Currency, Assets, Liabilities & EquityTransfers
You can receive currency transfers to Your accounts through:
SEPA-SCT, T2 (Target2), TIPS, Fedwire, Chips, KTT (Funds transfer through corresponding Banks and MT202) and many Instant Payment Systems
deferred settlement systems through IFC, our mother institution, and our correspondent accounts
Securities through T2S, Clearstream, Euroclear, DTC
Settlements through RTGS, ACH/SEPA and
SWIFT MT 103/202, Swiftnet Instant, SWIFT gpi UETR, FX4Cash
How do Banks tranfer Funds?
Content from YouTube can't be displayed due to your current cookie settings. To show this content, please click "Consent & Show" to confirm that necessary data will be transferred to YouTube to enable this service. Further information can be found in our Privacy Policy. Changed your mind? You can revoke your consent at any time via your cookie settings.
- For a comprehensive view of Correspondent Banking Transfers please click here.
- For a comprehensive view of Instant Payment Systems please click here.
- For a comprehensive view of the RTGS System please click here.
Clearing Process
The clearing process is a crucial step in the settlement of financial transactions, ensuring that the parties involved in a transaction are protected and that the transaction proceeds smoothly. Clearing involves the following steps:
Exchange of transaction information:
- The sending and receiving banks exchange transaction details, such as the amount, account numbers, and other relevant information-
- Netting of transactions: Clearing houses, such as the Automated Clearing House (ACH) in the United States, facilitate the process by acting as intermediaries between banks. They calculate the net amount owed by one bank to another, minimizing the amounts that change hands on a given day.
- Validation of funds: The clearing house ensures that funds are available for the transaction and records the transaction details
- Holding funds securely: Funds are held securely until the transaction is complete, and any discrepancies are investigated, with the clearing house acting as an intermediary
Settlement Process
The settlement process occurs after the clearing process and involves the actual transfer of funds between banks. The main steps in the settlement process are:
- Reconciliation of records: Banks reconcile their records to determine the net amount owed by one bank to another
- Transfer of funds: Banks transfer funds between accounts held at central banks or other financial institutions to settle any outstanding balances
- Settlement confirmation: The settlement bank provides settlement confirmation to the merchant when a transaction has cleared, and funds become available
Payment Network and Intermediaries
Payment networks and intermediaries play a vital role in facilitating the clearing and settlement processes. Some examples of payment networks and intermediaries include:
- Clearing houses: Independent organisations, such as the ACH in the United States, that facilitate the clearing process by acting as intermediaries between banks
- Central Bank Sytems (RTGS): These gateways help authenticate and securely pass transaction data and funds among the parties involved in the transaction flow, such as banks
- Intermediary banks: These banks serve as middlemen between the issuing bank and the receiving bank, often in different countries, to facilitate international wire transfers
In summary, the clearing and settlement processes involve the exchange of transaction information, validation of funds, reconciliation of records, and the actual transfer of funds between banks. Payment networks and intermediaries, such as clearing houses, and intermediary banks or central banks, play a crucial role in facilitating these processes.
The clearing and settlement processes are subject to oversight by financial regulators. Regulators play an important role in ensuring that these processes are safe, sound, and efficient.
Understanding Money Transfers and their Constraints
In the world of high-value financial transactions, different systems are in place to facilitate the smooth transfer of money between banks and institutions. Each system operates with its own set of rules, limits, and complexities, designed to handle various types of transactions—ranging from local, high-speed payments to cross-border transfers requiring rigorous compliance checks. In this article, we explore how large-scale money transfers are managed in four major systems: RTGS, SWIFT, SEPA, and RTP.
RTGS: No Limits, High-Speed Transfers
Real-Time Gross Settlement (RTGS) systems are designed specifically for high-value transfers, with no official upper limit on the amount that can be transferred. This system is used globally, often managed by central banks like the Federal Reserve in the U.S. (Fedwire) or the Bank of England (CHAPS).
RTGS operates in real-time, meaning transactions are settled individually as they occur, and there’s no batching of payments. The "gross" nature means each transaction is settled on its own, without netting it against other payments. This ensures that funds are moved immediately, and once a transaction is completed, it is final and irrevocable.
Due to its real-time and high-value focus, RTGS is ideal for transactions involving billions of dollars or euros. Large interbank transfers, corporate payments, or securities transactions often rely on RTGS because of the speed and certainty it offers.
SWIFT: Practical Limits Around €50 Million or $50 Million
The SWIFT (Society for Worldwide Interbank Financial Telecommunication) network is the backbone of international banking communication, facilitating cross-border payments between financial institutions. While SWIFT itself doesn’t impose a fixed transaction limit, practical limits often come into play, particularly for large transfers.
For transactions exceeding €50 million or $50 million, banks typically face heightened scrutiny due to increased risk, compliance concerns, and liquidity management. Banks may limit such transactions or require additional time for approval, especially for international payments involving multiple intermediary banks, which can increase the complexity of the process.
The need for multiple checks to prevent money laundering, ensure regulatory compliance, and mitigate credit risk can make transferring sums larger than €50 million or $50 million more cumbersome through the SWIFT network. These practical limitations are imposed by individual financial institutions rather than by SWIFT itself.
SEPA: Varying Limits, Especially for Instant Transfers
The Single Euro Payments Area (SEPA) facilitates euro-denominated payments across 36 countries in Europe. SEPA operates through two main types of transactions: SEPA Credit Transfer (SCT) and SEPA Instant Credit Transfer (SCT Inst).
- SEPA Credit Transfer (SCT): Typically has no formal limit, meaning large euro-denominated payments can be transferred within SEPA-participating countries without issue. However, individual banks may set their own limits based on internal policies.
- SEPA Instant Credit Transfer (SCT Inst): Initially capped at €15,000, the limit for SCT Inst has been gradually increased to accommodate larger transfers. As of recent developments, the maximum limit is €100,000 for an instant payment. However, this limit is not universal across all banks or countries, as financial institutions may impose lower thresholds based on their risk management policies.
SEPA is widely used for cross-border payments within Europe, and SCT Inst has become popular for real-time transfers, though its cap at €100,000 may pose a constraint for businesses needing to move larger sums quickly.
RTP: Limits in the U.S. and Europe
Real-Time Payments (RTP) systems have become increasingly popular for their ability to move funds instantly, providing users with immediate access to the transferred money. These systems are now operational in the U.S. and parts of Europe, but they come with defined transfer limits.
- United States RTP: The U.S. RTP network, operated by The Clearing House, allows for instant settlement of payments with a current maximum transfer limit of $1,000,000 per transaction. This system is commonly used for business-to-business (B2B) payments, payroll, and consumer transactions, though the limit may vary depending on the participating bank's internal policies.
- Europe’s RTP Systems: In Europe, the real-time payment landscape includes services like SEPA Instant Credit Transfer (as discussed above), which allows for instant payments up to €100,000. In addition to SEPA Inst, individual countries like the UK (with its Faster Payments system) also have RTP frameworks in place, though they may impose their own limits—typically ranging from £250,000 to £1 million for faster payments.
Conclusion: Flexibility vs. Practical Constraints
While systems like RTGS are designed to facilitate the transfer of billions of dollars without any official upper limit, systems like SWIFT and SEPA face practical constraints when moving amounts above €50 million or $50 million. This is often due to compliance, liquidity, and risk management requirements rather than any systemic limitations. Meanwhile, RTPsystems in the U.S. and Europe provide real-time payment capabilities with relatively high but clearly defined limits, such as $1 million in the U.S. and €100,000 in Europe.
Each payment system serves different needs, with RTGS excelling in high-value, real-time transactions, while SWIFT and SEPA balance large-scale transfers with regulatory and liquidity concerns. Understanding the practical limits of these systems is essential for institutions and businesses engaging in large-scale financial transactions.
What can be transferred from Bank to Bank?
Bank Assets:
- Cash & Cash Equivalents: These are funds that can be accessed immediately or almost immediately. They include physical cash, deposits with other banks, and highly liquid securities like Treasury bills.
- Investments/Securities: These are financial instruments that the bank invests in to earn a return, such as government and corporate bonds, stocks, and other securities.
- Loans and Advances: These are the funds that a bank lends to its customers, and they generate interest income. They can include personal loans, mortgages, commercial loans, credit card balances, and overdrafts.
- Fixed Assets: These are physical properties owned by the bank, such as buildings, land, equipment, and furniture.
- Intangible Assets: These include non-physical assets like software, patents, trademarks, and goodwill.
- Other Assets: These can include accrued interest receivable, deferred tax assets, and derivative financial instruments among others.
Bank Liabilities:
- Deposits: These are funds that individuals and businesses keep in the bank. They include checking accounts, savings accounts, and time deposits. They are liabilities because the bank has an obligation to return these funds to the depositors on demand or at a specific maturity date.
- Borrowed Funds: These are funds that the bank borrows from other financial institutions, the central bank, or through issuing debt securities.
- Debt Securities: These are bonds or other forms of debt issued by the bank to raise funds. The bank is obligated to pay back the principal and interest to the bondholders.
- Other Liabilities: These include items like accrued expenses, accounts payable, deferred tax liabilities, provisions for loan losses, and derivative financial instruments.
- Subordinated Liabilities: These are debts that will only be paid after all other debts if the bank goes bankrupt.
Bank Equity:
- Common Stock: This is the equity that owners of the bank hold. They have voting rights and may receive dividends.
- Preferred Stock: This type of equity has a higher claim on earnings and assets than common stock but usually doesn't come with voting rights.
- Retained Earnings: These are the net earnings a bank has accumulated over the years and chosen to reinvest in the business rather than distribute as dividends.
- Treasury Stock: These are the bank's own shares that it has repurchased from the market.
- Other Comprehensive Income: These are gains and losses from various investments and derivatives that haven't been realized yet.
- Minority Interest: This is the part of the net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent.