Page 52 - ITU-T Focus Group Digital Financial Services – Interoperability

ITU-T Focus Group Digital Financial Services
Interoperability

5.3 Payments exchanged via interoperable systems should be settled promptly, preferably on an intraday
basis.
5.4 The terms and conditions of an interoperability agreement should ensure adequate arrangements for
managing and containing the risks associated with the inability of one of the participating retail payment
entities to promptly fulfil its obligations.

57. RPEs participating in an interoperability agreement might be exposed to additional credit and liquidity
risks. Interoperability causes an exposure of one RPE and its customers to another RPE and its customers. A risk
can materialize if a participating RPE defaults, causing liquidity pressures on other RPEs. This risk may increase
when a netting process takes place. Also, interoperability causes an additional exposure if a participating RPE
temporarily holds the funds transferred between one retail payment entity and the other in a transitional
account. Moreover, interoperability may create significant credit and liquidity interdependencies between
systems. Problems may arise if, for example:

• One of the systems permits provisional transfers of funds that may be subject to an unwinding procedure.
• There are differences regarding the moment of finality.

• One of the systems experiences an operational problem that could expose participants in the arrangement
to losses.

58. Interoperability agreements should specify rules on payment finality. Participating RPEs should state in
their rulebooks that payments are final once they are confirmed as successful to the remitting RPE. In other
words, when the remitting PSP receives a positive confirmation from the beneficiary RPE via the interbank
system, payment finality has been achieved and the payment may not be recalled by the payer without the
consent of the beneficiary. In addition, settlement should be guaranteed to ensure there is no settlement
risk and that settlement is assured in the event of the insolvency and exclusion of a RPE, particularly where
settlement is based on a deferred model. The system of guarantees used will require agreement with the
relevant national central bank(s).
59. Where interoperability involves more than one RPS, interoperability agreements should include rules
for settlement finality. Guaranteed finality should apply to each step in the chain, i.e., where a payment
flows from one RPS to another, the payment will be guaranteed in the first system before being passed to the
second system.

60. There are a variety of strategies for guaranteeing settlement in interoperable systems. All such strategies
require the remitting RPE in some way guaranteeing payment to the beneficiary RPE in a way that would not
be affected by insolvency or RPE failure. Some of the options are as follows:

• cash prefunding (either periodic deferred net settlement or settlement in real time),
• pledging non-cash collateral to the central bank,
• bilateral guarantees between banks,

• loss-sharing agreements,
• trust lines.
61. RPEs participating in an interoperable agreement should have access to all the information necessary
to conduct an assessment of credit and liquidity risks associated with interoperability.

ACCESS CRITERIA
Principle 6: Criteria for access to interoperable systems should be clear, objective, non-discriminatory, and
publicly disclosed.

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