High Value Payments

A key element of the Payments System Board's responsibility for the safety and stability of the payments system in Australia is the oversight of systemically important payment systems. To determine whether a system should be subject to ongoing oversight as a systemically important payment system and assessed against relevant international standards, the Bank takes into account whether the system:

  1. is the sole payment system in the country or the principal system in terms of the aggregate value of payments
  2. mainly handles time-critical, high-value payments
  3. is used to effect settlement in other systemically important financial market infrastructures (FMIs).

Reserve Bank Information and Transfer System

To date, the Reserve Bank Information and Transfer System (RITS) is the only domestic system identified by the Bank as warranting oversight as a systemically important payment system. RITS is primarily a real-time gross settlement system, which settles transactions on an individual basis in real time across Exchange Settlement Accounts held at the Bank. Since RITS is owned and operated by the Bank, effective oversight is assured by separation of the Bank's operational and oversight functions, as well as annual assessments of RITS against the Principles for Financial Market Infrastructures (the Principles).[1]

CLS Bank International

The Bank has also identified CLS Bank International (CLS) as a systemically important international payment system. CLS settles foreign exchange trades in 17 currencies, including the Australian dollar. By operating a payment-versus-payment settlement mechanism, CLS allows participants to mitigate foreign exchange settlement risk (the risk that one party settles its obligation in one currency, but its counterparty subsequently does not settle its obligation in the other currency). In CLS, settlement members either receive or pay a net amount vis-à-vis CLS in each currency. These net amounts are settled in RITS and are typically a small proportion of the gross value of Australian dollar trades settled in CLS. CLS is chartered in the United States and is regulated and supervised by the Federal Reserve. The Federal Reserve has established a cooperative oversight arrangement for CLS, in which the Bank participates.[2]

Society for Worldwide Interbank Financial Telecommunication

The Bank also participates in the international cooperative oversight of the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a Belgian company. SWIFT provides communications services to facilitate the transfer of payment and other information between participants in the financial system. While SWIFT is not a payment system, it provides critical services to RITS and CLS, as well as other FMIs and market participants. SWIFT is primarily overseen by the SWIFT Oversight Group (OG), a cooperative body comprising the G10 central banks and chaired by the National Bank of Belgium (NBB). The NBB has also established the SWIFT Oversight Forum to provide information on SWIFT to a broader group of central banks, including the Bank, and to give these central banks an opportunity to provide input into the setting of the OG's oversight priorities. Oversight of SWIFT is supported by a set of standards – the High-level Expectations – which are consistent with standards for critical service providers in the Principles.[3]

Footnotes

See Assessment of RITS. [1]

These arrangements are set out in the Protocol for the Cooperative Oversight Arrangement of CLS, available at <http://www.federalreserve.gov/paymentsystems/cls_protocol.htm>. [2]

For more information on the oversight of SWIFT and the High-level Expectations, see <https://www.nbb.be/en/financial-oversight/oversight/oversight-swift>. [3]