Industry Collaboration Between CGI and Cash Netting Services
CGI (NYSE: GIB) (TSX: GIB.A) is pleased to announce its new collaboration with Cash Netting Services (CNS), to deliver a solution to help banks significantly reduce daily interbank payment flows and associated liquidity and capital management obligations.
CNS addresses interbank payment and liquidity inefficiencies by identifying payments netting opportunities between banks. CNS analyses high value payments data from participating banks and, at agreed times, calculates and publishes net cash positions per currency between pairs of banks (providing details of ALL payments included in the net calculation) using technology and infrastructure delivered by CGI. Net payment obligations are determined by bilateral netting agreement (by currency) between pairs of participating banks. In accordance with the terms of these agreements, participating banks receive payment messages in SWIFT format to facilitate net payments.
CGI will provide CNS with use of its intellectual property for the purposes of netting interbank cash flows. In many cases, CGI software is already in place in prospective banks, thus reducing the changes to existing payment and settlement processes to achieve the benefits of efficient interbank, intraday payments netting.
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It is estimated that some US$10 trillion a day is paid, gross, between banks – after other asset specific netting (e.g. FX through CLS) and payments compression (e.g. CHIPS). The largest banks in each currency represent 15% to 45% of total payments volumes. To support these huge flows, over US$1trillion of cash is required to be held in bank payment systems, with a corresponding impact on intraday liquidity efficiency.
John Barber, Director, Cash Netting Services said: “The real cost to banks of supporting high value global payments, and opportunity cost of having cash tied up to support mandated liquidity coverage ratios, is US$10s of billions a year. We are delighted to be collaborating with CGI, a leader in this field, to develop a ‘best of breed’ high value payments netting service that can reduce daily interbank payments volumes by 90+% and enhance intraday cash liquidity”.
Jerry Norton, Head of Financial Services Strategy, CGI said: “The Cash Netting Services initiative complements existing CGI payments and netting infrastructure, software and connectivity services implemented within the world’s largest banks. This is a market innovation which offers the potential for effective wholesale interbank payments netting. We are excited to work with Cash Netting Services to deliver an efficient and effective solution to our major bank clients.”
CGI has been at the forefront of the payments industry since the 1970s and is acknowledged as one of the leading providers of payments and netting infrastructures and services supporting major central bank systems, payment market infrastructures and many of the world’s largest retail and transaction banks.