2012O0027 — EN — 22.06.2015 — 003.001

This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents

►B GUIDELINE OF THE EUROPEAN CENTRAL BANK of 5 December 2012 on a Trans-European Automated Real-time Gross settlement Express Transfer system (TARGET2) (recast) (ECB/2012/27) (2013/47/EU) (OJ L 030 30.1.2013, p. 1)

Amended by:









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GUIDELINE OF THE EUROPEAN CENTRAL BANK

of 5 December 2012

on a Trans-European Automated Real-time Gross settlement Express Transfer system (TARGET2)

(recast)

(ECB/2012/27)

(2013/47/EU)







THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL BANK, Having regard to the Treaty on the Functioning of the European Union, and in particular the first and fourth indents of Article 127(2) thereof, Having regard to the Statute of the European System of Central Banks and of the European Central Bank, and in particular Article 3.1 and Articles 17, 18 and 22 thereof, Whereas: (1) Guideline ECB/2007/2 of 26 April 2007 on a Trans-European Automated Real-time Gross settlement Express Transfer system (TARGET2) ( 1 ) has been amended on several occasions. Since further amendments to this Guideline are now required to incorporate material previously internal to the Eurosystem and to add necessary definitions, as well as provisions with regard to inapplicability of sanctions to non-Union banks, information sharing with regard to suspension or termination of access to monetary policy operations and the consequences of such suspension or termination, it should be recast in the interests of clarity and transparency. (2) TARGET2 has a decentralised structure linking together national real-time gross settlement (RTGS) systems and the ECB Payment Mechanism. (3) TARGET2 is characterised by a single technical platform called the Single Shared Platform (SSP). TARGET2 is legally structured as a multiplicity of payment systems, where the TARGET2 component systems are harmonised to the greatest extent possible, with certain exceptions in the event of national law constraints. (4) There are three separate levels of governance for TARGET2. Level 1 (Governing Council) has final competence in relation to TARGET2 and safeguards its public function. Level 2 (Eurosystem central banks) has subsidiary competence for TARGET2, while Level 3 (SSP-providing NCBs) builds and operates the SSP for the Eurosystem’s benefit. (5) Acting on the Eurosystem’s behalf, the European Central Bank (ECB) enters into a Framework Agreement, as well as a Confidentiality and Non-Disclosure Agreement, with the ►M3 TARGET2 network service provider ◄ designated by the Governing Council, which sets out the main elements relating to network provision to the participants, including pricing. (6) TARGET2 is essential for the performance of certain basic Eurosystem tasks, i.e. implementing the Union’s monetary policy and promoting the smooth operation of payment systems, Whereas: HAS ADOPTED THIS GUIDELINE:







SECTION I

GENERAL PROVISIONS

Article 1

Subject matter and scope

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1. TARGET2 provides RTGS for payments in euro, with settlement in central bank money across payment module (PM) accounts and Dedicated Cash Accounts (DCA). TARGET2 is established and functions on the basis of the SSP through which all payment orders are submitted and processed and through which payments are ultimately received in the same technical manner. As far as the technical operation of the Dedicated Cash Accounts on T2S is concerned, TARGET2 is technically established and functions on the basis of the T2S Platform.

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2. TARGET2 is legally structured as a multiplicity of RTGS systems.

Article 2

Definitions

For the purposes of this Guideline:

(1) ‘Single Shared Platform (SSP)’ means the single technical platform infrastructure provided by the SSP-providing NCBs;

(2) ‘TARGET2 component system’ means any of the Eurosystem CBs’ RTGS systems that form part of TARGET2;

(3) ‘central bank (CB)’ means a Eurosystem CB and/or a connected NCB;

(4) ‘SSP-providing NCBs’ means the Deutsche Bundesbank, the Banque de France and the Banca d’Italia in their capacity as the CBs building and operating the SSP for the Eurosystem’s benefit;

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(5) ‘ ►M3 TARGET2 network service provider ◄ ’ means a provider of computerised network connections for the purpose of submitting payment messages in TARGET2. Computerised network connections are provided through SWIFT, and additionally for Eurosystem internal communication, through CoreNet;

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(6) ‘participant’ [or ‘direct participant’] means an entity that holds at least one PM account (PM account holder) and/or one Dedicated Cash Account (DCA holder) with a Eurosystem CB;

(7) ‘Eurosystem CB’ means the ECB or a euro area NCB;

(8) ‘Payments Module (PM)’ means an SSP module in which payments of ►M3 PM account holders ◄ are settled on PM accounts;

(9) ‘PM account’ means an account held by a ►M3 PM account holder ◄ in the PM with a Eurosystem CB which is necessary for such ►M3 PM account holder ◄ to: (a) submit payment orders or receive payments via TARGET2; and (b) settle such payments with such Eurosystem CB;

(10) ‘euro area NCB’ means the national central bank (NCB) of a Member State whose currency is the euro;

(11) ‘Business Identifier Code (BIC)’ means a code as defined by ISO Standard No 9362;

(12) ‘addressable BIC holder’ means an entity which: (a) holds a BIC; (b) is not recognised as an indirect participant; (c) is a correspondent or customer of a PM account holder or a branch of a PM account holder or of an indirect participant, and is able to submit payment orders to and receive payments from a TARGET2 component system via the PM account holder;

(13) ‘indirect participant’ means a credit institution established in the European Economic Area (EEA), which has entered into an agreement with a PM account holder to submit payment orders and receive payments via such PM account holder, and which has been recognised by a TARGET2 component system as an indirect participant;

(14) ‘branch’ means a branch within the meaning of point (17) of Article 4(1) of Regulation (EU) No 575/2013;

(15) ‘business day’ means any day on which TARGET2 is open for the settlement of payment orders, as set out in Appendix V to Annex II and Appendix V to Annex IIa;

(16) ‘certification authorities’ means one or more NCBs designated as such by the Governing Council to act on behalf of the Eurosystem to issue, manage, revoke and renew electronic certificates;

(17) ‘electronic certificates’ or ‘certificates’ means an electronic file, issued by the certification authorities, that binds a public key with an identity and which is used for the following: to verify that a public key belongs to an individual; to authenticate the holder; to check a signature from this individual; or to encrypt a message addressed to this individual. Certificates are held on a physical device such as a smart card or USB stick, and references to certificates include such physical devices. The certificates are instrumental in the authentication process of the ►M3 PM account holders ◄ accessing TARGET2 through the internet and submitting payment messages or control messages;

(18) ‘certificate holder’ means a named, individual person, identified and designated by a ►M3 PM account holder ◄ as authorised to have internet-based access to the ►M3 PM account holder ◄ ’s TARGET2 account. Their application for certificates will have been verified by the ►M3 PM account holder ◄ ’s home NCB and transmitted to the certification authorities, which will in turn have delivered certificates binding the public key with the credentials that identify the ►M3 PM account holder ◄ ;

(19) ‘connected NCB’ means an NCB, other than a euro area NCB, which is connected to TARGET2 pursuant to a specific agreement;

(20) ‘AL group’ means a group composed of aggregated liquidity (AL) group members that use the AL mode;

(21) ‘AL group member’ means a ►M3 PM account holder ◄ that fulfils the criteria for using the AL mode and which has entered into an AL agreement;

(22) ‘AL agreement’ means the multilateral aggregated liquidity agreement entered into by the AL group members and their respective AL NCBs, for the purposes of the AL mode;

(23) ‘AL NCB’ means a euro area NCB that is party to an AL agreement and acts as the counterparty for the AL group members which participate in its TARGET2 component system;

(24) ‘AL mode’ means the aggregation of available liquidity on PM accounts;

(25) ‘available liquidity’ means a credit balance on a participant’s account and, if applicable, any intraday credit line granted on the PM account by the relevant euro area NCB in relation to such account but not yet drawn upon, or if applicable, decreased by the amount of any processed reservations of liquidity or blocking of funds on the DCA;

(26) ‘intraday credit’ means credit extended for a period of less than one business day;

(27) ‘AL group manager’ means an AL group member appointed by the other AL group members to manage available liquidity within the AL group during the business day;

(28) ‘marginal lending rate’ means the interest rate applicable to the marginal lending facility;

(29) ‘marginal lending facility’ means a Eurosystem standing facility which counterparties may use to receive overnight credit from an NCB at the pre-specified marginal lending rate;

(30) ‘settlement bank’ means a ►M3 PM account holder ◄ whose PM account or sub-account is used to settle payment instructions submitted by an ancillary system via the ASI;

(31) ‘ancillary system’ means a system managed by an entity established in the EEA that is subject to supervision and/or oversight by a competent authority and complies with the oversight requirements for the location of infrastructures offering services in euro, as amended from time to time and published on the ECB’s website ( 2 ), in which payments and/or financial instruments are exchanged and/or cleared while the resulting monetary obligations are settled in TARGET2 in accordance with this Guideline and a bilateral arrangement between the ancillary system and the relevant Eurosystem CB;

(32) ‘Ancillary System Interface (ASI)’ means the technical device allowing an ancillary system to use a range of special, predefined services for the submission and settlement of ancillary system payment instructions; it may also be used by a euro area NCB for the settlement of cash operations resulting from cash deposits and withdrawals;

(33) ‘payer’ means a TARGET2 participant whose PM account or DCA will be debited as a result of a payment order being settled;

(34) ‘payee’ means a TARGET2 participant whose PM account or DCA will be credited as a result of a payment order being settled;

(35) ‘Harmonised Conditions’ means either the conditions laid down in Annexes II and V, or those laid down in Annex IIa;

(36) ‘core TARGET2 services’ means the processing of payment orders in TARGET2 component systems, the settlement of ancillary system-related transactions, and liquidity pooling features;

(37) ‘Home Account’ means an account opened outside the PM by a euro area NCB for an entity that is eligible to become an indirect participant;

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(39) ‘managing NCB’ means the AL NCB of the TARGET2 component system in which the AL group manager participates;

(40) ‘enforcement event’ means, with regard to an AL group member, any of the following: (a) any event of default referred to in Article 34(1) of Annex II; (b) any other event of default or event referred to in Article 34(2) of Annex II in relation to which the CB has decided, taking into account the seriousness of the event of default or event, that a pledge should be enforced in accordance with Article 25b of that Annex, collateral should be enforced in accordance with Article 25c of that Annex or a set-off of claims should be triggered in accordance with Article 26 of that Annex; (c) any decision to suspend or terminate access to intraday credit;

(41) ‘Participant Interface (PI)’ means the technical device allowing direct participants to submit and settle payment orders via the services offered in the PM;

(42) ‘Internet-based access’ means that the ►M3 PM account holder ◄ has opted for a PM account that can only be accessed via the internet and the ►M3 PM account holder ◄ submits payment messages or control messages to TARGET2 by means of the internet;

(43) ‘insolvency proceedings’ means insolvency proceedings within the meaning of Article 2(j) of Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems ( 3 );

(44) ‘Information and Control Module (ICM)’ means the SSP module that allows PM account holders to obtain on-line information and gives them the possibility to submit liquidity transfer orders, manage liquidity and initiate backup payment orders in contingency situations;

(45) ‘TARGET2 coordinator’ means a person appointed by the ECB to ensure the daily operational management of TARGET2, to manage and coordinate activity in the event of an abnormal situation occurring and to coordinate the dissemination of information to ►M3 PM account holders ◄ ;

(46) ‘TARGET2 settlement manager’ means a person appointed by a Eurosystem CB to monitor the operation of its TARGET2 component system;

(47) ‘TARGET2 crisis manager’ means a person appointed by a Eurosystem CB to handle, on behalf of that Eurosystem CB, failures of the SSP and/or abnormal external events;

(48) ‘technical malfunction of TARGET2’ means any difficulty, defect or failure in the technical infrastructure and/or the computer systems used by the relevant TARGET2 component system, including the SSP or T2S Platform, or any other event that makes it impossible to execute and complete the same-day processing of payments in the relevant TARGET2 component system;

(49) ‘non-settled payment order’ means a payment order that is not settled on the same business day as that on which it is accepted;

(50) ‘cross-system settlement’ means the real-time settlement of debit instructions under which payments are executed from a settlement bank of one ancillary system using settlement procedure 6 to a settlement bank of another ancillary system using settlement procedure 6 as set out in Annex IV;

(51) ‘cash settlement’ means settlement of banknotes and coins;

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(52) ‘CoreNet’ means the internal Eurosystem network service provided by the ECB and used by the Eurosystem CBs as a contingency network to access the SSP in the event that SWIFT is unavailable and as an alternative network to SWIFT to access the CRSS;

(53) ‘Customer-related services system (CRSS)’ provides core and optional services to Eurosystem CBs, i.e. archiving, billing optional services, query and report optional services and customer relationship optional services;

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(54) ‘deposit facility’ means a Eurosystem standing facility which counterparties may use to make overnight deposits with an NCB at the pre-specified deposit rate;

(55) ‘deposit facility rate’ means the interest rate applicable to the deposit facility;

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(56) ‘T2S Operations’ means harmonised and commoditised delivery-versus-payment settlement services provided in an integrated technical environment with cross-border capabilities through the T2S Platform;

(57) ‘TARGET2-Securities (T2S)’ or ‘T2S Platform’ means the set of hardware, software and other technical infrastructure components through which the Eurosystem provides the services to CSDs and Eurosystem CBs that allow core, neutral and borderless settlement of securities transactions on a delivery-versus-payment basis in central bank money;

(58) ‘T2S network service provider’ means an undertaking that has concluded a licence agreement with the Eurosystem to provide connectivity services in the context of T2S;

(59) ‘Dedicated Cash Account (DCA)’ means an account held by a DCA holder, opened in TARGET2-[insert CB/country reference], and used for cash payments in relation to securities settlement in T2S;

(60) ‘Harmonised Conditions for the Opening and Operation of a Dedicated Cash Account in TARGET2’ means the conditions that are laid down in Annex IIa;

(61) ‘Conditions for Auto-collateralisation Operations’ means the conditions that are laid down in Annex IIIa;

(62) ‘payment order’ means a credit transfer order, a liquidity transfer order, a direct debit instruction or a PM to DCA liquidity transfer order;

(63) ‘DCA to PM liquidity transfer order’ means the instruction to transfer a specified amount of funds from a DCA to a PM account;

(64) ‘PM to DCA liquidity transfer order’ means the instruction to transfer a specified amount of funds from a PM account to a DCA;

(65) ‘DCA to DCA liquidity transfer order’ means the instruction to transfer a specified amount of funds (i) from a DCA to a DCA linked to the same Main PM account; or (ii) from a DCA to a DCA held by the same legal entity;

(66) ‘Main PM account’ means the PM Account to which a DCA is linked and on which any remaining balance will be automatically repatriated at end-of-day;

(67) ‘real-time gross settlement’ means the processing and settlement of payment orders on a transaction by transaction basis in real time;

(68) ‘credit transfer order’ means an instruction by a payer to make funds available to a payee by means of a book entry on a PM account;

(69) ‘TARGET2 participant’ means any participant in any TARGET2 component system;

(70) ‘auto-collateralisation’ means intraday credit granted by the euro area NCB in central bank money triggered when a DCA holder has insufficient funds to settle securities transactions, whereby such intraday credit is collateralised either with the securities being purchased (collateral on flow), or with securities held by the DCA holder in favour of the euro area NCB (collateral on stock);

(71) ‘liquidity transfer order’ means a payment order, the main purpose of which is to transfer liquidity between different accounts of the same participant or within a CAI or AL group;

(72) ‘credit institution’ means either: (a) a credit institution within the meaning of point (1) of Article 4(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council ( 4 ) [and, if relevant, insert national law provisions implementing Article 2(5) of Directive 2013/36/EU of the European Parliament and of the Council ( 5 ) ] that is subject to supervision by a competent authority; or (b) another credit institution within the meaning of Article 123(2) of the Treaty that is subject to scrutiny of a standard comparable to supervision by a competent authority;

(73) ‘direct debit instruction’ means an instruction from a payee submitted to its CB pursuant to which the CB of the payer debits the payer's account by the amount specified in the instruction, on the basis of a direct debit authorisation.

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Article 3

TARGET2 component systems

1. Each Eurosystem CB shall operate its own TARGET2 component system.

2. Each TARGET2 component system shall be a system designated as such under the relevant national legislation implementing Directive 98/26/EC.

3. The names of the TARGET2 component systems shall only include ‘TARGET2’ and the name or abbreviation of the relevant Eurosystem CB or of the Member State of such Eurosystem CB. The ECB’s TARGET2 component system shall be called TARGET2-ECB.

Article 4

Connection of NCBs of Member States whose currency is not the euro

The NCBs of Member States whose currency is not the euro may only connect to TARGET2 if they conclude an agreement with the Eurosystem CBs. Such agreement shall specify that the connected NCBs will comply with this Guideline, subject to any mutually agreed appropriate specifications and modifications.

Article 5

Intra-ESCB transactions

Intra-European System of Central Banks (ESCB) transactions shall be processed through TARGET2, with the exception of payments that the CBs bilaterally or multilaterally agree to process through correspondent accounts, where appropriate.

Article 6

Intra-Eurosystem settlement

1. Any settlement of payments between participants in different TARGET2 component systems shall automatically give rise to an intra-Eurosystem obligation of the Eurosystem CB of the payer towards the Eurosystem CB of the payee.

2. Any intra-Eurosystem obligation arising under paragraph 1 shall automatically be aggregated and form part of a single obligation in relation to each Eurosystem CB. Each time a payment between participants in different TARGET2 component systems is settled, the single obligation of the relevant Eurosystem CB shall be adjusted accordingly. At the end of the business day each such single obligation shall be subject to a multilateral netting procedure resulting in each euro area NCB’s obligation or claim towards the ECB, as set out in an agreement between the Eurosystem CBs.

3. Each euro area NCB shall maintain an account to record its obligation or claim towards the ECB, resulting from the settlement of payments between TARGET2 component systems.

4. The ECB shall open on its books an account for each euro area NCB in order to mirror at the end of the day such euro area NCB’s obligation or claim towards the ECB.







SECTION II

GOVERNANCE

Article 7

Governance levels

1. Without prejudice to Article 8 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), the management of TARGET2 shall be based on a three-level governance scheme. The tasks assigned to the Governing Council (Level 1), the Eurosystem CBs (Level 2) and the SSP-providing NCBs (Level 3) are laid down in Annex I.

2. The Governing Council shall be responsible for the direction, management and control of TARGET2. The tasks assigned to Level 1 fall within the exclusive competence of the Governing Council. The ESCB’s Payment and Settlement Systems Committee (PSSC) shall assist the Governing Council as an advisory body in all matters relating to TARGET2.

3. In accordance with the third paragraph of Article 12.1 of the Statute of the ESCB, the Eurosystem CBs shall be responsible for the tasks assigned to Level 2, within the general framework defined by the Governing Council. In addition to its advisory role, the PSSC shall conduct the execution of the tasks assigned to Level 2. The connected NCBs shall participate without voting rights on Level 2-related issues. Member States’ NCBs that are neither Eurosystem CBs nor connected NCBs shall have observer status only at Level 2.

4. The Eurosystem CBs organise themselves through the conclusion of appropriate agreements. Within the context of such agreements, decision-making shall be based on a simple majority, and each Eurosystem CB shall have one vote.

5. In accordance with the third paragraph of Article 12.1 of the Statute of the ESCB, the SSP-providing NCBs shall be responsible for the tasks assigned to Level 3, within the general framework defined by the Governing Council.

6. The SSP-providing NCBs shall conclude an agreement with the Eurosystem CBs governing the services to be provided by the former to the latter. Such agreement shall also include, where appropriate, the connected NCBs.

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7. The Eurosystem, as provider of T2S services, and the Eurosystem CBs as operators of their respective national TARGET2 component systems shall conclude an agreement governing the services to be provided by the former to the latter in respect of the operation of the Dedicated Cash Accounts. Such agreement shall also be entered into, where appropriate, by the connected NCBs.

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SECTION III

OPERATION OF TARGET2

Article 8

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Harmonised Conditions for the Opening and Operation of a PM account in TARGET2

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1. Each euro area NCB shall adopt arrangements implementing the Harmonised Conditions. These arrangements shall exclusively govern the relationship between the relevant euro area NCB and its ►M3 PM account holders ◄ in respect of the processing of payments in the PM. A PM account can be accessed using either internet-based access or via the ►M3 TARGET2 network service provider ◄ . These two methods of accessing a PM account shall be mutually exclusive, although a ►M3 PM account holder ◄ may choose to have one or more PM accounts, each of which will be accessible by either the internet or the ►M3 TARGET2 network service provider ◄ .

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1a. Each euro area NCB shall adopt arrangements implementing the Harmonised Conditions for the Opening and Operation of a Dedicated Cash Account in TARGET2 that are laid down in Annex IIa. These arrangements shall exclusively govern the relationship between the relevant euro area NCB and its DCA holder in respect of the opening and operation of the DCA.

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2. The ECB shall adopt the Terms and Conditions of TARGET2-ECB by implementing (i) the Harmonised Conditions for the Opening and Operation of a PM account in TARGET2 as laid down in Annex II and (ii) the Harmonised Conditions for the Opening and Operation of a Dedicated Cash Account in TARGET2 laid down in Annex IIa, except that TARGET2-ECB shall only provide clearing and settlement services to clearing and settlement organisations, including entities established outside the EEA, providing that they are subject to oversight by a competent authority and their access to TARGET2-ECB has been approved by the Governing Council.

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3. The arrangements adopted by the Eurosystem CBs implementing the Harmonised Conditions shall be made public.

4. The Eurosystem CBs may request derogations from the Harmonised Conditions on the basis of national law constraints. The Governing Council shall consider such requests on a case-by-case basis and shall grant derogations where appropriate.

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5. Subject to the relevant monetary agreement, the ECB may determine appropriate conditions for participation in TARGET2, including the provision of settlement services in central bank money for T2S Operations, by entities referred to in Article 4(2)(e) of Annex II and Article 5(2)(e) of Annex IIa.

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6. The Eurosystem CBs shall not allow any entity to be an indirect ►M3 PM account holder ◄ or to be registered as an addressable BIC holder in their TARGET2 component system if this entity acts via a direct ►M3 PM account holder ◄ that is an NCB of a Member State but is neither a Eurosystem CB nor a connected NCB.

Article 9

Pricing

1. The Eurosystem CBs shall ensure that:

(a) the fees for core TARGET2 services provided to their indirect ►M3 PM account holders ◄ and their addressable BIC holders that are eligible to participate in TARGET2 as indirect ►M3 PM account holders ◄ are higher than the fees for direct ►M3 PM account holders ◄ specified in paragraph 1(a) of Appendix VI to Annex II;

(b) the fees for payments between credit institutions established in the EEA settled on Home Accounts are higher than the fees for direct ►M3 PM account holders ◄ specified in paragraph 1(a) of Appendix VI to Annex II;

(c) payments in relation to open market operations settled on a Home Account shall be charged in accordance with Appendix VI to Annex II;

(d) the pricing for all of the following operations and transactions is outside the scope of the fee schedule laid down in Appendix VI to Annex II: (i) liquidity transfers initiated from and processed within Home Accounts; (ii) operations relating to minimum reserve management and standing facilities; (iii) cash transactions settled on Home Accounts.

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Article 10

Liquidity pooling arrangements

1. The AL NCBs shall exchange all information that is necessary for the performance of their duties and obligations under an AL agreement. The AL NCBs shall immediately notify the managing NCB of any enforcement event of which they become aware relating to the AL group or any AL group member, including the head office and branches thereof.

2. When the managing NCB is notified that an enforcement event has occurred it shall, having regard to the AL agreement, instruct the relevant AL NCBs regarding the enforcement action to be taken in relation to the AL group or the relevant AL group member. The AL NCBs shall be responsible for enforcing their rights under the AL agreement and the arrangements implementing Annex II. The managing NCB shall be responsible for calculating and giving instructions in relation to the apportionment of claims.

3. If, on the occurrence of an enforcement event, intraday credit provided to any AL group member has not been fully reimbursed, an AL NCB shall, on receiving instructions from the managing NCB, enforce the rights it may have in relation to its respective AL group members, including rights deriving from the relevant pledge, set-off, close-out netting or any other relevant provision in the arrangements implementing Annex II, in order to obtain full and timely discharge of the claims that such AL NCB may have against its respective AL group members under the AL agreement. Such claims shall be enforced before the enforcement of any other claims of the relevant AL NCB towards its respective AL group members.

4. Any payments received in discharge of a claim under the AL agreement following enforcement action shall be forwarded to the AL NCBs that have extended intraday credit to the respective AL group members. Such payments shall be allocated to the AL NCBs in proportion to the amount of intraday credit that is not reimbursed by the AL group members to their respective AL NCBs.

5. Any AL NCB that wishes to claim it has incurred loss that should be borne by all AL NCBs shall send a submission to the managing NCB setting out the grounds for the claim. The managing NCB shall forward such request to the relevant AL NCBs and shall calculate the compensation due from each such AL NCB in equal shares.

Article 11

Guarantee Fund Accounts and Remuneration

1. To the extent that a central counterparty (CCP) is required by regulation, including on oversight grounds, to hold a Guarantee Fund Account, funds held on such an account of a CCP shall be remunerated at the main refinancing operations rate minus 15 basis points.

2. Funds otherwise credited to a Guarantee Fund Account of a CCP shall be remunerated at the deposit rate.

Article 12

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Intraday credit — Auto-collateralisation

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1. The euro area NCBs may grant intraday credit, provided that this is done in accordance with the arrangements implementing the rules on the provision of intraday credit laid down in Annex III. No intraday-credit shall be granted to a ►M3 PM account holder ◄ whose eligibility as a counterparty for Eurosystem monetary policy operations has been suspended or terminated.

2. The eligibility criteria for intraday credit of ECB counterparties are defined in Decision ECB/2007/7 of 24 July 2007 concerning the terms and conditions of TARGET2-ECB ( 6 ). Intraday credit granted by the ECB shall remain limited to the day in question with no possibility of an extension to overnight credit.

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3. Further to a request from a participant with access to intraday credit, the euro area NCBs shall offer an auto-collateralisation facility on DCAs, provided that this is done in accordance with the Conditions for Auto-collateralisation Operations laid down in Annex IIIa.

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Article 13

Ancillary systems

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1. The Eurosystem CBs shall provide fund transfer services in central bank money to ancillary systems in the PM accessed through the network service provider. Such services shall be governed by bilateral arrangements between the Eurosystem CBs and the respective ancillary systems.

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2. Bilateral arrangements with ancillary systems that use the ASI shall be in conformity with Annex IV. In addition, the Eurosystem CBs shall ensure that in such bilateral arrangements the following provisions of Annex II apply mutatis mutandis:

— Article 8(1) (technical and legal requirements),

— Article 8(2) to (5) (application procedure), except that instead of being required to meet the access criteria in Article 4 the ancillary system shall be required to meet the access criteria in the definition of ‘ancillary system’ set out in Article 1 of Annex II,

— the operating schedule in Appendix V,

— Article 11 (requirements for cooperation and information exchange), except paragraph 8,

— Articles 27 and 28 (business continuity and contingency procedures and security requirements),

— Article 31 (liability regime),

— Article 32 (evidence rules),

— Articles 33 and 34 (duration, termination and suspension of participation), except Article 34(1)(b),

— Article 35, where relevant (closure of PM accounts),

— Article 38 (confidentiality rules),

— Article 39 (Union requirements for data protection, prevention of money laundering and related issues),

— Article 40 (requirements for notices),

— Article 41 (contractual relationship with the ►M3 TARGET2 network service provider ◄ ),

— Article 44 (rules for governing law, jurisdiction and place of performance).

3. Bilateral arrangements with ancillary systems that use the PI shall be in conformity with:

(a) Annex II, with the exception of Title V and Appendices VI and VII; and

(b) Article 18 of Annex IV.

4. By derogation from paragraph 3, bilateral arrangements with ancillary systems that use the PI, but only settle payments for the benefit of their customers, shall be in conformity with:

(a) Annex II, with the exception of Title V, Article 36 and Appendices VI and VII; and

(b) Article 18 of Annex IV.

Article 14

Financing and cost methodology

1. The Governing Council shall determine the rules applicable to the financing of the SSP. Any surplus or deficit resulting from the functioning of the SSP shall be distributed among the euro area NCBs in accordance with the key for subscription to the ECB’s capital, pursuant to Article 29 of the Statute of the ESCB.

2. The Governing Council shall determine a common cost methodology and pricing structure for core TARGET2 services.

Article 15

Security provisions

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1. The Governing Council shall specify the security policy and security requirements and controls for the SSP. The Governing Council shall also specify the principles applicable to the security of certificates used for internet-based access to the SSP.

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2. The Eurosystem CBs shall comply with, and shall ensure that the SSP complies with, the measures referred to in paragraph 1.

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3. Matters relating to the compliance with information security requirements, in respect of the Dedicated Cash Account shall be governed by Guideline ECB/2012/13 ( 7 ).

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Article 16

Audit rules

Audit assessments shall be performed in accordance with the principles and arrangements set out in the Governing Council’s ESCB Audit Policy.

Article 17

Obligations in the event of suspension or termination

1. Eurosystem CBs shall immediately terminate without prior notice or suspend a participant’s participation in the relevant TARGET2 component system if:

(a) insolvency proceedings are opened in relation to a participant; or

(b) a participant no longer meets the access criteria for the participation in the relevant TARGET2 component system.

2. If a Eurosystem CB suspends or terminates a participant’s participation in TARGET2 in accordance with paragraph 1 or on the grounds of prudence in accordance with Article 19, it shall immediately notify all other Eurosystem CBs thereof, providing all of the following:

(a) the participant’s name, Monetary Financial Institution code and BIC;

(b) the information upon which the euro area NCB based its decision, including any information or opinion obtained from the relevant supervisory authority;

(c) the measure taken and a proposed time-frame for its application.

Each Eurosystem CB shall, if so requested by another Eurosystem CB, exchange information in relation to such participant, including information in relation to payments addressed to it.

3. A Eurosystem CB that has terminated or suspended the participation of a participant in its TARGET2 component system in accordance with paragraph 1 shall assume liability in relation to the other Eurosystem CBs if it either:

(a) subsequently authorises the settlement of payment orders addressed to participants whose participation it has suspended or terminated; or

(b) does not comply with the obligations in paragraphs 1 and 2.

4. The Eurosystem CBs’ obligations set out in paragraphs 1 to 3 shall also apply in the event of suspension or termination of the use of the ASI by ancillary systems.

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Article 18

Procedures for the rejection on the grounds of prudence of an application for participation in TARGET2

Where, pursuant to Article 8(4)(c) of Annex II or Article 6(4)(c) of Annex IIa, a Eurosystem CB rejects on the grounds of prudence an application to join TARGET2, that Eurosystem CB shall promptly inform the ECB of such rejection.

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Article 19

Procedures for the suspension, limitation or termination on the grounds of prudence of participation in TARGET2 and access to intraday credit

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1. Where on the grounds of prudence, a euro area NCB suspends, limits or terminates a participant's access to intraday credit pursuant to paragraph 12(d) of Annex III or paragraph 10(d) of Annex IIIa or a Eurosystem CB suspends or terminates a participant's participation in TARGET2 pursuant to Article 34(2)(e) of Annex II or Article 24(2)(e) of Annex IIa, the decision shall, to the extent possible, take effect at the same time in all TARGET2 component systems.

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2. The euro area NCB shall provide the information of Article 17(2) without delay to the relevant supervisory authorities in the euro area NCB’s Member State, with the request that the supervisory authorities share information with the supervisory authorities of other Member States in which the participant has a subsidiary or branch. Taking into account the decision pursuant to paragraph 1, other euro area NCBs shall take appropriate action and provide information thereof to the ECB without delay.

3. The ECB’s Executive Board may propose to the Governing Council to take any decisions in order to ensure uniform implementation of the measures taken pursuant to paragraphs 1 and 2.

4. The euro area NCBs of the Member States in which the decision is to be implemented shall inform the participant about the decision, and shall take all necessary implementation measures.

Article 20

Procedures for cooperation by Eurosystem CBs in connection with administrative or restrictive measures

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In connection with the implementation of Article 39(3) of Annex II and Article 28(3) of Annex IIa:

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(a) any Eurosystem CB shall promptly share with all potentially affected CBs all information that it receives in connection with a proposed credit transfer order;

(b) any Eurosystem CB that receives from a participant evidence of notification having been made to, or consent having been received from, any competent authority shall promptly transmit such evidence to any other CB acting as the payment service provider of the payer or payee as appropriate;

(c) the Eurosystem CB acting as payment service provider of the payer shall then promptly inform the payer that it can enter a credit transfer order into TARGET2.

Article 21

Business continuity

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1. If the events referred to in Article 27 of Annex II or Article 17 of Annex IIa affect the operation of the TARGET2 services other than the PM and the ICM and DCAs, the Eurosystem CB concerned shall monitor and manage such events in order to prevent any spillover to the smooth functioning of TARGET2.

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2. If an event affecting the normal operation of the PM and/or the ICM occurs, the Eurosystem CB concerned shall immediately notify the TARGET2 coordinator, who together with the settlement manager of the Eurosystem CB concerned shall decide on the further steps to be taken. The TARGET2 settlement managers shall agree on the information that should be communicated to TARGET2 participants.

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3. The Eurosystem CBs shall report the participant's failure to the TARGET2 coordinator if such failure might affect the operation of the T2S Platform, the settlement in ancillary systems or create systemic risk. The closure of TARGET2 shall normally not be delayed due to a participant's failure.

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4. A failure affecting an ancillary system shall be reported by the Eurosystem CBs to the TARGET2 coordinator for information purposes. The TARGET2 coordinator shall initiate a teleconference of the TARGET2 settlement managers in the event that there is an unavoidable systemic impact, in particular when this is of a cross-border nature.

5. In exceptional circumstances, the SSP’s closure may be delayed if there is a failure affecting an ancillary system. A request to delay the SSP’s closure shall be communicated by the Eurosystem CBs to the TARGET2 crisis managers.

Article 22

Treatment of claims under the TARGET2 compensation scheme

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1. Unless otherwise decided by the Governing Council, the compensation procedure set out in Appendix II to Annex II or Appendix II to Annex IIa shall be managed in accordance with this Article.

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2. The CB of the participant submitting the claim for compensation shall assess the compensation claim on a preliminary basis and communicate with the participant in relation to that assessment. Where necessary for the assessment of claims, such CB shall be assisted by other CBs concerned. The relevant CB shall inform the ECB and all other CBs concerned as soon as it becomes aware of pending claims.

3. Within nine weeks following a technical malfunction of TARGET2, the CB of the participant submitting the claim shall:

(a) prepare a preliminary assessment report containing the CB’s assessment of the claims received; and

(b) submit the preliminary assessment report to the ECB and all other CBs concerned.

4. Within five weeks following receipt of the preliminary assessment report, the Governing Council shall carry out the final assessment of all claims received, and shall decide on the compensation offers to be made to the participants concerned. Within five business days following the completion of the final assessment, the ECB shall communicate the outcome of the final assessment to the CBs concerned. Those CBs shall without delay inform their participants of the outcome of the final assessment and, where applicable, details of the compensation offer, together with the form constituting the letter of acceptance.

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5. Within two weeks following expiry of the period referred to in the final sentence of Article 4(d) of Appendix II to Annex II or in the final sentence of Article 4(d) of Appendix II to Annex IIa, the CB shall inform the ECB and all other CBs concerned about which compensation offers have been accepted and which compensation offers have been rejected.

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6. The CBs shall inform the ECB of any claim submitted by their participants to those CBs outside the scope of the TARGET2 compensation scheme, but relating to a technical malfunction of TARGET2.

Article 23

Treatment of losses caused by a technical malfunction of TARGET2

1. In the event of a technical malfunction of TARGET2:

(a) On the payer’s side, any CB with which a payer has placed a deposit benefits from certain financial gains which amount to the difference between the Eurosystem’s main refinancing operations rate and the deposit rate applied to the marginal increase in the use of the Eurosystem’s deposit facility for the period of the technical malfunction of TARGET2 and up to the amount of the non-settled payment orders. Where the payer is left with non-remunerated surplus funds, the financial gains amount to the Eurosystem’s main refinancing operations rate, applied to the amount of the non-interest-bearing surplus funds for the period of the technical malfunction of TARGET2 and up to the amount of the non-settled payment orders.

(b) On the payee’s side, the CB from whom the payee has borrowed by using the marginal lending facility benefits from certain financial gains which amount to the difference between the marginal lending rate and the Eurosystem’s main refinancing operations rate, applied to the marginal increase in the use of the marginal lending facility for the period of the technical malfunction of TARGET2 and up to the amount of the non-settled payment orders.

2. The ECB’s financial gains amount to:

(a) the earnings in relation to the connected NCBs arising from the different remuneration of end-of-day balances of those connected NCBs in relation to the ECB; and

(b) the amount of penalty interest the ECB receives from connected NCBs whenever one of those connected NCBs imposes a penalty on a participant for a failure to reimburse intraday credit on time, as provided for in the agreement between the Eurosystem CBs and the connected NCBs.

3. The financial gains referred to in paragraphs 1 and 2 shall be pooled by the CBs and the resulting pooled amount shall be used to reimburse those CBs that incur the costs of compensating their participants. Any remaining financial gains or costs incurred by the CBs in compensating their participants shall be shared among the Eurosystem CBs in accordance with the key for subscription to the ECB’s capital.

Article 24

Security rights in relation to funds on sub-accounts and intra-Eurosystem guarantee

1. For the purpose of the settlement of ancillary system-related payment instructions, any Eurosystem CB that has opened sub-accounts for its ►M3 PM account holders ◄ shall ensure that the balances on such sub-accounts (including increases or reductions of the frozen balance resulting from crediting or debiting cross system settlement payments to or from the sub-account or from crediting liquidity transfers to the sub-account) that are frozen during the ancillary system processing cycle can be used for the settlement of ancillary system related payment instructions. This is notwithstanding any insolvency proceedings with respect to the relevant ►M3 PM account holder ◄ and notwithstanding any individual enforcement measure relating to such ►M3 PM account holder ◄ ’s sub-account.

2. Each time liquidity is transferred to a ►M3 PM account holder ◄ ’s sub-account and where the Eurosystem CB is not the ancillary system’s CB, such Eurosystem CB shall, upon communication by the ancillary system (via a ‘start-of-cycle’ message), confirm the freezing of the balances on the sub-account to the relevant ancillary system and, in doing so, guarantee to the ancillary system’s CB payment up to the amount of this particular balance. The confirmation of the freezing to the ancillary system shall also entail a legally binding declaration of will by the ancillary system’s CB that the latter guarantees to the ancillary system payment up to the amount of the frozen balance. By confirming the increase or reduction of the frozen balance upon crediting or debiting cross-system settlement payments to or from the sub-account or crediting liquidity transfers to the sub-account, both the Eurosystem CB that is not the ancillary system’s CB and the ancillary system’s CB declare an increase or a reduction of the guarantee in the amount of the payment. Both guarantees shall be irrevocable, unconditional and payable on first demand. Both guarantees and the freezing of the balances shall expire upon communication by the ancillary system that the settlement has been completed (via an ‘end-of-cycle’ message).







SECTION IV

TRANSITIONAL AND FINAL PROVISIONS

Article 25

Dispute resolution and applicable law

1. In the event of a dispute between Eurosystem CBs in relation to this Guideline, the affected parties shall seek to settle the dispute in accordance with the Memorandum of Understanding on an Intra-ESCB Dispute Settlement Procedure.

2. By derogation from paragraph 1, if a dispute relating to the division of the tasks between Level 2 and Level 3 cannot be settled by agreement between the affected parties, the Governing Council shall resolve the dispute.

3. In the event of a dispute of the type referred to in paragraph 1, the parties’ respective rights and obligations shall primarily be determined by the rules and procedures laid down in this Guideline. In disputes concerning payments between TARGET2 component systems, the law of the Member State where the seat of the Eurosystem CB of the payee is located shall apply in a supplementary manner, provided that it does not conflict with this Guideline.

Article 26

Entry into force and application

1. This Guideline shall enter into force on 7 December 2012. It shall apply from 1 January 2013, subject to the transitional provisions laid down in Article 27.

2. Guideline ECB/2007/2 is repealed with effect from 1 January 2013.

3. References to the repealed Guideline shall be construed as references to this Guideline and shall be read in accordance with the correlation table set out in Annex VII.

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Article 27

Miscellaneous provisions

Accounts opened outside the PM and outside the T2S Platform by a euro area NCB for credit institutions and ancillary systems shall be governed by the rules of such euro area NCB, subject to the provisions of this Guideline which relate to Home Accounts and other decisions of the Governing Council. Accounts opened outside the PM and outside the T2S Platform by a euro area NCB for entities other than credit institutions and ancillary systems shall be governed by the rules of such euro area NCB.

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Article 28

Addressees, implementing measures and annual reports

1. This Guideline applies to all Eurosystem CBs.

2. The euro area NCBs shall by 20 December 2012 send to the ECB the measures by which they intend to comply with Article 39 of Annex II, Appendix VI to Annex II, paragraph 9(a), paragraph 12(a)(v) and paragraph 13 of Annex III, paragraph 18(1)(c)(ii) of Annex IV, and Appendix IIA to Annex V of this Guideline.

3. The ECB shall prepare annual reports for review by the Governing Council on the overall functioning of TARGET2.









ANNEX I







TARGET2 GOVERNANCE ARRANGEMENTS Level 1 — Governing Council Level 2 — Eurosystem CBs Level 3 — SSP-providing NCBs 0. General provisions Level 1 has final competence in relation to domestic and cross-border TARGET2 issues and is responsible for safeguarding the public function of TARGET2 Level 2 has subsidiary competence in relation to issues left to its discretion by Level 1 Level 3 takes decisions on the daily running of the Single Shared Platform (SSP) on the basis of the service levels defined in the agreement referred to in Article 7(6) of this Guideline 1. Cost and pricing policy — Deciding on common cost methodology — Deciding on single price structure — Deciding on pricing of additional services and/or modules (Not applicable) 2. Service level — Deciding on core services — Deciding on additional services and/or modules — Delivering input according to Level 1/Level 2 needs 3. Risk management — Deciding on the general framework for risk management and acceptance of remaining risks — Conducting the actual risk management — Conducting risk analysis and follow-up — Providing the necessary information for risk analysis according to Level 1/Level 2 requests 4. Governance and financing — Defining rules for ownership, decision-making and financing of the SSP — Establishing and ensuring adequate implementation of the European System of Central Bank’s legal framework for TARGET2 — Drawing up the rules on governance and financing decided at Level 1 — Drawing up the budget, its approval and implementation — Having ownership and/or control of the application — Collecting funds and remuneration of services — Providing cost figures to Level 2 for the service provision 5. Development — Being consulted by Level 2 on the location of the SSP — Approving the overall project plan — Deciding on the initial design and development of the SSP — Deciding on establishing from scratch against establishing on the basis of an existing platform — Deciding on the choice of the SSP operator — Establishing, in agreement with Level 3, the service levels of the SSP — Deciding on the location of the SSP after consultation of Level 1 — Approving the specification process methodology and the ‘deliverables’ of Level 3 deemed appropriate in order to specify and, later on, test and accept the product (in particular general and detailed user specifications) — Establishing a milestone project plan — Evaluating and accepting the deliverables — Establishing test scenarios — Central banks’ and users’ test coordination, in close cooperation with Level 3 — Proposing the initial design of the SSP — Proposing whether to establish from scratch or establish on the basis of an existing platform — Proposing the location of the SSP — Drafting the general and the detailed functional specifications (internal detailed functional specifications and user detailed functional specifications) — Drafting the detailed technical specifications — Providing initial and ongoing input for milestone project planning and control — Technical and operational support for tests (performing tests on the SSP, input on SSP-related test scenarios, supporting Eurosystem CBs in their SSP test activities) 6. Implementation and migration — Deciding on the migration strategy — Preparing and coordinating migration to the SSP, in close cooperation with Level 3 — Providing input on migration issues in accordance with Level 2 requests — Performing SSP-related migration work; additional support for joining NCBs 7. Operation — Managing severe crisis situations — Authorising establishment and operation of TARGET2 Simulator — Appointing certification authorities for internet-based access — Specifying security policies, requirements and controls for the SSP — Specifying principles applicable to security of certificates used for internet-based access — Management with regard to system-owner responsibilities — Maintaining contacts with users at European level (subject to the sole responsibility of Eurosystem CBs for the business relationship with their customers) and monitoring daily user activity from a business perspective (Eurosystem CB task) — Monitoring business developments — Budgeting, financing, invoicing (Eurosystem CB task) and other administrative tasks — Managing the system on the basis of the agreement referred to in Article 7(6) of this Guideline









ANNEX II

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HARMONISED CONDITIONS FOR THE OPENING AND OPERATION OF A PM ACCOUNT IN TARGET2

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TITLE I

GENERAL PROVISIONS

Article 1

Definitions

For the purposes of these Harmonised Conditions (hereinafter the ‘Conditions’), the following definitions apply:

— ‘addressable BIC holder’ means an entity which: (a) holds a Business Identifier Code (BIC); (b) is not recognised as an indirect ►M3 PM account holder ◄ ; and (c) is a correspondent or customer of a ►M3 PM account holder ◄ or a branch of a direct or indirect ►M3 PM account holder ◄ , and is able to submit payment orders to and receive payments from a TARGET2 component system via the ►M3 PM account holder ◄ ,

— ‘AL agreement’ means the multilateral aggregated liquidity agreement entered into by the AL group members and their respective AL NCBs, for the purposes of the AL mode,

— ‘AL group’ means a group composed of AL group members that use the AL mode,

— ‘AL group manager’ means an AL group member appointed by the other AL group members to manage available liquidity within the AL group during the business day,

— ‘AL group member’ means a ►M3 PM account holder ◄ which has entered into an AL agreement,

— ‘AL mode’ means the aggregation of available liquidity on PM accounts,

— ‘AL NCB’ means a euro area NCB that is party to an AL agreement and acts as the counterparty for the AL group members which participate in its TARGET2 component system,

— ‘ancillary system’ means a system managed by an entity established in the European Economic Area (EEA) that is subject to supervision and/or oversight by a competent authority and complies with the oversight requirements for the location of infrastructures offering services in euro, as amended from time to time and published on the ECB’s website ( 8 ), in which payments and/or financial instruments are exchanged and/or cleared while the resulting monetary obligations are settled in TARGET2 in accordance with Guideline ECB/2012/27 on a Trans-European Automated Real-time Gross settlement Express Transfer system (TARGET2) ( 9 ) and a bilateral arrangement between the ancillary system and the relevant CB,

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— ‘available liquidity’ means a credit balance on a participant's PM account and, if applicable, any intraday credit line granted by the relevant euro area NCB in relation to such account but not yet drawn upon,

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— ‘Business Identifier Code (BIC)’ means a code as defined by ISO Standard No 9362,

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— ‘branch’ means a branch within the meaning of point (17) of Article 4(1) of Regulation (EU) No 575/2013,

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— ‘business day’ means any day on which TARGET2 is open for the settlement of payment orders, as set out in Appendix V,

— ‘CAI group’ means a group composed of ►M3 PM account holders ◄ that use the CAI mode,

— ‘CAI group manager’ means a CAI group member appointed by the other members of the CAI group to monitor and distribute the available liquidity within the CAI group during the business day,

— ‘CAI mode’ means the provision of consolidated account information in relation to PM accounts via the ICM,

— ‘capacity opinion’ means a participant-specific opinion that contains an assessment of a participant’s legal capacity to enter into and carry out its obligations under these Conditions,

— ‘central banks (CBs)’ means the Eurosystem CBs and the connected NCBs,

— ‘connected NCB’ means a national central bank (NCB), other than a Eurosystem CB, which is connected to TARGET2 pursuant to a specific agreement,

— ‘Contingency Module’ means the SSP module enabling the processing of critical and very critical payments in contingency situations,

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— ‘credit institution’ means either: (a) a credit institution within the meaning of point (1) of Article 4(1) of Regulation (EU) No 575/2013 [and, if relevant, insert national law provisions implementing Article 2(5) of Directive 2013/36/EU] that is subject to supervision by a competent authority; or (b) another credit institution within the meaning of Article 123(2) of the Treaty that is subject to scrutiny of a standard comparable to supervision by a competent authority,

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— ‘credit transfer order’ means an instruction by a payer to make funds available to a payee by means of a book entry on a PM account,

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— ‘deposit facility’ means a Eurosystem standing facility which counterparties may use to make overnight deposits with an NCB at a pre-specified deposit rate,

— ‘deposit facility rate’ means the interest rate applicable to the deposit facility,

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— ‘direct debit authorisation’ means a general instruction by a payer to its CB entitling and obliging that CB to debit the payer’s account upon a direct debit instruction from a payee,

— ‘direct debit instruction’ means an instruction from a payee submitted to its CB pursuant to which the CB of the payer debits the payer’s account by the amount specified in the instruction, on the basis of a direct debit authorisation,

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— ‘Dedicated Cash Account (DCA)’ means an account held by a DCA holder, opened in TARGET2-[insert CB/country reference], and used for cash payments in relation to securities settlement in T2S,

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— ‘enforcement event’ means, with regard to an AL group member: (a) any event of default referred to in Article 34(1); (b) any other event of default or event referred to in Article 34(2) in relation to which the [insert name of CB] has decided, taking into account the seriousness of the event of default or event, [Insert if applicable: [a pledge should be enforced in accordance with Article 25b] [collateral should be enforced in accordance with Article 25c] and] a set-off of claims should be triggered in accordance with Article 26; or (c) any decision to suspend or terminate access to intraday credit,

— ‘entry disposition’ means a payment processing phase during which TARGET2-[insert CB/country reference] attempts to settle a payment order which has been accepted pursuant to Article 14, by means of specific procedures, as described in Article 20,

— ‘euro area NCB’ means the national central bank (NCB) of a Member State whose currency is the euro,

— ‘Eurosystem CB’ means the ECB or a euro area NCB,

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— ‘event of default’ means any impending or existing event, the occurrence of which may threaten the performance by a participant of its obligations under these Conditions or any other rules applying to the relationship between that participant and the [insert name of CB] or any other CB, including: — (a) where the participant no longer meets the access criteria laid down in Article 4 or the requirements laid down in Article 8(1)(a)(i); (b) the opening of insolvency proceedings in relation to the participant; (c) the submission of an application relating to the proceedings referred to in point (b); (d) the issue by the participant of a written declaration of its inability to pay all or any part of its debts or to meet its obligations arising in relation to intraday credit; (e) the entry of the participant into a voluntary general agreement or arrangement with its creditors; (f) where the participant is, or is deemed by its CB to be, insolvent or unable to pay its debts; (g) where the participant's credit balance on its PM account or DCA or all or a substantial part of the participant's assets are subject to a freezing order, attachment, seizure or any other procedure that is intended to protect the public interest or the rights of the participant's creditors; (h) where participation of the participant in another TARGET2 component system and/or in an ancillary system has been suspended or terminated; (i) where any material representation or pre-contractual statement made by the participant or which is implied to have been made by the participant under the applicable law is incorrect or untrue; (j) the assignment of all or a substantial part of the participant's assets,

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— ‘group’ means: — (a) a composition of credit institutions included in the consolidated financial statements of a parent company where the parent company is obliged to present consolidated financial statements under International Accounting Standard 27 (IAS 27), adopted pursuant to Commission Regulation (EC) No 2238/2004 ( 10 ) and consisting of either: (i) a parent company and one or more subsidiaries; or (ii) two or more subsidiaries of a parent company; or (b) a composition of credit institutions as referred to in subparagraph (a)(i) or (ii), where a parent company does not present consolidated financial statements in accordance with IAS 27, but may be able to satisfy the criteria defined in IAS 27 for inclusion in consolidated financial statements, subject to the verification of the CB of the ►M3 PM account holder ◄ or, in the case of an AL group, the managing NCB; (c) a bilateral or multilateral network of credit institutions that is: (i) organised through a statutory framework determining the affiliation of credit institutions to such a network; or (ii) characterised by self-organised mechanisms of cooperation (promoting, supporting and representing the business interests of its members) and/or economic solidarity going beyond the ordinary cooperation usual between credit institutions whereby such cooperation and solidarity are permitted by credit institutions’ by-laws or articles of incorporation or established by virtue of separate agreements; — and in each case referred to in (c) the ECB’s Governing Council has approved an application to be considered as constituting a group,

— ‘Home Account’ means an account opened outside the PM by a CB for an entity that is eligible to become an indirect participant,

— ‘Information and Control Module (ICM)’ means the SSP module that allows participants to obtain on-line information and gives them the possibility to submit liquidity transfer orders, manage liquidity and initiate backup payment orders in contingency situations,

— ‘ICM broadcast message’ means information made simultaneously available to all or a selected group of TARGET2 participants via the ICM,

— ‘indirect participant’ means a credit institution established in the EEA, which has entered into an agreement with a ►M3 PM account holder ◄ to submit payment orders and receive payments via such ►M3 PM account holder ◄ ’s PM account, and which has been recognised by a TARGET2 component system as an indirect participant,

— ‘insolvency proceedings’ means insolvency proceedings within the meaning of Article 2(j) of Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems ( 11 ),

— ‘instructing participant’ means a TARGET2 participant that has initiated a payment order,

— ‘intraday credit’ means credit extended for a period of less than one business day,

— ‘investment firm’ means an investment firm within the meaning of [insert national law provisions implementing Article 4(1)(1) of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC ( 12 )], excluding the institutions specified in [insert national law provisions implementing Article 2(1) of Directive 2004/39/EC], provided that the investment firm in question is: — (a) authorised and supervised by a recognised competent authority, which has been designated as such under Directive 2004/39/EC; and (b) entitled to carry out the activities referred to under [insert national law provisions implementing items 2, 3, 6 and 7 of Section A of Annex I to Directive 2004/39/EC],

— ‘liquidity transfer order’ means a payment order, the main purpose of which is to transfer liquidity between different accounts of the same participant or within a CAI or AL group,

— ‘managing NCB’ means the AL NCB of the TARGET2 component system in which the AL group manager participates,

— ‘marginal lending facility’ means a Eurosystem standing facility which counterparties may use to receive overnight credit from a Eurosystem CB at the pre-specified marginal lending rate,

— ‘marginal lending rate’ means the interest rate applicable to the marginal lending facility,

— ‘multi-addressee access’ means the facility by which branches or credit institutions established in the EEA can access the relevant TARGET2 component system by submitting payment orders and/or receiving payments directly to and from the TARGET2 component system; this facility authorises these entities to submit their payment orders through the ►M3 PM account holder ◄ ’s PM account without that ►M3 PM account holder ◄ ’s involvement,

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— ‘Main PM account’ means the PM account to which a DCA is linked and on which any remaining balance must be automatically repatriated from the DCA at the end of the day,

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— ‘ ►M3 TARGET2 network service provider ◄ ’ means the undertaking appointed by the ECB’s Governing Council to provide computerised network connections for the purpose of submitting payment messages in TARGET2,

— ‘non-settled payment order’ means a payment order that is not settled on the same business day as that on which it is accepted,

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— ‘participant’ [or ‘direct participant’] means an entity that holds at least one PM account (PM account holder) and/or one Dedicated Cash Account (DCA holder) with a Eurosystem CB,

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— ‘payee’, except where used in Article 39 of this Annex, means a TARGET2 participant whose PM account will be credited as a result of a payment order being settled,

— ‘payer’, except where used in Article 39 of this Annex, means a TARGET2 participant whose PM account will be debited as a result of a payment order being settled,

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— ‘payment order’ means a credit transfer order, a liquidity transfer order, a direct debit instruction or a PM to DCA liquidity transfer order,

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— ‘Payments Module (PM)’ means an SSP module in which payments of ►M3 PM account holders ◄ are settled on PM accounts,

— ‘PM account’ means an account held by a TARGET2 participant in the PM with a CB which is necessary for such TARGET2 participant to: — (a) submit payment orders or receive payments via TARGET2; and (b) settle such payments with such CB,

— ‘public sector body’ means an entity within the ‘public sector’, the latter term as defined in Article 3 of Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for the application of the prohibitions referred to in Articles 104 and 104b (1) of the Treaty ( 13 ),

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— ‘PM to DCA liquidity transfer order’ means the instruction to transfer a specified amount of funds from a PM account to a DCA,

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— ‘Single Shared Platform (SSP)’ means the single technical platform infrastructure provided by the SSP-providing NCBs,

— ‘SSP-providing NCBs’ means the Deutsche Bundesbank, the Banque de France and the Banca d’Italia in their capacity as the CBs building and operating the SSP for the Eurosystem’s benefit,

— ‘static data collection form’ means a form developed by [insert name of CB] for the purpose of registering applicants for TARGET2-[insert CB/country reference] services and registering any changes in relation to the provision of such services,

— ‘suspension’ means the temporary freezing of the rights and obligations of a participant for a period of time to be determined by the [insert name of CB],

— ‘TARGET2-[insert CB/country reference]’ means the TARGET2 component system of [insert CB name],

— ‘TARGET2’ means the entirety resulting from all TARGET2 component systems of the CBs,

— ‘TARGET2 component system’ means any of the CBs’ real-time gross settlement (RTGS) systems that form part of TARGET2,

— ‘TARGET2 CUG’ means a subset of the ►M3 TARGET2 network service provider ◄ ’s customers grouped for the purpose of their use of the relevant services and products of the ►M3 TARGET2 network service provider ◄ when accessing the PM,

— ‘TARGET2 participant’ means any participant in any TARGET2 component system,

— ‘technical malfunction of TARGET2’ means any difficulty, defect or failure in the technical infrastructure and/or the computer systems used by TARGET2-[insert CB/country reference], or any other event that makes it impossible to execute and complete the same-day processing of payments in TARGET2-[insert CB/country reference],

— ‘User Detailed Functional Specifications (UDFS)’ means the most up-to-date version of the UDFS, which is the technical documentation that details how a participant interacts with TARGET2.

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Article 1a

Scope

The present Conditions govern the relationship between the relevant euro area NCB and its PM account holder as far the opening and the operation of the PM account is concerned.

▼B

Article 2

Appendices

1. The following Appendices form an integral part of these Conditions:

Appendix I: Technical specifications for the processing of payment orders

Appendix II: TARGET2 compensation scheme

Appendix III: Terms of reference for capacity and country opinions

Appendix IV: Business continuity and contingency procedures

Appendix V: Operating schedule

Appendix VI: Fee schedule and invoicing

Appendix VII: Aggregated liquidity agreement

2. In the event of any conflict or inconsistency between the content of any appendix and the content of any other provision in these Conditions, the latter shall prevail.

Article 3

General description of TARGET2-[insert CB/country reference] and TARGET2

▼M3

1. TARGET2 provides real-time gross settlement for payments in euro, with settlement in central bank money across PM accounts and DCAs.

2. The following payment orders are processed in TARGET2-[insert CB/country reference]:

(a) payment orders directly resulting from or made in connection with Eurosystem monetary policy operations;

(b) settlement of the euro leg of foreign exchange operations involving the Eurosystem;

(c) settlement of euro transfers resulting from transactions in cross-border large-value netting systems;

(d) settlement of euro transfers resulting from transactions in euro retail payment systems of systemic importance;

(e) settlement of the cash leg of securities transactions;

(f) PM to DCA liquidity transfer orders; and

(g) any other payment orders in euro addressed to TARGET2 participants.

▼B

3. TARGET2 is established and functions on the basis of the SSP. The Eurosystem specifies the SSP’s technical configuration and features. The SSP services are provided by the SSP-providing NCBs for the benefit of the Eurosystem CBs, pursuant to separate agreements.

4. The [insert name of CB] is the provider of services under these Conditions. Acts and omissions of the SSP-providing NCBs shall be considered acts and omissions of [insert name of CB], for which it shall assume liability in accordance with Article 31 below. Participation pursuant to these Conditions shall not create a contractual relationship between ►M3 PM account holders ◄ and the SSP-providing NCBs when the latter act in that capacity. Instructions, messages or information which a ►M3 PM account holder ◄ receives from, or sends to, the SSP in relation to the services provided under these Conditions are deemed to be received from, or sent to, [insert name of CB].

5. TARGET2 is legally structured as a multiplicity of payment systems composed of all the TARGET2 component systems, which are designated as ‘systems’ under the national laws implementing Directive 98/26/EC. TARGET2-[insert CB/country reference] is designated as a ‘system’ under [insert the relevant legal provision implementing Directive 98/26/EC].

6. Participation in TARGET2 takes effect via participation in a TARGET2 component system. These Conditions describe the mutual rights and obligations of ►M3 PM account holders ◄ in TARGET2-[insert CB/country reference] and the [insert name of CB]. The rules on the processing of payment orders (Title IV) refer to all payment orders submitted or payments received by any ►M3 PM account holder ◄ .







TITLE II

PARTICIPATION

Article 4

Access criteria

1. The following types of entities are eligible for direct participation in TARGET2-[insert CB/country reference]:

(a) credit institutions established in the EEA, including when they act through a branch established in the EEA;

(b) credit institutions established outside the EEA, provided that they act through a branch established in the EEA;

(c) NCBs of Member States and the ECB;

provided that the entities referred to in subparagraphs (a) and (b) are not subject to restrictive measures adopted by the Council of the European Union or Member States pursuant to Article 65(1)(b), Article 75 or Article 215 of the Treaty, the implementation of which, in the view of [CB/country reference] after informing the ECB, is incompatible with the smooth functioning of TARGET2.

2. The [insert name of the CB] may, at its discretion, also admit the following entities as direct participants:

(a) treasury departments of central or regional governments of Member States active in the money markets;

(b) public sector bodies of Member States authorised to hold accounts for customers;

(c) investment firms established in the EEA;

(d) entities managing ancillary systems and acting in that capacity;

(e) credit institutions or any of the entities of the types listed under subparagraphs (a) to (d), in both cases where these are established in a country with which the Union has entered into a monetary agreement allowing access by any of such entities to payment systems in the Union subject to the conditions set out in the monetary agreement and provided that the relevant legal regime applying in the country is equivalent to the relevant Union legislation.

3. Electronic money institutions, within the meaning of [insert national law provisions implementing Article 2(1) of Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC ( 14 )], are not entitled to participate in TARGET2-[insert CB/country reference].

Article 5

Direct participants

1. Direct participants in TARGET2-[insert CB/country reference] shall comply with the requirements set out in Article 8(1) and (2). They shall have at least one PM account with the [insert name of CB].

2. ►M3 PM account holders ◄ may designate addressable BIC holders, regardless of their place of establishment.

3. ►M3 PM account holders ◄ may designate entities as indirect ►M3 PM account holders ◄ , provided that the conditions laid down in Article 6 are met.

4. Multi-addressee access through branches may be provided as follows:

(a) A credit institution within the meaning of Article 4(1)(a) or (b), which has been admitted as a ►M3 PM account holder ◄ , may grant access to its PM account to one or more of its branches established in the EEA in order to submit payment orders and/or receive payments directly, provided that [insert name of the CB] has been informed accordingly.

(b) Where a branch of a credit institution has been admitted as a ►M3 PM account holder ◄ , the other branches of the same legal entity and/or its head office, in both cases provided that they are established in the EEA, may access the branch’s PM account, provided that it has informed the [insert name of CB].

Article 6

Indirect participants

1. Credit institutions established in the EEA may each enter into a contract with one ►M3 PM account holder ◄ that is either a credit institution within the meaning of Article 4(1)(a) or (b), or a CB, in order to submit payment orders and/or receive payments, and to settle them via the PM account of that ►M3 PM account holder ◄ . TARGET2-[insert CB/country reference] shall recognise indirect participants by registering such indirect participation in the TARGET2 directory, the latter as described in Article 9.

2. Where a ►M3 PM account holder ◄ , which is a credit institution within the meaning of Article 4(1)(a) or (b), and an indirect participant belong to the same group, the ►M3 PM account holder ◄ may expressly authorise the indirect participant to use the ►M3 PM account holder ◄ ’s PM account directly to submit payment orders and/or receive payments by way of group-related multi-addressee access.

Article 7

►M3 PM account holder ◄ ’s responsibility

1. For the avoidance of doubt, payment orders submitted or payments received by indirect participants pursuant to Article 6, and by branches under Article 5(4), shall be deemed to have been submitted or received by the ►M3 PM account holder ◄ itself.

2. The ►M3 PM account holder ◄ shall be bound by such payment orders, regardless of the content of, or any non-compliance with, the contractual or other arrangements between that ►M3 PM account holder ◄ and any of the entities referred to in paragraph 1.

▼M3

3. A PM account holder accepting its PM account to be designated as the Main PM account defined in Annex IIa shall be bound by any invoices related to the opening and operation of each Dedicated Cash Account linked to that PM account, as set out in Appendix VI to this Annex, including any penalties levied in accordance with paragraph 9(d) of Annex IIIa, regardless of the content of, or any non-compliance with, the contractual or other arrangements between that PM account holder and the DCA holder.

4. A Main PM account holder shall be bound by any invoices, as set out in Appendix VI to this Annex, for the linkage to each DCA to which the PM account is linked

▼B

Article 8

Application procedure

1. To join TARGET2-[insert CB/country reference], applicant participants shall:

(a) fulfil the following technical requirements: (i) install, manage, operate and monitor and ensure the security of the necessary IT infrastructure to connect to TARGET2-[insert CB/country reference] and submit payment orders to it. In doing so, applicant participants may involve third parties, but retain sole liability. In particular, applicant participants shall enter into an agreement with the ►M3 TARGET2 network service provider ◄ to obtain the necessary connection and admissions, in accordance with the technical specifications in Appendix I; and (ii) have passed the tests required by the [insert name of CB]; and

(b) fulfil the following legal requirements: (i) provide a capacity opinion in the form specified in Appendix III, unless the information and representations to be provided in such capacity opinion have already been obtained by the [insert name of CB] in another context; and (ii) for the entities referred to in Article 4(1)(b), provide a country opinion in the form specified in Appendix III, unless the information and representations to be provided in such country opinion have already been obtained by the [insert name of CB] in another context.

2. Applicants shall apply in writing to the [insert name of CB], as a minimum enclosing the following documents/information:

(a) completed static data collection forms as provided by [insert name of CB];

(b) the capacity opinion, if required by the [insert name of CB]; and

(c) the country opinion, if required by the [insert name of CB].

3. The [insert name of CB] may also request any additional information it deems necessary to decide on the application to participate.

4. The [insert name of CB] shall reject the application to participate if:

(a) access criteria referred to in Article 4 are not met;

(b) one or more of the participation criteria referred to in paragraph 1 are not met; and/or

(c) in the [insert name of CB]’s assessment, such participation would endanger the overall stability, soundness and safety of TARGET2-[insert CB/country reference] or of any other TARGET2 component system, or would jeopardise the [insert name of CB]’s performance of its tasks as described in [refer to relevant national law] and the Statute of the European System of Central Banks and of the European Central Bank, or poses risks on the grounds of prudence.

5. The [insert name of CB] shall communicate its decision on the application to participate to the applicant within one month of the [insert name of CB]’s receipt of the application to participate. Where the [insert name of CB] requests additional information pursuant to paragraph 3, the decision shall be communicated within one month of the [insert name of CB]’s receipt of this information from the applicant. Any rejection decision shall contain reasons for the rejection.

Article 9

TARGET2 directory

1. The TARGET2 directory is the database of BICs used for the routing of payment orders addressed to:

(a) ►M3 PM account holders ◄ and their branches with multi-addressee access;

(b) indirect participants of TARGET2, including those with multi-addressee access; and

(c) addressable BIC holders of TARGET2.

It shall be updated weekly.

2. Unless otherwise requested by the ►M3 PM account holder ◄ , its BICs shall be published in the TARGET2 directory.

3. ►M3 PM account holders ◄ may only distribute the TARGET2 directory to their branches and entities with multi-addressee access.

4. Entities specified in paragraph 1(b) and (c) shall only use their BIC in relation to one ►M3 PM account holder ◄ .

5. Participants acknowledge that the [insert name of CB] and other CBs may publish participants’ names and BICs. In addition, names and BICs of indirect participants registered by participants may be published and participants shall ensure that indirect participants have agreed to such publication.







TITLE III

OBLIGATIONS OF THE PARTIES

Article 10

Obligations of the [insert name of CB] and the participants

1. The [insert name of CB] shall offer the services described in Title IV. Save where otherwise provided in these Conditions or required by law, the [insert name of CB] shall use all reasonable means within its power to perform its obligations under these Conditions, without guaranteeing a result.

2. Participants shall pay to the [insert name of CB] the fees laid down in Appendix VI.

3. Participants shall ensure that they are connected to TARGET2-[insert CB/country reference] on business days, in accordance with the operating schedule in Appendix V.

4. The participant represents and warrants to the [insert name of CB] that the performance of its obligations under these Conditions does not breach any law, regulation or by-law applicable to it or any agreement by which it is bound.

Article 11

Cooperation and information exchange

1. In performing their obligations and exercising their rights under these Conditions, the [insert name of CB] and participants shall cooperate closely to ensure the stability, soundness and safety of TARGET2-[insert CB/country reference]. They shall provide each other with any information or documents relevant for the performance of their respective obligations and the exercise of their respective rights under these Conditions, without prejudice to any banking secrecy obligations.

2. The [insert name of CB] shall establish and maintain a system support desk to assist participants in relation to difficulties arising in connection with system operations.

3. Up-to-date information on the SSP’s operational status shall be available on the TARGET2 Information System (T2IS). The T2IS may be used to obtain information on any event affecting the normal operation of TARGET2.

4. The [insert name of CB] may either communicate messages to participants by means of an ICM broadcast or by any other means of communication.

5. Participants are responsible for the timely update of existing static data collection forms and the submission of new static data collection forms to the [insert name of CB]. Participants are responsible for verifying the accuracy of information relating to them that is entered into TARGET2-[insert CB/country reference] by the [insert name of CB].

6. The [insert name of CB] shall be deemed to be authorised to communicate to the SSP-providing NCBs any information relating to participants which the SSP-providing NCBs may need in their role as service administrators, in accordance with the contract entered into with the ►M3 TARGET2 network service provider ◄ .

7. Participants shall inform the [insert name of CB] about any change in their legal capacity and relevant legislative changes affecting issues covered by the country opinion relating to them.

8. Participants shall inform the [insert name of CB] of:

(a) any new indirect participant, addressable BIC holder or entity with multi-addressee access which they register; and

(b) any changes to the entities listed in paragraph (a).

9. Participants shall immediately inform the [insert name of CB] if an event of default occurs in relation to them.







TITLE IV

MANAGEMENT OF PM ACCOUNTS AND PROCESSING OF PAYMENT ORDERS

Article 12

Opening and management of PM accounts

1. The [insert name of CB] shall open and operate at least one PM account for each participant. Upon request by a participant acting as a settlement bank, the [insert name of CB] shall open one or more sub-accounts in TARGET2-[insert CB/country reference] to be used for dedicating liquidity.

2. [Insert if applicable: No debit balance shall be allowed on PM accounts].

3. [Insert if applicable: At the beginning and end of a business day, there shall be a zero balance on the PM accounts. Participants shall be deemed to have instructed the [insert name of CB] to transfer any balance at the end of a business day to the account designated by the participant].

4. [Insert if applicable: At the beginning of the next business day such balance shall be retransferred to the participant’s PM account].

▼M2

5. PM accounts and their sub-accounts shall either be remunerated at zero per cent or the deposit facility rate, whichever is lower, unless they are used to hold required minimum reserves. In such a case, the calculation and payment of remuneration of holdings of minimum reserves shall be governed by Council Regulation (EC) No 2531/98 of 23 November 1998 concerning the application of minimum reserves by the European Central Bank ( 15 ) and Regulation (EC) No 1745/2003 of the European Central Bank of 12 September 2003 on the application of minimum reserves (ECB/2003/9) ( 16 ).

▼B

6. In addition to the settlement of payment orders in the Payments Module, a PM account may be used to settle payment orders to and from Home Accounts, according to the rules laid down by the [insert name of CB].

7. Participants shall use the ICM to obtain information on their liquidity position. The [insert name of CB] shall provide a daily statement of accounts to any participant that has opted for such service.

Article 13

Types of payment orders

▼M3

The following are classified as payment orders for the purposes of TARGET2:

(a) credit transfer orders;

(b) direct debit instructions carried out under a direct debit authorisation;

(c) liquidity transfer orders; and

(d) PM to DCA liquidity transfer orders.

▼B

Article 14

Acceptance and rejection of payment orders

1. Payment orders submitted by participants are deemed accepted by the [insert name of CB] if:

(a) the payment message complies with the rules established by the ►M3 TARGET2 network service provider ◄ ;

(b) the payment message complies with the formatting rules and conditions of TARGET2-[insert CB/country reference] and passes the double-entry check described in Appendix I; and

(c) in cases where a payer or a payee has been suspended, the suspended participant’s CB’s explicit consent has been obtained.

2. The [insert name of CB] shall immediately reject any payment order that does not fulfil the conditions laid down in paragraph 1. The [insert name of CB] shall inform the participant of any rejection of a payment order, as specified in Appendix I.

3. The SSP determines the timestamp for the processing of payment orders on the basis of the time when it receives and accepts the payment order.

Article 15

Priority rules

1. Instructing participants shall designate every payment order as one of the following:

(a) normal payment order (priority class 2);

(b) urgent payment order (priority class 1);

(c) highly urgent payment order (priority class 0).

If a payment order does not indicate the priority, it shall be treated as a normal payment order.

2. Highly urgent payment orders may only be designated by:

(a) CBs; and

(b) participants, in cases of payments to and from CLS International Bank and liquidity transfers in relation to ancillary system settlement using the ASI.

▼M3

All payment instructions submitted by an ancillary system through the ASI to debit or credit the participants' PM accounts and all PM to DCA liquidity transfer orders submitted shall be deemed to be highly urgent payment orders.

▼B

3. Liquidity transfer orders initiated via the ICM are urgent payment orders.

4. In the case of urgent and normal payment orders, the payer may change the priority via the ICM with immediate effect. It shall not be possible to change the priority of a highly urgent payment order.

Article 16

Liquidity limits

1. A participant may limit the use of available liquidity for payment orders in relation to other TARGET2 participants, except any of the CBs, by setting bilateral or multilateral limits. Such limits may only be set in relation to normal payment orders.

2. Limits may only be set by or in relation to an AL group in its entirety. Limits shall not be set in relation to either a single PM account of an AL group member or by AL group members in relation to each other.

3. By setting a bilateral limit, a participant instructs the [insert name of CB] that an accepted payment order shall not be settled if the sum of its outgoing normal payment orders to another TARGET2 participant’s PM account minus the sum of all incoming urgent and normal payments from such TARGET2 participant’s PM account would exceed this bilateral limit.

4. A participant may set a multilateral limit for any relationship that is not subject to a bilateral limit. A multilateral limit may only be set if the participant has set at least one bilateral limit. If a participant sets a multilateral limit, it instructs the [insert name of CB] that an accepted payment order shall not be settled if the sum of its outgoing normal payment orders to all TARGET2 participants’ PM accounts in relation to which no bilateral limit has been set, minus the sum of all incoming urgent and normal payments from such PM accounts would exceed this multilateral limit.

5. The minimum amount of any of the limits shall be EUR 1 million. A bilateral or a multilateral limit with an amount of zero shall be treated as if no limit has been set. Limits between zero and EUR 1 million are not possible.

6. Limits may be changed in real time with immediate effect or with effect from the next business day via the ICM. If a limit is changed to zero, it shall not be possible to change it again on the same business day. The setting of a new bilateral or multilateral limit shall only be effective from the next business day.

Article 17

Liquidity reservation facilities

1. Participants may reserve liquidity for highly urgent or urgent payment orders via the ICM.

2. The AL group manager may only reserve liquidity for the AL group in its entirety. Liquidity shall not be reserved for single accounts within an AL group.

3. By requesting to reserve a certain amount of liquidity for highly urgent payment orders, a participant instructs the [insert name of CB] only to settle urgent and normal payment orders if there is available liquidity after the amount reserved for highly urgent payment orders has been deducted.

4. By requesting to reserve a certain amount of liquidity for urgent payment orders, a participant instructs the [insert name of CB] only to settle normal payment orders if there is available liquidity after the amount reserved for urgent and highly urgent payment orders has been deducted.

5. After receipt of the reservation request the [insert name of CB] shall check whether the amount of liquidity on the participant’s PM account is sufficient for the reservation. If this is not the case, only the liquidity available on the PM account shall be reserved. The rest of the requested liquidity shall be reserved if additional liquidity becomes available.

6. The level of the liquidity reservation may be changed. Participants may make a request via the ICM to reserve new amounts with immediate effect or with effect from the next business day.

Article 17a

Standing instructions for liquidity reservation and dedication of liquidity

1. Participants may predefine the default amount of liquidity reserved for highly urgent or urgent payment orders via the ICM. Such standing instruction or a change to such instruction shall take effect from the next business day.

2. Participants may predefine via the ICM the default amount of liquidity set aside for ancillary system settlement. Such standing instruction or a change to such instruction shall take effect from the next business day. Participants shall be deemed to have instructed the [insert name of CB] to dedicate liquidity on their behalf if the relevant ancillary system so requests.

Article 18

Predetermined settlement times

1. Instructing participants may predetermine the settlement time of the payment orders within a business day by using the Earliest Debit Time Indicator or the Latest Debit Time Indicator.

2. When the Earliest Debit Time Indicator is used, the accepted payment order is stored and only entered into the entry disposition at the indicated time.

3. When the Latest Debit Time Indicator is used, the accepted payment order shall be returned as non-settled if it cannot be settled by the indicated debit time. 15 minutes prior to the defined debit time, the instructing participant shall be sent an automatic notification via the ICM. Instructing participant may also use the Latest Debit Time Indicator solely as a warning indicator. In such cases, the payment order concerned shall not be returned.

4. Instructing participants can change the Earliest Debit Time Indicator and the Latest Debit Time Indicator via the ICM.

5. Further technical details are contained in Appendix I.

Article 19

Payment orders submitted in advance

1. Payment orders may be submitted up to five business days before the specified settlement date (warehoused payment orders).

2. Warehoused payment orders shall be accepted and entered into the entry disposition on the date specified by the instructing participant at the start of daytime processing, as referred to in Appendix V. They shall be placed in front of payment orders of the same priority.

3. Article 15(3), Article 22(2) and Article 29(1)(a) shall apply mutatis mutandis to warehoused payment orders.

Article 20

Settlement of payment orders in the entry disposition

1. Unless instructing participants have indicated the settlement time in the manner described in Article 18, accepted payment orders shall be settled immediately or at the latest by the end of the business day on which they were accepted, provided that sufficient funds are available on the payer’s PM account and taking into account any liquidity limits and liquidity reservations as referred to in Articles 16 and 17.

2. Funding may be provided by:

(a) the available liquidity on the PM account; or

(b) incoming payments from other TARGET2 participants, subject to the applicable optimisation procedures.

3. For highly urgent payment orders the ‘first in, first out’ (FIFO) principle shall apply. This means that highly urgent payment orders shall be settled in chronological order. Urgent and normal payment orders shall not be settled for as long as highly urgent payment orders are queued.

4. For urgent payment orders the FIFO principle shall also apply. Normal payment orders shall not be settled if urgent and highly urgent payment orders are queued.

5. By derogation from paragraphs 3 and 4, payment orders with a lower priority (or of the same priority but accepted later) may be settled before payment orders with a higher priority (or of the same priority which were accepted earlier), if the payment orders with a lower priority would net out with payments to be received and result on balance in a liquidity increase for the payer.

6. Normal payment orders shall be settled in accordance with the FIFO by-passing principle. This means that they may be settled immediately (independently of other queued normal payments accepted at an earlier time) and may therefore breach the FIFO principle, provided that sufficient funds are available.

7. Further details on the settlement of payment orders in the entry disposition are contained in Appendix I.

Article 21

Settlement and return of queued payment orders

1. Payment orders that are not settled immediately in the entry disposition shall be placed in the queues in accordance with the priority to which they were designated by the relevant participant, as referred to in Article 15.

2. To optimise the settlement of queued payment orders, the [insert name of CB] may use the optimisation procedures described in Appendix I.

3. Except for highly urgent payment orders, the payer may change the queue position of payment orders in a queue, i.e. reorder them, via the ICM. Payment orders may be moved either to the front or to the end of the respective queue with immediate effect at any time during daytim