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Anb1 Clearing Systems. anb2 Clearing Systems End of Day Net Settlement Systems (NSS) Real Time Gross Settlement Systems (RTGS) Intra Day Net Settlement.

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Presentation on theme: "Anb1 Clearing Systems. anb2 Clearing Systems End of Day Net Settlement Systems (NSS) Real Time Gross Settlement Systems (RTGS) Intra Day Net Settlement."— Presentation transcript:

1 anb1 Clearing Systems

2 anb2 Clearing Systems End of Day Net Settlement Systems (NSS) Real Time Gross Settlement Systems (RTGS) Intra Day Net Settlement (Hybrid) Systems Continuous Linked Settlement

3 anb3 Clearing Systems NSS Traditional Approach Amounts are netted and One amount is paid or received across settlement accounts with CB at end of day/period Creates intra-day exposures Finality at end of period Risk – position built up with a member during the day will not be settled So – Collateral, Guarantees, Bilateral debit/credit caps

4 Clearing Systems NSS Helps preserve participants liquidity Usually used for low value payments and paper based instruments Lower cost Examples: UK cheque clearing, BACS, ACH in USA anb4

5 5 Clearing Systems NSS Cheque and Credit Clearing Company process

6 anb6 Clearing Systems NSS Clearing cheques with cheque truncation

7 anb7 Clearing Systems RTGS Each payment settles singly and bilaterally across accounts at the settlement bank, usually the Central Bank e.g. Bank of England Eliminates settlement risk Herstatt Risk Designed to eliminate Herstatt risk (but does it?)

8 Clearing Systems RTGS Payments should arrive with value, availability and finality Used for high value/urgent payments More expensive than NSS Examples: UK CHAPS, Fedwire in the USA, CHATS in Hong Kong anb8

9 9 Clearing Systems RTGS Hong Kong Clearing House Automated Transfer System process (CHATS)

10 Faster Payments Service anb10

11 anb11 Clearing Systems Hybrid Intra-day settlement at pre-defined periods Intra-day finality Most located in Europe and handle clearing of euro payments Examples - CHIPS (USA) - CLS

12 anb12 Clearing Systems Continuous Linked Settlement (CLS) Payment versus payment system 71 full members CLS Services owns CLS Bank Inc, USA an Edge Act Bank Main operations in London/USA Some 5 Trillion USD settled daily (95% of daily traded volumes) Eliminates 4 trillion of settlement risk

13 anb13 Clearing Systems Benefits of CLS Used to settle FX transactions between banks real time Reduces number of bank to bank payments CLS is a common counter-party, payment versus payment Reduces risk and costs of high volumes of large value funds transfers Banks will obtain real-time information on intra-day liquidity

14 anb14 Clearing Systems Card Payments

15 anb15 Clearing Systems There are some oddballs London US Dollar Clearing London Currency Settlement Scheme Euro Clearing Hong Kong Currency Clearing

16 anb16 Clearing Systems Some Domestic Payment Methods Paper-based –Cash –Cheques –Bank transfers or giros –Postal giros –Bills of exchange –Promissory notes –Bankers drafts

17 anb17 Clearing Systems Some Domestic Payment Methods Electronic –Funds transfer Urgent wires Standard EFT –Automated clearing house payments –Standing order –Direct debit –Electronic bills of exchange –Plastic (credit, charge, cheque guarantee, cash dispenser, debit) –Financial EDI

18 International Payments Cover Method anb18

19 Serial Method 19 COMPANY ABC (SINGAPORE) COMPANY XYZ (HONG KONG) BANK ABC (SINGAPORE)BANK XYZ (HONGKONG) BANK DEF (USA)BANK UVW (USA) PAYMENT INSTRUCTION INVOICE CREDIT ADVICE ADVICE OF RECEIPT Debit Co. ABC account Debit Bank ABC account Debit Bank DEF account Debit Bank UVW account Credit Bank ABC account at Bank DEF Credit Bank DEF account at Bank UVW Credit Bank XYZ account at Bank UVW Credit Co. XYZ account MT103 Payment Order MT103 Payment Order MT210 ADVICE TO RECEIVE


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