CBDC Definition: The CPMI (BIS – Committee on Payments and Market Infrastructures) defines a CBDC as “a digital form of central bank money that is different from balances in traditional reserve or settlement accounts.” A CBDC can leverage cryptotechnologies such as DLT/blockchain or be based on a centralised database. A CBDC can also be general… Read More »
Fiat Currency Definition: A government-issued currency that is considered legal tender in a specific jurisdiction. Fiat currency can include both physical banknotes/coins as well as electronic reserves made available to financial institutions with a reserve account at the central bank. Fiat currency is fully backed by the government that issues it and is not backed… Read More »
Gridlock Definition: A situation that can arise in a funds or securities transfer system in which the failure of some transfer instructions to be executed (due to insufficient funds or securities balances) prevents fulfillment of a substantial number of instructions given by other participants Gridlock resolution Definition: Resolution of the gridlock condition without overdrawing the… Read More »
Delivery versus Payment (DvP) Definition: Mechanism used in securities transfers transactions, which ensures that the final transfer of the securities (the delivery) can be considered completed only if the actual payment for the transaction has been made. Details: This is used when a financial institution is selling securities to another financial institution and the actual… Read More »
Netting Definition: An agreed offsetting of obligations between two or more parties or participants in which a great number of obligations is reduced to a smaller number of obligations. Details: Basically this is the equivalent of two or more friends that sit on a table and net between themselves to sort the money transfer. The… Read More »
Gross Settlement Definition: The settlement of funds and securities transfer, which is affected individually on an order-by-order basis, i.e. without netting debit against credit payment transfers. Details: In laymen terms this is basically the simplest possible payment operation. One actor gives money to another actor in a form that is recognized by both parties as… Read More »
Payment Message Definition: A set of data transferred via an electronic mechanism representing the sender and receiver of the transaction and the amount to transfer, which enables the settlement of transactions between participants in a payment system. Details: In layman terms (not using the banking jargon) a payment message is an electronic representation of a… Read More »
Payment Definition: The payer’s transfer to the payee against a payee’s monetary claim in a manner acceptable for the payee. Details: It is funny that this definition looks like a self defining definition. Basically in layman terms (not using the banking jargon) a payment is a transfer of value from one party to another party,… Read More »
Real Time Gross Settlement Definition: Gross settlement of payment instructions one by one in which processing and settlement take place in real time (continuously). Details: The most well known examples for infrastructure payment systems that implement this type of settlement are the so called: Real Time Gross Settlement (RTGS) systems: the top level payment systems… Read More »
Settlement Finality Principle Definition: The governing principle within a Real Time Gross Settlement (RTGS) System that once a payment has been submitted to and processed by the RTGS the payment/settlement is final and irrevocable. Details: The finality principle comes from the juridical domain where has the meaning that certain disputes must achieve a resolution from… Read More »