Real Time Gross Settlement
Encyclopedia
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 covering multiple countries:
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.
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. Extending the example above, say another person deposits a check drawn on Bank B in Bank A for $500. At the end of the day, Bank A will have to "electronically" pay Bank B only $500 ($1000 - $500).
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.
RTGS does not require core banking
to be implemented across participating banks, since transactions are direct, with no central processing or clearing operations. Any RTGS employs two sets of queues: one for testing outgoing funds availability on a chronological FIFO
basis with the option of prioritizing specific inquiries, while the other queue is for processing debit/credit requests received from the central bank's Integrated Accounting System.
Existing systems
Below is a listing of countries and their RTGS systems:- AlbaniaAlbaniaAlbania , officially known as the Republic of Albania , is a country in Southeastern Europe, in the Balkans region. It is bordered by Montenegro to the northwest, Kosovo to the northeast, the Republic of Macedonia to the east and Greece to the south and southeast. It has a coast on the Adriatic Sea...
- AECH, RTGS - AustraliaAustraliaAustralia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
- RITS (Reserve BankReserve Bank of AustraliaThe Reserve Bank of Australia came into being on 14 January 1960 as Australia's central bank and banknote issuing authority, when the Reserve Bank Act 1959 removed the central banking functions from the Commonwealth Bank to it....
Information and Transfer System) - Bosnia and HerzegovinaBosnia and HerzegovinaBosnia and Herzegovina , sometimes called Bosnia-Herzegovina or simply Bosnia, is a country in Southern Europe, on the Balkan Peninsula. Bordered by Croatia to the north, west and south, Serbia to the east, and Montenegro to the southeast, Bosnia and Herzegovina is almost landlocked, except for the...
- RTGS - BulgariaBulgariaBulgaria , officially the Republic of Bulgaria , is a parliamentary democracy within a unitary constitutional republic in Southeast Europe. The country borders Romania to the north, Serbia and Macedonia to the west, Greece and Turkey to the south, as well as the Black Sea to the east...
- RINGS (Real-time INterbank Gross-settlement System) - BrazilBrazilBrazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
- STR (Sistema de Transferência de Reservas) - CanadaCanadaCanada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
- LVTS (Large Value Transfer SystemLarge Value Transfer SystemThe Large Value Transfer System, or LVTS, is a system in Canada for electronic wire transfers of large sums of money; it permits the participating institutions and their clients to send large sums of money securely in real-time with complete certainty that the payment will settle...
) (This is actually an RTGS Equivalent system. Final settlement happens in the evening.) - ChinaChinaChinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
- China National Advanced Payment System ("CNAPS") (also called "Super Online Banking System) - ChileChileChile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far...
- LBTR/CAS - CroatiaCroatiaCroatia , officially the Republic of Croatia , is a unitary democratic parliamentary republic in Europe at the crossroads of the Mitteleuropa, the Balkans, and the Mediterranean. Its capital and largest city is Zagreb. The country is divided into 20 counties and the city of Zagreb. Croatia covers ...
- HSVP - Czech RepublicCzech RepublicThe Czech Republic is a landlocked country in Central Europe. The country is bordered by Poland to the northeast, Slovakia to the east, Austria to the south, and Germany to the west and northwest....
- CERTIS (Czech Express Real Time Interbank Gross Settlement System) - Hong KongHong KongHong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
- Clearing House Automated Transfer System (CHATS) - HungaryHungaryHungary , officially the Republic of Hungary , is a landlocked country in Central Europe. It is situated in the Carpathian Basin and is bordered by Slovakia to the north, Ukraine and Romania to the east, Serbia and Croatia to the south, Slovenia to the southwest and Austria to the west. The...
- VIBER - IndiaIndiaIndia , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
- RTGS - IndonesiaIndonesiaIndonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
- Sistem Bank Indonesia Real Time Gross Settlement (BI-RTGS) - IranIranIran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...
- SATNA (سامانه تسویه ناخالص آنی , Real-Time Gross Settlement System) - IsraelIsraelThe State of Israel is a parliamentary republic located in the Middle East, along the eastern shore of the Mediterranean Sea...
- Zahav (Credit and Transfers in Real Time) - JapanJapanJapan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
- BOJ-NET (Bank of Japan Financial Network System) - KenyaKenyaKenya , officially known as the Republic of Kenya, is a country in East Africa that lies on the equator, with the Indian Ocean to its south-east...
- Kenya Electronic Payment and Settlement System (KEPSS) - KuwaitKuwaitThe State of Kuwait is a sovereign Arab state situated in the north-east of the Arabian Peninsula in Western Asia. It is bordered by Saudi Arabia to the south at Khafji, and Iraq to the north at Basra. It lies on the north-western shore of the Persian Gulf. The name Kuwait is derived from the...
- KASSIP (Kuwait's Automated Settlement System for Inter-Participant Payments) - MacedoniaRepublic of MacedoniaMacedonia , officially the Republic of Macedonia , is a country located in the central Balkan peninsula in Southeast Europe. It is one of the successor states of the former Yugoslavia, from which it declared independence in 1991...
- MIPS (Macedonian Interbank Payment System) - Malaysia - RENTAS (Real Time Electronic Transfer of Funds and Securities)
- MexicoMexicoThe United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
- SPEI - New ZealandNew ZealandNew Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
- ESAS (Exchange Settlement Account System) - NigeriaNigeriaNigeria , officially the Federal Republic of Nigeria, is a federal constitutional republic comprising 36 states and its Federal Capital Territory, Abuja. The country is located in West Africa and shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, and Niger in...
- CIFTS (CBN Inter-Bank Funds Transfer System) - PakistanPakistanPakistan , officially the Islamic Republic of Pakistan is a sovereign state in South Asia. It has a coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by Afghanistan and Iran in the west, India in the east and China in the far northeast. In the north, Tajikistan...
- RTGS - PeruPeruPeru , officially the Republic of Peru , is a country in western South America. It is bordered on the north by Ecuador and Colombia, on the east by Brazil, on the southeast by Bolivia, on the south by Chile, and on the west by the Pacific Ocean....
- LBTR - PhilippinesPhilippinesThe Philippines , officially known as the Republic of the Philippines , is a country in Southeast Asia in the western Pacific Ocean. To its north across the Luzon Strait lies Taiwan. West across the South China Sea sits Vietnam...
- PhilPaSS http://www.bsp.gov.ph/financial/payment_phil.asp - PolandPolandPoland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
- SORBhttp://www.nbp.pl/publikacje/bank_i_kredyt/2003_04/summaries.pdf - RussiaRussiaRussia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
- BESP system (Banking Electronic Speed Payment System)http://www.cbr.ru/eng/today/besp/description.htm - RomaniaRomaniaRomania is a country located at the crossroads of Central and Southeastern Europe, on the Lower Danube, within and outside the Carpathian arch, bordering on the Black Sea...
- ReGIS system http://www.bnro.ro/Sistemul-ReGIS-307.aspx - Saudi ArabiaSaudi ArabiaThe Kingdom of Saudi Arabia , commonly known in British English as Saudi Arabia and in Arabic as as-Sa‘ūdiyyah , is the largest state in Western Asia by land area, constituting the bulk of the Arabian Peninsula, and the second-largest in the Arab World...
- (Saudi Arabian Riyal Interbank Express) SARIE http://www.sarie.gov.sa/portal_en.php?lang=en&cid=3 - SingaporeSingaporeSingapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
- MEPS+ (MAS Electronic Payment System Plus) - South AfricaSouth AfricaThe Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...
- SAMOS (The South African Multiple Option Settlement) http://www.reservebank.co.za - SwitzerlandSwitzerlandSwitzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
- SIC (Swiss Interbank Clearing) http://www.sic.ch/en/tkicch_home.htm - TaiwanTaiwanTaiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
- CIFS (CBC Interbank Funds Transfer System) http://www.cbc.gov.tw/ct.asp?xItem=936&CtNode=497&mp=2 - ThailandThailandThailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
- BAHTNET (Bank of Thailand Automated High value Transfer Network) - TurkeyTurkeyTurkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
- EFT (Electronic Fund Transfer) - United KingdomUnited KingdomThe United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
- CHAPSCHAPSThe Clearing House Automated Payment System or CHAPS is a British company established in London in 1984, which offers same-day sterling fund transfers...
(Clearing House Automated Payment System) - United StatesUnited StatesThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
- FedwireFedwireFormally known as the Federal Reserve Wire Network, Fedwire is a Real Time Gross Settlement Funds Transfer system operated by the Federal Reserve Banks that enables financial institutions to electronically transfer funds between its more than 9,289 participants...
RTGS systems covering multiple countries:
- TARGETTARGETTARGET was an interbank payment system for the real-time processing of cross-border transfers throughout the European Union. It included 16 national real-time gross settlement systems and the ECB payment mechanism...
resp. TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System) in 26 countries of the European UnionEuropean UnionThe European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
TARGET2 is the Real Time Gross Settlement system for the Euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
currency, and is offered by the Eurosystem
Eurosystem
The Eurosystem is the monetary authority of the Eurozone, the collective of European Union member states that have adopted the euro as their sole official currency...
, which comprises the European Central Bank
European Central Bank
The European Central Bank is the institution of the European Union that administers the monetary policy of the 17 EU Eurozone member states. It is thus one of the world's most important central banks. The bank was established by the Treaty of Amsterdam in 1998, and is headquartered in Frankfurt,...
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.
Mechanism
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 $1000 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
BACS
Bacs Payment Schemes Limited is a United Kingdom scheme for the electronic processing of financial transactions. BACS direct debits and BACS direct credits are made using the BACS system...
. 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. Extending the example above, say another person deposits a check drawn on Bank B in Bank A for $500. At the end of the day, Bank A will have to "electronically" pay Bank B only $500 ($1000 - $500).
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.
RTGS does not require core banking
Core banking
Core banking is a general term used to describe the services provided by a group of networked bank branches. Bank customers may access their funds and other simple transactions from any of the member branch offices.- Core banking :...
to be implemented across participating banks, since transactions are direct, with no central processing or clearing operations. Any RTGS employs two sets of queues: one for testing outgoing funds availability on a chronological FIFO
FIFO
FIFO is an acronym for First In, First Out, an abstraction related to ways of organizing and manipulation of data relative to time and prioritization...
basis with the option of prioritizing specific inquiries, while the other queue is for processing debit/credit requests received from the central bank's Integrated Accounting System.