The Design of RTGS Systems: Concluding Remarks: Part II: Real-Time Gross Settlement Systems

The design of RTGS systems: concluding remarks http://ifci.ch/139060.
htm
Part II: Real-Time Gross Settlement Systems:
The design of RTGS systems: concluding remarks
As the above analysis has shown, the concept of RTGS is straightforward but
the systems themselves can take many different forms. These differences partly
reflect the fact that circumstances vary from country to country, so that
arrangements that are appropriate for one country may not be relevant for
another. In many cases a pragmatic approach has been adopted to certain
design features. Finally, as mentioned earlier, RTGS systems are on the whole a
relatively recent concept and thus there has often been little operational
experience on which to base comparisons between different options.
Risk Library
Documents by
Author Given these factors, while it may be difficult to draw any universally applicable
Committees at the conclusions about the merits of particular features of RTGS systems, it might be
Bank for
International...
useful to set out the key criteria that are likely to be used when choosing
Real-Time Gross between different options. Following the presentation of Part II, RTGS systems
Settlement can be categorised according to three main considerations, namely (a) whether
Systems
Part II: Real-
the central bank provides intraday credit to participants in the system and, if so,
Time Gross on what terms, (b) the message flow structure and (c) the facilities, if any,
Settlement available for queuing. Although there are many other ways in which systems
Syst...
Overview of
differ, these three areas seem to capture the most important aspects.
RTGS systems
Components, Whether intraday credit is provided or not may depend partly on whether
measures and interbank funds transfer systems are seen simply as mechanisms that enable
management of
l...
settlement to take place, in which case it may be decided that no specific
Message flow liquidity facilities will be provided, or whether the provision of intraday liquidity is
structures seen as being a straightforward extension of a central bank's existing role as a
Queuing
arrangements
provider of liquidity to the banking system. The decision to extend intraday credit
The design of may also reflect a view that intraday credit is necessary to enable the system to
RTGS systems: function smoothly. Where credit is provided, there are variations in the terms set
concluding r...
(e.g. whether the credit has to be collateralised and what fee or interest rate, if
any, is charged), reflecting a number of important considerations. For example,
central banks differ in the way they prefer to manage any risks associated with
providing credit. Moreover, in some systems a key consideration may be a
desire to keep the cost to banks of obtaining intraday liquidity as low as
possible, while in other systems this may be less critical or a positive cost may
be seen as a useful way of encouraging banks to economise on their use of any
central bank liquidity facility.
As far as the message flow structure is concerned, the key choice is often
between the Vshaped and Yshaped structures, and an important consideration
here is the role of the central bank relative to the private sector in the daytoday
operation of the system: for some, the attraction of the Y architecture is that it
enables a distinction to be drawn between the central bank's core role as
settlement agent and the rest of the system processing, which can be a
separate, private sector function. Whether this is an issue typically depends in
part on the nature of the arrangements in place before RTGS was introduced
(i.e. the extent to which the central bank was involved in the daytoday operation
of the previous nonRTGS system) and thus on what has come to be regarded
as normal or desirable in the market concerned. Other relevant factors may
include potential risks associated with the message flow (which is why the T‐
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The design of RTGS systems: concluding remarks http://ifci.ch/139060.htm
those cases where the new RTGS system is being adapted from a previous
system and thus where particular architectures, such as the Lshaped structure,
may be used).
Approaches to queuing may depend importantly on views about the relative

roles of the private sector and the central bank, the central bank's policies
regarding the granting of intraday credit and the extent to which banks can
obtain liquidity easily from their own sources. If, as noted above, an interbank
funds transfer system is seen as being simply a settlement mechanism, then it
may also be that no centralised queue management facilities are provided
beyond basic FIFO processing. Or the balance between centralised and
decentralised queue management may depend on the extent to which banks
see such management as a competitive issue rather than one on which they
want a standard approach to be adopted. Consideration of the balance to be
struck between risk, cost and liquidity may also determine whether queued
incoming transfers are transparent or not. More generally, queue management
may be an area where the relative novelty of RTGS systems is particularly
relevant: key policy considerations apart, differences in queue management
techniques may simply reflect the fact that so far there is not enough experience
to judge how desirable the different methods are.
Finally, it is important to stress that, in designing an RTGS system, attention

must be paid to the wider environment in which the system is to operate.
Mention has already been made of the fact that circumstances vary from country
to country, and this is true not just of the payment system environment itself but
also of the wider financial system: for example, the RTGS system may have to
interact with other systems such as securities settlement systems, or its
introduction may have some monetary policy implications. Moreover, while
RTGS is one approach to managing payment system risks, there are also other
approaches such as the introduction of secured DNS systems. Part III therefore
looks at some of these wider issues concerning RTGS.
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International Settlement (BIS) * Real-Time Gross Settlement Systems * Part II:
Real-Time Gross Settlement Systems:
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The design of RTGS systems: concluding remarks http://ifci.ch/139060.

Part II: Real-Time Gross Settlement Systems:

The design of RTGS systems: concluding remarks

Approaches to queuing may depend importantly on views about the relative

Finally, it is important to stress that, in designing an RTGS system, attention

Contact us * Risk Library * Documents by Author * Committees at the Bank for

Downloads Iternat' Bank for Sette… 100% Clear

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