Investigation into the Riksbank’s future settlement services

Growing internationalisation, where banks and others are active on several markets, increases the requirements for harmonisation and thus also the use of common standards. Additionally, there is a need for payment systems to manage increasingly large amounts of data and to be able to interact with other systems. Another challenge is the operational risks that arise when the financial infrastructure is used by an increasing number of actors, at an increasingly fast pace and at a greater distance. This development leads to greater demands with regard to security (especially cyber security) and robustness in the systems, to ensure they are resilient to attacks and maintain a high degree of continuity.
The Riksbank's conclusion in the in-depth analysis of the T2 and T2S platforms is that we see several advantages in being part of a larger system for settlement services to better meet these challenges.

Why choose T2?

T2 is the Eurosystem’s technical platform for the settlement of large-value payments. The platform was operationalised in March 2023, replacing the earlier TARGET2 platform. T2 has the capacity to manage different currencies and it is therefore possible for the Riksbank to make use of the platform for the settlement of large-value payments and payments from financial market infrastructures (FMIs) in SEK.

It is important that the Riksbank, in the event of a change of settlement system for payments, can continue to fulfil its task under the Riksbank Act in all areas of the Riksbank's operations. In the in-depth analysis, the Riksbank makes the assessment that the T2 platform enables this and that being part of a collective with a common platform carries major advantages for the Riksbank. The T2 platform has very good redundancy from an operational perspective, but also from an organisational perspective, as several central banks are jointly responsible for maintaining its operation. The Riksbank's assessment is that, with the Eurosystem as supplier of the application and operation, we will increase the prerequisites for ensuring a robust, stable and efficient payment settlement system in the long term.

The Executive Board has therefore decided to negotiate a contract with the Eurosystem for the T2 platform. Contract negotiations will start in 2024, the transition is planned to start in 2025 and is expected to take around five years. RIX participants will be consulted in the process of developing a timetable for the transition. More information on the forthcoming process will be published on the Riksbank’s website.

Read more about the in-depth analysis of T2: Link to decision and decision guidance

What does upholding the strategic decision on T2S entail?

T2S (TARGET2-Securities) is the Eurosystem’s platform for securities settlement. If the Riksbank provides SEK on the platform, the settlement transactions in securities in exchange for SEK in central bank money will be carried out on T2S. This means that central securities depositories such as Euroclear Sweden, will have to use T2S for their securities clearance service in SEK in central bank money. The in-depth analysis has therefore also looked at the impact of a potential on-boarding on the Swedish securities market.

With regard to T2S, the in-depth analysis resulted in the Riksbank upholding the strategic decision to transfer securities settlement to the T2S platform. The reason why the analysis did not result in a decision to enter into contractual negotiations with the ECB is that the Riksbank and market participants do not consider it appropriate to move both settlement services at the same time. A transition to the T2 platform should therefore be implemented before a transition to the T2S platform is initiated, which means that contract negotiations are several years ahead.  

The in-depth analysis has been summarised in a Riksbank study. In the preface to this study, the Executive Board emphasises the importance of the Swedish securities market complying with the standards that exist for securities settlement and corporate actions to enable a harmonised European market. More information on the ongoing harmonisation work can be found on the page Harmonisation of the financial infrastructure.

The Executive Board also states that the use of the T2S platform is the most appropriate way to ensure that this development takes place in the long term. When the decision is to be taken in the future, the key preconditions in the Riksbank study will need to be addressed again.

Read more in the Riksbank study: In-depth analysis of T2S platform