T2, which has replaced TARGET2, is the real-time gross settlement (RTGS) system for high-value euro payments, owned and operated by the Eurosystem, the monetary authority of the eurozone.

Central and commercial banks can submit payment orders in euro to T2, where they are processed and settled in central bank money, i.e., money held in an account with a central bank, minimising system risk in the euro payments market. Alongside bank-to-bank and commercial transactions, it also settles payments related to the Eurosystem’s monetary policy operations, playing a critical role in safeguarding the financial stability of the euro area.

More than 1,700 banks use T2 to initiate transactions in euros, either on their own behalf or on behalf of their customers. Taking into account branches and subsidiaries, more than 55,000 banks worldwide (and all their customers) can be reached via T2.

As a result, T2 is one of the largest payment systems in the world, processing a value close to the entire euro area GDP, every five days.

T2 uses a centralised platform to process transactions, with each bank having its account within the system. Payment orders are submitted to the platform for processing and are settled one by one on a continuous basis in central bank money, with immediate finality. There is no upper or lower limit for their value. T2 is used by central banks and commercial banks for monetary policy transactions, interbank payments and commercial payments.

T2 works through the following steps:

• Initiation: the sender instructs their bank to initiate a T2 payment.
• Processing: the sender’s and receiver’s banks process the transaction through the T2 system.
• Confirmation: once the transaction is complete, both banks receive a confirmation message in real-time, ensuring the funds are available to the recipient.
• Settlement: the settlement of the transaction happens on the books of the central bank of the sender and receiver.
• Reconciliation: both banks reconcile their books and update their account balances accordingly.

T2 is available for processing payments on working days from 02:30 to 17:00 CET for customer credit transfers and 18:00 CET for FI to FI payments. ClearBank’s solution is open for outbound payments from 07:00 CET.

The scheme is also closed on several holidays, specifically 1 January (New Year’s Day), Good Friday, Easter Monday, 1 May (Labour Day), 25 December (Christmas Day), and 26 December (Boxing Day).

T2 provides a reliable and secure platform for large-value cross-border payments.

The benefits of T2 include increased efficiency and security in cross-border payments and improved liquidity management for banks. It offers a range of features allowing efficient liquidity management, including payment priorities, timed transactions, liquidity reservation facilities, limits, liquidity pooling and optimisation procedures.

Overall, T2 offers several benefits, including:

• Increased efficiency: a single, centralised platform that handles high-volume and large-value payments, enabling businesses to make and receive payments much faster and more efficiently.
• Reduced risk: processing payments in real-time, ensuring that funds are transferred quickly and securely between accounts, reducing the risk of payment delays or failures, which can have significant consequences for businesses and financial institutions.
• Improved transparency: through the provision of detailed payment information, including each transaction’s status, which helps businesses keep track of their finances more effectively.
• Low costs: fees for using T2 are generally lower than alternative payment systems, making it a cost-effective solution for businesses of all sizes.
• Widespread acceptance: more than 1,700 banks across Europe use T2.
• Modern technology stack: using international standards, including ISO 20022 to support more straightforward integration with other payments, back office and accounting systems.

Other financial institutions can connect to T2 via a participating central bank. They can choose from several different access options:

• Direct participant: a financial institution established in the European Economic Area (EEA) that holds an RTGS account in central bank money in T2, sends and receives payments on its own behalf or on behalf of its customers.
• Multi-addressee access: branches and subsidiaries of a direct participant in the EEA that are authorised to channel payments through the account of the direct participant.
• Addressable BIC: a correspondent of a direct participant that holds a Bank Identifier Code (BIC), irrespective of its place of establishment.

Financial institutions are increasingly turning to trusted Direct Participants like ClearBank to connect to payment schemes. Rather than building and maintaining individual connections to each scheme, ClearBank takes the pressure off firms by delivering connectivity through a single API that unlocks access to the different European payment schemes.

Our direct participation in T2 means you can send and receive euro payments, including high-value payments. You can reach over 1,700 direct and indirect banks, and a further 55,000 banks worldwide via correspondent banking.

Payments are cleared and settled in real-time in euros, with enhanced messaging through ISO 20022. This improved messaging gives you more information on the payment, greater traceability and requires less effort in reconciliation.

ClearBank’s T2 solution offers long opening hours and no transaction limit, making it the most efficient and flexible way to send high-value euro payments such as treasury payments.

Alexandra Rivas-Gale, is the Vice President of Product for Europe at ClearBank, spearheading the company's client product strategy, digital assets development, and international expansion initiatives. Before joining ClearBank in 2022, Alexandra was Vice President within the Wholesale Payments business at J.P. Morgan, Alexandra brings extensive experience managing SEPA Instant in the EMEA region. Prior to her focus on payments, she worked in J.P. Morgan’s Real Estate team and at Citi Private Bank across New York and London in the Investment Finance sector.