Appendix IV BUSINESS CONTINUITY AND CONTINGENCY PROCEDURE

This Appendix sets out the arrangements between the ECB and participants, or ancillary systems, if one or more components of the SSP or the telecommunications network fail or are affected by an abnormal external event, or if the failure affects any participant or ancillary system.

F1All references to specific times in this Appendix are to the local time at the seat of the ECB, i.e. Central European Time (CET) ^f1 .

In the event that an abnormal external event occurs and/or there is a failure of the SSP or the telecommunications network which affects the normal operation of TARGET2, the ECB shall be entitled to adopt business continuity and contingency processing measures.

The following main business continuity and contingency processing measures shall be available in TARGET2:

1. (i)

   relocating the operation of the SSP to an alternative site;

2. (ii)

   changing the SSP's operating hours; and

3. (iii)

   initiating contingency processing of very critical and critical payments, as defined in paragraph 6(c) and (d) respectively.

In relation to business continuity and contingency processing measures, the ECB shall have full discretion regarding whether and which measures are adopted to settle payment orders.

Information about the failure of the SSP and/or an abnormal external event shall be communicated to participants through the domestic communication channels, the ICM and T2IS. In particular, communications to participants shall include the following information:

1. (i)

   a description of the event;

2. (ii)

   the anticipated delay in processing (if known);

3. (iii)

   information on the measures already taken; and

4. (iv)

   the advice to participants.

In addition, the ECB may notify participants of any other existing or anticipated event which has the potential to affect the normal operation of TARGET2.

In the event that any of the events referred to in paragraph 2(a) occurs, the operation of the SSP may be relocated to an alternative site, either within the same region or in another region.

F2In the event that the operation of the SSP or the T2S Platform, as referred to in Annex II, is relocated from one region (Region 1) to another region (Region 2), the participants shall endeavour to reconcile their positions up to the point of the failure or the occurrence of the abnormal external events and provide to the ECB all relevant information in this respect.

F3Where a F4PM to T2S DCA liquidity transfer order is debited on the participant's PM account on the SSP in Region 1, but, after reconciliation, is not shown as debited on the SSP in Region 2, the CB responsible for the participant shall debit the participant's PM account in Region 2 to return the participant's PM account balance to the level it had prior to the relocation.

The daytime processing of TARGET2 may be extended or the opening time of a new business day may be delayed. During any extended operating time of TARGET2, payment orders shall be processed in accordance with the terms and conditions of TARGET2-ECB, subject to the modifications contained in this Appendix.

Daytime processing may be extended and the closing time thereby delayed if an SSP failure has occurred during the day but has been resolved before 18.00. Such a closing time delay shall in normal circumstances not exceed two hours and shall be announced as early as possible to participants. If such a delay is announced before 16.50, the minimum period of one hour between the cut-off time for customer and interbank payment orders shall remain in place. Once such a delay is announced it may not be withdrawn.

The closing time shall be delayed in cases where an SSP failure has occurred before 18:00 and has not been resolved by 18.00. The ECB shall immediately communicate the delay of closing time to participants.

Upon recovery of the SSP, the following steps shall take place:

1. (i)

   The ECB shall seek to settle all queued payments within one hour; this time is reduced to 30 minutes in the event that the SSP failure occurs at 17.30 or later (in cases where the SSP failure was ongoing at 18.00).

2. (ii)

   Participants' final balances shall be established within one hour; this time shall be reduced to 30 minutes in the event that the SSP failure occurs at 17.30 or later, in cases where the SSP failure was ongoing at 18.00.

3. (iii)

   At the cut-off time for interbank payments, the end-of-day processing, including recourse to the Eurosystem standing facilities shall take place.

Ancillary systems that require liquidity in the early morning need to have established means to cope with cases where the daytime processing cannot be started in time due to an SSP failure on the previous day.

F5If the ECB deems it necessary to do so, it shall initiate the contingency processing of payment orders using the Contingency Solution of the SSP. In such cases, only a minimum service level shall be provided to participants. The ECB shall inform its participants of the start of contingency processing by any available means of communication.

In contingency processing, payment orders shall be submitted by the participants and authorised by the ECB. In addition, the participants may submit files containing payment instructions, which may be uploaded into the Contingency Solution by the ECB.

The following payments shall be considered as ‘very critical’ and the ECB shall use best efforts to process them in contingency situations:

1. (i)

   CLS Bank International-related payments, with the exception of payments related to the CLS CCP service and, at the discretion of the Governing Council, the CLSNow service;

2. (ii)

   end-of-day settlement of EURO1; and

3. (iii)

   central counterparty margin calls.

Payments required to avoid systemic risk shall be considered as ‘ critical ’ and the ECB may decide to initiate contingency processing in relation to them.

Participants shall submit payment orders for contingency processing directly into the Contingency Solution and information to payees shall be provided through encrypted and authenticated email, as well as via authenticated fax Participants shall submit files which contain payment instructions to the ECB for uploading into the Contingency Solution and which authorise the ECB to do so. The ECB may, exceptionally, also manually input payments on behalf of participants. Information concerning account balances and debit and credit entries may be obtained via the ECB.

Payment orders that have already been submitted to TARGET2-ECB, but are queued, may also undergo contingency processing. In such cases the ECB shall endeavour to avoid the double processing of payment orders, but the participants shall bear the risk of such double processing if it occurred.

For contingency processing of payment orders, participants shall provide additional collateral. During contingency processing, incoming contingency payments may be used to fund outgoing contingency payments. For the purposes of contingency processing, participants' available liquidity may not be taken into account by the ECB.

In the event that a participant has a problem that prevents it from settling payments in TARGET2 it shall be its responsibility to resolve the problem. In particular, a participant may use in-house solutions or the ICM functionality, i.e. backup liquidity redistribution and backup contingency payments (e.g. CLS, EURO1).

If a participant decides to use the ICM functionality for making backup liquidity redistribution, the ECB shall, if the participant so requests, open this functionality via the ICM. If the participant so requests, the ECB shall transmit an ICM broadcast message to inform other participants about the participant’s use of backup liquidity redistribution. The participant shall be responsible for sending such backup liquidity redistribution exclusively to other participants with which it has bilaterally agreed on the use of such payments and for any further steps in relation to such payments.

If the measures referred to in subparagraph (a) are exhausted or if they are inefficient, the participant may request support from the ECB.

In the event that a failure affects an ancillary system, that ancillary system shall be responsible for resolving the failure. If the ancillary system so requests, the ECB may act on its behalf. The ECB shall have discretion to decide what support it gives to the ancillary system, including during the night-time operations of the ancillary system. The following contingency measures may be taken:

1. (i)

   the ancillary system initiates clean payments (i.e. payments that are not linked to the underlying transaction) via the Participant Interface;

2. (ii)

   the ECB creates and/or processes XML instructions/files on behalf of the ancillary system; and/or

3. (iii)

   the ECB makes clean payments on behalf of the ancillary system.

The detailed contingency measures with respect to ancillary systems shall be contained in the bilateral arrangements between the ECB and the relevant ancillary system.

In the event that certain data are unavailable because one of the events referred to in paragraph 3(a) has occurred, the ECB is entitled to start or continue processing payment orders and/or operate TARGET2-ECB on the basis of the last available data, as determined by the ECB. If so requested by the ECB, participants and ancillary systems shall resubmit their FileAct/Interact messages or take any other action deemed appropriate by the ECB.

F6In the event of a failure of the ECB, some or all of its technical functions in relation to TARGET2-ECB may be performed by other Eurosystem CBs or the operational team of the SSP .

The ECB may require that the participants participate in regular or ad hoc testing of business continuity and contingency processing measures, training or any other preventative arrangements, as deemed necessary by the ECB. Any costs incurred by the participants as a result of such testing or other arrangements shall be borne solely by the participants.