2009 Self-assessment of the Reserve Bank Information and Transfer System Introduction and Executive Summary

Safe and efficient payment systems are critical to the effective functioning of the financial system. The Core Principles for Systemically Important Payment Systems (Core Principles) are designed to assess systems which, if insufficiently protected against risk, have the potential to trigger or transmit further disruptions amongst participants or systemic disruptions in the financial area more widely.^[1] In Australia, there is one systemically important payment system – the Reserve Bank Information and Transfer System (RITS), which is owned and operated by the Reserve Bank of Australia (Reserve Bank). RITS is a real-time gross settlement (RTGS) system that also accepts payment instructions from authorised RTGS feeder systems and settles the interbank obligations from net clearing arrangements as batches. The Reserve Bank conducts periodic self-assessments of RITS against the Core Principles. This document presents the self-assessment conducted by the Reserve Bank in 2009.

Since the last self-assessment of RITS was undertaken in 2005 the Reserve Bank has implemented a number of changes in RITS in response to market and technological developments. As well as upgrading the operating system and hardware to keep pace with technological developments, the Reserve Bank has enhanced RITS’ business continuity and information security arrangements in accordance with international best practice. Most significantly, the Reserve Bank has opened a new, geographically remote backup site that is an alternative workspace for critical staff and has the same processing capacity as the primary site. This backup site is permanently staffed and has full system redundancy on-site. More recently, in response to user demand, the Reserve Bank has implemented targeted bilateral offset functionality, a tool that assists participants in managing credit exposures to clients while minimising liquidity needs.

It is the view of the Reserve Bank that RITS complies with the Core Principles. Nevertheless, work at the Reserve Bank is ongoing to ensure RITS continues to meet the Core Principles and international best practice. There are a number of projects underway that will offer further reductions in operational and credit risk in the payments system. These include the following:

• rotation of RITS production operations between the primary and backup sites on a regular basis; and
• working, in conjunction with the Australian Payments Clearing Association (APCA), to develop functionality to facilitate same-day settlement of direct-entry transactions (which are currently settled on a net deferred basis in the ‘9am batch’ process). This will reduce both the credit risk associated with these payments and the concentration of operational risk in the 9am batch in RITS.

Footnote

3.0.2 of the Core Principles for Systemically Important Payment Systems, Committee on Payment and Settlement Systems, Bank for International Settlements, January 2001. [1]