T2, the new real-time gross settlement system ("T2"), went live on 20 March 2023 and has replaced the previous settlement payment system TARGET2.
The purpose of T2 is to improve both technical and functional aspects of TARGET2 and ensure enhanced user readiness and system stability while also ensuring enhanced payment security, reduced costs and improved efficiency for cross-border payments.
According to the European Central Bank:
"The T2-T2S consolidation project will consolidate both the technical and the functional aspects of TARGET2 and TARGET2-Securities (T2S). The current real-time gross settlement system, TARGET2, will be replaced by a new system, T2, which will optimise liquidity management across all TARGET Services and offer enhanced and modernised services to the market."
Given the significant changes payment systems have undergone in the past decade in relation to technological developments, new regulations and changing consumer demands, TARGET2 was due a necessary update to ensure the continued safety and efficiency of European payment settlements. T2 will offer modernised and enhanced services, using the ISO20022 messaging standard and facilitating payments in several currencies, if the respective central banks decide to do so. This shared IT infrastructure allows for more efficient liquidation management, reduces costs and increases harmonisation across Europe.
In terms of its practical impact, not much will change for TARGET2 users, except for some system and procedure changes. Any loan or financing documents referencing TARGET2 and "Target Day" will need to be amended to reflect the launch of T2.