Four EU banking bodies request one-year delay to T2-T2S consolidation
Four European banking bodies have written to the European Central Bank (ECB) requesting a one-year delay to the ongoing consolidation project of TARGET2 and TARGET2 Securities (T2-T2S).
The objective of the consolidation, due to be completed in November 2021, is to replace TARGET2, a payment system owned and operated by the monetary authority of the eurozone, with a new real-time gross settlement (RTGS) system which can better manage liquidity provision.
The letter, written by European Banking Federation (EBF), European Savings Banks Group (ESBG), European Association of Co-operative Banks (EACB) and European Association of Public Banks (EAPB), cited impacts from COVID-19 and Swift’s decision to delay the ISO 20022 migration for cross-border payments as the main reasons for the requested delay to November 2022.
“The unprecedented crisis related to the coronavirus is creating severe constraints on banks’ ability to progress with the consolidation project according to the current timelines,” the letter reads.
The European bodies say banks are being requested by national authorities to focus on “core activities”, and to do this “they have had to reallocate their resources”, both physical and financial, to prioritise “frontline operational processes”.
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It also highlights the impacted “availability of resources for IT projects” due to remote working, which has already “had a negative impact on software development projects”, the letter says.
The March decision by Swift to delay the migration of cross-border payments to ISO 20022 to November 2022 is also cited as a reason for the requested delay.
“This requires all affected parties to reconsider their cross-border payments strategy and re-engineer their internal projects, concept and documentation to deal with the mismatch of message types being introduced,” the letter says.
“This conceptual work requires sufficient time and cooperation amongst the European industry which in the current non-business as usual set-up is likely to take longer than normally.”
Swift is working with banks and the ECB to provide further guidance, but the letter suggests there will not be enough time in the current climate to assess this guidance thoroughly before the November 2021 deadline.
The letter concludes: “Since the implementation is to be by means of a ‘big bang’, failure is not an option which means that the project is dependent on the weakest link in the chain being ready notwithstanding any unexpected and unforeseen events for which adequate contingency is considered to be essential.”