A Deloitte review of an extended Target2 outage last year identifies crisis management as a key failure in the recovery efforts of the European Central Bank.
The ECB blamed a software defect at a third party technology provider for the outage that downed the Target2 settlement system for almost 11 hours in October 2020.
With Target2 down, and the backup site failing to boot up, central banks and financial institutions across the Eurozone were unable to process transactions, transfer liquidity, or settle securities transactions. Data published by the ECB indicates that the glitch resulted in a €416 billion slump in the use of the deposit facility at the central bank.
The ECB commissioned Deloitte to conduct an independent review in November 2020 after the extended outage. In total, five major IT-related incidents occurred in 2020, affecting payment transactions and securities processing of the Target Services that are operated by four central banks on behalf of the Eurosystem.
Deloitte's report lists weaknesses in several areas, including business continuity management, fail-over and recovery testing, and communication protocols in crisis situations. In total, the review issued 18 detailed recommendations.
States the ECB: "Measures addressing several recommendations have already been agreed or implemented. For example, in 2020 the Eurosystem decided to establish a more comprehensive second line of defence for all the Target Services, which has already been partially implemented, and which will be fully operational by the end of 2021. The Eurosystem has also improved its external communication with market participants after dedicated industry workshops that were held in the first quarter of 2021.
"The Eurosystem is committed to decisively implement the other recommendations as soon as possible. Market participants will be kept informed about the deployment of the measures."