Systemically Important Payment System: Difference between revisions

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{{Short description|Designation for financial payment systems}}

'''Systemically important payment systems''' ('''SIPS''') are [[payment system]]s which have the characteristic that a failure of these systems could potentially endanger the operation of the whole economy. In general, these are the major payment clearing systems or [[real-time gross settlement]] systems of individual countries, but in the case of Europe, there are certain pan-European payment systems. [[TARGET2]] is a pan-European SIPS dealing with major inter-bank payments. [[STEP2]], operated by the [[Euro Banking Association]], is a major pan-European clearing system for retail payments which has the potential to become a SIPS.

A '''Systemically Important Payment System''' ('''SIPS''') is a [[payment system]]s whose failure could potentially endanger the operation of the whole economy. In general, these are the major payment clearing systems or [[real-time gross settlement]] systems of individual countries, but in the case of Europe, there are certain pan-European payment systems. As of late 2023, the [[European Central Bank]] had designated five payment systems as SIPS, namely [[T2 (settlement system)|T2]], [[EURO1]], [[STEP2]], [[STET-CORE|CORE(FR)]], and [[Mastercard Europe]].<ref>{{cite web |website=International Monetary Fund |date={{date|2023-9-8}} |url=https://www.imf.org/en/Publications/CR/Issues/2023/12/07/Belgium-Financial-Sector-Assessment-Program-Detailed-Assessment-of-Observance-Assessment-of-542179 |title=Belgium: Financial Sector Assessment Program-Detailed Assessment of Observance-Assessment of the CPSS–IOSCO Principles for Financial Market Infrastructures Euroclear Bank}}</ref>{{rp|12}}

In the event of a bank failure, adherence to the rules for the operation of SIPS should prevent a domino effect whereby payment obligations of the failing bank are effected against the solvent banks. Clearly, this does not prevent the effects of a bank failure from spreading; however, it closes off one route.

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# A well-founded legal basis

# Rules and procedures which enable participants to have a clear understanding of the system’s impact on each of the [[financial risksrisk]]s they incur through participation in it.

# Clearly defined procedures for the management of credit risks and liquidity risks, which specify the respective responsibilities of the system operator and the participants and which provide appropriate incentives to manage and contain those risks

# Prompt final settlement on the day of value, preferably during the day and at a minimum at the end of the day.

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==See also==

* [[Financial market infrastructure]]

* [[List of systemically important banks]]

* [[Systemic risk]]

* [[Systemically important financial market utility]]