TARGET2
TARGET2 is the real-time gross settlement system operated by the Eurosystem for high-value euro payments between banks — the euro area's equivalent of a national RTGS system.
What it is. TARGET2 settles large-value and time-critical euro payments individually and in real time across accounts held at the euro area's central banks, with immediate finality. It is the system through which banks and central banks move central-bank money in euros, and it underpins the settlement of other euro payment schemes. Because it settles in central-bank money rather than commercial-bank money, it carries no settlement risk between the parties — the payment is as final as money can be.
Its place in the plumbing. Where SEPA schemes handle everyday retail and business euro payments, TARGET2 sits beneath the system as the high-value settlement layer between financial institutions — analogous to CHAPS in the UK. Banks use it for large interbank obligations, and central banks for monetary-policy operations. In 2023 the platform was consolidated into the Eurosystem's newer T2 service, modernising the infrastructure and combining settlement with enhanced liquidity-management features, while continuing the same core role.
Where it fits. TARGET2 (now T2) is critical financial-market infrastructure: it settles interbank obligations, supports monetary-policy operations and provides the finality on which the wider euro payments system depends. Businesses rarely interact with it directly — they experience it only indirectly, through the reliability of the euro payments that ultimately settle over it — but it is the foundation that makes large-value euro settlement work, and the ultimate backstop of the euro-area payment system. Its reliability is a precondition for everything built on top of it, which is why it is run by the central banks themselves rather than any commercial provider.