I define Central Liquidity Management (CLM) as the component of the Eurosystem payment infrastructure that manages liquidity centrally for participants. CLM is part of the TARGET Service T2. It provides a single point of control for central bank money. Therefore, it supports efficient and secure payment settlement. Moreover, it replaces fragmented liquidity handling with a harmonised approach.
At its core, CLM concentrates liquidity from different TARGET services. For example, it connects payment, securities, and instant payment services. As a result, participants no longer need to split funds across multiple accounts. Instead, they steer liquidity from one central position. Consequently, operational complexity decreases and transparency increases.
CLM manages several key functions. First, it holds central liquidity accounts. Second, it controls liquidity transfers between services. Third, it supports standing facilities such as marginal lending and overnight deposits. In addition, it calculates reserve requirements. Therefore, it links daily operations with monetary policy execution.
From a process perspective, CLM orchestrates the movement of funds. For instance, it routes liquidity to real-time payment processing when needed. At the same time, it retrieves unused funds after settlement. As a result, liquidity circulates efficiently during the business day. Moreover, predefined rules automate many transfers. Thus, manual intervention becomes the exception.
CLM also enforces strict timing and status rules. It follows a defined operating schedule with start-of-day and end-of-day phases. In addition, it supports contingency procedures. Therefore, the system maintains control even during incidents. This reliability strengthens trust in the overall infrastructure.
From a requirements engineering view, CLM represents a critical coordination system. It interacts with multiple actors, accounts, and services. Hence, analysts must define clear interfaces and responsibilities. Moreover, they must capture constraints such as cut-off times, limits, and authorisations. Consequently, precise requirements reduce operational risk.
CLM also illustrates strong separation of concerns. It focuses on liquidity, not on payment execution itself. However, it feeds other components continuously. As a result, dependencies remain controlled but explicit. This structure supports modular system design and traceability.
In summary, Central Liquidity Management (CLM) acts as the liquidity backbone of the Eurosystem. It centralises control, improves efficiency, and reduces risk. Therefore, it plays a key role in modern payment infrastructures. For system analysis, it serves as a prime example of how central coordination enables stability at scale.