Key points of this lesson, in order.
The Three TARGET Services: T2, T2S and TIPS
What you will learn
Your objective. By the end of this lesson, you will be able to explain three target services: T2, T2S and TIPS. TARGET is now a family of three services, and each one settles a different type of business.
Why it matters. A customer who sends EUR 500 to a friend on a Sunday evening does not wait until Monday morning.
Chapter objective: Learner explains TARGET Services, distinguishes T2, T2S and TIPS, and describes the MCA, ESMIG access, and multi currency operation after TARGET2 closed on 20 March 2023. Learner uses real amounts, banks and message names to show how the services work in practice.
Key learning points
- TARGET: now family of three
- Three services share liquidity
- T2: service this chapter examines
- TIPS stands for TARGET Instant
- Shared liquidity pool
- One pool
Key terms
Settlement: The final movement of funds between banks to discharge obligations created by cleared payments. Settlement is usually made in central bank money or through correspondent accounts.
Liquidity: Cash or assets that a bank can use immediately to meet payment obligations. Banks manage liquidity by forecasting inflows and outflows, funding nostro and settlement accounts, and using central bank...
Finality: The point at which a payment settlement becomes irrevocable and unconditional, so it cannot be reversed by the payer or the system.
Payment flow diagram showing The Three TARGET Services: T2, T2S and TIPS.
Practise this lesson
Exercise
Decide which settlement model fits the scenario in this lesson and explain why.
Use the settlement models, the liquidity trade-off and the finality rules in this lesson.
- What to do. Name the model, state when settlement becomes final, and explain what happens if the sending bank does not have enough liquidity.
Correct result. Real time gross settlement settles each payment individually in central bank money with immediate finality, but it needs liquidity for every payment. Deferred net settlement nets payments and settles the net position, which needs less liquidity but leaves settlement risk until the net settles.
Why. Settlement is where money actually moves. The model decides the risk, the liquidity need, and when the payment is truly final.
Check your understanding
Practice question
Which of the following best describes three target services: T2, T2S and TIPS?
Takeaway and next step
What to remember
One pool, three uses, and no trapped liquidity.
Follow EUR 20 through every stage, from instruction to beneficiary credit, and note where it can stop.
Open the Payment Lifecycle Simulator →
Builds on "TARGET2 Does Not Exist Anymore: What Went Live on 20 March 2023".
Transcript and full text
Show transcript
TARGET is now a family of three services, and each one settles a different type of business. T2 settles large value euro payments in real time, T2S settles securities transactions in central bank money, and TIPS settles instant payments in seconds, day and night. A bank does not choose one service and ignore the others. A large bank such as Societe Generale, BIC SOGEFRPPXXX, uses T2 for a EUR 20 million interbank payment, T2S for the cash leg of a bond purchase, and TIPS for a EUR 800 instant payment from a retail customer. The three services share liquidity, but they do different work. T2 is the direct successor to TARGET2 for large value payments. It settles payments one by one, in full, in central bank money, with immediate finality. A EUR 10 million payment from Commerzbank in Frankfurt, BIC COBADEFFXXX, to UniCredit in Milan, BIC UNCRITMMXXX, settles when the RTGS component of T2 debits the payer Dedicated Cash Account and credits the payee Dedicated Cash Account. The payment cannot be unwound after that point, and both banks can rely on the funds at once. T2 is the service this chapter examines in the most detail. T2S, which stands for TARGET2-Securities, settles the cash leg of securities transactions. When a bank buys EUR 5 million of German government bonds, T2S moves the bonds to the buyer and moves the cash to the seller at the same moment, in central bank money. That simultaneous exchange is called delivery versus payment, and it removes the risk that one side delivers while the other side fails to pay. T2S went live in 2015, before the T2 cutover, and it kept running through the March 2023 change, with its cash accounts relinked to the new Central Liquidity Management service. TIPS, which stands for TARGET Instant Payment Settlement, settles instant payments in under ten seconds, 24 hours a day, every day of the year. A customer who sends EUR 500 to a friend on a Sunday evening does not wait until Monday morning. TIPS debits the payer bank Dedicated Cash Account and credits the payee bank Dedicated Cash Account at once, and both banks receive a pacs.002 status report confirming settlement. TIPS has no cut off time, no weekend pause and no batch, which makes it very different from T2, where large value payments follow the T2 operating day. The three services share one liquidity pool through the Main Cash Account, and that sharing is the point of the design. A bank holds its euro liquidity in its Main Cash Account in Central Liquidity Management, then moves funds to its RTGS Dedicated Cash Account for large payments, to its T2S Dedicated Cash Account for securities settlement, and to its TIPS Dedicated Cash Account for instant payments. A bank that expects EUR 30 million of instant payments overnight can prefund its TIPS account from its Main Cash Account before the evening, and sweep the balance back in the morning. One pool, three uses, and no trapped liquidity. Worked example with numbers: a bank treasurer starts the day with EUR 50 million on the Main Cash Account, then allocates EUR 30 million to the RTGS DCA for large payments, EUR 10 million to the TIPS DCA for instant payments, and EUR 10 million to the T2S DCA for securities settlement. During the day the bank settles a EUR 8 million RTGS payment, a EUR 500 instant payment through TIPS, and a EUR 5 million securities purchase through T2S, and each service debits its own DCA while the MCA stays the single funding source. At the end of the day the treasurer sweeps the remaining balances back to the MCA, so the bank starts the next day with one liquidity pool and three ways to spend it. Failure and recovery: the shared liquidity pool fails when one service drains the MCA and leaves nothing for the others. If the RTGS DCA holds EUR 30 million but the bank sends EUR 35 million of large payments, the extra EUR 5 million queues until incoming funds arrive, and meanwhile the TIPS DCA may run dry, so instant payments start to fail even though the bank is solvent. The recovery is a floor and ceiling rule that sweeps funds automatically between the MCA and each DCA, so that no single service can take all the liquidity. A bank that sets its floors too low discovers the problem when its instant payments fail on a Sunday evening, when no one is in the office to move funds manually. For a business analyst, product owner or subject matter expert, the three service requirement must state which service settles which business, T2 for large value, T2S for securities, TIPS for instant, and must state that all three draw from the same Main Cash Account. The requirement must name the account for each service, RTGS DCA, T2S DCA and TIPS DCA, and must state the liquidity rule that protects each one, because a design that treats the three services as separate systems will underfund one of them. The test pack must include a day when all three services are busy at once, because that is the day the liquidity design is truly tested. Source: European Central Bank, TARGET services; last reviewed 7 November 2026.
TARGET is now a family of three services, and each one settles a different type of business. T2 settles large value euro payments in real time, T2S settles securities transactions in central bank money, and TIPS settles instant payments in seconds, day and night. A bank does not choose one service and ignore the others. A large bank such as Societe Generale, BIC SOGEFRPPXXX, uses T2 for a EUR 20 million interbank payment, T2S for the cash leg of a bond purchase, and TIPS for a EUR 800 instant payment from a retail customer. The three services share liquidity, but they do different work.
T2 is the direct successor to TARGET2 for large value payments. It settles payments one by one, in full, in central bank money, with immediate finality. A EUR 10 million payment from Commerzbank in Frankfurt, BIC COBADEFFXXX, to UniCredit in Milan, BIC UNCRITMMXXX, settles when the RTGS component of T2 debits the payer Dedicated Cash Account and credits the payee Dedicated Cash Account. The payment cannot be unwound after that point, and both banks can rely on the funds at once. T2 is the service this chapter examines in the most detail.
T2S, which stands for TARGET2-Securities, settles the cash leg of securities transactions. When a bank buys EUR 5 million of German government bonds, T2S moves the bonds to the buyer and moves the cash to the seller at the same moment, in central bank money. That simultaneous exchange is called delivery versus payment, and it removes the risk that one side delivers while the other side fails to pay. T2S went live in 2015, before the T2 cutover, and it kept running through the March 2023 change, with its cash accounts relinked to the new Central Liquidity Management service.
TIPS, which stands for TARGET Instant Payment Settlement, settles instant payments in under ten seconds, 24 hours a day, every day of the year. A customer who sends EUR 500 to a friend on a Sunday evening does not wait until Monday morning. TIPS debits the payer bank Dedicated Cash Account and credits the payee bank Dedicated Cash Account at once, and both banks receive a pacs.002 status report confirming settlement. TIPS has no cut off time, no weekend pause and no batch, which makes it very different from T2, where large value payments follow the T2 operating day.
The three services share one liquidity pool through the Main Cash Account, and that sharing is the point of the design. A bank holds its euro liquidity in its Main Cash Account in Central Liquidity Management, then moves funds to its RTGS Dedicated Cash Account for large payments, to its T2S Dedicated Cash Account for securities settlement, and to its TIPS Dedicated Cash Account for instant payments. A bank that expects EUR 30 million of instant payments overnight can prefund its TIPS account from its Main Cash Account before the evening, and sweep the balance back in the morning. One pool, three uses, and no trapped liquidity.
Worked example with numbers: a bank treasurer starts the day with EUR 50 million on the Main Cash Account, then allocates EUR 30 million to the RTGS DCA for large payments, EUR 10 million to the TIPS DCA for instant payments, and EUR 10 million to the T2S DCA for securities settlement. During the day the bank settles a EUR 8 million RTGS payment, a EUR 500 instant payment through TIPS, and a EUR 5 million securities purchase through T2S, and each service debits its own DCA while the MCA stays the single funding source. At the end of the day the treasurer sweeps the remaining balances back to the MCA, so the bank starts the next day with one liquidity pool and three ways to spend it.
Failure and recovery: the shared liquidity pool fails when one service drains the MCA and leaves nothing for the others. If the RTGS DCA holds EUR 30 million but the bank sends EUR 35 million of large payments, the extra EUR 5 million queues until incoming funds arrive, and meanwhile the TIPS DCA may run dry, so instant payments start to fail even though the bank is solvent. The recovery is a floor and ceiling rule that sweeps funds automatically between the MCA and each DCA, so that no single service can take all the liquidity. A bank that sets its floors too low discovers the problem when its instant payments fail on a Sunday evening, when no one is in the office to move funds manually.
For a business analyst, product owner or subject matter expert, the three service requirement must state which service settles which business, T2 for large value, T2S for securities, TIPS for instant, and must state that all three draw from the same Main Cash Account. The requirement must name the account for each service, RTGS DCA, T2S DCA and TIPS DCA, and must state the liquidity rule that protects each one, because a design that treats the three services as separate systems will underfund one of them. The test pack must include a day when all three services are busy at once, because that is the day the liquidity design is truly tested. Source: European Central Bank, TARGET services; last reviewed 7 November 2026.
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