Abhishek Jhanwar

Settlement Systems in the world

Some settlement systems in the world• U.S. Settlement System

• Settlement Systems in U.K.

• Settlement Systems in France

• Settlement System in Germany

• Settlement System in Switzerland

• Settlement Systems in Japan

U.S. Settlement System

• Federal reserve has its own settlement system called FEDWIRE and CHIPS

• The transaction handled by FEDWIRE settlement system can be classified in two categories:

1)Transfers between Reserve Deposit Account (or settlement accounts) of all financial institutions in the U.S. with their affiliates. )

2)Transfers of government securities through which treasury bills and federal reserve agency conduct securities related settlements.

• It is a settlement a operating in New York Clearing House Association and was established as means of settling Euro –dollar transactions.

• CHIPS settlement are conducted in the following manner:

1)Payment instructions are sent out and received continuously during the day .Each member’s net balance continues on changing, but at the cut-off time, every member fixes its own net balance including the portions on behalf of non-settling banks.

2) The fixed net balance is then settled between CHIPS accounts and and the banks' account with the federal reserve bank of New York through FEDWIRE. Settlement is done before the settlement is closed and as a result the CHIPS account balance becomes zero.

Settlement System in u.k.• In U.K. , CHAPS operates to settle transactions by 14 major banks including bank of England.

• The system was established in 1984.

• The system is an effective means of settling transactions of London Financial Market.

• Cut off time is 15.00 Hrs.

• CHAP’s transactions are irrevocable and all are settled on the same day.

Settlement system in france• The settlement system in France is called SAGITTAIRE.

• The System is operated by bank of France.

• The settlement in this system are done by transferring net balances calculated at the cut-off time between SAGITTAIRE accounts at the Bank Of France.

• The settlement time is 8 A.M. on the following day.

• SAGITTAIRE requires standard message issued by SWIFT (Society for worldwide interbank financial telecommunication)

Settlement system in germany• The commercial banks, saving banks, credit association, etc. have their own settlement

systems.

• The settlement between the businesses of different types is done by means of transfers between accounts held individually by each financial institutions at the Bundes Bank.

In this system

• Payments are irrevocable,

• Daylight overdraft is basically forbidden

Settlement system in switzerland• The system of settlement prevailing in Switzerland is called Bankers Clearing.

• This system handles more than 90% of total interbank transactions.

• New system SIC (Swiss interbank clearance) was introduces in1987 to handle the increasing volume of transactions.

Characteristics of SIC

• It is a 24 hours settlement system

• It introduces the risks and introduces counter measures

Settlement system in japan• Japanese settlement system is yen based and is roughly grouped into the following three

types:

1)Bill Clearing system

2)Domestic exchange settlement system –Zengin system

3)Yen based settlement system for foreign exchange

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