TARGET Services

TARGET Services Infrastructure

This is a second introductory article about TARGET system.

In the previous one, I walked you trough the main phases of the evolution of the TARGET system.

Today I am going to present high-level architecture of the current system.

A quick reminder: TARGET stands for:




Gross settlement



It is one of the largest payment systems in the world.

The TARGET2 migration to the new system took place in March 2023. 


TARGET vs. TARGET Services


When we talk with payment professionals we still often hear the name: TARGET2.

Over the years people have become much accustomed to this name.

The problem is that TARGET2 does not exist anymore.

On 20 March 2023, a new system went live. 

What do we call the new system?

Below I would like to describe three terms you may encounter:


TARGET: Interestingly enough this is a formal name of a new system. The Eurosystem removed the suffix “2” but left the well-recognised name.

The legal framework for TARGET is defined in:

Guideline (EU) of the European Central Bank on a new generation Trans-European Automated Real-time Gross Settlement Express Transfer system (TARGET) and repealing Guideline ECB/2012/27

From the legal pespective, TARGET is a payment system that provides the settlement in euro in central bank money on several kinds of cash accounts.

These accounts are held in different TARGET Services.


TARGET Services: This is a more functional term related to the whole infrastructure. I will describe it in more detail below. 

At this point, you may ask whether TARGET and TARGET Services are just different names for the same thing. Is TARGET the legal term and TARGET Services cover a more functional perspective?

In my opinion, this is the correct way of looking at this issue.

However, I would also argue that the term TARGET Services is a bit larger in scope.

As I said above TARGET covers only cash accounts and EUR settlement.

T2S on the other hand, one of the TARGET Services, incorporate also securities accounts (securities accounts are not cash accounts).

Also, TARGET Services are implemented as multi-currency services not only dedicated to EUR settlement.


Another term often used is T2.

This is simply one of the TARGET Services.  I am going to describe it in more detail below. 




When you open TARGET Services documentation (for example the most important functional document related to RTGS: RTGS User Detailed Functional Specifications  (here) you may notice that at the top, on the right-hand side, there are logos of the 4 CBs:

  • Deutsche Bundesbank,
  • Banque de France,
  • Banca d’Italia and
  • Banco de España

Why these 4CBs are listed on the functional documentation? 

This is because these 4 CBs developed and operate (on behalf of the Eurosystem) the TARGET Services infrastructure.


One payment system or a multiplicity of payment systems? 


TARGET Services form a centralized and harmonized technical infrastructure.

However, the legal perspective is different here from the technical one.

From the legal point of view TARGET is structured as a multiplicity of payment systems. 

Each Central Bank operate its own TARGET component system. 

This approach has not changed with the migration to the new system. 

This means that current TARGET national components constitute the legal successors of the corresponding, previous TARGET2 national components.

ECB operates also its own TARGET component.

Not only Eurozone Central Banks have their TARGET components. Under additional agreement, Central Banks outside the Eurozone, may also connect to TARGET system and operate their own TARGET component. 

This is precisely the case for Poland, where Narodowy Bank Polski operates the polish component of TARGET, called TARGET-NBP.


What does the new TARGET infrastructure look like?


When we talk about infrastructure we have to start with the term that we are already familiar with: TARGET Services.

TARGET Services are:

  • T2 (comprised of CLM and RTGS)
  • TARGET2-Securities (T2S)
  • TARGET Instant Payment Settlement (TIPS).

* ECMS is also defined as a TARGET Service but let’s skip it in this article

These services are dedicated to a particular business area.

However, they are not independent.

All TARGET Services use so-called common components, which allows the harmonization across services.

Below I present two common components, which in my opinion are the most important:


  • Eurosystem Single Market Infrastructure Gateway (ESMIG). 
    It is a network service provider (NSP) agnostic component, using ISO 20022-compliant messages as the standard format for communication with all TARGET Services. ESMIG allows users to connect to TARGET settlement services and common components via both A2A* and U2A** (via GUI), through a single certified NSP.
    • *A2A connection allows the software of TARGET participants to communicate with TARGET by sending/receiving single messages and files. A2A communication relies on ISO 20022 XML messages.
    • **U2A connection allows TARGET users to access TARGET via the graphical user interfaces (GUIs). 


  • Common Reference Data Management (CRDM)
    It is a component where reference data are maintained. CRDM allows for the creation, maintenance, and deletion of common reference data relating to parties, cash accounts, rules, and parameters across TARGET services. 


This is how the infrastructure comprisinf of TARGET Services and common components is presented in the document:



In this diagram, I indicated TARGET Services in red.

We can see T2S on the left and TIPS on the right.

Where is T2?

T2 is presented by CLM and RTGS. CLM and RTGS form together one service: T2. 


In orange, both ESMIG and CRDM are highligted.


What are the most practical benefits of knowing the structure of the above infrastructure?

In my opinion, the most useful aspect of this is the fact, that the TARGET documentation is organized in the same way as the whole infrastructure.

In other words, documentation follows the structure of the infrastructure.

This means that, e.g. in RTGS documentation you will not find all the details related to connectivity, as these are in the ESMIG documentation. 

What is even more crucial, in the RTGS documentation you will not find the RTGS Directory description, because RTGS Directory is the reference data, so it is described in CRDM documentation.

Needless to say, the same goes for TIPS Directory.



This is the way the TARGET Services documentation is presented on the ECB website:



You can recognize the T2, T2S, TIPS.

The “Shared features” section contains the common components documentation, i.a. ESMIG, CRDM.


Accounts and business areas in the TARGET infrastructure


We already know the TARGET Services.

Now, let’s see what business areas each of them covers.

This may be presented by the below diagram:



On the left, we can see T2S Service dedicated to Secirities settlement.

On the right, there is TIPS Service used for Instant Payments settlement.

In the middle, we have T2 Service, consisting of CLM and RTGS.

The green arrows denote the Liquidity transfers that participants may use to shift funds from one Service to another, depending on business needs.

Because the changes introduced in March 2023 were mainly dedicated to T2 Service, I will skip the detailed description of T2S and TIPS for the time being and will focus on explaining the new T2 Service. 

As we already know, T2 Service is formed by CLM and RTGS.

Let’s present them one by one. 

We are going to begin with CLM. 


T2 Service: CLM


Central Liquidity Management (CLM) is a new feature of the TARGET infrastructure. There was no equivalent module in the TARGET2 system. 

The account that participants hold in CLM is called the main cash account (MCA).

If a participant holds at least one dedicated cash account in any of the TARGET Services, that is: RTGS DCA, TIPS DCA, or T2S DCA, this participant is required to also open an MCA with the same central bank.

There are two main functionalities that CLM offers:

  • settlement of Central Bank Operations (CBOs)
  • efficient liquidity management

Let’s look at them more in detail.

In TARGET2 CBOs were conducted on the same accounts as other payments. This is not the case anymore. With the introduction of CLM Eurosystem segregated all interactions of the credit institutions with their Central Bank from the settlement of other transactions. One of the indicators that CLM is mainly dedicated to the CBOs is the fact that participants cannot send any pacs. messages to CLM. Pacs.009 and pacs.010 can be sent only by Central Banks. 

One of the most important CBOs is the provision of the Intraday credit. Participants can be granted Intraday credit on their MCA, however, obtained liquidity can be distributed to cash accounts in RTGS, TIPS, and T2S through liquidity transfers. In other words, the central source of liquidity in TARGET system is the main cash account (MCA) in CLM.

And this is where we approach the second aspect of CLM: centralised mechanism for the monitoring and management of liquidity.

In this context, CLM offers a wide range of instruments for liquidity management and information tools for liquidity monitoring purposes.  

When it comes to generating Liquidity transfers, participants may send them ad-hoc depending on current business needs or trigger them automatically based on defined events (e.g. a queued payment order, breaching of floor/ceiling amount).


T2 Service: RTGS


Last but not least we are going to discuss the RTGS component of T2 Service.

What transactions are processed in RTGS?

Let’s have a look at this table:


Source: Information Guide for TARGET participants. Part 1 – Fundamentals 


We can distinguish 3 types of cash orders based on this table:

  • payments between TARGET participants (pacs.004, pacs.008, pacs.009, pacs.010)
  • AS settlement (pain.998)
  • Liquidity transfers (camt.050)

We have already talked about LTs, so let’s focus now on the settlement of payments and ancillary system transactions.


  • Settlement of payments in RTGS


Real-time gross settlement (RTGS) is designed for the real-time gross settlement of interbank and customer payments.

These transactions are settled on dedicated cash accounts (RTGS DCAs).

This is the area where there have been a lot of changes in comparison to TARGET2, i.a.:

  • FIN messages were replaced by ISO 20022-compliant messages,
  • SWIFT Y-copy mode was switched to V-shape mode.

When it comes to ISO 20022-compliant, a fully-fledged (no “like-for-like” approach) approach was chosen. This meant, that the ISO 20022 message standard was implemented fully. 

The shift to the V-shape communication model meant that:

  • At the technical level the payment message is addressed to the RTGS component
  • After the settlement, RTGS generates and sends out the message to the receiver.

The V-shape model is illustrated by this diagram:




What is important here is that one payment from Bank A to Bank B means that two pacs messages are generated:

  • first sent by Bank A to the RTGS
  • second sent by RTGS to Bank B

More information about the processing of the payments in RTGS are available in the following articles on my website:


  • Settlement of ancillary systems transactions


What are ancillary systems?

Simply put, ancillary systems (AS) are systems in which payments and/or financial instruments are exchanged and/or cleared, and as a consequence the resulting obligations are settled in TARGET.

Examples of AS include retail payment systems (RPS), large-value payment systems (LVPS), foreign exchange systems, money market systems (MMS), automated clearing houses (ACH), central counterparties (CCP) and securities settlement systems (SSS).

The RTGS offers 5 AS settlement procedures for the settlement of AS transfer orders (procedures A, B, C, D, and E).

The list od AS and the procedures which are used in available here.

One of the most well-known AS is STEP2-T which uses procedure D in RTGS. 


<< previous page next page >>