On 17 March 2025, the European Securities and Markets Authority (ESMA) published a statement (dated 14 March 2025) on the treatment of settlement fails with respect to the penalty mechanism under the Central Securities Depositories Regulation (CSDR), following the major incident that affected T2S and T2 on 27 February 2025.
On 27 February 2025, a major incident adversely affected T2S and T2. Due to a defective hardware component, both services suffered from a slowdown and subsequent unavailability from 08:07 CET and 10:15 CET, respectively. As a consequence of this outage, no settlement instructions, payment, ancillary system instructions or liquidity transfers between TARGET Services could be processed for several hours.
In the statement ESMA states that:
- The T2S and T2 major incidents on 27 February 2025 constitute a failure of the infrastructure component and as such the application of cash penalties for the failed settlement of T2S transactions/settlement instructions, and any directly or indirectly related transactions/settlement instructions at EEA central securities depositories (CSDs) is not justified.
- ESMA understands that Member State competent authorities converge on the supervisory stance that all settlement fails for the days of 27 and 28 of February 2025, and in all EEA CSDs, were impacted, directly or indirectly, by the T2S-T2 downtime and that cash penalties should not be applied.
- As per ESMA’s CSDR Q&As, cash penalties should not be applied in situations where settlement cannot be performed for reasons that are independent from the involved participants.