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Such systems are an alternative to systems of settling transactions at the end of the day, also known as the net settlement system such as BACS. In the net settlement system, all the inter-institution transactions during the day are accumulated. At the end of the day, the accounts of the institutions are adjusted.
Such systems are an alternative to systems of settling transactions at the end of the day, also known as the net settlement system such as BACS. In the net settlement system, all the inter-institution transactions during the day are accumulated. At the end of the day, the accounts of the institutions are adjusted.
The implementation of RTGS systems by Central Banks throughout the world is driven by the goal to minimize risk in high-value electronic payment settlement systems.
The implementation of RTGS systems by Central Banks throughout the world is driven by the goal to minimize risk in high-value electronic payment settlement systems.
In an RTGS system, transactions are settled across accounts held at a Central Bank on a continuous gross basis. Settlement is immediate, final and irrevocable. Credit risks due to settlement lags are eliminated. The best RTGS national payment system cover up to 95% of high-value transactions within the national monetary market. The World Bank has bee paying increasing attention to payment system development as a key component of the financial infrastructure of a country, and has provided various form of assistance to over 100 counrites. Most of the RTGS systems in place are secure and have been designed around international standards and best practices. <ref>Massimo Cirasino and Jose Antonio Garcia, " Measuring Payment System Development", The World Bank, 2008</ref>
In an RTGS system, transactions are settled across accounts held at a Central Bank on a continuous gross basis. Settlement is immediate, final and irrevocable. Credit risks due to settlement lags are eliminated. The best RTGS national payment system cover up to 95% of high-value transactions within the national monetary market. The World Bank has been paying increasing attention to payment system development as a key component of the financial infrastructure of a country, and has provided various form of assistance to over 100 counrites. Most of the RTGS systems in place are secure and have been designed around international standards and best practices. <ref>Massimo Cirasino and Jose Antonio Garcia, " Measuring Payment System Development", The World Bank, 2008</ref>
By 1985 only 3 central banks had implemented RTGS system. At the end of 2005, the use of RTGS systems had diffused to 90 central banks. <ref>Morten Bech, Bart Hobijn, " Technology Diffusion within Central Banking: The Case of Real-Time Gross Settlement", Staff Report nj. 260, Federal Reserve Bank of New York, Working Paper, September 2006, p.2</ref>
By 1985 only 3 central banks had implemented RTGS system. At the end of 2005, the use of RTGS systems had diffused to 90 central banks. <ref>Morten Bech, Bart Hobijn, " Technology Diffusion within Central Banking: The Case of Real-Time Gross Settlement", Staff Report nj. 260, Federal Reserve Bank of New York, Working Paper, September 2006, p.2</ref>


Revision as of 16:34, 25 March 2013

Real time gross settlement systems (RTGS) are funds transfer systems where transfer of money or securities[1] takes place from one bank to another on a "real time" and on "gross" basis. Settlement in "real time" means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. "Gross settlement" means the transaction is settled on one to one basis without bunching or netting with any other transaction. Once processed, payments are final and irrevocable.

An efficient national payment system reduced the cost of exchanging goods and services, and indispensable to the functioning of the interbank, money, and capital markets. A weak payment system may severely drag on the stability and developmental capacity of a national economy; its failures can resuolt in inefficient use of financial resources, inequitable risk-sharing among agents, actual losses for participants, and loss of confidence in the financial system and in the very use of money [2] The technical effciency of payment system is important for a development of economy. Real time gross settlement systems (RTGS) are funds transfer systems where transfer of money or securities takes place from one bank to another on a "real time" and on "gross" basis. Settlement in "real time" means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. "Gross settlement" means the transaction is settled on one to one basis without bunching or netting with any other transaction. Once processed, payments are final and irrevocable.

RTGS systems in Europe covering multiple countries: TARGET resp. TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System) in 26 countries of the European Union. TARGET2 is the Real Time Gross Settlement system for the Euro currency, and is offered by the Eurosystem, which comprises the European Central Bank and the National Central Banks of those countries that have adopted the Euro currency. The Eurosystem and the European System of Central Banks will co-exist as long as there are EU Member States outside the Euro area. TARGET2 is used for the settlement of central bank operations, large-value Euro interbank transfers as well as other euro payments. TARGET 2 provides real-time financial transfers, debt settlement at central banks which is immediate and irreversible.

This "electronic" payment system is normally maintained or controlled by the Central Bank of a country. There is no physical exchange of money; the Central Bank makes adjustments in the electronic accounts of Bank A and Bank B, reducing the amount in Bank A's account by $100,000 and increasing the amount of Bank B's account by the same. The RTGS system is suited for low-volume, high-value transactions. It lowers settlement risk, besides giving an accurate picture of an institution's account at any point of time. Such systems are an alternative to systems of settling transactions at the end of the day, also known as the net settlement system such as BACS. In the net settlement system, all the inter-institution transactions during the day are accumulated. At the end of the day, the accounts of the institutions are adjusted. The implementation of RTGS systems by Central Banks throughout the world is driven by the goal to minimize risk in high-value electronic payment settlement systems. In an RTGS system, transactions are settled across accounts held at a Central Bank on a continuous gross basis. Settlement is immediate, final and irrevocable. Credit risks due to settlement lags are eliminated. The best RTGS national payment system cover up to 95% of high-value transactions within the national monetary market. The World Bank has been paying increasing attention to payment system development as a key component of the financial infrastructure of a country, and has provided various form of assistance to over 100 counrites. Most of the RTGS systems in place are secure and have been designed around international standards and best practices. [3] By 1985 only 3 central banks had implemented RTGS system. At the end of 2005, the use of RTGS systems had diffused to 90 central banks. [4]


Existing systems

Below is a listing of countries and their RTGS systems:

References

  1. ^ Committee on Payment and Settlement Systems of the central banks of the Group of Ten countries (March 1997). "Real-Time Gross Settlement Systems" (PDF). Bank for International Settlements: 14. {{cite journal}}: Cite journal requires |journal= (help)
  2. ^ Biago Bossone and Massimo Cirasino, "The Oversight of the Payment Systems: A Framework for the Development and Governanace of Payment Systems in Emerging Economies"The World Bank, July 2001, p.7
  3. ^ Massimo Cirasino and Jose Antonio Garcia, " Measuring Payment System Development", The World Bank, 2008
  4. ^ Morten Bech, Bart Hobijn, " Technology Diffusion within Central Banking: The Case of Real-Time Gross Settlement", Staff Report nj. 260, Federal Reserve Bank of New York, Working Paper, September 2006, p.2
  5. ^ "China's 'Super Online Banking System' Launches on Monday". Business China. August 30, 2010. Retrieved September 3, 2010.
  6. ^ http://www.hnb.hr/platni-promet/medubankovni-platni-statistika/hsvp/h-sustav-velikih-placanja.htm
  7. ^ The RTGS System Reserve Bank of India website
  8. ^ http://www.npci.org.in/aboutimps.aspx
  9. ^ The Zahav System Bank of Israel website
  10. ^ Bank of Japan (2003). "Payment systems in Japan" (PDF). Bank of Japan. Retrieved Jun.17,2010. {{cite journal}}: Check date values in: |accessdate= (help); Cite journal requires |journal= (help)
  11. ^ [1] National Bank of Macedonia website
  12. ^ [2] - Banxico's SPEI

See also

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