Migration of Danish kroner to TARGET Services

Abstract icon Danmarks Nationalbank is working on a project, which is going to migrate the settlement of Danish kroner to the European payment and securities settlement platform TARGET Services in 2025. A migration of Danish kroner to TARGET Services future-proofs the payment settlement system in Denmark through a harmonized and consolidated settlement of Danish kroner to the joint European platform.

One of Danmarks Nationalbank's objectives is to contribute to the safe and efficient settlement of payments. The Kronos2 payment system plays a central role in the infrastructure, both in connection with the settlement of large, time-critical payments between banks (interbank payments) and due to Danmarks Nationalbank's role as a settlement bank for other payment and settlement systems.

Based on a preliminary analysis and dialogue with the financial sector, Danmarks Nationalbank has decided to migrate Danish kroner to the forthcoming European consolidated payment and securities settlement platform TARGET Services in 2025. A migration of Danish kroner to TARGET Services will ensure:

  • a single platform for settlement of Danish kroner

  • strengthened information security and a common front against cyber threats

  • a harmonised infrastructure with increased operational benefits in relation to maintenance and further development 

TARGET Services consists of the T2 payment system, the T2S securities settlement system and the TIPS instant payment system. Danish euro securities have been settled in the T2S system since 2016 and likewise for Danish kroner securities since 2018. The migration will replace the existing payment system – Kronos2 – with the European T2 payment settlement system. Furthermore, Danish kroner will be connected to TIPS (TARGET Instant Payment Settlement). The migration can be regarded as a next logical step as it will consolidate all settlements involving Danish kroner on one platform.

The basic payment functionalities of Kronos2 and TARGET Services are very similar. However, there are differences that will require harmonisation to TARGET Services, such as changes in the monetary policy day, collateral, and monetary operations.

TARGET Services is accessed via the European Single Market Infrastructure Gateway (ESMIG). Participants must enter into an agreement with one of the two network providers, SWIFT or SIA-Colt, both of which are authorised to offer access to ESMIG through their dedicated networks. All communication via ESMIG follows the ISO20022 message format standard.

Until go-live in 2025, the work of migrating Danish kroner to TARGET Services will take place in close collaboration with the ECB, European central banks, payment and settlement systems, and representatives of the Danish financial sector.

Danmarks Nationalbank's total cost of migrating Danish kroner to Target Services is estimated to be kr. 310-370 million. A share corresponding to kr. 90-120 million will be covered by the institutions becoming participants in the system.