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Clearing and Settlement Mechanisms

Clearing and Settlement Mechanisms (CSMs) are the processes underlying all payment transactions exchanged between two payment service providers (PSPs).

Clearing and Settlement Mechanisms

They are invisible to the end-users of the EPC payment schemes, yet they are indispensable in transferring money from one account to another when two different PSPs are involved.

PSPs participating in the EPC payment schemes have to choose a CSM in order to comply with the reachability requirements of the schemes.

Clearing and settlement, a central piece of the payment puzzle

To understand clearing and settlement mechanisms, imagine John, who wishes to transfer money from his account to another person, Anna. This example would also work for any kind of user – a business, a public body, and so on. The two people can either be located in the same country or in two different SEPA countries, and in our example they hold payment accounts with different PSPs. If John holds sufficient funds in his account, the money is moved to Anna’s account. Behind the scenes, John’s PSP, which we will call ‘PSP A’ sends a message to a ‘clearing’ system (a company specialising in this activity) asking to move this money to Anna’s PSP, ‘PSP B’. This clearing company aggregates all orders for transactions to other PSPs received from PSP A during a given number of hours, as well as orders for transactions received from its other PSP customers (like PSP B) and intended for other PSPs, including PSP A.

The clearing company is then able to ‘net’ the orders: in our simple example, the gross amount of transfers towards PSP B is compared to the amount of transfers towards PSP A (this is the ‘netting’). The net amount of money to be moved from one of the PSPs to the other (the final position) is then transferred. This last step is the ‘settlement’ of the transaction: it is now complete, and discharges the obligation of the PSP with a net debit position towards the PSP with a net credit position.

In other words, clearing is defined by the European Central Bank as “the process of transmitting, reconciling and, in some cases, confirming transfer orders prior to settlement, potentially including the netting of orders and the establishment of final positions for settlement.” The settlement is “the completion of a transaction or of processing with the aim of discharging participants’ obligations through the transfer of funds.”

Clearing and settlement in the EPC payment scheme context

Services based on the EPC payment schemes and offered by CSM companies are governed by market forces and lie outside the scope of the EPC. There is a clear separation between the EPC as the payment scheme manager and CSM organisations. Each CSM organisation can propose its own solution, provided that it is compliant with the rules stated in the EPC payment schemes.

Each PSP participating in the EPC payment schemes freely works with the CSMs of its choice. What matters is that the PSP is reachable.

As soon as a PSP signals its readiness to participate in the EPC payment scheme(s), it is obliged to be reachable if it is to receive EPC payment scheme transactions. This reachability can be achieved by using one or several of the following options:

  • An Automated Clearing House (ACH) that is compliant with an EPC payment scheme or schemes. An ACH is a multilateral arrangement based on legislation or private contractual arrangements with multiple memberships, common rules and standardised procedures. The EPC payment scheme transactions are cleared and settled among the members of the ACH.
  • A decentralised bi- or multilateral clearing and settlement arrangement (i.e. not via an ACH) that is compliant with an EPC payment scheme or schemes. A PSP clears and settles its EPC payment scheme transactions with another PSP directly in an agreed bilateral channel or through third parties (these parties act as correspondent banks).
  • An intra-PSP and / or intra-group clearing and settlement arrangement that is compliant with an EPC payment scheme or schemes. In this case, the two PSPs are branches or subsidiaries within a single PSP entity or within a group of PSPs. They use their respective accounts within that entity or group to clear and settle EPC payment scheme transactions.
CSM organisations compliant with the EPC payment schemes

Any CSM organisation can publicly announce its compliance with an EPC payment scheme by filing this disclosure letter.

The list below includes all CSM organisations compliant with one or several EPC payment schemes:

 
  

Overseen by

SCT scheme

SDDCore scheme

SDD B2B
scheme

SCT Inst scheme

Banco ditalia

 

Banca d'Italia  Banca d'ItaliacheckcheckcheckCheck

through TIPS

 

BNR

 

Banca Nationala a RomanieiBanca Nationala a Romaniei   Check

through TIPS

BES

 

Banco de EspañaBanco de España   check

through TIPS

Bport

 

Banco de PortugalBanco de Portugal   check

through TIPS

GR

 

Bank of GreeceBank of Greece   check

through TIPS

LT

 

Bank of LithuaniaBank of Lithuania   check

 through TIPS

SL

 

Banka SlovenijeBanka Slovenije   check

through TIPS

Bankart

 

BankartBank of Sloveniacheck

 

check

 

check

 

check

 

lu

 

Banque centrale du LuxembourgBanque centrale du Luxembourg   check

through TIPS

fr

 

Banque de FranceBanque de France   check

through TIPS

be

 

Banque nationale de Belgique/Nationale Bank van BelgiëBanque nationale de Belgique/Nationale Bank van België   check

through TIPS

bor

 

Borica - Bankservice JSC  Bulgarian National Bankcheckcheckcheck

 

 

 

bg

 

Bulgarian National BankBulgarian National Bank   check

through TIPS

cec

 

CEC-UCV  National Bank of Belgiumcheckcheckcheck

 

check

 

cyprus

 

Central Bank of CyprusCentral Bank of Cyprus   check

through TIPS

ir

 

Central Bank of IrelandCentral Bank of Ireland   check

through TIPS

malta

 

Central Bank of MaltaCentral Bank of Malta   check

through TIPS

lcli

 

CENTROlinkLietuvos Bankascheckcheck check
dk

 

Danmarks NationalbankDanmarks Nationalbank   check

through TIPS

nl

 

De Nederlandsche BankDe Nederlandsche Bank   check

through TIPS

dt

 

Deutsche BundesbankDeutsche Bundesbankcheckcheckcheckcheck

through TIPS

DIASDIAS  Bank of GreececheckcheckcheckCheck
ecl

 

EBA CLEARING  European Central Bankcheckcheckcheckcheck

 

est

 

Eesti PankEesti Pank   check

through TIPS

ew

 

EquensWorldline  De Nederlandsche Bankcheckcheckcheckcheck

 

erg

 

Eurogiro   checkcheckcheck 
fina

 

FINA Hrvatska Narodna Bankacheckcheckcheckcheck
nhb

 

Hrvatska narodna bankaHrvatska narodna banka   check

through TIPS

       IberpayIberpayBanco de Espanacheckcheckcheckcheck

 

kuir

 

KIR  Narodowy Bank Polskicheck

 

 

 
lv

 

Latvijas Banka  Latvijas Bankacheck  check

and through TIPS

sv

 

Narodna Banka Slovenska  Narodna Banka Slovenskacheckcheckcheckcheck

through TIPS

no

 

Narodowy Bank PolskiNarodowy Bank Polski   check

through TIPS

nets

 

Nets A/S  Finanstilsynetcheckcheckcheckcheck

 

PSAPSA Oesterreichische Nationalbankcheckcheckcheck

 

check

through TIPS

399

 

SIBS FPS  Banco de Portugalcheckcheckcheckcheck

 

40

 

STET  Banque de Francecheckcheckcheckcheck

 

41

 

Suomen PankkiSuomen Pankki   check

through TIPS

42

 

TRANSFOND  Banca Nationala a Romanieicheck   

 

Companies offering messaging services compliant with the EPC payment schemes

Likewise, any company wishing to disclose its intent to offer messaging services to CSMs that support full compliance with the EPC payment schemes can file this disclosure letter.

The list below shows which companies have informed the EPC of their ability to offer such messaging service:

  Overseen bySCT schemeSDD Core schemeSDD B2B schemeSCT Inst scheme
NexiNexi Payments S.p.ABanca d'Italiacheckcheckcheckcheck
sw

 

S.W.I.F.T. SCRL  Central banks of the Group
of Ten countries (G-10)
checkcheckcheckcheck