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Target2’s turnover decreases due to TS2 and economic sluggishness

Changes in financial market infrastructure, with more migration to TS2, and slow economic growth in Europe are behind the 4.6 per cent decrease in turnover announced by Target2.

The turnover processed by Target2 in 2015 decreased by 4.6 per cent, according to the payments system's annual report. Target2 remains one of the world's biggest payment systems despite the decrease. It processes euro payments in real time and is used by 1,700 credit institutions in Europe.

New securities system diverts payments away from Target2

The system processed 91 per cent of the total value settled by large-value payment systems in euro. The report found that, compared with 2014, the total turnover decreased by 4.6 per cent to almost €470 trillion, while the total volume of payments also decreased by 2.6 per cent to 87,994,541 transactions. The report stated that both decreases observed in 2015 “can be largely attributed to the launch of Target2-Securities (T2S) in June 2015”.

Second wave of migration to Target2-Securities now complete

TS2 is a single pan-European platform for securities settlement in central bank money. It offers services to central securities depositories (CSDs) and the second migration of CSDs to TS2 is now complete. Three more waves of migration are scheduled between now and 18 September 2017.

The drop in total Target2 turnover observed in 2015 was related to the launch of T2S and, more specifically, to the first wave of CSDs migrating to the new platform. Target's annual report states that “The magnitude of the drop largely corresponds to the turnover that the migrated CSDs used to generate in Target2.”

Europe's economic doldrums also a factor

However, muted economic growth in Europe is also a contributing factor to the decreased turnover on the payments system. The annual report also stated: “The negative trend in turnover registered in 2015 was further exacerbated by low growth in euro area GDP over the last year. Since the values settled in TARGET2 broadly mirror the developments in euro area economic activity, the performance of the European economy was not sufficient to offset the decrease stemming from the launch of T2S.”

Target's annual report is available here.

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