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The consolidation of TARGET2 and TARGET2-Securities: How is the Eurosystem exploring synergies across its infrastructures, and how will this impact day-to-day operations?
Journal of Securities Operations & Custody,
11
(3),
198-212
(2019)
Abstract
Financial market infrastructures play an important role in financial integration in Europe. From the very start of the monetary union, the Eurosystem has provided and enhanced financial market infrastructures to facilitate integrated money markets and capital markets. Whereas TARGET enabled a European money market, TARGET2 has improved this by channelling all high-value payments through a single platform, allowing a single liquidity management. With TARGET2-Securities, which was launched eight years after TARGET2, several of the Giovannini barriers to harmonised post-trade business were removed. In the next stage, TARGET2 and TARGET2-Securities will be consolidated on a single platform to make a further improvement in overall liquidity management and bring about a further reduction in settlement costs by converging to harmonised technical features and using common components. These two TARGET services will be augmented by TARGET instant payment settlement (TIPS) as a new TARGET service. The renewed and complemented TARGET services are scheduled to go live in November 2021. One year later the Eurosystem will be providing the Eurosystem collateral management system (ECMS) — a single system for the management of all eligible collateral for monetary policy operations. The current 19 different local systems used for that purpose will be replaced. After that, the whole lifecycle of central bank money will be covered by integrated financial market infrastructure services: In TARGET2 and TIPS, central bank money is used for payments such as those for the settlement of securities in TARGET2-Securities. And these securities could be easily mobilised to become collateral to be used by the means of ECMS in order to receive central bank money. This paper analyses how the consolidation of TARGET2 and TARGET2-Securities, as well as the complementation by TIPS and the ECMS will contribute to the integration of European financial markets, improving the efficiency and safety of FMIs. It also looks into what is required in order to achieve the full benefits.
Keywords: TARGET2; TARGET2-Securities; T2-T2S consolidation; liquidity management; Eurosystem collateral management; harmonisation
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Author's Biography
Diehl Martin Martin Diehl is Head of section payment system analysis with the Deutsche Bundesbank. His analysis covers mainly financial market infrastructures, especially TARGET2, and, most recently, blockchain technology and related applications in the financial sector. He is particularly interested in efficiency and stability issues of financial transactions. He is a trained economist (Diplom-Volkswirt and MA economics) and got his PhD from University Gießen, Germany. He joined Deutsche Bundesbank in 1998 starting as an economist. After five years as Head of the speechwriter group for the president he was seconded to the embassy in Beijing, serving as a representative of Deutsche Bundesbank to China. In 2008 he joined the department for payment and settlement systems in Deutsche Bundesbank.
Heid Christoph Christoph Heid is Deputy Head of Division, Strategy, Policy and Oversight — Payments and Securities Settlement. He joined Deutsche Bundesbank in 1988 and has spent most of his business career in the area of payments, securities settlement and collateral management. His special focus is on TARGET2, TARGET2-Securities and the further developments of the TARGET-Services. In addition, he deals with issues related to cybersecurity. He is participating in the German National TARGET2 user group as well as in the Advisory Group on Market Infrastructures on Payments (AMI-Pay) and different working groups at the level of the Eurosystem and the CPMI.
Tobiasch Katharina Katharina Tobiasch is Head of the T2/T2S Section in the payments and settlement systems department at the Deutsche Bundesbank. She is responsible for all strategic and political matters related to T2 and T2S. Katharina has been deeply involved in the T2S programme from the very beginning, encompassing all different angles of this major Eurosystem market infrastructure project. She participates regularly in various T2S governance bodies such as the project managers’ group. Before joining the payments and settlement systems department in 2006, she was Senior Expert for issues related to eligible collateral for NCB refinancing in the markets department.
