SWIFT has just added 22 new members to its Global Payments Innovation (GPI) project.
Banks have, for some time, been looking at a way to monitor their intraday payments, global positions, and liquidity exposures more effectively. This is in line with rules set out by the Basel Committee on Banking Supervision (BCBS), which require banks to take into account metrics such as currencies and intraday exposures at correspondent banks.
Currently, a lack of intraday reporting coverage means banks have no way of monitoring the position of their Nostro accounts in real-time throughout the day.
If this vitally important sector is to be revitalised, finding a solution to monitoring payments in real-time, which can give banks more control and more confidence in managing their correspondent and corporate banking relationships, is vital.
There has been significant progress made on this front from one of the utilities at the center of the international financial system. SWIFT, the global provider of secure financial messaging and compliance services, has just added 22 new members to its Global Payments Innovation (GPI) project.
This could help transform the nature of international payments as we know it.
SWIFT launched a proof of concept (PoC) for its blockchain initiative earlier this year with six partner banks, as part of the SWIFT GPI, to provide the first system enabling real time monitoring of Nostro accounts.
There is growing momentum behind the project. Last week, a further 22 banks, including Lloyds in the UK, JPMorgan Chase in the US, Standard Bank in South Africa and Westpac Banking Corporation in Australia, all joined the PoC.
There is a lot of enthusiasm and anticipation about the outcome of the PoC. If banks could manage their Nostro account liquidity in real-time, it would allow them to accurately gauge how much money is required in each account at any given point. This would enable them to free up significant funds for other investments and reduce the cost of correspondent banking.
This PoC is a key example of the way in which industry leaders across the financial markets have been bringing the industry together to collaborate on projects using new technologies to tackle industry wide problems.
Although there are other companies launching similar initiatives, SWIFT benefits from its long-standing position of trust and neutrality at the heart of the financial sector. As a result, it is able to bring together banks, technology providers (such as Hyperledger which developed the blockchain technology for this PoC) and other industry stakeholders to find innovative and meaningful ways of introducing potentially transformative technologies.
“The proof of concept is about the accounts banks hold between themselves,” says Wim Raymaekers, Global Head of Banking Market at SWIFT. “Banks are exchanging information today; what we want to see with blockchain is those status information reports being exchanged, as banks don’t always know the levels of their Nostro accounts on a per transaction basis. Most often, banks get that information at the end of the day but they also want to know how much money is in their accounts in real-time.”
The results of this initial PoC are due to be announced at Sibos later in Toronto in October. We look forward to seeing them with great interest.