The associations have cited impacts from Covid-19 and SWIFT’s decisions to delay ISO 20022 migration for cross-border payments as the primary reasons for the requested delay.
Four European banking bodies have written to the ECB (European Central Bank) requesting a one-year delay for the ongoing project to consolidate TARGET2 and TARGET2 Securities.
The project was due to be completed in November 2021, to consolidate and optimise the provision of the TARGET2 and T2S services and to address the increasing demand for having an effective facility for the provision of liquidity to existing and future Eurosystem payment and settlement services.
According to the letter, the Covid-19 crisis is creating “severe constraints” on banks’ ability to progress with the consolidation project due to requests from national authorities for them to focus on their core activities to finance the economy and maintain payments system stability.
Further, the lockdown situation has impacted the availability of resources for IT and software development projects. As some forms of social distancing are expected to remain for “an extended period of time”, it will present further challenges for banks to coordinate complex project activities such as the T2-T2S consolidation, the associations say.
The delay is also being requested in response to the March decision by SWIFT to delay the migration of cross-border payments to ISO 20022 to November 2022.
The letter says the one-year lag between ISO 20022 high value euro payments migration and cross border payments ISO 20022 migration causes “important additional work for the banking community”, including the implementation of market practice guidelines to ensure that there is no data truncation for cross-border ‘leg-out’ payments.
“This requires all affected parties to reconsider their cross border payments strategy and re-engineer their internal projects, concept and documentation to deal with the mismatch of message types being introduced,” the letter said.
“This conceptual work requires sufficient time and cooperation amongst the European industry which in the current non-business as usual set-up is likely to take longer than normally.”
While SWIFT is working with the banking industry and the ECB to provide further guidance, the letter suggests this will not provide enough time for banks to assess the impacts of any proposed remedies and adapt their project plans in time for the November 2021 deadline.
“Since the implementation is to be by means of a ‘big bang’, failure is not an option which means that the project is dependent on the weakest link in the chain being ready notwithstanding any unexpected and unforeseen events for which adequate contingency is considered to be essential.”
The full letter is available here.
The letter was jointly written by the EBF (European Banking Federation), ESBG (European Savings Banks Group), EACB (European Association of Co-operative Banks) and EAPB (European Association of Public Banks).