In the 12th edition of its TARGET2-Securities (T2S) Annual Report, the European Central Bank (ECB) takes a look at the development of T2S over the past year. Amid a healthy increase in transaction values between 2021 and 2022, it finds that settlement efficiency has dropped. The cash penalties for settlement fails on the platform amounted to €142 million per month on average.

In T2S, settlement efficiency is measured by comparing the volume or value of transactions settled on a given day with the total volume or value of transactions that were eligible for settlement on the day. It excludes liquidity transfers and transactions by corporations or internally generated by T2S, but includes party-on-hold transactions.

Based on these parameters, end-of-day settlement efficiency value decreased from 94.1 percent in 2021 to 93.3 percent in 2022, representing a drop of 0.8 percentage points. In terms of volume, it dropped from 94.3 percent to 93.7 percent, a decrease of 0.6 percent.


Efficiency is a priority

The daily average value of unsettled transactions was significantly higher in 2022, coming in at €25.2 billion in August 2022 compared to the €14.8 billion recorded in the same month in 2021. Despite the increase in value, the volume of daily average unsettled transactions actually decreased, from 14,170 in 2021 to 11,457 in 2022 – about 6.3 percent of total processed daily transactions.

Citing settlement efficiency as a priority, the report touches on some ongoing initiatives aimed at promoting it, such as regular discussions with key stakeholders in dedicated Market Settlement Efficiency (MSE) workshops. On average in 2022, the monthly value of cash penalties for settlement fails in T2S amounted to €142 million.

A growing platform

T2S settled 182 million transactions in 2022, with a total value of €184 trillion. This works out to 708,000 transactions with a value of €717 billion daily – the equivalent of settling the eurozone’s annual GDP every 18 operating days.

The €184 trillion in settled value represents a 3.3 percent increase from 2021’s €178 trillion. This increase was seen despite the volume of transactions dropping from 187 million in 2021 to 182 million in 2022.

PostTrade 360° discussed Finland’s and Sweden’s transition to T2S at our conferences last year. The video from Helsinki can be viewed here and the one from Stockholm here. Read ECB’s full report here.