TARGET2-Securities is a European platform for the harmonised and centralised settlement of securities in central bank money. It is also one of Europe’s largest infrastructure projects

However, we believe T2S is more than "just" a settlement platform – it represents a fundamental reshaping of European capital markets. More than this – it presents benefits and opportunities for savings for all those involved in dealing with securities.

Objective

Regulatory constraints and the resulting capital, funding and cost pressures that subsequently result continue to force banks to re-engineer their business models. While trading and clearing operations are being actively restructured, banks are missing out on untapped optimisation opportunities in the post-trade area, particularly in the highly fragmented European market.

The European Central Bank’s TARGET2-Securities (T2S) initiative is addressing this fragmentation. T2S will trigger fundamental changes in the post-trade landscape, far beyond the initial scope of pan-European settlement in central bank money. These changes will enable cost efficiencies which banks must consider to support their cost saving agendas and stay competitive with other market players. T2S will enable banks to reap significant benefits from consolidating assets and from direct access to and use of central bank money.

These efficiencies play an important role in unleashing the wider macroeconomic benefits from integrating European securities markets, building on the creation of the joint interbank payment system TARGET2.

Institutions that delay a proactive T2S strategy risk being hindered by their current providers and losing their competitive edge as savings accrue to first-movers. Banks should act now – or they risk missing out on the T2S opportunity.

T2S offers multiple benefits that banks can unlock by consolidating their securities and cash holdings in Europe directly on central securities deposititories (CSDs) and central banks, thereby allowing them to:

• reduce settlement-related exposures,
• pool collateral for settlement and triparty purposes,
• net more cash settlements, and
• simplify operations.

Time line

T2S started operations in June 2015. Since then, participating CSDs have been migrating to T2S in multiple major on-boarding phases (“waves”). This process was completed in February 2017.

T2S: the highlighted parts of the value chain are affected