The European Central Bank announced on Thursday that it had resolved an unprecedented outage in its payment system, Target 2, affecting transactions totaling trillions of euros. This disruption impacted inter-bank transactions crucial to the euro zone's economy. While not directly affecting regular customers, it raised concerns about the behind-the-scenes transactions.
Despite causing disruptions during U.S. trading, banks managed to process backlogs after the ECB reactivated the system following a seven-hour hiatus. The ECB assured normal functioning of Target 2 with delayed settlement deadlines, attributed the issue to a "hardware defect," and confirmed no malicious activity.
The pan-European TARGET 2 Securities (T2S) platform, used for cash and securities trades, also resumed after a communication glitch, with trading deadline extended. However, disruptions persisted in communications affecting central securities depositories (CSDs), crucial for financial markets.
Market structure expert Michael Thomas highlighted potential consequences due to delayed settlement impacting financial system liquidity. Although European financial markets appeared unaffected, settlement delays may surface next week due to the two-day settlement process.
Central counterparties ensure trade completion, with CSDs managing the final settlement. Clearstream noted euro security settlement delays, while Euroclear clients might also experience processing delays. The impact of the outage was significant, with repercussions potentially unfolding in the coming days.