Continuous gross settlement

The STEP2 SEPA Services use a Continuous Gross Settlement mechanism, or short CGS. It allows the gross settlement in real time of the payment orders that payment service providers exchange over the STEP2 SEPA Services.

Continuous Gross Settlement (CGS) allows settlement of STEP2 SEPA payments at any time the settlement windows are open, provided the involved participants have enough liquidity to cover their outgoing payments or incoming direct debits. This is why settlement can happen much faster in CGS than in the previously used cycle-based settlement.


EBA CLEARING, together with the users of the STEP2 SEPA Services, started to explore the idea of enhancing the settlement model of the STEP2 SEPA Services in 2013.

The go-live of RT1 in 2017 and subsequent ramp-up of instant payments made users see the benefits that a set-up with the Ancillary Systems Interface (AS) D Real Time could bring to the STEP2 SEPA Services. Additionally, some elements of the revised SIPS Regulation in 2017 provided further impulse to revisit the idea of changing the settlement mechanism of the STEP2-T System. After consulting its users, EBA CLEARING kicked off the CGS project in 2018.

In 2020, EBA CLEARING implemented the CGS mechanism in the STEP2-T System. CGS and the existing cycle-based settlement model co-existed until July 2022 to enable a phased, risk-minimising migration of the large STEP2 user community.

Key features

Under the CGS mechanism, the STEP2-T clearing and settlement process is currently operational on TARGET days and offers the following key features to its participants: 

  • continuous execution of payments in immediately available euro-denominated central bank funds
  • legal design catering for real-time processing of bulks and settlement of resulting bilateral payment orders on a transaction-by-transaction basis
  • immediate settlement of bilateral payment orders provided that sufficient funds are available
  • bilateral payment instructions that cannot be processed immediately are queued until sufficient funds are available
  • Optimisation algorithms: payment orders for which funds are then not available are queued and algorithms for optimal queue resolution are used, similar to what exists in RTGS payment systems.

Current benefits

  • Wider range of liquidity management tools and functions

  • A highly secure and resilient settlement process

  • Smoother processing mitigates operational risk throughout the day

  • Flexible evolution of the services in line with user needs

Future benefits

  • Faster settlement

  • Improved end-user service levels for bulk payments

  • Extended STEP2-T opening hours

  • Cross-service liquidity management (SCT & SDD)

How the clearing and settlement process works

Clearing and settlement phase

Each payment submitted to the STEP2-T System goes through three standard phases in a business day: 

  • Validation phase: from the opening time of the validation window until the relevant sending cut-off time, incoming and warehoused payments are validated in real time (or deferred validation when the payment is sent outside the opening times of the validation window). 
  • Settlement phase: positively validated payment orders are submitted to the Continuous Gross Settlement module and settled immediately provided that sufficient funds are available. Settlement instructions which are not settled immediately (due to insufficient funds) are queued until sufficient funds become available or cancelled when the settlement cut-off for the service is reached at the end of the business day.
  • Output phase: when settlement has been completed, STEP2 delivers the payments and reconciliation reports to the participants.


The principle of continuous gross settlement is that the processing of bulks of transactions occurs continuously during the periods the system is open for settlement, and bilateral payment instructions are settled immediately (provided funds are available), as in other RTGS systems such as T2 RTGS. The system queues any bilateral payment instructions that cannot be processed immediately. At the end of the business day, transactions in the queue that have not been settled will be cancelled. Each participant provides funds for its own payments for which it acts as the debtor party.