ESMIG, Multi-Currency Support and the Legal Framework (Guideline (EU) of the ECB on TARGET, repealing Guideline ECB/2012/27)

ESMIG, the Eurosystem Single Market Infrastructure Gateway, is the single entry point through which banks reach T2, T2S and TIPS. A bank connects once to ESMIG, through its chosen network service provider, and sends ISO 20022 messages with a Business Application Header that names the service, the message type and the sender. ESMIG checks the sender identity, validates the header and routes the message to the correct service. A pacs.008 for T2 and a pacs.008 for TIPS travel through the same gateway, and the bank does not need a separate connection for each service it uses. ESMIG also handles the reply path, so a bank receives status reports, account statements and liquidity information through the same connection. When T2 settles a EUR 6 million payment, it sends a pacs.002 status report back through ESMIG to the sending bank, and a camt.054 debit notification to the payer and a camt.054 credit notification to the payee. When a bank asks for its RTGS balance, it sends a camt.003 request through ESMIG and receives a camt.004 return. One gateway, one identity check and one set of network rules cover every TARGET service a bank uses. TARGET was designed to support more than one currency, even though the euro is the currency in live use today. The account structure, the message formats and the liquidity tools were built so that another currency could be added without rebuilding the system. A non-euro central bank that joins TARGET would hold its own Main Cash Accounts and Dedicated Cash Accounts in its currency, and its banks would settle in that currency on the same platform. The design keeps each currency separate, so euro liquidity never mixes with liquidity in another currency, and each currency has its own settlement rules and operating day. The legal framework for TARGET is the Guideline (EU) of the ECB on TARGET, which repealed Guideline ECB/2012/27, the old TARGET2 Guideline. The new Guideline defines TARGET as the set of services, sets out the conditions for participation, and describes the accounts, the settlement rules and the duties of participants and national central banks. A bank that joins T2 signs up under the new Guideline, not under the old TARGET2 rules, and its lawyers, compliance team and operations team all work from the same legal text. The repeal matters, because the old Guideline described accounts and messages that no longer exist. The Guideline also sets the participation and oversight rules that keep TARGET safe. It defines direct participation, indirect participation, multi-addressee access and addressable BIC holders, and it sets the conditions each type must meet. It requires participants to hold enough liquidity, to follow the operating schedule, and to report incidents to their national central bank. A bank such as KBC in Brussels, BIC KREDBEBBXXX, joins T2 through the National Bank of Belgium under the Guideline, holds its MCA and RTGS DCA there, and accepts the settlement finality and liability rules that the Guideline sets out in full.