The Bank of Finland provides the Eurosystem’s common TARGET services to Nordic financial sector entities. In 2022 the Bank of Finland maintained the current systems and actively participated in new TARGET development projects.

The Eurosystem’s common TARGET services consist of the TARGET2 payment system, the TIPS instant payment system and the T2S securities settlement system.

Reliable functioning of TARGET systems supported financial system stability in 2022

The stable and effective functioning of the TARGET services permits the smooth flow of cash, securities and collateral everywhere in Europe and therefore supports the single monetary policy.

The TARGET systems functioned reliably throughout 2022 and there were no major disruptions.

The Eurosystem and the Bank of Finland actively make provision for risks to market infrastructures. A greater number of contingency exercises were carried out with Bank of Finland participants in 2022.

Number and total value of TARGET2-Suomen Pankki system payment transactions up in 2022

TARGET2 is one of the biggest payment systems in the world and is owned by the central banks in the Eurosystem. More than one thousand credit institutions have a TARGET2 account. It is used, for example, for interbank retail payments made using central bank money. It is also used for executing monetary policy operations in the euro area.

At the end of 2022, a total of 23 Nordic banks and 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 2022 was 4,350, with a total value of around EUR 49 billion.

The number of daily payments was up by 21%, and its value by 20%, compared to 2021.

Bank of Finland preparing for new T2 system

The current TARGET2 system introduced in 2007 is to be replaced with the new T2 payment system as part of the T2-T2S consolidation project.

The purpose is to adopt new payment messaging standards, update the liquidity management of the TARGET systems and link the various systems to one common technical platform.

In 2022 the Bank of Finland made preparations for the introduction of the T2 system in association with the other central banks and supported its participants in testing the system.

Towards the end of the year, the Bank and its participants moved on from the testing phase to preparations for the system’s introduction.

Although the new T2 system was supposed to be introduced at the end of 2022, the challenges that arose in testing it meant that the Governing Council of the European Central Bank (ECB) decided to postpone its adoption until March 2023, to allow participants sufficient time to prepare for the introduction.

Bank of Finland participants in the SEPA Instant Credit Transfer scheme have joined the TIPS instant payment system

In accordance with a decision of the Governing Council of the ECB, all payment service providers that are in the TARGET2 system and adhere to the SEPA Instant Credit Transfer scheme, had, by February 2022, to be reachable in the TIPS (TARGET Instant Payment Settlement) system. The objective is to promote the use of instant payment and improve accessibility in the euro area.

All Finnish banks making SEPA instant credit transfers were ready to receive such transfers via the TIPS system by the deadline set.

Euroclear Finland’s migration to the T2S system is under way

The T2S system is a securities settlement platform used by the Eurosystem. It makes possible real-time delivery-versus-payment (DvP) settlement of securities in central bank money.

The Finnish central securities depository Euroclear Finland will adopt the T2S system in September 2023. The system will then assume a growing importance for Finnish financial sector entities.

In 2022 the Bank of Finland, together with the ECB, prepared for Euroclear Finland’s migration to the T2S system and aided its future T2S participants in their deployment of the system.

Eurosystem Collateral Management System to be introduced in 2024

Currently, every national central bank within the Eurosystem has its own system for managing the assets used as collateral for monetary policy credit operations.

The Eurosystem is replacing these 20 national systems with the unified Eurosystem Collateral Management System (ECMS).

The aim is to make collateral management in the Eurosystem more effective and allow speedier adoption of decisions on the monetary policy collateral framework.

Towards the end of 2022, the Bank of Finland began ECMS connectivity testing and prepared user testing for monetary policy counterparty banks. Because of the rescheduled launch of the new T2 system, the Governing Council of the ECB decided to postpone the launch of the ECMS system until April 2024.

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