Real-time gross settlement (RTGS) systems are specialist funds transfer systems where the transfer of

money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money ar ...

or securities takes place from one

bank A bank is a financial institution that accepts Deposit account, deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital m ...

to any other bank on a "real-time" and on a " gross" basis.

Settlement Settlement may refer to: * Human settlement, a community where people live *Settlement (structural), the distortion or disruption of parts of a building *Closing (real estate), the final step in executing a real estate transaction *Settlement (fin ...

in "real time" means a payment transaction is not subjected to any waiting period, with transactions being settled as soon as they are processed. "Gross settlement" means the transaction is settled on a one-to-one basis, without bundling or netting with any other transaction. "Settlement" means that once processed, payments are final and irrevocable.

History

As of 1985, three central banks implemented RTGS systems, while by the end of 2005, RTGS systems had been implemented by 90 central banks. The first system that had the attributes of an RTGS system was the US

Fedwire Fedwire (formerly known as the Federal Reserve Wire Network) is a real-time gross settlement funds transfer system operated by the United States Federal Reserve Banks that allows financial institutions to electronically transfer funds between it ...

system which was launched in 1970. This was based on a previous method of transferring funds electronically between US federal reserve banks via

telegraph Telegraphy is the long-distance transmission of messages where the sender uses symbolic codes, known to the recipient, rather than a physical exchange of an object bearing the message. Thus flag semaphore is a method of telegraphy, whereas ...

. The United Kingdom and France both independently developed RTGS type systems in 1984. The UK system was developed by the Bankers' Clearing House in February 1984 and was called

CHAPS Chaps ( or ) are sturdy coverings for the legs consisting of leggings and a belt. They are buckled on over trousers with the chaps' integrated belt, but unlike trousers, they have no seat (the term "assless chaps" is a tautology) and are not jo ...

. The French system was called SAGITTAIRE. A number of other developed countries launched systems over the next few years. These systems were diverse in operation and technology, being country-specific as they were usually based upon previous processes and procedures used in each country. In the 1990s international finance organizations emphasized the importance of large-value funds transfer systems which banks use to settle interbank transfers for their own account as well as for their customers as a key part of a country's financial infrastructure. By 1997 a number of countries, inside as well as outside the Group of Ten, had introduced real-time gross settlement systems for large-value funds transfers. Nearly all G-10 countries had plans to have RTGS systems in operation in the course of 1997 and many other countries were also considering introducing such systems.

Operation

RTGS systems are usually operated by a country's

central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a centra ...

as it is seen as critical infrastructure for a country's economy. Economists believe that an efficient national payment system reduces the cost of exchanging

goods and services Goods are items that are usually (but not always) tangible, such as pens, physical books, salt, apples, and hats. Services are activities provided by other people, who include architects, suppliers, contractors, technologists, teachers, doc ...

, and is indispensable to the functioning of the interbank, money, and capital markets. A weak payment system may severely drag on the stability and developmental capacity of a national economy; its failures can result in inefficient use of financial resources, inequitable risk-sharing among agents, actual losses for participants, and loss of confidence in the financial system and in the very use of money. RTGS system does not require any physical exchange of money; the central bank makes adjustments in the electronic accounts of Bank A and Bank B, reducing the balance in Bank A’s account by the amount in question and increasing the balance of Bank B’s account by the same amount. The RTGS system is suited for low-volume, high-value transactions. It lowers settlement risk, besides giving an accurate picture of an institution’s account at any point in time. The objective of RTGS systems by central banks throughout the world is to minimize risk in high-value electronic payment settlement systems. In an RTGS system, transactions are settled across accounts held at a central bank on a continuous gross basis. The settlement is immediate, final, and irrevocable. Credit risks due to settlement lags are eliminated. The best RTGS national payment systems cover up to 95% of high-value transactions within the national monetary market. RTGS systems are an alternative to systems of settling transactions at the end of the day, also known as the net settlement system, such as the BACS system in the United Kingdom. In a net settlement system, all the inter-institution transactions during the day are accumulated, and at the end of the day, the central bank adjusts the accounts of the institutions by the net amounts of these transactions. The

World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...

has been paying increasing attention to payment system development as a key component of the financial infrastructure of a country and has provided various forms of assistance to over 100 countries. Most of the RTGS systems in place are secure and have been designed around international standards and best practices. There are several reasons for central banks to adopt RTGS. First, a decision to adopt is influenced by competitive pressure from the global financial markets. Second, it is more beneficial to adopt an RTGS system for the central bank when this allows access to a broad system of other countries' RTGS systems. Third, it is very likely that the knowledge acquired through experiences with RTGS systems spills over to other central banks and helps them make their adoption decision. Fourth, central banks do not necessarily have to install and develop RTGS themselves. The possibility of sharing development with providers that have built RTGS systems in more than one country ( CGI of UK holding the IP, CMA Small System of Sweden, JV Perago of South Africa,

SIA S.p.A. SIA S.p.A. is an Italian company operating in the area of ICT, providing solutions and technologies to the banking and finance sector in addition to platforms for financial markets and e-payment services. History The company was founded in 197 ...

of Italy and Montran of USA) has presumably lowered the cost and hence made it feasible for many countries to adopt.

Existing systems

Below is a listing of countries and their RTGS systems: }; Real-time Payment System) , - , , , MEP ( es, Medio electrónico de pagos; Electronic Means of Payment) , - , , , AZIPS (Azerbaijan Interbank Payment System) , - , , , RITS ( Reserve Bank Information and Transfer System) , - , , , RTGS (Real Time Gross Settlement System) , - , , , RTGS (

Bangladesh Bank Bangladesh Bank ( bn, বাংলাদেশ ব্যাংক) is the central bank of Bangladesh and is a member of the Asian Clearing Union. It is fully owned by the Government of Bangladesh. The bank is active in developing green bankin ...

Payment Service Division) , - , , , Central Bank Real Time Gross Settlement System (CBRTGS) , - , , , RTGS , - , , , BISS (Belarus Interbank Settlement System) , - , , , RINGS (Real-time Interbank Gross Settlement) , - , , , STR ( pt, Sistema de Transferência de Reservas; Reserves Transfer System) , - , , , Lynx , - , , , China National Advanced Payment System (CNAPS) (also called Super Online Banking System) , - , , , LBTR/CAS ( es, Liquidación Bruta en Tiempo Real; Real-time Gross Settlement) , - , , , TEF ( es, Transferencia Electrónica de Fondos; Electronic Funds Transfer) , - , , , HSVP ( hr, Hrvatski sustav velikih plaćanja; Croatian Large Payment System) , - , , , CERTIS (Czech Express Real Time Interbank Gross Settlement System) , - , , , KRONOS , - , , , LBTR ( es, Liquidación Bruta en Tiempo Real; Gross Settlement in Real Time) , - , , , RTGS , - ,

Eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU pol ...

, , TARGET2 , - , , , FIJICLEAR , - , , ,

Clearing House Automated Transfer System The Clearing House Automated Transfer System, or CHATS, is a real-time gross settlement (RTGS) system for the transfer of funds in Hong Kong. It is operated by Hong Kong Interbank Clearing Limited, a private company jointly owned by the Hong Kon ...

(CHATS) , - , , , VIBER ( hu, Valós Idejű Bruttó Elszámolási Rendszer; Real-time Gross Settlement System) , - , , , GPSS (Georgian Payment and Securities System) , - , , , RTGS , - , , , Sistem Bank Indonesia Real Time Gross Settlement (BI-RTGS) , - , , , SATNA (سامانه تسویه ناخالص آنی, Real-Time Gross Settlement System) , - , , , RTGS (Real Time Gross Settlement System) , - , , , Zahav ( he, זה"ב זיכויים והעברות בזמן אמת; Zahav Real-time Credits and Transfers) , - , , , BOJ-NET (Bank of Japan Financial Network System) , - , , , RTGS-J , - , , , Kenya Electronic Payment and Settlement System (KEPSS) , - , , , BOK-WIRE+ (The Bank of Korea Financial Wire Network, 한은금융망) , - , , , KASSIP (Kuwait's Automated Settlement System for Inter-Participant Payments) , - , , , BDL-RTGS (Banque Du Liban – Real Time Gross Settlement) , - , , , MIPS (Macedonian Interbank Payment System) , - , , , RTGS , - , , , MITASS (Malawi Interbank Settlement System) , - , , , RENTAS (Real Time Electronic Transfer of Funds and Securities) , - , , , Mauritius Automated Clearing and Settlement System (MACSS) , - , , , SPEI ( es, Sistema de Pagos Electrónicos Interbancarios; Interbank Electronic Payment System) , - , , , SRBM (Système de règlement brut du Maroc; Moroccan Gross Settlement System) , - , , , NISS (Namibia Interbank Settlement System) , - , , , ESAS (Exchange Settlement Account System) , - , , , CIFTS (CBN Inter-Bank Funds Transfer System) , - , , , RTGS (Real Time Gross Settlement System) , - , , , LBTR ( es, Liquidación Bruta en Tiempo Real; Gross Settlement in Real Time) , - , - , , , LBTR ( es, Liquidación Bruta en Tiempo Real; Gross Settlement in Real Time) , - , , , PhilPaSS , - , , , SORBNET and SORBNET2 , - , , , Qatar Payment System (QPS) , - , , , BESP System (Banking Electronic Speed Payment System) , - , , , ReGIS , - , , , Saudi Arabian Riyal Interbank Express (SARIE) , - , , , MEPS+ (MAS Electronic Payment System Plus) , - , , , SAMOS (The South African Multiple Option Settlement) , - , , , LankaSettle (RTGS/SSSS) , - , , , RIX ( sv, Riksbankens system för överföring av kontoförda pengar) , - , , , SIC ( Swiss Interbank Clearing) , - , , , CIFS (CBC Interbank Funds Transfer System) , - , , , Tanzania Interbank Settlement (TIS) , - , , , BAHTNET (Bank of Thailand Automated High Value Transfer Network) , - , , , EFT (Electronic Fund Transfer) , - , , , SEP (System of Electronic Payments of the National Bank of Ukraine) , - , , ,

(Clearing House Automated Payment System) , - , , ,

, - , , , Uganda National Interbank Settlement (UNIS) , - , , , National Payment Service 24/7 Interbank Funds Transfer (NAPAS247) , - , , , Zambian Interbank Payment and Settlement System (ZIPSS) , - , , , Zimbabwe Electronic Transfer and Settlement System (ZETSS) , - , , , UAE Funds Transfer System (UAEFTS) In 2010, the World Bank published a report on payment systems worldwide, which investigated these countries' usage of real-time gross settlement systems for large-value payments.

References

{{reflist

History

Operation

Existing systems

See also

References