2005 Self-assessment of the Reserve Bank Information and Transfer System Core Principle IV

The system should provide prompt final settlement on the day of value, preferably during the day and at a minimum at the end of the day.

4.1 Assessment of Compliance

RITS complies with this principle. RITS is a RTGS system. Payments settle in real-time with
immediate finality.

4.2 Final and Irrevocable Payment

As discussed in section 1.3, an approval under Part 2, Section 9 of the Payment Systems and Netting Act provides legal certainty for settlement in RITS. Payment is final and irrevocable upon the simultaneous debit and credit of the paying and receiving participants' ESAs at the Reserve Bank.

4.3 System Queue

Before a payment is accepted onto the system queue, it is validated to ensure the message/entry fields are valid and the payment is eligible for settlement. If the payment is valid and eligible for settlement, it is placed on the system queue for settlement testing. It is queued until the paying bank has sufficient funds in its ESA. Once a payment is settled, it is irrevocable. Until a payment has been settled, the sending bank may recall the transaction.

4.4 Operating Hours and Unsettled Payments Instructions

The operating timetable is established by the RITS Conditions of Operation. RITS standard settlement hours are from 07:30 to 18:30 in Australian Eastern Standard Time (April to October) and from 07:30 to 20:30 in Australian Eastern Daylight Time (November to March). For a further 30 minutes after the close of settlement, members may download relevant reports for reconciliation. The Reserve Bank has the discretion to vary the operating hours.

Payments which are unsettled at the end of the day are automatically removed from the system queue, with an advice sent to the paying bank. To be settled, these payments must be resubmitted with a new value date. This can be at any time for SWIFT payments, which are ‘warehoused’ if RITS is not open. This is preferable to automatic resubmission of payments that do not settle on a day, because it enables the paying bank to decide on whether a payment should still be settled and to avoid reconciliation issues with its internal systems.

4.5 Failure of a Participant

The RITS Regulations require each member to immediately advise the Reserve Bank if it were to become aware of an insolvency event in respect of itself. Should that occur, the affected participant's ESA and RITS membership would be suspended. Unsettled transactions would be removed from the system queue. Transactions that have previously settled are irrevocable and cannot be unwound. Protection from the zero-hour rule is provided by an approval under the Payment Systems and Netting Act.

The RITS Regulations also provide for the Reserve Bank to suspend a bank if that bank is unable to meet its net deferred batch obligations (the 9am batch), or if, in the opinion of the Reserve Bank, it is unable to meet its RTGS settlement obligations in RITS. If the Reserve Bank suspends a bank, it must inform that bank and give notice of the suspension to all members. If a bank is suspended due to failure to settle its 9am batch obligations, the batch amounts will be recast to exclude the bank that has failed to settle.