Systemically important payment systems (SIPS) are
payment systems which have the characteristic that a failure of these systems could potentially endanger the operation of the whole economy. In general, these are the major payment clearing systems or
real-time gross settlement systems of individual countries, but in the case of Europe, there are certain pan-European payment systems.
TARGET2
TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System) is the real-time gross settlement (RTGS) system for the Eurozone, and is available to non-Eurozone countries. It was developed by and is owned by the Eurosystem ...
is a pan-European SIPS dealing with major inter-bank payments.
STEP2
EBA Clearing is a provider of pan-European payment infrastructure wholly owned by shareholders that consist of major European banks.
It owns and operates major payment infrastructure in Europe for Euro payments between banks. This includes EURO1 ...
, operated by the
Euro Banking Association
The Euro Banking Association (EBA) is an industry forum for the European payments industry with close to 200 member banks and organisations from the European Union and around the world aimed at fostering and driving pan-European payment initiatives ...
, is a major pan-European clearing system for retail payments which has the potential to become a SIPS.
In the event of a bank failure, adherence to the rules for the operation of SIPS should prevent a domino effect whereby payment obligations of the failing bank are effected against the solvent banks. Clearly, this does not prevent the effects of a bank failure from spreading; however, it closes off one route.
Operation of a SIPS
In 2001, the
Bank for International Settlements
The Bank for International Settlements (BIS) is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks".
The BIS carries out its work thr ...
(BIS) issued the "Core Principles for Systemically Important Payment Systems", and these are summarised below. In certain banking circles, these have become known as the 10 Commandments.
In 2003 the