Topic 3 - Parties and their roles

Question 1

SWIFT - what does it stand for

Answer 1

SWIFT = Society for Worldwide Interbank Financial Telecommunications

• world’s largest secure financial messaging platofmr for communicating payment and info relating to payments.

Question 2

NOSTRO & VOSTRO

Answer 2

NOSTRO = means “our”

VOSTRO = means “your”

Question 3

Bank Identifier Code (BIC)

Answer 3

BIC

A BIC identifies the Bank and Branch

eg. MIDLGB22123

Bank code = MIDL

Country ISO code = GB

Branch identifier number = 22123

Question 4

International Bank Account Number (IBAN)

Answer 4

IBAN

An IBAN identifies a specific bank account and makes it easier to process payments across borders. An IBAN can be up to 32 charachters long.

eg. GB15MIDL40051512345678

Country code = GB

Check digit = 15

Bank code = MIDL

Sort code = 400515

Account number = 12345678

Question 5

Straight-through Processing (STP)

Answer 5

STP

STP is a system where a transaction is processed by automated systems with minimal human intervention.

Question 6

What does the inclusion of BIC and IBAN codes enable banks to do?

Answer 6

The inclusion of both codes in a funds transfer instruction enables banks using SWIFT to send messages to each other using STP (straight-through processing), which eliminates delays and queries.

Question 7

Real-time Gross Settlement (RTGS)

1) what is it?
2) name the UK and European equivalents of RTGS

Answer 7

1) RTGS

RTGS is a payment system that transfers and settles payments between banks electronically, in real time (instantaneously) & on a one-to-one basis.

2) UK = CHAPS (Clearing House Automated Payment System)

Eurozone = TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System)

Question 8

List two types of payment systems used and state whether they are irrevocable or not?

Answer 8

SWIFT & RTGS

Payments made either via SWIFT messages or by RTGS systems are irrevocable.

Once made, even if in error, they cannot be withdrawn or cancelled once sent, unless the recipient agrees to return the money.

Question 9

Continuous Linked Settlements (CTS)

Answer 9

CTS

CTS: institution owned and operated by banks. Allows banks to have a single NOSTRO account in foreign territory. CTS disperses funds from account to beneficiaries at different banks.