One of Danmarks Nationalbank’s most important tasks is to ensure the secure and efficient processing of payments to allow citizens, businesses, and banks to trade with each other with confidence. The heart of the Danish payments infrastructure is Kronos2, Danmarks Nationalbank’s system for settling payments in Danish kroner. The vast majority of Danish banks participate in Kronos2.
To future-proof Denmark’s payments infrastructure, Danmarks Nationalbank has decided to move payments and transfers in Danish kroner from Kronos2 to the pan-European platform for payments and securities trading, TARGET Services. The project is called TARGET DKK.
Several benefits from switching to TARGET Services
The decision to move payments in Danish kroner to TARGET Services in 2025 is based on extensive analysis and dialogue with the Danish financial sector. The switch to TARGET Services will ensure:
- One single platform for settlement of payments in Danish kroner.
- Strengthened IT security and a united front against cyber threats.
- Operational and developmental benefits. E.g.: TARGET Services is based on the ISO 20022, which is the new standard for financial messages. Migrating to TARGET Services ensures that payments in DKK are up to date on the latest message stand, well ahead the November 2025 deadline of adopting ISO 20022.
Continued own currency and monetary policy with TARGET DKK
TARGET Services is owned by the Eurosystem. However, Denmark is not part of the eurozone and has its own currency. Denmark conducts its own monetary policy – e.g. Danmarks Nationalbank sets interest rates on the current accounts, where the monetary policy counterparties can place their overnight liquidity and issues monetary policy loans to account holders.
The Danish krone and Danish monetary policy are not affected by the switch to TARGET Services. Collateral and monetary policy instruments are supported by Danmarks Nationalbank’s own system, SPI. SPI is based on the IT system Calypso, which Danmarks Nationalbank is already using.
Together, the settlement of Danish kroner in TARGET Services and SPI is named TARGET DKK.
Extensive collaboration on the project
The TARGET DKK project is responsible for moving payments in Danish kroner from Kronos2 to TARGET Services. The TARGET DKK project works in close cooperation with the European Central Bank (ECB), owners and operators of payment and settlement systems, Danmarks Nationalbank’s account holders, data centres, Finance Denmark and the Association of Local Banks, Savings Banks and Cooperative Banks in Denmark as well as other stakeholders from the Danish financial sector.
The total cost to Danmarks Nationalbank of implementing the TARGET DKK project is estimated to be kr. 310-370 million. Danmarks Nationalbank’s account holders, i.e. the banks and mortgage banks that becomes participants in the system, bear a part of the cost, estimated to kr. 90-120 million.
Parts of TARGET Services are already in use today
TARGET Services comprises three main systems: T2, T2S and TIPS. The main systems are supported by a number of common components, e.g. for managing static data and charging participants of usage fees. The current Danish payments infrastructure is already linked to some of the main systems.
-
T2 (formerly TARGET2). T2 processes large, time-critical payments between banks, also known as interbank payments. In addition, financial third parties (e.g. currency trading and retail payment systems) can participate in T2 to ensure efficient and secure payments between market participants. Today, Danish banks already participate in T2 to process payments in euros. From 2025, T2 also settles interbank and retail payments as well as currency exchange trades in Danish kroner.
-
TIPS (TARGET Instant Payment Settlement). TIPS settles instant payments in euro. In 2025, TIPS will also settle instant payments in Danish kroner. This means that TIPS replaces the Danish Straksclearing, Finance Denmark’s system for instant payments. Thus, the Straksclearing are phased out in 2025.
-
T2S (formerly TARGET2-Securities). T2S already settles securities transactions in euro and Danish kroner. T2S was connected to Kronos2 in 2016 and began settling Danish securities transactions in euro and Danish kroner in 2018. The phase-out of Kronos2 in 2025 entails minor adaptations to T2S.
Denmark has its own monetary policy and collateral rules and this is managed by in Danmarks Nationalbank’s system for collateral and monetary policy instruments (SPI). In SPI, participants has access to collateralized intraday credit and monetary policy loans.
The Danish payments infrastructure today
Payments infrastructure following migration to the TARGET Services platform
Access to and participation in TARGET Services
Participants access TARGET Services via the European Single Market Infrastructure Gateway (ESMIG). To access ESMIG, Participants must enter an agreement with one of two network providers, SWIFT or Nexi (formerly SIA-Colt), which are authorised by ECB to offer connectivity to ESMIG via their dedicated networks.
Participants interact with TARGET Services by exchanging financial messages in the ISO 20022 standard or by using the graphical user interface (GUI).
Account holders with low payments volume are able to outsource the administration of their account to another participant. This is called co-management and is a new model in Denmark. The benefit is that the account holder does not have to connect to TARGET Services via ESMIG, and that the other participant instructs payments on behalf.
Danmarks Nationalbank's participation agreements with the Eurosystem
Danmarks Nationalbank has three participation agreements with the Eurosystem.
The agreements allow Danmarks Nationalbank to use TARGET Services in Danish kroner to settle payments in T2, instant payments in TIPS and provide liquidity for the settlement of securities transactions in T2S. The agreements correspond to a T2 CPA, TIPS CPA and T2S CPA. The term CPA stands for Currency Participation Agreement.
These three agreements (CPAs) define the framework for what, when, and how the parties are required to deliver. The agreements primarily cover the obligations of the Eurosystem.
Danish kroner is already connected to T2S and Danmarks Nationalbank signed the T2S CPA in 2012.
In March 2024, Danmarks Nationalbank signed the T2 CPA and TIPS DCA. Each CPA consists of a main contract with appendices.