This presentation talks about T2 and T2S Consolidation in a nutshell and was presented by PwC at the 2020 ECB Target conference.

1. T2-T2S
Consolidation
How to be compliant in time?
January 2020

2. PwC
2T2 – T2S Consolidation
T2-T2S Consolidation in a nutshell
The European Central Bank (ECB) has adopted a strategy called “Vision 2020” in order to develop the current market infrastructures and to improve the provided services.
T2-T2S Consolidation is one of the three initiatives that have been introduced along with TIPS and ECMS. Under T2-T2S Consolidation, the Euro-system seeks to maximize the
synergies between TARGET2 (T2) and TARGET2-Securities (T2S) by integrating the provision of securities and cash settlement services, and by introducing new functions that
satisfy the latest market needs. The consolidation of technical, application and infrastructural elements should further boost the use of the services provided, while continuously
guarantee high levels of security in line with international best practices and standards.
Objectives and key changes of T2-T2S Consolidation project
• The ultimate goal of the Consolidation project is to:
• promote the integration and harmonization of the financial services linked to
securities and cash;
• identify new services to support the financial markets, financial intermediaries,
citizens and firms in Europe;
• promote innovation in securities and cash settlement services and the
modernization of the Eurosystem market infrastructures.
• The Consolidation aims to a technical harmonization of the current market
infrastructure to protect systems and data against the cyber-attacks.
• The project will further lead to the unification of an access to systems of TARGET via a
unique gateway and to the convergence of common components of TARGET systems.
• RTGS framework will establish new functionalities and will optimize those currently
existing, including the introduction of the multi-currency concept in the system.
Accounting
New account structure
for all participants:
Main Cash Account
(MCA), Dedicated
Cash Account (DCA)
Operations
New automatic
liquidity transfer,
extension of the
settlement window
for the processing
of payments
Single gateway
(ESMIG) connectivity
via two granted
Network Service
Providers
Connectivity
ISO 20022 standards;
shift from the current
Y-copy model to the
new V-shape model
Message standards

3. PwC
3T2 – T2S Consolidation
Milestones defined by the ECB and macrophases of the project
Reporting to the national Central Bank (for 2021 to be further specified)
2018 2019 2021
31st December
Set-up of the T2 -
T2S Consolidation
project
31st July
NSP
procurement
completed
31st October
Software
development
completed
31st December
1. Internal tests
completed
2. Network
connectivity tests
start
Connectivity tests
completed; start of
the community
tests
30th September
1. UAT completed
2. Contractual and legal
adaptations completed
3. Internal staff training
completed
4. Operational procedure
adaptations completed
31st October
Migration activities
on production
environment ready
to start
22nd November
Go-live of T2 service
(first business day)
5th November31st March
Impact
Assessment
start
28th February
Migration activities
completed
Test of internal
applications start
30th June
1. Drafting of internal app.
documentation completed
2. Start of the internal
software development
3. NSP selection and
contract preparation
completed
31st March
31st December
NSP design strategy
and planning
completed
30th September
Impact
Assessment
completed
31st July
NSP selection
criteria
completed
2020
today

4. PwC
4T2 – T2S Consolidation
ECB Assessment of the Community readiness (as of November 2019)
Previous
milestones*
IAD1
100%
PES
96%
Project start
(31/12/2018)
Impact
assessment start
(31/03/2019)
Current milestones*
IAD3
84% IAD2
72%
Impact assessment
completed
(30/09/2019)
Drafting of internal
applications
documentation start
(30/09/2019)
NSP1
84%
NSP selection criteria
completed
(15/07/2019)
• ECB approved the overall Key Milestones in order to ensure the monitoring of the readiness of the different
communities to migrate and to ensure a successful and timely big-bang migration in November 2021.
• In November 2019, ECB published an assessment of the Community readiness and the confidence levels of
the achievement of the Key Milestones as reported by the Central Banks.
• 14 out of 25 (56%) Central banks reported a confidence level “Green” for the ability of their community to go-
live, i.e. they feel fully confident and did not identify any significant risk.
• Certain participants expressed the following concerns:
• Still ongoing UDFS finalization to start their internal documentation
• Challenging projects’ efforts (e.g. ISO 20022 standards or instant payments)
• Insufficient time to perform all required activities to reach defined milestones
• Uncertain NSPs costs and T2 service pricing
Confidence level to go live in November 2021 and completion of the Key Milestones of the ECB by European Central Banks
* % of Central Banks that reported completion of the milestone
Confidence level to Go-live in November 2021 as a % of
Central Banks that expressed the level of confidence as
“Green” (by 33% less compared to the survey performed
in April 2019).
56%

5. PwC
5T2 – T2S Consolidation
Set up of the project: Project
Governance & Planning
Impact analysis and definition of
Target Operating Model (TOM)
Specification of Business
Requirements (BRs) and vendor
selection process
Test & Go-Live of T2 Services
• Definition of the project plan
• Identification of stakeholders and
project chart structure
• Capacity plan
• Communication to relevant
stakeholders
• Monitoring of the project
• Process mapping
• Impact and gap analysis, effort
estimations
• Assessment of a current IT
architecture, design of a future one
• Definition of a business case
• Definition of a TOM
• Definition of operational and
technical Business Requirements
• Support in a software selection
process
• Quantitative and qualitative
evaluation of vendors’ software • Testing strategy
• Internal and external tests
• Go-Live strategy definition
• Post Go-Live early care
PwC’s support covers all macrophases of the project
Set up Impact analysis and definition of TOM BRs specification and vendors selection Test & Go-Live

6. PwC
6T2 – T2S Consolidation
Set up of the project: Project Governance & Planning
• More than a year of experience from
various T2-T2S Consolidation
assignments
• Expertise in the impact analysis and
identification of all impacted areas
across bank’s environment
• Definition of the structured project plan
and project chart clearly describing
roles and responsibilities
• Monitoring of the project’s
performance and communication,
including management of escalations,
and reporting to a national central bank
• Capacity plan based on each client’s
needs
• Communication with the top
management and cooperation on the
evaluation of strategic decisions and
planning
• A precise project planning is one of
the key aspects to ensure the timely and
accurate reporting to the ECB and to
comply with defined milestones.
• A project’s governance must be well
defined and should include a clear
definition of roles and
responsibilities, ensure the monitoring
and controls and effective management
of the project’s activities.
• The involvement of all impacted
business areas from the beginning is a
paramount in order to avoid delays in
the achievements of project’s objectives
and guarantee the quality of the
delivery.
• Regular meetings with the identified
key stakeholders are fundamental to
guarantee the adoption of right strategic
decisions.
PwC support Lessons Learnt
Steering
Committee
Correlated projects
e.g.: CB, Euro1, ECMS,
TIPS, etc.
Project
Leader
Structure of the on
demand support
▪ Audit
▪ Risk
▪ Compliance (Embargo,
AML, Antifraud)
PMO -
Governance
OperationsTreaury Payment Solutions
Business steam
Processes stream
ICT stream
Q1
2019
Q2 Q3 Q1Q4 Q3Q2 Q1Q4 Q4Q3Q2
2020 2021
Governance
Analysis and development
Strategy
Infrastructure and NSP
Go Live & Early Care
Messages XML
People & Organization
Test & Migration
Clients
Project plan
Project chart
Main outputs
Set up Impact analysis and definition of TOM BRs specification and vendors selection Test & Go-Live

7. PwC
7T2 – T2S Consolidation
Impact analysis and definition of Target Operating Model
• Assessment of the impacts on the
identified areas by evaluating relevant
documentation and interviews with
identified stakeholders
• Mapping of current processes,
account structure and ICT
architecture
• Evaluation of operational and
technological impacts due to the
Consolidation project
• Collection of estimations on efforts
needed due to the migration
• Assessment of new business
opportunities and market benchmarks
• Specification of the business case and
comparison of scenarios
• Design of the Target Operating Model
• The main impacted areas have been so
far identified as Treasury, Compliance,
Core Payments and Network
Connectivity (e.g. SWIFT).
• Based on experiences from previous
and ongoing projects, banks tend to
stick to the current operational model.
Only those banks that today use T2
value added service to manage T2S
Dedicated Cash Accounts (DCA) are
forced to adjust their model and to
modify the way in which they manage
liquidity across cash accounts due to the
technical platform changes.
• Generally, banks that are currently
running the T2-T2S Consolidation
project (in addition to the analysis of
requirements due to the Consolidation)
assess also Cross Border XML and
EBA Euro1 migration changes. Using
synergies between projects, banks
benefit from the increased cost
efficiency.
Lessons Learnt
TOM
Impact analysis
Main outputs
Interviews and
collection of
documentation
Mapping
current state
(Business and
ICT)
Analysis of the
operational
impacts
Analysis of the
technical
impacts
Gap analysis
between current
state and future
TOM
Estimation collection
and preliminary project
budget preparation
Document mapping the
operativity of the Treasury,
accounts’ structure and
applications’ architecture
(As-Is)
Worksheet summarizing the
gap analysis and the effort
estimations for the
impacted applications
Deliverables
Target Operating Model
Current needs
of business
New business
opportunities
Market
benchmark
Comparison of
the possible
scenarios
Set up Impact analysis and definition of TOM BRs specification and vendors selection Test & Go-Live
PwC support

8. PwC
8T2 – T2S Consolidation
Specification of BRs and vender selection process
• Specification of business
requirements and drafting of
operational and technical BRs
• Analysis of changes in message fields
on payments side
• Preparation of the framework
(Scorecard) to support the selection of
the Network Service Provider (NSP) or
other vendor application providers
(for treasury, payments, etc.)
• Support during the RFI and RFP
process and drafting of the
documentation providing the
quantitative and qualitative
estimations to be presented to the top
management
• Preparation of the supporting materials
to assist a client during the phase of the
SLA definition
• The phase of definition of BRs is the
best moment to clarify and assess
business needs from either operational
and technical perspective.
• The analysis of message fields
changes on a payments side is one of
the biggest challenges in the phase of
BRs specification. It is a crucial activity
to precisely draft BRs.
• Particular attention should be made in
case of a new connectivity solution.
Within the analysis of a potential change
of the current NSP or Service Bureau,
the bank should consider not only the
Eurosystem connectivity related to
ESMIG, but also impacts on the entire
market infrastructure to which the
bank is connected (i.e. Retail
payments, Cross-border payments, EBA
Euro1, Instant Payments, Step2 and
local payment systems) in order to
prevent inefficiencies from cost,
technical and operational perspective.
Lessons Learnt
Business Requirements
Vendor selection
Main outputs
Operational BRs
Critical analysis of the
internal processes in the
diverse Business Units,
evaluating the TOM
Technical BRs
Analysis of the technical
impacts based on UDFS
and the requirements
linked to the selection of
vendor(s)
Preliminary meetings
to evaluate the
connectivity strategy
and VAS offered by
the potential vendors
Definition of the
selection criteria for
vendors
Evaluation
of the
functional
offers
Successive
contractual
phase SLA
definition
Evaluation of
the economic
proposals
Scorecard to
assess the
vendors’ solutions
Set up Impact analysis and definition of TOM BRs specification and vendors selection Test & Go-Live
PwC support

9. PwC
9T2 – T2S Consolidation
Test & Go-Live of T2 Services
• PwC offers proven technical
experience which covers the entire
cycle of the end-to-end data migration
and all phases of testing.
• PwC provides strong knowledge and
lessons-learnt of T2-T2S topics
obtained during the previous and
ongoing engagements within diverse
clients’ environments and the
experience from the T2S project
assignments from 2013 to 2017
• Thanks to a wide network of
professionals, PwC supports both
horizontal and vertical project
governance to guarantee that efficient
planning, monitoring, controls and
communication are in place. This leads
to achievement of defined goals and
enables to timely address potential
critical points.
Tasks and activities
The implementation phase covers a complex framework for testing activities and Go-Live preparation, requiring detailed action plan.
To be ready for Go-Live in November 2021, the planning of internal tests need to be aligned with ECB’s milestones and the
internal tests (not connected to ESMIG) should be completed before the end of the year 2020.
Internal tests External tests
2020 2021
System Integration
Tests performed in order to control
the integration of all configurations
and technical details. In general,
testing tools are used to monitor its
execution.
Connectivity
Tests performed to verify the right
connection to the platform (ESMIG),
processing of messages, correct
reception of the messages and their
confirmation.
Community (E2E Testing)
Mandatory tests stipulated by the
ECB, organized and performed in
cooperation with other participants
adhering to the new payment
platform.
For the successful Go-live, it is essential
that all involved actors are informed in
timely manner about project’s activities
and timeline.
• Runbook
• Early Care
• Fallback scenarios
• Communication process
Pre-defined procedures are performed.
The role of PwC comprises a close
cooperation with the client.
• Coordination of the project
• Monitoring of the activities
• Respond to critical issues
PwC supports the client in the management of
daily operations and in the resolution of
potential problems arising in the production
environment.
• Identification of Business as usual (BAU)
• Definition of the detailed daily plan
• Monitoring of activities per stream
Preparation for Go-Live Go-Live Early care
Set up Impact analysis and definition of TOM BRs specification and vendors selection Test & Go-Live
PwC support

10. PwC
10T2 – T2S Consolidation
PwC Network: Build trust in society and solve important problems
Advisory services provide the partnership to the clients in the projects of transformation and optimization of the processes of a core business, offer high quality governance and
overall project management. PwC has a deep know-how across markets and industries and benefits from the broad experience in the areas of Finance, Operations, People &
Change, Strategy and Technology.
PwC network comprises more than 276.000 professionals all over the world that works closely together to ensure the highest quality of the services in audit, strategic, legal and
tax consulting to the various clients. PwC offers a wide range of integrated and multidisciplinary services. The great strength of the PwC’s network is the capability to combine
the know-how of local markets with global perspectives, providing the start-to-end consulting initiating from the strategic planning and finalizing in the implementation of the
identified solutions.
Development of the tailor-made
strategies thanks to experience from
working with clients of diverse
dimensions and needs
Identification of main attention points
and risks for each specific client
ensuring the effective coordination of
the working groups
The approach based on high
quality and low risk thanks on
the deep knowledge of the
market
Vertical and horizontal
management of the project
including potential innovations and
upgrades on a structural level
Close cooperation with the client
and communication to the top
management addressing the critical
matters
Task force dedicated to solve the
potential risks and issues identified
during the project
Know-how Solutions Support

11. PwC
T2 – T2S Consolidation 11
Contacts
Andrea Laurenti
Associate Partner
PwC Advisory
Mobile: + 39 348 15 05 630
Mail: andrea.laurenti@pwc.com
Daria Iafolla
Senior Manager
PwC Advisory
Mobile: +39 340 58 45 383
Mail: daria.iafolla@pwc.com
Matteo Pigatto
Manager
PwC Advisory
Mobile: +39 344 15 25 092
Mail: matteo.pigatto@pwc.com
Dr. Thomas Schönfeld
Director
PwC Advisory
Mobile: + 49 171 33 99 739
Mail: thomas.schoenfeld@pwc.com

12. pwc.com
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