The Trans-European Automated Real-Time Gross Settlement Express Transfer System (TARGET2)

TARGET2 is a pivotal financial infrastructure of the European Union, specifically serving as a real-time gross settlement (RTGS) system. It is owned and operated by the Eurosystem, which comprises the European Central Bank (ECB) and the national central banks of the EU member states that use the euro. This system plays a crucial role in the European financial landscape by providing an efficient and secure mechanism for the settlement of central bank operations, large-value euro transactions, and other euro-denominated transfers across Europe.

The main function of TARGET2 is to facilitate the immediate processing of cross-border and domestic payment transactions between participating banks. In an RTGS system like TARGET2, transactions are settled individually in real-time, which means the money is transferred and settled in central bank funds instantaneously, thereby eliminating the risk associated with the timing of payments. This feature is critical for maintaining the stability and reliability of the financial market infrastructure, especially for high-value transactions that require immediate and irrevocable settlement.

TARGET2 supports the implementation of the Eurosystem’s monetary policy and the functioning of the European financial market infrastructure. It also enhances the efficiency of cross-border transactions within the euro area by providing a standardized process that minimizes settlement risks.

As a backbone of the European financial system, TARGET2 links with other major payment systems and market infrastructures, ensuring seamless financial operations across borders and contributing to the overall economic stability and integration of the Eurozone.