Abstract
Financial market infrastructures play an important role in financial integration in Europe. From the very start of the monetary union, the Eurosystem has provided and enhanced financial market infrastructures to facilitate integrated money markets and capital markets. Whereas TARGET enabled a European money market, TARGET2 has improved this by channelling all high-value payments through a single platform, allowing a single liquidity management. With TARGET2-Securities, which was launched eight years after TARGET2, several of the Giovannini barriers to harmonised post-trade business were removed. In the next stage, TARGET2 and TARGET2-Securities will be consolidated on a single platform to make a further improvement in overall liquidity management and bring about a further reduction in settlement costs by converging to harmonised technical features and using common components. These two TARGET services will be augmented by TARGET instant payment settlement (TIPS) as a new TARGET service. The renewed and complemented TARGET services are scheduled to go live in November 2021. One year later the Eurosystem will be providing the Eurosystem collateral management system (ECMS) — a single system for the management of all eligible collateral for monetary policy operations. The current 19 different local systems used for that purpose will be replaced. After that, the whole lifecycle of central bank money will be covered by integrated financial market infrastructure services: In TARGET2 and TIPS, central bank money is used for payments such as those for the settlement of securities in TARGET2-Securities. And these securities could be easily mobilised to become collateral to be used by the means of ECMS in order to receive central bank money. This paper analyses how the consolidation of TARGET2 and TARGET2-Securities, as well as the complementation by TIPS and the ECMS will contribute to the integration of European financial markets, improving the efficiency and safety of FMIs. It also looks into what is required in order to achieve the full benefits.
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