ESBG joined three other European banking associations to request the European Central Bank delay by one year the ongoing TARGET2 and the TARGET2 Securities (T2-T2S) consolidation project. TARGET2 is real-time gross settlement processed and (RTGS) system owned and operated by the Eurosystem, Target 2 allows central banks and commercial banks to submit to the settlement system payment orders in euro, where they are settled in central bank money – money held in an account with a central bank. TARGET2 settles payments related to the Eurosystem’s monetary policy operations, as well as bank-to-bank and commercial transactions.
Jointly signed by the European Savings Bank Group, along with the European Banking Federation, the European Association of Cooperative Banks, and the European Association of Public Banks, the letter calls for postponement of the project, which weaves together the European real-time gross settlement mechanism and securities settlement platform, due to two recent events – the COVID-19 crisis and the decision by SWIFT to delay migration of cross-border payments to ISO20022 to November 2022. Both have “impacted banks’ ability to achieve completion of their consolidation projects by the current deadline of November 2021,” they note, adding: “In light of recent developments, we urge the ECB to consider a delay of one year in the consolidation project and to bring the deadline to November 2022.”
Banks hampered by Covid-19
All four banking bodies were adamant that they remained strongly committed to the consolidation project and its full implementation that they expect to bring benefits to all parties involved, the letter notes. Members within the associations have been working extensively in the past years to ensure a successful migration within the set dates. Covid-19 changed things.
According to a FinExtra story published Wednesday that reports on the letter, the T2-T2S consolidation project faces a major roadblock caused by the ongoing Covid-19 pandemic. The project was initially posited in 2015 with the ECB’s Vison20/20 project for the harmonization and integration of European cash and securities settlement services marking “a major upheaval for European banks. The eurosystem has launched a review of its RTGS services with the aim to consolidate the technical and functional aspects of TARGET2 and TARGET2-Securities, or T2S, with the aim of improving efficiency and reducing operating costs.
The joint banking association letter lists in bullet form how national authorities have requested banks to focus on maintaining their core activities. Those include financing the economy, including SMEs and housholds as well as maintaining the stability and smooth functioning of their payment systems and payment services. Furthermore the lockdown situation, also globally, impacts the availability of resources for IT projects and our members observe that the remote working has already had a negative impact on software development projects.
Decision needed quickly
“Given the advanced T2-T2S consolidation project status, the decision has to be made as soon as possible in order to allow the market to take time to conduct a proper analysis of the different options available rather than rush into individualised solutions leading to possible unexpected effects on clients and the wider community,” the letter states.
“Since the implementation is to be by means of a ‘big bang’, failure is not an option which means that the project is dependent on the weakest link in the chain being ready notwithstanding any unexpected and unforeseen events for which adequate contingency is considered to be essential,” the letter notes.