The European Central Bank has launched a new real-time gross settlement (RTGS) system that settles payments in euro relating to monetary policy operations, bank‑to‑bank and commercial transactions.
The Eurosystem’s T2 operations, which include a central liquidity management tool as well as the RTGS system, went live on 20 March , the ECB said.
On its first day it reportedly settled around 400,000 transactions, broadly in line with the average volume experienced before the migration to T2, which took place between 17 and 20 March.
The system replaces TARGET2, which had been processing payments worth on average €2.2 trillion per day, the ECB said.
The software and the environment for the new system were delivered by the central banks of Italy, Spain, France and Germany, the four national central banks that act as providers for TARGET services. The project was initiated in December 2017 with the aim of integrating these services for the benefit of Europe’s financial markets.
What is T2?
T2 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 T2, where they are processed and settled in central bank money or money held in an account with a central bank.
Every five days, T2 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 T2 to initiate transactions in euro, either on their own behalf or on behalf of their customers. Taking into account branches and subsidiaries, more than 43,000 banks worldwide and all their customers can be reached via T2.
What are its objectives?
The system is broadly in place to support the implementation of the Eurosystem’s monetary policy and the overall functioning of the euro money market. According to the ECB, not only does it ensure the efficient processing of payments in euro but it helps minimise systemic risk such as the possibility of a single actor causing an entire market to collapse.