Payments Academy
T2S settles securities transactions in central bank PAYMENT OPERATIONS STARTED LIVE 01 T2S - money, and it does so for the whole euro ACTIVE 02 T2S serves central securities depositories across - not just one market. QUEUED 03 TIPS - its promise is speed at any hour. QUEUED 04 TIPS - day, 365 days a year, with no cut off and no QUEUED 05 T2S and TIPS both - Main Cash Account QUEUED 06 Separate - money is one pool. QUEUED T2S settles securities transactions in central bank money, and it does so for the whole euro area on one platform. Step 1 of 6 T2S settles securities transactions in central bank STARTED T2S money, and it does so for the whole euro ACTIVE T2S serves central securities depositories not just one market. QUEUED TIPS its promise is speed at any hour. QUEUED TIPS day, 365 days a year, with no cut off and no QUEUED T2S and TIPS both Main Cash Account QUEUED Separate money is one pool. QUEUED T2S settles securities transactions in central bank money, and it does so for the whole euro area on one platform.
T2S serves central securities depositories across Europe PAYMENT OPERATIONS IN PROGRESS LIVE 01 T2S - money, and it does so for the whole euro DONE 02 T2S serves central securities depositories across - not just one market. ACTIVE 03 TIPS - its promise is speed at any hour. QUEUED 04 TIPS - day, 365 days a year, with no cut off and no QUEUED 05 T2S and TIPS both - Main Cash Account QUEUED 06 Separate - money is one pool. QUEUED T2S serves central securities depositories across Europe, not just one market. Step 2 of 6 T2S serves central securities depositories across Europe IN PROGRESS T2S money, and it does so for the whole euro DONE T2S serves central securities depositories not just one market. ACTIVE TIPS its promise is speed at any hour. QUEUED TIPS day, 365 days a year, with no cut off and no QUEUED T2S and TIPS both Main Cash Account QUEUED Separate money is one pool. QUEUED T2S serves central securities depositories across Europe, not just one market.
TIPS settles instant payments PAYMENT OPERATIONS IN PROGRESS LIVE 01 T2S - money, and it does so for the whole euro DONE 02 T2S serves central securities depositories across - not just one market. DONE 03 TIPS - its promise is speed at any hour. ACTIVE 04 TIPS - day, 365 days a year, with no cut off and no QUEUED 05 T2S and TIPS both - Main Cash Account QUEUED 06 Separate - money is one pool. QUEUED TIPS settles instant payments, and its promise is speed at any hour. Step 3 of 6 TIPS settles instant payments IN PROGRESS T2S money, and it does so for the whole euro DONE T2S serves central securities depositories not just one market. DONE TIPS its promise is speed at any hour. ACTIVE TIPS day, 365 days a year, with no cut off and no QUEUED T2S and TIPS both Main Cash Account QUEUED Separate money is one pool. QUEUED TIPS settles instant payments, and its promise is speed at any hour.
TIPS works 24 hours PAYMENT OPERATIONS IN PROGRESS LIVE 01 T2S - money, and it does so for the whole euro DONE 02 T2S serves central securities depositories across - not just one market. DONE 03 TIPS - its promise is speed at any hour. DONE 04 TIPS - day, 365 days a year, with no cut off and no ACTIVE 05 T2S and TIPS both - Main Cash Account QUEUED 06 Separate - money is one pool. QUEUED TIPS works 24 hours a day, 365 days a year, with no cut off and no end of day pause. Step 4 of 6 TIPS works 24 hours IN PROGRESS T2S money, and it does so for the whole euro DONE T2S serves central securities depositories not just one market. DONE TIPS its promise is speed at any hour. DONE TIPS day, 365 days a year, with no cut off and no ACTIVE T2S and TIPS both Main Cash Account QUEUED Separate money is one pool. QUEUED TIPS works 24 hours a day, 365 days a year, with no cut off and no end of day pause.
T2S and TIPS both depend PAYMENT OPERATIONS IN PROGRESS LIVE 01 T2S - money, and it does so for the whole euro DONE 02 T2S serves central securities depositories across - not just one market. DONE 03 TIPS - its promise is speed at any hour. DONE 04 TIPS - day, 365 days a year, with no cut off and no DONE 05 T2S and TIPS both - Main Cash Account ACTIVE 06 Separate - money is one pool. QUEUED T2S and TIPS both depend on the Main Cash Account, and that shared funding is what makes TARGET a single liquidity system. Step 5 of 6 T2S and TIPS both depend IN PROGRESS T2S money, and it does so for the whole euro DONE T2S serves central securities depositories not just one market. DONE TIPS its promise is speed at any hour. DONE TIPS day, 365 days a year, with no cut off and no DONE T2S and TIPS both Main Cash Account ACTIVE Separate money is one pool. QUEUED T2S and TIPS both depend on the Main Cash Account, and that shared funding is what makes TARGET a single liquidity system.
Services: separate PAYMENT OPERATIONS COMPLETE LIVE 01 T2S - money, and it does so for the whole euro DONE 02 T2S serves central securities depositories across - not just one market. DONE 03 TIPS - its promise is speed at any hour. DONE 04 TIPS - day, 365 days a year, with no cut off and no DONE 05 T2S and TIPS both - Main Cash Account DONE 06 Separate - money is one pool. ACTIVE The services are separate, but the money is one pool. Step 6 of 6 Services: separate COMPLETE T2S money, and it does so for the whole euro DONE T2S serves central securities depositories not just one market. DONE TIPS its promise is speed at any hour. DONE TIPS day, 365 days a year, with no cut off and no DONE T2S and TIPS both Main Cash Account DONE Separate money is one pool. ACTIVE The services are separate, but the money is one pool.

Key points of this lesson, in order.

0:00 / 3:00 Step 1 of 6

T2S Securities Settlement and TIPS Instant Settlement

TARGET Services: T2, T2S and TIPS, Lesson 5 of 7, Narration 3:00, D05 Domestic payment systems

SettlementLiquiditypacs.002

What you will learn

Your objective. By the end of this lesson, you will be able to explain T2S securities settlement and TIPS instant settlement. T2S settles securities transactions in central bank money, and it does so for the whole euro area on one platform.

Why it matters. A retail customer who sends EUR 250 to a friend at 20 minutes to midnight on a Saturday expects the money to arrive in seconds, not on 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

  • T2S settles securities transactions in central bank
  • T2S serves central securities depositories across Europe
  • TIPS settles instant payments
  • TIPS works 24 hours
  • T2S and TIPS both depend
  • Services: separate

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...

pacs.002: An ISO 20022 message one financial institution sends to another to report the status of a payment instruction.

Payment flow diagram showing T2S Securities Settlement and TIPS Instant Settlement.

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.

  1. 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 T2S securities settlement and TIPS instant settlement?

Takeaway and next step

What to remember

The services are separate, but the money is one pool.

Follow EUR 5 through every stage, from instruction to beneficiary credit, and note where it can stop.

Open the Payment Lifecycle Simulator →

Builds on "Inside T2: RTGS Real-Time Gross Settlement".

Transcript and full text

Show transcript

T2S settles securities transactions in central bank money, and it does so for the whole euro area on one platform. When a bank buys securities, T2S moves the securities to the buyer securities account and moves the cash to the seller Dedicated Cash Account at the same time. A purchase of EUR 5 million of French government bonds, known as OATs, settles when the bonds leave the seller account at Euroclear France and the EUR 5 million leaves the buyer T2S Dedicated Cash Account. Neither leg settles without the other, so neither party carries settlement risk after the trade. T2S serves central securities depositories across Europe, not just one market. A German bank buying Italian bonds, a French bank buying Dutch bonds and a Spanish bank buying German bonds all settle on the same platform, in the same central bank money, under the same rules. Each bank holds a T2S Dedicated Cash Account, funded from its Main Cash Account, and each central securities depository holds the securities accounts. A EUR 20 million trade in German Bunds settles in T2S in the same way as a EUR 200,000 trade in a corporate bond, with the same delivery versus payment protection on both. TIPS settles instant payments, and its promise is speed at any hour. A retail customer who sends EUR 250 to a friend at 20 minutes to midnight on a Saturday expects the money to arrive in seconds, not on Monday morning. TIPS debits the payer bank TIPS Dedicated Cash Account and credits the payee bank TIPS Dedicated Cash Account immediately, and it sends a pacs.002 status report to both banks confirming settlement. The whole round trip, from the customer pressing send to the payee bank receiving confirmation, must complete within ten seconds under the instant payment scheme rules. TIPS works 24 hours a day, 365 days a year, with no cut off and no end of day pause. Banks prefund their TIPS Dedicated Cash Accounts from their Main Cash Accounts, because there is no central bank window overnight to add liquidity. A bank that expects EUR 2 million of instant payments overnight will hold EUR 2 million on its TIPS account before the evening, and it will monitor the balance through the night. If the TIPS account runs dry, new instant payments are rejected at once, so funding discipline is a daily operational duty, not a monthly task. T2S and TIPS both depend on the Main Cash Account, and that shared funding is what makes TARGET a single liquidity system. A bank treasurer looks at one MCA balance in the morning, then decides how much to allocate to RTGS for large payments, how much to T2S for securities settlement, and how much to TIPS for instant payments. A EUR 10 million bond settlement, a EUR 4 million large value payment and EUR 1 million of instant payments can all be funded from the same EUR 15 million MCA balance, moved with camt.050 liquidity transfers. The services are separate, but the money is one pool. Worked example with numbers: a bank buys EUR 5 million of German government bonds through T2S, and at the same moment T2S moves the bonds to the buyer securities account and moves EUR 5 million from the buyer T2S Dedicated Cash Account to the seller account, so neither side takes settlement risk. On the same day a retail customer sends EUR 250 to a friend at 20 minutes to midnight on a Saturday, and TIPS debits the payer bank TIPS DCA and credits the payee bank TIPS DCA in under ten seconds, even though it is the weekend. The two services share the same Main Cash Account, so the treasurer funds both from one pool and never needs to choose between securities settlement and instant payments. Failure and recovery: T2S fails when the securities are not available, because delivery versus payment means the cash moves only when the securities move. If the seller does not hold the bonds, the settlement fails, and both sides must try again the next day, which costs the buyer a day of interest. TIPS fails when the TIPS DCA is empty, because there is no central bank window overnight to add liquidity, so a bank that expects EUR 2 million of instant payments overnight must prefund its TIPS DCA before the evening, or its customers payments will fail at midnight. The recovery for TIPS is a prefunding rule that tops up the DCA automatically from the MCA when the balance falls below a floor. For a business analyst, product owner or subject matter expert, the T2S and TIPS requirement must state the settlement model for each, delivery versus payment for T2S and prefunded instant settlement for TIPS, and must state that both draw from the Main Cash Account. The requirement must name the DCA for each service and the prefunding rule for TIPS, because a design that funds TIPS from the RTGS DCA will fail on a weekend. The test pack must include a securities purchase that fails for missing securities and an instant payment at midnight on a Saturday, because those are the cases that expose a funding design that only works on a weekday. Source: European Central Bank, TARGET services; last reviewed 7 November 2026.

T2S settles securities transactions in central bank money, and it does so for the whole euro area on one platform. When a bank buys securities, T2S moves the securities to the buyer securities account and moves the cash to the seller Dedicated Cash Account at the same time. A purchase of EUR 5 million of French government bonds, known as OATs, settles when the bonds leave the seller account at Euroclear France and the EUR 5 million leaves the buyer T2S Dedicated Cash Account. Neither leg settles without the other, so neither party carries settlement risk after the trade.

T2S serves central securities depositories across Europe, not just one market. A German bank buying Italian bonds, a French bank buying Dutch bonds and a Spanish bank buying German bonds all settle on the same platform, in the same central bank money, under the same rules. Each bank holds a T2S Dedicated Cash Account, funded from its Main Cash Account, and each central securities depository holds the securities accounts. A EUR 20 million trade in German Bunds settles in T2S in the same way as a EUR 200,000 trade in a corporate bond, with the same delivery versus payment protection on both.

TIPS settles instant payments, and its promise is speed at any hour. A retail customer who sends EUR 250 to a friend at 20 minutes to midnight on a Saturday expects the money to arrive in seconds, not on Monday morning. TIPS debits the payer bank TIPS Dedicated Cash Account and credits the payee bank TIPS Dedicated Cash Account immediately, and it sends a pacs.002 status report to both banks confirming settlement. The whole round trip, from the customer pressing send to the payee bank receiving confirmation, must complete within ten seconds under the instant payment scheme rules.

TIPS works 24 hours a day, 365 days a year, with no cut off and no end of day pause. Banks prefund their TIPS Dedicated Cash Accounts from their Main Cash Accounts, because there is no central bank window overnight to add liquidity. A bank that expects EUR 2 million of instant payments overnight will hold EUR 2 million on its TIPS account before the evening, and it will monitor the balance through the night. If the TIPS account runs dry, new instant payments are rejected at once, so funding discipline is a daily operational duty, not a monthly task.

T2S and TIPS both depend on the Main Cash Account, and that shared funding is what makes TARGET a single liquidity system. A bank treasurer looks at one MCA balance in the morning, then decides how much to allocate to RTGS for large payments, how much to T2S for securities settlement, and how much to TIPS for instant payments. A EUR 10 million bond settlement, a EUR 4 million large value payment and EUR 1 million of instant payments can all be funded from the same EUR 15 million MCA balance, moved with camt.050 liquidity transfers. The services are separate, but the money is one pool.

Worked example with numbers: a bank buys EUR 5 million of German government bonds through T2S, and at the same moment T2S moves the bonds to the buyer securities account and moves EUR 5 million from the buyer T2S Dedicated Cash Account to the seller account, so neither side takes settlement risk. On the same day a retail customer sends EUR 250 to a friend at 20 minutes to midnight on a Saturday, and TIPS debits the payer bank TIPS DCA and credits the payee bank TIPS DCA in under ten seconds, even though it is the weekend. The two services share the same Main Cash Account, so the treasurer funds both from one pool and never needs to choose between securities settlement and instant payments.

Failure and recovery: T2S fails when the securities are not available, because delivery versus payment means the cash moves only when the securities move. If the seller does not hold the bonds, the settlement fails, and both sides must try again the next day, which costs the buyer a day of interest. TIPS fails when the TIPS DCA is empty, because there is no central bank window overnight to add liquidity, so a bank that expects EUR 2 million of instant payments overnight must prefund its TIPS DCA before the evening, or its customers payments will fail at midnight. The recovery for TIPS is a prefunding rule that tops up the DCA automatically from the MCA when the balance falls below a floor.

For a business analyst, product owner or subject matter expert, the T2S and TIPS requirement must state the settlement model for each, delivery versus payment for T2S and prefunded instant settlement for TIPS, and must state that both draw from the Main Cash Account. The requirement must name the DCA for each service and the prefunding rule for TIPS, because a design that funds TIPS from the RTGS DCA will fail on a weekend. The test pack must include a securities purchase that fails for missing securities and an instant payment at midnight on a Saturday, because those are the cases that expose a funding design that only works on a weekday. Source: European Central Bank, TARGET services; last reviewed 7 November 2026.

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