WHAT is the TARGETT system?

Institutional structure

Participation in the system

Categories of transactions processed

Hours of operation (opening)

Pricing principles

Execution of payments transaction s cross-border

Procedures implemented

Interconnection System

Procedures at end of day

SUPPLY intraday liquidity

Intraday borrowing in the euro area

Intraday credits outside the euro area

From Target to Target 2

The principal innovations of Target 2

Target 2 balances

Introduction (why there are accumulated liabilities and claims)



Since the establishment of central banks, their main activities and missions are essentially to preserve the value of the currency and to facilitate its circulation.

During the process of preparation for the Monetary Union, the Council of the EMI (European Monetary Institute) adopted a report on the Target project.

The objective of the Target system is to create technical links that allow each central bank in the European Union, to credit their settlement accounts opened for the national commercial banks, in exchange for the debits made to another central bank.

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Thus, the Target system is a decentralized payment mechanism that allows all 16 national real time gross settlement systems that exist in the each country of the European Union to make direct cross-border payments in euro.


Target stands for “Trans-European Automated Real-time Gross settlement Express Transfer”, and represents a payment system which allows the transfer of funds between credit institutions located in the euro area. The system system is composed by the ECB payment mechanism, the Interlinking system and the 16 national systems.

The role of Target

The objectives for which the Target system was developed are the next ones:

  • To provide an effective and safe mechanism for the settlement of payments made within the euro area;
  • To facilitate the implementation of the single monetary policy;
  • To increase the efficiency in the payments made in the euro zone by the inter-Member States.

Institutional structure

The Target system links the national central banks (NCBs) and credit institutions between themselves under the supervision European Central Bank (ECB) system. The ECB system is composed by the national RTGS systems and the Interlinking system.

The central banks located in each member state of the euro area implemented a RTGS system in their respective country. National RTGS systems are interconnected by a communication network exchanging payment messages in a common format and common procedures. Through the Interlinking system, payment orders in euro, can be transferred from one RTGS system to another.

If the credit institutions want to carry out cross-border payments in euro, central bank would act as correspondent. The central bank debits the account of the commercial bank introducing the order, converts the payment message in the format used for the connections between the NCB and send it through the Interlinking system. The central bank recipient automatically credits the account of the beneficiary commercial bank. The last one will be informed about the operation by the second national RTGS system and will then be able to credit its customer at its turn.

Target operates as an RTGS system, payment orders are processed one by one in a continuous basis and it ensures the immediate settlement finality of all payments under the condition that the account of the issuing credit institution, with its central bank, is sufficiently funded.

Tough the account of the beneficiary institution will never be credited before the account of the issuing institution has been debited. Thus, the beneficiary institution will always be sure that payments made through the Target system are unconditional and irrevocable.

Participation in the system

The European member states outside the euro zone holding RTGS systems may be connected to the TARGET system as well, but under the condition of being able to process transactions in euro.

Three mechanisms were developed to prevent intraday credits. If they were granted to NCBs outside the euro zone, those are not converted into 24 hours credits.

Generally, only central banks and credit institutions are allowed to participate directly in the funds transfer system that processes payments from third parties.

However, NCBs may authorize certain other institutions to hold accounts for their customers directly participating in these systems under the conditions:

Their status of public institution eliminates the default risk or if they are under the supervision of a competent authority.

Types of transaction handled

The use of Target is only mandatory for payments directly related to monetary policy operations in which the ESCB is involved, either as a recipient or as a sender.

In practice, Target should treat almost exclusively payments of high amount made ​​between participants, on their own behalf or on the behalf of their clients.

The EMI didn’t make any decision on the minimum or maximum amounts of payments that can be transferred through Target. However, the retail payments that do not require to be run in real time can be be treated by other systems, which may be less expensive but with a process that last longer.

Operation of the transfer system

Target has extended hours of operation. Generally, the system is opened at 7 am and closes at 6 pm (Central European Time).

These long daily operating hours provide a good synchronization and a common operating interval of time between Target and payment systems of the main financial centers in North America and Far East and also it limits the settlement risk in foreign exchange transactions. A common closing time has positive consequence on the limitation of the risk that a significant number of payments are made outside the common operating hours and also avoiding variability of the interest rate that might cause a problem to the single monetary policy.

By late afternoon, a mechanism ensures that all transactions made through Target are processed before the closure of the system.

Pricing principles

The pricing policy objective of the Target is to cover the costs. The principle of the cost-recovery incurred by central banks in the Target system, allows the ESCB to allocate the cost for its administration to the correct source and to avoid unfair competition between payment schemes of central banks and other payment schemes.

Target principles don’t encourage credit institutions to use less secure payment mechanism.

Commercial banks appreciate the speed of real-time systems, but are generally less interested in making settlements with immediate finality. RTGS systems are more expensive for the banks that must present a guarantee to cover their intraday commitments.

The charge of the cross-border payments through Target depends on the number of transactions executed between direct participants. The fees are:

1.75 EUR per transaction for the first 100 transactions during a month;

1.00 EUR per transaction for the following 900 transactions within a month;

0.80 EUR per the transaction that exceed 1000 transaction within a month;.

These fees are charged by the sending National Central Bank or European Central Bank to the sending participant in the system. They are not based on the value of the payment or on the destination. There are no fees for the receiving National Central bank or European Central bank to the receiving participant.

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An extra fee applies for the telecommunication link between the sender and the national RTGS system, which is calculated on the basis of domestic rules by the NCBs. The NCBs calculate the price of transfers considering the transparency, the principle of cost recovery and a fair competition with the others systems.

Settlement procedures

To make a cross-border Target payment, a credit institution sends a payment order to the NCB via the national RTGS system, once the NCB received the order, verifies the validity of the payment. In order to be processed, the payment order should respect the agreed standards and contain the required elements and information. Moreover, the amount of payment can’t exceed the account balance of the sending bank.

Once the sending NCB has validated the payment, the value of the payment is immediately and irrevocably debited from the account of the sending credit institution, part of the RTGS system, and credited into account of the Interlinking system of the receiving NCB.

The sending NCB is responsible for adapting the payment order to the standards required by the Interlinking messages and also is in charge of sending the message to the receiving NCB.

After checking the validity of the payment and the existence of the beneficiary bank, the receiving NCB ensures that format of the message is according to the standards of the Interlinking system. Also the receiving NCB debits the account of the Interlinking of the sending NCB and credits the RTGS account of the beneficiary bank. Finally, the receiving NCB sends the payment order through the national RTGS system to the beneficiary credit institution.

For a cross-border Target payment, under optimal conditions only a few seconds are required for debiting the account of the credit institution issuing the order, through the sending RTGS system and crediting to the account of beneficiary credit institution through the receiving RTGS system.

Finally, the receiving RTGS system transmits, after the allocation of the credit, a notice of settlement to the sending NCB. This procedure allows the sending NCB to ensure the accomplishment of all payments sent to the other NCBs.

The Interlinking System

Target interconnection system consists of a telecommunications network that is present in each country and which is connected to a local interface called national component of the Interlinking system. Besides the requirements for a certain speed and safety, this type of communication disposes of a big flexibility in terms of processing capacity. Communication between NCBs through Target requires the use of a common language developed on the basis of SWIFT messages.


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