How to manage liquidity with SEPA Instant

It’s 3 a.m. in Paris.

A customer of yours – a multinational construction company – has just closed a deal for a multi-million-euro project. Their team have been working into the early hours of Saturday to finalize terms and secure funding. Things are looking good. 

To move forward, the payment must be sent immediately. So, they use a SEPA Instant Payment to make the transfer in seconds. The €100,000 transaction limit has been removed. Your customer attempts to transfer €10 million. 

But there’s a problem. A wave of large instant payments has just hit your systems. You weren’t expecting a transfer this big, at this hour. So, there isn’t enough money in your instant payments account (i.e. your TIPS – TARGET Instant Payment Settlement master account). There’s no one at the bank because it’s the weekend. And the European Central Bank (ECB) is closed, so you can’t get funding elsewhere. 

The payment fails. Your customer loses the deal. You lose your customer. And you don’t find out till Monday morning when you’re back at work. 

This may sound dramatic. But it’s an increasingly likely scenario for European banks as the Instant Payment Regulation is introduced. And that’s adding a lot of pressure.

No limits

How do you, as a bank, know if you have enough cash to meet the peaks of instant payment volumes?  What if several of your customers are making big deals at the same time?  How much liquidity do you need? 

€300 million? €600 million? €1 billion? 

You can’t predict the future. And yet you need to prepare for huge instant payment volumes at any time. 

In an ideal world, you’d fund your instant payments peaks as and when they were needed. You’d have real-time monitoring and systems set up to automatically fund your instant payments account (TIPS account) using central bank money (via your T2 account) when it’s needed. 

But this is not an ideal world. 

Bank hours

TIPS, the EU’s 24/7 instant payments system account, operates 24/7. But T2 (where banks hold their central bank accounts – i.e. with the ECB) does not. In fact, T2 is open for less than a third of the TIPS business hours.* The ECB (and T2) only operates during business hours (07:00–18:00 CET, weekdays) and it’s closed for six bank holidays each year. 

So, if you run low on funds in your instant payments (TIPS) account outside of the ECB’s (T2) hours, you cannot access more liquidity until the ECB (T2) reopens. That could be 7am tomorrow morning. Or, you might have to wait till the weekend and holidays are over. That means you have to make sure your TIPS account is pre-funded during T2’s operating hours.  

Not only does borrowing from the central bank cost money, but any funds also held in a TIPS account could be earning interest elsewhere. You’ll most likely have also moved money from an interest-bearing account to your non-interest-bearing instant payments account. In other words, liquidity that remains idle in TIPS during off-hours costs money. 

In a soon-to-be-released survey, we’ve found most EU banks are concerned about liquidity management. (93%) Nearly half (47%) expect to lose millions in interest. That then begs the question: Is it more cost-effective to pay a fine for non-compliance than fund TIPS? If a bank is set to lose €20 million in interest but only pay, say, a €5 million fine, why comply? 

Without proactive liquidity management, there is a risk that outgoing instant payments could fail or experience delays. That will damage customer trust and potentially lead to regulatory non-compliance. Some banks may have pre-funding mechanisms in place, but they cannot access more funds until the ECB is open again. 

What does proactive liquidity management look like?

First, you need to make sure you pre-fund your instant payment (TIPS) direct cash accounts (DCA). There’s no real-time link to TARGET2 during nights, weekends, or holidays. So, you need to make a best guess at how much you’ll need. It’s arguably better to have too much liquidity than not enough. (Rather keep your customers happy and lose money on interest than lose your customers and keep the interest.) But you’ll get better at it as you get more data.  

Then, split your euro liquidity between your instant payment accounts (TIPS DCAs) and Real-Time Gross Settlement (T2) accounts. Once the ECB (T2) closes, you won’t be able to send money between the two systems. The European Central Bank offers some relief by allowing instant payment (TIPS DCA) balances to count toward minimum reserve requirements over weekends. Still: if you have not put your central bank money to good use, it will cost you money. 

Liquidity monitoring has become more of a pain. You now need robust forecasting and monitoring tools to track instant payment (TIPS) balances 24/7, especially as SEPA Instant volumes continue to grow. To meet these challenges head-on, treasury departments must embrace technology. 

Real-time monitoring tools, AI-driven forecasting, and automated funds reallocation mechanisms are key to managing liquidity across multiple accounts and minimising the risk of payment failures. 

Treasury teams need to create dashboards that monitor the balance levels in their TIPS, RTGS, and Nostro accounts. They should also use tools to track payment activity throughout the day and spot times when payment volumes are highest. There should be alert systems set up to notify them when account balances get too low, even during weekends. And automated systems can be put in place to move funds or secure collateral automatically, making sure accounts are topped up before running low. 

Lesson from other schemes

Looking at how other instant payment systems manage liquidity may offer valuable insights:  

• Switzerland – SNB’s 24/7 Liquidity Facility
The Swiss National Bank (SNB) has introduced the Payment System Support Facility (PSSF), which allows banks to draw liquidity anytime, even over weekends. This system provides 24/7 access, direct payment system drawdowns, collateral-backed secured loans, and continuous liquidity provisioning, without requiring manual intervention during off-hours. 

• United States – FedNow and Pre-Funded Master Accounts
The FedNow Service requires participating institutions to pre-fund their master accounts, ensuring liquidity is available for real-time clearing. This system allows banks to designate service providers to manage liquidity pooling, set thresholds for automatic top-ups, and use APIs to monitor and move funds in real time. 

• India – UPI’s Treasury Integration with Core Banking
India’s Unified Payments Interface (UPI) uses tight integration between core banking systems and liquidity layers. Banks maintain buffer balances and use automated fund sweep mechanisms to ensure liquidity during holidays or surges in transactions. This integration supports a robust 24/7 settlement back-end, backed by the Reserve Bank of India’s real-time services.

Can the EU help?

In lieu of the ECB opening 24 hours a day, the regulators must clarify how liquidity can be accessed during weekends, especially for TIPS participants. Yes, treasury systems must move beyond traditional spreadsheet-based liquidity tracking. And cross-scheme collaboration could unlock best practices in liquidity pooling and collateral optimisation. But the fact of the matter is: managing liquidity is no longer just the responsibility of the treasury department.  

Today, it’s a strategic capability. As SEPA Instant continues to grow, banks that invest in smarter monitoring, automation, and weekend readiness will prevent service outages, offer superior customer experiences, reduce compliance risks, and gain early-mover advantages in cross-border instant payments. 

Ultimately, addressing liquidity management for TIPS is not just about solving a technical problem. It’s about transforming liquidity risk into a competitive differentiator.

Want to learn more?

We’re helping some of the world’s biggest banks get ready for the SEPA Instant Payments Regulation. If you’re interested in learning more about it, need some advice, or are looking for support, reach out to the RedCompass Labs team today.