Cash and payments
4.6 An active year in TARGET services
The Bank of Finland provides to banks and other financial market entities the Eurosystem’s common TARGET payment and settlement system services. The year 2020 was busy both in the daily operation of services and in development work.
The number of payments in TARGET2-Suomen Pankki continues to increase
The TARGET2 payment system is a real-time gross settlement (RTGS) system jointly owned and operated by the Bank of Finland and the other Eurosystem central banks.
At the end of 2020, a total of 24 credit institutions operating in Finland and the Nordic countries as well as ancillary systems used the Bank of Finland's TARGET2 component.
The average daily number of payments settled via the TARGET2-Suomen Pankki system in 2020 was 2,570, with an average aggregate value of EUR 44 billion per day.
The daily number of transactions has increased in recent years. This was also the case in 2020, with an increase of 25% year-on-year. The value of transactions remained unchanged compared with 2019.
Securities settlement in Finland will migrate to T2S in 2023
In addition to TARGET2, the Bank of Finland provides to banks central bank money accounts in TARGET2-Securities (T2S) for securities settlement purposes.
T2S is a securities settlement platform built by the Eurosystem where the settlement of transactions takes place in central bank money.
The number of transactions settled in T2S increased significantly in spring 2020, due to the market turbulence caused by the COVID-19 pandemic.
As many as 21 European central securities depositories have already joined T2S. On the Finnish market, the importance of T2S will grow further when Euroclear Finland joins the platform in autumn 2023.
The number of TIPS participants will increase significantly in 2021
The TARGET Instant Payment Settlement (TIPS) system provided by the Eurosystem enables the transfer of instant payments in central bank money around the clock, every day of the year.
TIPS was launched a couple of years ago, but thus far Finnish banks have not joined the system. The situation is, however, changing, as a result of the European Commission's retail payment strategy and the decisions taken by the ECB in July 2020. In line with these, all banks that are reachable in TARGET2 and provide instant payments as well as Automated Clearing Houses (ACHs) offering instant payment services must be reachable via TIPS by the end of 2021.
Together with its payment system participants, the Bank of Finland has launched measures for achievement of the objective.
The initiative will ensure the full reachability of instant payments across the euro area.
Disruptions in payment and settlement systems in 2020
The pandemic year 2020 was challenging in terms of system operations and required from the Bank of Finland the reorganisation of functions to ensure business continuity.
Despite the challenges caused by the pandemic, the Eurosystem's payment and settlement systems operated almost normally throughout the year.
The systems did, however, also experience some disruptions. The most significant was in October 2020 when a technical problem in TARGET2 caused an outage for almost ten hours.
The ECB launched an internal review into the incident within the Eurosystem, as well as an independent review. The latter’s findings will be made public in spring 2021.
The COVID-19 pandemic affected the schedule of system initiatives
The Bank of Finland and its participants are involved in the Eurosystem's T2-T2S consolidation project, in which the TARGET2 and T2S systems are being consolidated technically into a single platform. The objective is to provide operational and financial efficiency in system maintenance.
The current TARGET2 system will be replaced with a new real-time gross settlement (RTGS) system, to meet growing market demands and enhance banks’ liquidity management. In payment messages, the system will use the new messaging standard ISO 20022.
In July 2020, in response to the wishes of the markets, the Governing Council of the ECB decided to delay the go-live date of the new system by one year.
The rationale for these decisions was the challenges posed to the financial sector by the pandemic and the decision taken by SWIFT to delay the global migration of cross‑border payments to ISO 20022 by one year.
The new T2 system will go live in November 2022.
The Governing Council also decided to delay by one year the go-live date for another significant Eurosystem project, the Eurosystem Collateral Management System (ECMS). The new date is November 2023.
This ensures that the central banks, T2S central securities depositories and banks will have adequate time for the necessary testing and other preparations after the completion of the consolidation project.
The new ECMS will eventually replace the Bank of Finland's own collateral management system.
Despite the rescheduling, in 2020, the Bank of Finland promoted the projects actively, both within the Eurosystem and with its market participants.