ECB Payments Strategy Targets Settlement Fragmentation: Treasury Teams Must Rethink Prefunded Nostro Structures
The Eurosystem's payments strategy, published March 31, marks the first time the ECB has unified its approach to wholesale, business-to-business, and cross-border payments within a single policy framework. The strategy articulates four strategic aims: maintaining central bank money as the anchor of the monetary system, achieving strategic autonomy and increased resilience for European payments, fostering an integrated and competitive payments ecosystem, and supporting the international role of the euro.
This is not abstract policymaking. The strategy directly calls for "standardisation, automation and process integration in business-to-business payments, so that companies can benefit from efficient and innovative solutions." For corporate treasurers, the implication is pointed: the fragmented, bank-by-bank, currency-by-currency settlement architecture that defines most multinational liquidity management is precisely the problem the ECB is attempting to solve.
The operational reality is familiar. Treasury teams maintain prefunded nostro balances across currencies to ensure payment capacity in each jurisdiction. This capital sits idle, earning minimal returns, while rebalancing between accounts involves correspondent banking fees, FX spreads, and timing constraints imposed by local clearing windows. Industry estimates suggest roughly $27 trillion is tied up globally in prefunded cross-border accounts, functioning as settlement buffers rather than productive capital. For a corporation holding $1 billion in foreign settlement accounts, a five percent interest environment implies approximately $50 million in annual opportunity cost.
The ECB's strategy attacks this problem from the infrastructure layer. The Pontes project, scheduled to launch by the end of Q3 2026, will connect distributed ledger technology platforms with the Eurosystem's TARGET Services, enabling settlement in central bank money for tokenised transactions. Appia, the longer-term initiative, aims to deliver a blueprint for an integrated tokenised wholesale financial ecosystem by 2028. Together, these projects are designed to ensure interoperability between public and private settlement forms while maintaining the anchoring role of central bank money.
The strategic framing is explicit. In a speech this week in Riga, ECB Executive Board member Piero Cipollone described the need to "reduce our existing dependencies in payments, and avoid creating new ones, to ensure our economic resilience and strategic autonomy." A February 2025 ECB report showed that most EU countries rely on international card schemes for card payments. A European Parliament study last year found Europe's dependence on foreign payment networks represents a "structural vulnerability" for its financial sovereignty.
This geopolitical dimension is not peripheral to the treasury function. When regulators frame payment infrastructure as critical economic infrastructure, comparable to energy and telecommunications, they are signalling that the current correspondent banking model, with its reliance on prefunded nostro balances and multi-hop settlement chains, is not merely inefficient but strategically exposed. The ECB has stated plainly that in a world where dependencies can be weaponised, independence is a precondition for resilience.
The relevance for corporate treasurers lies in the direction of travel. TARGET Instant Payment Settlement already provides instant settlement in central bank money and is being extended across currencies. The ECB is exploring links between TIPS and fast payment systems in other countries, starting with India. Pontes will enable DLT-based transactions to settle with finality in central bank euros rather than through correspondent bank chains. Appia will explore how tokenised deposits and regulated euro stablecoins can operate alongside central bank money within an interoperable framework.
None of this eliminates the need for liquidity management. But it does change where that liquidity sits and how quickly it can move. If cross-border payments settle instantly, the rationale for maintaining large prefunded balances in multiple jurisdictions weakens. Capital that was previously locked as settlement buffer becomes available for deployment. The same pool of capital simply moves through the system faster.
The defensive posture, maintaining nostro balances across multiple banks and currencies as a hedge against settlement risk, made sense in a world where cross-border payment finality was slow, uncertain, and dependent on correspondent relationships. But when regulators are actively building infrastructure to accelerate settlement and reduce intermediation, that defensive posture becomes a drag on capital efficiency that the regulatory direction is designed to eliminate.
The BIS has documented the gap between ambition and reality. G20 member countries are unlikely to meet their cross-border payment targets by 2027, with only 35% of global cross-border retail payments and 55% of wholesale payments currently settling within one hour. The ECB's strategy is a response to that gap, an attempt to build European infrastructure that delivers the speed and efficiency the global roadmap promised but has not yet achieved.
For treasury teams managing multi-entity, multi-currency liquidity across European and international subsidiaries, the strategic question is no longer whether to optimise existing nostro structures but whether to begin positioning for an infrastructure environment where those structures become redundant. The ECB has made clear that payment autonomy is a policy priority. The question is whether corporate treasury architecture will align with that direction or remain anchored to a settlement model that regulators themselves are working to obsolete.
References
[1] ECB, "Eurosystem sets out comprehensive strategy for future of European payments," 31 March 2026
[2] ECB, "The Eurosystem's comprehensive payments strategy," 31 March 2026
