The European Central bank has blamed a software defect at a third party technology provider for an outage that downed the Target2 settlement system for almost 11 hours on Friday.

With Target2 down, and the backup site failing to boot up, central banks and financial institutions across the Eurozone were unable to process transactions, transfer liquidity, or settle securities transactions. Data published by the ECB indicates that the glitch resulted in a €416 billion slump in the use of the deposit facility at the central bank.

On Sunday the ECB had ruled out a “cyber-related incident” as a cause, but a recent update on the central bank's site states that that “the root cause has been found in a software defect of a third party network device used in the internal network of the central banks operating the Target2 service on behalf of the Eurosystem.”

It adds: “The Eurosystem has taken measures to prevent this from happening in the future and will discuss it with the vendor.”

Today's announcement also states:

• Target2 and T2S opened and closed normally on the two business days following the incident, i.e. Monday, 26 October and Tuesday, 27 October 2020;
• market participants have confirmed that they have resumed normal business operations and only a small number of reconciliation investigations is still ongoing;
• the test environment for Target2 is available to the users;
• the test environment for T2S is available as of Wednesday, 28 October 2020.

The ECB has not yet addressed why the failover nor contingency modules failed to operate.