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appenDiX B - acH anD rtGs Basics
B.2
InteR-BAnK PAyMent systeMs
a payment system can be thought of as “a particular set of payment instruments, technical standards for the transmission of payment
messages and an agreed means of settling claims among system members, including use of a nominated settlement institution.”18
an inter-bank payment system is a “means of settling claims” between commercial banks issuing money and using the central bank
as the settlement institution. the payment may either be financed with funds already on the account of the paying bank or with credit
provided by the settlement institution.
an inter-bank payment system involves the customers of the commercial banks making and receiving payments. additionally, the
system can encompass customers of other banks, where the bank has a correspondent relationship with a commercial bank payment
system member, to create more complex chains of payments than seen in a straightforward single bank-to-bank transfer.
a typical inter-bank payment system is illustrated below.
SETTlEMENT Inter-bank
INSTITUTION Payment
System
BANK A BANK B
BANK C PAyEE
PAyEr
Figure 8: Typical Inter-bank Payment System
each organisation has the following roles:
Central Bank (Settlement Institution):
• provides accounts for members of the inter-bank payment system
• provides liquidity (ie issues money and lends member banks funds)
• manages risk throughout system (ie sets the rules for provision of liquidity by members)
45
B.2
InteR-BAnK PAyMent systeMs
a payment system can be thought of as “a particular set of payment instruments, technical standards for the transmission of payment
messages and an agreed means of settling claims among system members, including use of a nominated settlement institution.”18
an inter-bank payment system is a “means of settling claims” between commercial banks issuing money and using the central bank
as the settlement institution. the payment may either be financed with funds already on the account of the paying bank or with credit
provided by the settlement institution.
an inter-bank payment system involves the customers of the commercial banks making and receiving payments. additionally, the
system can encompass customers of other banks, where the bank has a correspondent relationship with a commercial bank payment
system member, to create more complex chains of payments than seen in a straightforward single bank-to-bank transfer.
a typical inter-bank payment system is illustrated below.
SETTlEMENT Inter-bank
INSTITUTION Payment
System
BANK A BANK B
BANK C PAyEE
PAyEr
Figure 8: Typical Inter-bank Payment System
each organisation has the following roles:
Central Bank (Settlement Institution):
• provides accounts for members of the inter-bank payment system
• provides liquidity (ie issues money and lends member banks funds)
• manages risk throughout system (ie sets the rules for provision of liquidity by members)
45
