Banque centrale du Luxembourg - Evolution of TARGET: TARGET2

Although TARGET has reached its main objectives (contribution to the singleness of the money market in the euro zone and to the financial stability thanks to robust and efficient payments), the system continually looks at improving its functionalities and performance. In particular, the system has to adapt to new demands (users’ needs, further integration of the European financial system, EU enlargement). On 24 October 2002, the Governing Council of the ECB announced its long-term strategy about TARGET.

The next TARGET generation; TARGET2 will:

answer the users’ needs, with the harmonization of the services offered;
be cost efficient;
adapt rapidly to the changes to come, notably the European Union and the Eurosystem enlargement.

With TARGET2, it will not be compulsory for national central banks to operate their own RTGS platform. They may use a shared platform. However, each national central bank will keep the relationship (settlement account, intra-day credit facility, etc.) with its "own" participants. The sharing of the technical infrastructure allows the harmonization of the services and some cost reduction thanks to the economies of scale.

Due to the importance of the system, and in order to mitigate the risks associated with the migration to a new system, the Eurosystem decided to migrate to TARGET2 in “country groups". Thus, TARGET users migrate to TARGET2 in different waves and on different, pre-defined dates. Each wave will consist of a group of central banks and their respective national banking communities.

The migration of the first group on 19 November 2007 includes Luxembourg as well as Austria, Cyprus, Germany, Latvia, Lithuania, Malta and Slovenia.

TARGET2 will be used for gross payments, interbank and customer, but also for net payments associated with ancillary systems’ clearings, for instance those of securities systems like Clearstream Banking Luxembourg. Some services offered today by BCL to its customers in relation to Clearstream Banking Luxembourg will be replaced by mechanisms included in TARGET2’s ancillary system interface module. Thus, the current Night Time Link model will be replaced by the Euro Night Time Funding Link settling directly in TARGET2.