Cross-currency instant payment settlement in a multi-currency clearing and settlement mechanism
The Bank of Italy is today publishing “Inter-Currency Instant Payments Settlement in a Multi-Currency Clearing and Settlement Mechanism”, the new issue of the “Markets, Infrastructures, Payment Systems” series.
Starting from the observed gap, mainly in terms of cost and speed, between domestic and cross-border retail payments in Europe, this article focuses on the opportunities that a multi-currency technical platform can offer to bridge this gap. In particular, the ECB, together with the Riksbank and the Banca d’Italia (in its role as market infrastructure service provider for the Eurosystem) has started to analyze how TIPS (TARGET Instant Payment Settlement), as that multi-currency platform for the settlement of instant payments in central bank money, could support instant payment transactions in different currencies. Based on a general overview of recent market developments and government demand to improve the efficiency of cross-border payments, the article describes a three-tier model for processing currency payments in multi-currency clearing. and settlement mechanism. Within this framework, different possible ways of dealing with the main elements of a transaction between currencies (i.e. determining the applicable exchange rate for a given transaction, how to apply the agreed exchange rate and the settlement model) are identified and described. A methodology for evaluating and comparing the different models identified for the three treatment layers is also provided. Against this background, the paper concludes by providing a number of considerations (of a political, commercial, technical, operational and legal nature) to be taken into account in finalizing the ongoing analysis for the provision of an instant payment settlement. between currencies. in TIPS, and its potential applicability in the wider context of cross-border payments between different technical platforms.
Bank of Italy published this content on January 11, 2022 and is solely responsible for the information it contains. Distributed by Public, unedited and unmodified, on January 11, 2022 10:07:01 AM UTC.