Money and payments
4.4 In 2021, the Bank of Finland participated in the development of TARGET services
The Bank of Finland provides to banks and other financial market entities the Eurosystem’s common TARGET services. In 2021, the Bank of Finland participated actively in Eurosystem-wide market infrastructure development projects for the improvement of TARGET services.
TARGET services comprise payment system services (TARGET2), instant payment services (TIPS) and settlement system services (T2S).
TARGET2 is one of the largest payment systems in the world. It is owned by the Eurosystem central banks. More than one thousand credit institutions have a TARGET2 account.
At the end of 2021, 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- Suomen Pankki component.
The average daily number of payments settled via the TARGET2-Suomen Pankki component in 2021 was 3,600, with an average aggregate value of EUR 41 billion per day.
The daily number of transactions has increased in recent years. This was also the case in 2021, with an increase of 41% year-on-year. The value of transactions, however, decreased slightly compared to 2020.
The TARGET2- Suomen Pankki component accounts for some one percent of the total number and for two percent of the total value of transactions in TARGET2.
The new TARGET system entered the testing phase in 2021
TARGET2 will be discontinued in 2022, and it will be replaced by a new TARGET system in November 2022.
The Bank of Finland is actively participating in the development of the new system, in which customers are provided payment and liquidity management services, as in the current system.
In the T2-T2S consolidation project for the introduction of the new system, the central bank testing phase was launched in June.
In September, TARGET participants started network connectivity testing. Actual user testing activities will start in early 2022.
The Bank of Finland organised in 2021 several information sessions and user trainings on the project.
Finnish banks joined the TIPS instant payment service in 2021
The first Finnish banks joined the Eurosystem’s TARGET Instant Payment Settlement (TIPS) service at the end of 2021.
The EBA Clearing RT1 system, which is the main system for settling Finnish banks’ instant payments, also migrated its liquidity management to TIPS in December 2021.
This was based on the decision taken by the Governing Council of the ECB in summer 2020. All Payment Service Providers (PSPs) which are reachable in TARGET2 and adhere to the SEPA Instant Credit Transfer scheme should also become reachable through the TIPS service.
At the same time, all automated clearing houses offering instant payment services are to migrate their technical accounts from TARGET2 to TIPS.
The decision will remove barriers to European instant payment, as all PSPs providing instant payments, counterparties and ultimately end customers will therefore be reachable via TIPS.
In 2021, the Bank of Finland worked actively in Eurosystem working groups to promote the achievement of the objective set by the ECB Governing Council and supported the migration of its participants to TIPS.
A decision was taken in 2021 that Eurosystem collateral management will migrate to the T2S platform
The new uniform Eurosystem Collateral Management System (ECMS) will replace the existing collateral management systems of all the Eurosystem national central banks in November 2023.
The ECB Governing Council decided in April 2021 that when the ECMS is launched, the national central banks will take eligible marketable collateral from their monetary policy counterparties only via central securities depositories (CSDs) that are part of TARGET2-Securities (T2S).
T2S is a securities settlement platform, constructed by the Eurosystem, where the settlement of transactions takes place in central bank money.
The Bank of Finland has prepared, together with the Finnish central securities depository Euroclear Finland (EFi), the ECB and the Finnish markets, the migration of EFi to T2S.
The ECB’s Market Infrastructure Board (MIB) confirmed in summer 2021 that EFi will migrate to T2S on 11 September 2023.
The Bank of Finland already provides to its participants central bank money accounts in T2S for securities settlement purposes abroad, but the number of the accounts will increase following the migration of EFi to T2S.
TARGET systems operated reliably in 2021
The TARGET systems operated reliably throughout the 2021 and there were no significant incidents.
The independent review of incidents in the TARGET services in 2020 , launched by the ECB, was completed in 2021.
The results of the review were published in July 2021, and they included a total of eighteen recommendations on, among other things, business continuity, testing and crisis communication protocols.
The Eurosystem has already taken the necessary measures, and in December 2021 the ECB published an action plan to implement the recommendations made in the review. The work will continue in the years to come.