Real-time gross settlement systems

March 1997

The work of the Committee on Payment and Settlement Systems of the central banks of the Group of Ten countries (CPSS) has consistently emphasised 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. Estimates compiled by the CPSS indicate that these systems transfer several trillion dollars per day in the G-10 countries, a large portion of which is related to the settlement of financial market transactions.

During the past decade a number of countries, inside as well as outside the Group of Ten, have introduced real-time gross settlement (RTGS) systems for large-value funds transfers. Nearly all G-10 countries plan to have RTGS systems in operation in the course of 1997 and many other countries are also considering introducing such systems.

RTGS systems effect final settlement of interbank funds transfers on a continuous, transaction- by-transaction basis throughout the processing day. Because of the growing importance of RTGS, the CPSS set up a Study Group to identify and analyse the major issues related to the operation of such systems. The Group, which was chaired by Mr. Yvon Lucas of the Bank of France, has produced the present analytical report. The report is intended to provide information on the important features of RTGS systems to a broad audience, including operators of and participants in clearing and settlement systems for securities, derivatives and foreign exchange that make or intend to make use of RTGS systems, and the various supervisory authorities and industry groups interested in the enhancement of risk controls in payment and settlement systems. The report might also be particularly helpful to the many countries currently in the process of introducing or developing RTGS systems.