The euroSIC payment system
The Swiss euro-RTGS system was developed by SIX Interbank Clearing on behalf of the Swiss financial center. It has been in operation since 1999, in order to enable the Swiss banks to settle euro payments among themselves rapidly, easily and inexpensively, without having to maintain mutual euro accounts.
Forming the basis of euroSIC are the participants' settlement accounts, which are operated by SIX in Zurich. All the transactions of the participating institutions are processed through these settlement accounts, as long as sufficent liquidity is provided on the euroSIC participant's sight deposit account at the euroSIC system manager (SECB Swiss Euro Clearing Bank).
Participation in euroSIC is generally possible for any institution that is subject to Swiss banking supervision. Financial institutions, joint institutions and clearing organizations along with their members outside Switzerland, also receive access, as long as they are subject to at least the same legal and operational standards in their country of origin as are participants in Switzerland.
The SECB, a joint venture of SIX, Credit Suisse, UBS and PostFinance, supervises and monitors the euroSIC system. As a fully licensed bank in Germany and as a participant in the RTGS system of the Deutsche Bundesbank, the SECB has access to all eurozone countries through TARGET2. It thus handles euro payment transactions of the euroSIC participants going from Switzerland to the euro area and vice versa in real time. The SECB also participates in the German and pan-European bulk payment systems EMZ and STEP2.
A further essential task of the SECB is the liquidity management of the euroSIC system. At the beginning of a clearing day, the SECB transfers the sight deposit of the euroSIC participant to the system. The latter is enabled to query the balance of its settlement account and the status of settled incoming and outgoing payments, online and in real time. The participant may, throughout the clearing day, absorb excessive liquidity or ask the SECB to supply him with additional liquidity. This is granted in the form of interest-free intraday or overnight credit secured by central bank collateral. Both kinds of loans are subject to the same lending criteria. At the end of the clearing day, the SECB transfers the balance back to the euroSIC participant’s corresponding sight deposit account.
Payment orders can be submitted up to five clearing days in advance. Transactions are generally processed in the order received; however, the actual execution can also be determined using a priority code.
No credit and liquidity risks
The system monitors each individual payment to verify that the amount is sufficiently covered within the respective bank’s settlement account. The transaction is only irrevocably executed if there is sufficient cover. Otherwise, the payment will be kept in a wait file until sufficient cover is available. The payment beneficiary can immediately access the credited amount without exposure to credit and liquidity risks.
The gate for euro payments
Switzerland as a non EU member does not have a direct connection to TARGET2, which provides the link for cross-border euro payment transactions between the EU member countries’ national RTGS systems.
To facilitate euro payments between Switzerland resp. Liechtenstein and countries within the eurozone, SIX Interbank Clearing developed euroSIC on behalf of the Swiss financial center. The euroSIC participants are indirectly connected in real time to TARGET2 via the SECB and the German RTGS system and thereby with the euro RTGS systems of all the EU member states.
In this way, euroSIC enables its participants to process cross-border euro payments to practically all institutions in the eurozone. Conversely, eurozone institutions receive access to over 3,200 bank locations in Switzerland and Liechtenstein.
Non-urgent euro payments can also be processed through euroSIC. With the SECB, euroSIC participants can make non-urgent payments to Germany up to EUR 50,000 at an attractive transaction price via the EMZ bulk payment system provided by the Deutsche Bundesbank. The SECB also offers euroSIC participants from the eurozone (plus Liechtenstein) an inexpensive payment path through STEP2, the pan-European payment system for bulk payments.
A payment order sent by a participating bank first undergoes a formal verification: The system checks the electronic signature, the entry authorization and the payment instruction structure by comparing them to the master data at the institution. Verification is also made to ensure that the payment order has not be duplicated. The availability of cover is verified next: in case of insufficient cover, the payment is routed to a wait queue until sufficient liquidity is created: Conditional payments are thus not permitted by euroSIC. The debtor bank is able query all details of the respective payment at any time.
Transactions between euroSIC participants are considered to be so-called domestic payments and are settled directly. This also applies for transactions resulting from securities trading (SECOM, Eurex/Euro-Repo). However, if cross-border payments are involved (payments to institutions that are not connected to euroSIC), then these are automatically converted by the SECB into SWIFT messages and routed in real time to the appropriate connected foreign systems. The SECB used a flow charge to choose the preferred system (routing), which considers both the system criteria and existing bilateral agreements. Payments from the euro payment zone take the opposite direction on their way to euroSIC participants.
Extended opening times
Payments can be submitted by euroSIC participants online around the clock on bank business days. They are settled and routed 24 hours a day after verification of the required cover.
A week contains five days for euroSIC: Transactions submitted on weekends are given the following Monday as a settlement date.
In contrast to a calendar day, the euroSIC clearing day proceeds with a time delay. It lasts from around 8:30 pm CET of the previous evening to approximately 6:45 pm CET of the current day, on weekends from Friday 8:30 pm to Monday 6:45 pm CET. In contrast to other euro payment systems, euroSIC offers extraordinarily long opening times with 6:45 pm CET set as the end of a clearing day. Deviations are listed in the annually published provisions governing processing and value date, which also lists the bank holidays.
The SIX Interbank Clearing Operations Center monitors all activities. It is available to participating banks from 6:00 am to 8:00 pm CET to provide information and support.
An interbank security system provides reliable, confidential transmission of payment messages between the institutions. Over two million transactions are handled daily in this way, a volume worth over CHF 300 billion on peak days. The enhanced SWIFT security requirements apply for participants using the web portal. Both communication paths must meet the following requirements:
- Messages are to be transmitted unadulterated.
- Senders of messages are unambiguous.
- The sending and receiving of messages is indisputable.
- Messages are to be impenetrable and secure during transmission
The financial institutions are connected to the euroSIC system either through Finance IPNet, a Internet protocol based communications infrastructure, or they choose the web portal, an alternative, inexpensive connection. To do so, they use their existing SWIFT infrastructure for the payment message the Internet for cash management.