The European Central Bank (ECB) reported on Thursday that its critical transaction system, which processes approximately $1.9 trillion daily, suffered a major outage, disrupting interbank fund transfers across the eurozone. The unexpected failure left banks and financial institutions scrambling to assess the potential impact on the broader financial system.
The Bank of Greece confirmed that due to the outage, interbank transfers were “not currently possible.” Meanwhile, the ECB assured market participants that an emergency channel remained open for “very critical payments.”
Trading Disruptions and Settlement Delays
The outage affected the TARGET2 Securities (T2S) platform, the system responsible for settling trades in cash and securities across the 24 nations that use the euro. The ECB cited a “glitch in communication channels” as the cause but did not provide further details.
Financial market participants reported disruptions in communications with central securities depositories (CSDs), the entities responsible for completing stock, bond, and derivatives transactions. The status of trades executed since the outage was first detected at 07:30 GMT remained unclear by mid-afternoon.
Michael Thomas, a financial market structure expert at Hogan Lovells, warned of potentially significant consequences. “Where transactions are interdependent, a break in the chain can impact an entire series of trades,” he explained. “The longer the disruption, the greater the impact on liquidity, as cash cannot be realized due to unsettled securities transactions.”
Urgency to Restore Operations
The ECB stated that its teams were working to resolve the issue as quickly as possible and promised a further update at 16:00 GMT. According to the ECB’s website, previous issues with the T2S platform have typically been resolved swiftly, though Thursday’s outage remained unresolved for several hours.
Despite the disruption, European stock, currency, and bond markets continued trading normally, according to LSEG data. However, traders noted that since settlement of trades typically takes two working days, the full impact of the outage might not be felt until early next week.
A London-based trader noted that their team had “little precedent for such an outage,” adding that the ECB was under intense pressure to restore the system before the day’s settlement deadline.
Uncertain Impact on Major Financial Institutions
Clearstream, a key CSD, confirmed on its website that settlement of euro-denominated securities would be delayed. Euroclear, another major CSD, did not immediately respond to requests for comment, though sources familiar with the matter suggested some Euroclear clients might also experience transaction delays.
As the ECB worked to resolve the issue, market participants remained on edge, wary of potential liquidity constraints and broader financial repercussions if the outage extended further.
