T2 is the real-time gross settlement (RTGS) system owned and operated by the Eurosystem, the European Central Bank and the national central banks of the euro area. It settles large-value and urgent payments in euros, one by one and in central bank money, and it is the channel through which the Eurosystem carries out its monetary policy operations. T2 went live on 20 March 2023, replacing TARGET2.
T2 is one of the TARGET Services, alongside TARGET2-Securities (T2S) for securities settlement, TIPS for instant payments and the Eurosystem Collateral Management System (ECMS). It is often confused with SEPA, but SEPA is a set of payment schemes and standards, while T2 is the settlement platform where banks' central bank accounts are debited and credited.
T2 in plain terms
Imagine the euro area's banks all keep a current account at one shared bank: the central bank. When one bank owes another a large sum, the central bank simply moves money from the first account to the second. There is no question of whether that money is good, because it is the central bank's own money.
T2 is the system that makes those moves. Each payment is handled on its own and settled the moment it is processed, rather than bundled with others and settled at the end of the day. That is why banks use it for big, time-critical transfers, such as payments between banks, the final legs of other payment systems and the cash side of central bank lending. Ordinary shoppers never see T2, but most euro payments eventually touch it.
History
The first TARGET system started with the euro in January 1999 as a network linking the national RTGS systems of the participating central banks. TARGET2 replaced it from November 2007 with a single shared technical platform, and by 2023 it processed payments worth about €2 trillion on an average day.
The Eurosystem then launched a consolidation project to merge TARGET2 and T2S onto common components and adopt a single messaging standard. The switch was planned for November 2022 but was moved to March 2023 to give participants more time. Migration ran over the weekend of 17 to 20 March 2023, and the first business day on the new platform was 20 March. Danmarks Nationalbank joined in April 2025, making the Danish krone the second currency in T2 and the first non-euro currency in all three settlement services.
How T2 works
T2 is built from two main components and a set of shared services:
- Central Liquidity Management (CLM). Each participant holds a main cash account in CLM, where central bank operations such as credit, reserve holdings and standing facilities are booked. CLM is the hub that distributes liquidity to the other services.
- The RTGS component. Participants move funds from the main cash account to a dedicated cash account for real-time settlement of interbank and customer payments and of ancillary systems such as retail clearing houses, card schemes and securities settlement systems.
- Shared services. A single access portal, a common reference-data service, a business-day schedule and a data warehouse are used across T2, T2S and TIPS.
T2 uses ISO 20022 messages only, replacing the older MT formats used in TARGET2. Tools for liquidity management, including payment priorities, reservations, limits and queuing, let banks control the order in which payments are processed. Intraday credit is available against eligible collateral, which reduces the liquidity each bank must hold in advance. T2 operates on TARGET business days and is closed at weekends and on a short list of holidays, including New Year's Day, Good Friday, Easter Monday, 1 May and 25 and 26 December.
Participants
Direct participants are mainly credit institutions established in the European Economic Area, together with central banks and certain public bodies. Banks that do not join directly can reach T2 through a direct participant as an indirect participant or addressable BIC. Ancillary systems, from retail clearing houses to central counterparties, settle their participants' positions in T2. Payments settled in T2 are irrevocable once processed and final, which gives other systems a safe point at which to complete their own payment finality.
Governance and oversight
The ECB's Governing Council has final responsibility for T2, supported by the Market Infrastructure Board. The platform is built and run on behalf of the Eurosystem by four central banks: the Deutsche Bundesbank, the Banque de France, the Banca d'Italia and the Banco de España. T2 is designated under national law implementing the Settlement Finality Directive, which protects its settlements from insolvency challenge, and it is classed as a systemically important payment system overseen against the PFMI. Settling gross and in real time removes much of the settlement risk that net systems carry.
Comparison with other systems
T2 is the euro counterpart of the US Fedwire Funds Service and the UK's CHAPS, which settles in the Bank of England's RTGS service. All three settle large-value payments gross in central bank money and moved to ISO 20022. T2 differs in serving many central banks and countries at once and in sharing its liquidity hub with separate securities and instant payment services, so a bank can move central bank money between T2, T2S and TIPS during the day.