What is the fundamental definition of a Real-time Gross Settlement (RTGS) system?

A Real-time Gross Settlement (RTGS) system is a specialized electronic funds transfer system where the transfer of money or securities between banks occurs on a 'real-time' and 'gross' basis. This method is specifically designed to mitigate settlement risk.

What does the term 'real-time' signify within the context of RTGS operations?

In RTGS, 'real-time' means that a payment transaction is settled as soon as it is processed, without any waiting period. However, it is important to note that 'real-time' does not necessarily imply immediate or instantaneous settlement, as some processing or review by the issuing or reviewing bank might still occur.

How is 'gross settlement' understood in the operation of RTGS systems?

'Gross settlement' means that each transaction is settled individually on a one-to-one basis. This is in contrast to netting, where multiple transactions are aggregated, and only the net difference is settled.

What is the primary objective of implementing RTGS systems?

The primary objective of RTGS systems, as pursued by central banks globally, is to minimize the risk associated with high-value electronic payment settlement systems. This is achieved by ensuring that once a transaction is processed, it is final and irrevocable.

What was the first system to exhibit characteristics of an RTGS, and when was it established?

The first system that possessed the attributes of an RTGS was the U.S. Fedwire system, which was launched in 1970. This system evolved from an earlier method of transferring funds electronically between U.S. federal reserve banks using telegraph.

Which European countries independently developed RTGS-type systems in 1984, and what were these systems called?

In 1984, the United Kingdom developed the CHAPS system through the Bankers' Clearing House, and France developed a system named SAGITTAIRE. These were independent developments of RTGS-type systems in Europe.

How did international financial organizations view RTGS systems in the 1990s?

During the 1990s, international finance organizations began to emphasize the critical importance of large-value funds transfer systems, like RTGS, as a key component of a country's financial market infrastructure. These systems are used by banks to settle interbank transfers for themselves and their customers.

By what year had most Group of Ten (G-10) countries implemented RTGS systems?

By 1997, a significant number of countries, including most of the G-10 nations, had introduced real-time gross settlement systems for large-value funds transfers, with many other countries also considering their implementation.

Who typically operates RTGS systems, and why is this entity considered crucial?

RTGS systems are usually operated by a country's central bank. This is because such systems are viewed as critical infrastructure for the nation's economy, essential for the smooth functioning of financial markets.

What are the economic benefits of having an efficient national payment system, such as RTGS?

An efficient national payment system, like RTGS, is believed by economists to reduce the cost of exchanging goods and services. It is also considered indispensable for the proper functioning of interbank, money, and capital markets.

What are the potential negative consequences of a weak national payment system?

A weak payment system can severely hinder a national economy's stability and developmental capacity. Its failures can lead to inefficient use of financial resources, inequitable risk-sharing among economic agents, actual financial losses for participants, and a general loss of confidence in the financial system and the use of money itself.

How does an RTGS system facilitate transactions without physical money exchange?

An RTGS system operates electronically. The central bank directly adjusts the electronic accounts of the involved banks, decreasing the balance in the sending bank's account and increasing the balance in the receiving bank's account by the transaction amount.

What types of financial transactions are RTGS systems best suited for?

RTGS systems are particularly well-suited for low-volume, high-value transactions. This focus helps to manage risk and ensure the integrity of significant financial movements.

How do RTGS systems differ from net settlement systems?

RTGS systems settle each transaction individually and immediately on a gross basis, eliminating settlement risk. In contrast, net settlement systems accumulate all inter-institution transactions throughout the day and settle only the net amounts at the end of the day, which carries a higher settlement risk.

What role has the World Bank played in the development of payment systems globally?

The World Bank has increasingly focused on payment system development as a vital component of a country's financial infrastructure. It has provided various forms of assistance to over 100 countries to help them establish and improve their payment systems, including RTGS.

What are some of the key factors influencing a central bank's decision to adopt an RTGS system?

Several factors influence the adoption of RTGS systems by central banks. These include competitive pressures from global financial markets, the potential benefits of accessing other countries' RTGS systems, the spillover of knowledge and experience from other central banks, and the feasibility of sharing development costs with specialized providers.

What is the RTGS system used in the African Union called?

The RTGS system utilized by the African Union is known as PAPSS, which stands for the Pan-African Payment and Settlement System.

What is the name of the RTGS system in Angola, and what does its acronym signify?

Angola uses the SPTR system, which is the Portuguese acronym for 'Sistema de pagamentos em tempo real,' translating to 'Real-time Payment System'.

What is the RTGS system in Argentina called, and what is its meaning?

Argentina's RTGS system is called MEP, which is the Spanish abbreviation for 'Medio electrónico de pagos,' meaning 'Electronic Means of Payment'.

What is the RTGS system in Australia, and what is its full name?

Australia's RTGS system is named RITS, which stands for the Reserve Bank Information and Transfer System, operated by the Reserve Bank of Australia.

What is the RTGS system used within the Eurozone called?

The RTGS system used within the Eurozone is named T2.

What is the primary RTGS system for large-value payments in the United Kingdom?

The primary RTGS system for large-value payments in the United Kingdom is CHAPS, which stands for the Clearing House Automated Payment System.

What is the name of the RTGS system in the United States?

The RTGS system used in the United States is called Fedwire.

What is the RTGS system in Japan known as, and what does its acronym represent?

Japan's RTGS system is called BOJ-NET, which is the Bank of Japan Financial Network System.

What is the name of China's RTGS system for cross-border interbank payments?

China's RTGS system for cross-border interbank payments is named CIPS, which stands for the Cross-Border Interbank Payment System.

What is the RTGS system in Canada called?

Canada's RTGS system for high-value payments is named Lynx.

What is the RTGS system in India referred to as?

India's RTGS system is simply referred to as RTGS, operated by the Reserve Bank of India.

What is the name of Brazil's RTGS system, and what does its acronym mean?

Brazil's RTGS system is called STR, which is the Portuguese acronym for 'Sistema de Transferência de Reservas,' meaning 'Reserves Transfer System'.

What is the RTGS system in Russia called, and what does its acronym stand for?

Russia's RTGS system is known as the BESP System, which stands for Banking Electronic Speed Payment System.

What is the RTGS system in South Africa named, and what does it stand for?

South Africa's RTGS system is called SAMOS, which stands for The South African Multiple Option Settlement.

What is the name of Switzerland's interbank clearing system that functions as an RTGS?

Switzerland's RTGS system is known as SIC, which stands for Swiss Interbank Clearing.

What is the RTGS system in Sweden called, and what does its name translate to?

Sweden's RTGS system is named RIX. Its full name in Swedish is 'Riksbankens system för överföring av kontoförda pengar,' which translates to 'Riksbank's system for the transfer of account-based money'.

What is the RTGS system in Hong Kong called, and what does its acronym represent?

Hong Kong's RTGS system is known as CHATS, which stands for Clearing House Automated Transfer System.

What is the RTGS system in Singapore called, and what does its acronym signify?

Singapore's RTGS system is named MEPS+, which stands for MAS Electronic Payment System Plus.

What is the RTGS system in South Korea known as?

South Korea's RTGS system is called BOK-WIRE+, which is the Bank of Korea Financial Wire Network.

What is the RTGS system in Taiwan called, and what does its acronym stand for?

Taiwan's RTGS system is named CIFS, which stands for CBC Interbank Funds Transfer System.

What is the RTGS system in the Philippines known as, and what are its alternative names?

The Philippines' RTGS system is called RTGS PS (Peso Real-Time Gross Settlement Payment System), and it is also known as PhilPaSSplus.

What are the RTGS systems used in Poland?

Poland utilizes two RTGS systems: SORBNET and SORBNET2.

What is the RTGS system in Turkey called?

Turkey's RTGS system is referred to as EFT, which stands for Electronic Fund Transfer.

What is the RTGS system in Ukraine known as?

Ukraine's RTGS system is called SEP, which stands for the System of Electronic Payments of the National Bank of Ukraine.

What is the RTGS system in the United Arab Emirates called, and what does its acronym represent?

The RTGS system in the United Arab Emirates is known as UAEFTS, which stands for UAE Funds Transfer System.

What is the RTGS system in Vietnam called?

Vietnam's RTGS system is known as IBPS.

What is the RTGS system in Egypt called?

Egypt's RTGS system is referred to simply as RTGS.

What is the RTGS system in Israel known as, and what does its name mean?

Israel's RTGS system is called Zahav, which means 'gold' in Hebrew and stands for Zahav Real-time Credits and Transfers.

What is the RTGS system in Mexico called, and what does its acronym signify?

Mexico's RTGS system is named SPEI, which is the Spanish acronym for 'Sistema de Pagos Electrónicos Interbancarios,' meaning 'Interbank Electronic Payment System'.

What is the RTGS system in Thailand called, and what does its acronym represent?

Thailand's RTGS system is known as BAHTNET, which stands for the Bank of Thailand Automated High Value Transfer Network.

What is the RTGS system in Indonesia called?

Indonesia's RTGS system is named BI-RTGS, which stands for Bank Indonesia Real Time Gross Settlement Sistem.

What is the RTGS system in Iran known as?

Iran's RTGS system is called SATNA, which is an acronym for a Persian phrase meaning 'Real-Time Gross Settlement System'.

What is the RTGS system in Iraq called?

Iraq's RTGS system is referred to as RTGS (Real Time Gross Settlement System).

What is the RTGS system in Jordan called?

Jordan's RTGS system is designated as RTGS-J.

What is the RTGS system in Kenya known as, and what does its acronym stand for?

Kenya's RTGS system is called KEPSS, which stands for Kenya Electronic Payment and Settlement System.

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What is RTGS?

Core Principles

Real-Time Gross Settlement (RTGS) systems are specialized funds transfer systems. They facilitate the transfer of monetary assets or securities between financial institutions on a "real-time" and "gross" basis. This mechanism is designed to mitigate settlement risk, ensuring transactions are finalized as they are processed, without delay or aggregation with other transactions.

Real-Time Settlement

The "real-time" aspect signifies that transactions are settled as soon as they are processed, without any waiting period. While not always instantaneous, it means settlement occurs without artificial delays, providing immediate finality. This contrasts with net settlement systems that batch transactions and settle them at the end of a period.

Gross Basis

The "gross" settlement means each transaction is processed and settled individually, on a one-to-one basis. This prevents the bundling or netting of multiple transactions, which could introduce or amplify settlement risk if one party defaults on its net obligations.

Finality and Risk Mitigation

Once a transaction is settled through an RTGS system, it is final and irrevocable. This immediate finality significantly reduces settlement risk, which is the risk that one party to an obligation will not settle when due. By settling each transaction individually and in real-time, RTGS systems provide a robust framework for high-value interbank payments.

Historical Evolution

Early Adoption

The concept of RTGS gained prominence as financial markets grew more complex. The first system exhibiting RTGS attributes was the U.S. Fedwire system, established in 1970. This was followed by independent developments in the UK and France in 1984, with CHAPS and SAGITTAIRE, respectively. These early systems were often country-specific, reflecting existing operational procedures.

Global Standardization

By the mid-1990s, international finance organizations underscored the importance of RTGS for financial market infrastructure. This led to widespread adoption, with many Group of Ten (G-10) countries implementing or planning RTGS systems by 1997. The World Bank has also been instrumental in assisting numerous countries in developing their payment systems.

1970: U.S. Fedwire system launched, incorporating RTGS principles.
1984: UK's CHAPS and France's SAGITTAIRE systems introduced.
1990s: Increased emphasis by international bodies on RTGS for financial stability.
1997: Significant number of G-10 countries had RTGS systems operational.
2000s onwards: Continued global expansion and technological upgrades of RTGS infrastructure.

Operational Mechanics

Central Bank Role

RTGS systems are typically operated by a nation's central bank. This is because they are considered critical infrastructure for the economy. The central bank manages the accounts of participating commercial banks, facilitating the electronic transfer of funds by debiting one bank's account and crediting another's.

Electronic Ledger

The settlement process involves adjustments to the electronic accounts held by commercial banks at the central bank. There is no physical exchange of money. This digital ledger system ensures accuracy and provides real-time visibility into each institution's liquidity position.

High-Value, Low-Volume

RTGS systems are primarily designed for high-value transactions, such as interbank payments and large corporate transfers. While they handle fewer transactions compared to retail payment systems, the value of these transactions is substantial, making the efficiency and security of RTGS paramount.

RTGS vs. Net Settlement

Unlike net settlement systems (e.g., BACS), which accumulate transactions throughout the day and settle the net amounts, RTGS settles each transaction individually. This immediate gross settlement eliminates credit risk associated with payment lags, enhancing overall financial system stability.

Global RTGS Systems

International Landscape

Numerous countries worldwide operate RTGS systems, forming a crucial part of their national payment infrastructure. These systems vary in name and specific operational details but share the core principles of real-time, gross settlement.

Country	System Name
African Union	PAPSS (Pan-African Payment and Settlement System)
Angola	SPTR (Sistema de pagamentos em tempo real)
Argentina	MEP (Medio electrónico de pagos)
Australia	RITS (Reserve Bank Information and Transfer System)
Azerbaijan	AZIPS (Azerbaijan Interbank Payment System)
Bahrain	RTGS (Real Time Gross Settlement System)
Bangladesh	RTGS (Bangladesh Bank Payment Service Division)
Barbados	CBRTGS (Central Bank Real Time Gross Settlement System)
Belarus	BISS (Belarus Interbank Settlement System)
Bosnia and Herzegovina	RTGS
Brazil	STR (Sistema de Transferência de Reservas)
Bulgaria	RINGS (Real-time Interbank Gross Settlement)
Canada	Lynx
Chile	LBTR/CAS (Liquidación Bruta en Tiempo Real)
China	CIPS (Cross-Border Interbank Payment System)
Costa Rica	TEF (Transferencia Electrónica de Fondos)
Czech Republic	CERTIS (Czech Express Real Time Interbank Gross Settlement System)
Denmark	KRONOS2
Dominican Republic	LBTR (Liquidación Bruta en Tiempo Real)
Egypt	RTGS
Eurozone	T2
Fiji	FIJICLEAR
Georgia	GPSS (Georgian Payment and Securities System)
Hong Kong	CHATS (Clearing House Automated Transfer System)
Hungary	VIBER (Valós Idejű Bruttó Elszámolási Rendszer)
India	RTGS
Indonesia	BI-RTGS (Bank Indonesia Real Time Gross Settlement Sistem)
Iran	SATNA (Real-Time Gross Settlement System)
Iraq	RTGS (Real Time Gross Settlement System)
Israel	Zahav (Zahav Real-time Credits and Transfers)
Japan	BOJ-NET (Bank of Japan Financial Network System)
Jordan	RTGS-J
Kenya	KEPSS (Kenya Electronic Payment and Settlement System)
Korea	BOK-WIRE+ (Bank of Korea Financial Wire Network)
Kuwait	KASSIP (Kuwait's Automated Settlement System for Inter-Participant Payments)
Lebanon	BDL-RTGS (Banque Du Liban – Real Time Gross Settlement)
Macao	RTGS
Malawi	MITASS (Malawi Interbank Settlement System)
Malaysia	RENTAS (Real Time Electronic Transfer of Funds and Securities)
Mauritius	MACSS (Mauritius Automated Clearing and Settlement System)
Mexico	SPEI (Sistema de Pagos Electrónicos Interbancarios)
Morocco	SRBM (Système de règlement brut du Maroc)
Namibia	NISS (Namibia Interbank Settlement System)
New Zealand	ESAS (Exchange Settlement Account System)
Nigeria	CIFTS (CBN Inter-Bank Funds Transfer System)
North Macedonia	MIPS (Macedonian Interbank Payment System)
Pakistan	RTGS (Real Time Gross Settlement System)
Paraguay	LBTR (Liquidación Bruta en Tiempo Real)
Peru	LBTR (Liquidación Bruta en Tiempo Real)
Philippines	PhilPaSS^plus (Peso Real-Time Gross Settlement Payment System)
Poland	SORBNET / SORBNET2
Qatar	QPS (Qatar Payment System)
Romania	ReGIS
Russia	BESP System (Banking Electronic Speed Payment System)
Saudi Arabia	SARIE (Saudi Arabian Riyal Interbank Express)
Singapore	MEPS+ (MAS Electronic Payment System Plus)
South Africa	SAMOS (The South African Multiple Option Settlement)
Sri Lanka	LankaSettle (RTGS/SSSS)
Sweden	RIX (Riksbankens system för överföring av kontoförda pengar)
Switzerland	SIC (Swiss Interbank Clearing)
Taiwan	CIFS (CBC Interbank Funds Transfer System)
Tanzania	TISS (Tanzania Interbank Settlement System)
Thailand	BAHTNET (Bank of Thailand Automated High Value Transfer Network)
Tunisia	SGMT (Système de Virements de Gros Montant Tunisien)
Turkey	EFT (Electronic Fund Transfer)
Uganda	UNIS (Uganda National Interbank Settlement)
Ukraine	SEP (System of Electronic Payments of the National Bank of Ukraine)
United Arab Emirates	UAEFTS (UAE Funds Transfer System)
United Kingdom	CHAPS (Clearing House Automated Payment System)
United States	Fedwire
Vietnam	IBPS
Zambia	ZIPSS (Zambian Interbank Payment and Settlement System)
Zimbabwe	ZETSS (Zimbabwe Electronic Transfer and Settlement System)

Related Concepts

Net Settlement

An alternative to RTGS where transactions are aggregated over a period, and only the net amounts are settled. This is generally used for lower-value, higher-volume retail payments.

Payment System

The broader infrastructure and mechanisms through which financial transactions are conducted. RTGS is a critical component of a nation's payment system.

SWIFT

While not an RTGS system itself, SWIFT (Society for Worldwide Interbank Financial Telecommunication) provides a secure messaging network used by financial institutions globally, often to initiate or confirm transactions that are then settled via RTGS systems.

Central Bank

The primary operator and overseer of RTGS systems, responsible for maintaining financial stability and managing the nation's monetary policy and payment infrastructure.

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References

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 2007, p. 2

Biago Bossone and Massimo Casino, "The Oversight of the Payment Systems: A Framework for the Development and Governance of Payment Systems in Emerging Economies"The World Bank, July 2001, p.7

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. 16â17

A full list of references for this article are available at the Real-time gross settlement Wikipedia page

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Important Notice

This page was generated by an Artificial Intelligence and is intended for informational and educational purposes only. The content is based on a snapshot of publicly available data from Wikipedia and may not be entirely accurate, complete, or up-to-date.

This is not financial advice. The information provided on this website is not a substitute for professional financial consultation, advice, or services. Always seek the advice of a qualified financial professional or institution for any financial decisions or concerns.

The creators of this page are not responsible for any errors or omissions, or for any actions taken based on the information provided herein.

Navigating Financial Flows

💡 Dive in with Flashcard Learning! 💡

What is RTGS? ℹ️

⚡ Core Principles

⏱️ Real-Time Settlement

↔️ Gross Basis

🔒 Finality and Risk Mitigation

Historical Evolution 📈

🕰️ Early Adoption

🌐 Global Standardization

Operational Mechanics ⚙️

🏛️ Central Bank Role

💻 Electronic Ledger

⚖️ High-Value, Low-Volume

🆚 RTGS vs. Net Settlement

Global RTGS Systems 🌍

🗺️ International Landscape

Related Concepts 🔗

⚖️ Net Settlement

🏦 Payment System

🤝 SWIFT

🏛️ Central Bank

Teacher's Corner 🧑‍🏫

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📜 Important Notice

Dive in with Flashcard Learning!

What is RTGS?

Core Principles

Real-Time Settlement

Gross Basis

Finality and Risk Mitigation

Historical Evolution

Early Adoption

Global Standardization

Operational Mechanics

Central Bank Role

Electronic Ledger

High-Value, Low-Volume

RTGS vs. Net Settlement

Global RTGS Systems

International Landscape

Related Concepts

Net Settlement

Payment System

SWIFT

Central Bank

Teacher's Corner

True or False?

Test Your Knowledge!

Gamer's Corner

Discover other topics to study!

References

Feedback & Support

Disclaimer

Important Notice