in value terms and 58%
in volume terms,
the SSP technical availability was 100%, and
99.94% of TARGET2 payments were processed in less than five minutes.
 TARGET2 facts in 2015
TARGET2 in 2015
TARGET2 had 1,004 direct participants, 735 indirect participants and 5,292
No of participants
correspondents

No of ancillary systems TARGET2 settled the cash positions of 79 ancillary systems

TARGET2 processed a daily average of 343,729 payments, representing a

Daily averages
daily average value of 1.8 trillion

Average transaction value 5.3 million

More than two-thirds of all TARGET2 payments had a value of less than
Payment values
50,000 each; 12% of all payments had value of over 1 million

The peak in volume turnover was 7 April 2015 with 512,422 transactions and
Peaks
peak value turnover was on 27 February 2015 with 2,635 billion

TARGET2s share in total large-value payment system traffic in euro was 91%
Large-value payment system traffic
in value terms and 61% in volume terms

SSP technical availability 99.98%

99.94% of TARGET2 payments were processed in less than five minutes
TARGET2 Migration
TARGET2 Migration
Summary
Thank you!