Introduction of the instant payment system
3.2 Liquidity framework of instant clearing Instant payments will be executed from the liquidity provided on the instant settlement accounts. In the case of instant payment transactions where settlement between clearing members is needed, the amount will be settled in central bank money provided by the clearing members. In practice, this will mean that if in a transaction the payment service provider of the sender differs from the payment service provider of the recipient, the amount of the transaction will be transferred between instant settlement accounts created by the MNB specifically for this purpose. The amount will be booked from the instant settlement account of the payer’s payment service provider to the instant settlement account of the recipient’s payment service provider. The direct participants of the ICS system mainly need to pre-finance the funds for executing the transactions on their instant settlement account. The direct participants of the ICS system need to provide the funds for their own and their indirect participants’ outgoing transactions every day, around the clock. During VIBER operating hours (between 7:00 and 18:00 on working days), direct Chart 31 Sources of forint liquidity required to cover instant payments Outside VIBER operating hours Instant settlement accounts
Liquidity decrease
Pre-financing (liquidity increase)
VIBER payment account 7 am – 6 pm VIBER business days
22
Liquidity increase
Instant credit
participants can transfer the pre-financed liquidity to their instant settlement account from the balance of their payment bank account using the GIROInstant central liquidity management solution. During VIBER operating hours, direct participants also need to ensure that sufficient pre-financed funds are available not only for intraday transactions, but also for the smooth execution of instant credit transfers submitted outside of working hours (at night and on holidays). Credit institutions subject to the minimum reserve system will have the option to request the MNB to offset their minimum reserves with their liquidity prefinanced from their payment account balance, whereby the liquidity allocated for pre-financing will be subject to the best possible interest rate condition to credit institutions, namely the central bank base rate.22 System participants will have no problem providing prefinancing, but the central bank has prepared a new credit instrument to enhance liquidity security outside of VIBER operating hours. According to the preliminary calculations of the MNB, the existing liquidity in the banking system, including the minimum reserves of over HUF 200 billion, the hundreds of billions of forints of O/N deposits and the potentially available securities pledged for the MNB amounting to over HUF 2,000 billion, will be more than enough to ensure pre-financing for instant payments. To enhance the liquidity security of instant payments during the nights and holidays, the MNB has prepared a concept on credit disbursement outside of VIBER operating hours. In essence, after VIBER closing, the central bank will provide system participants a new credit instrument, the instant credit. Instant credit is a collateralised central bank credit instrument that can be provided by the MNB if securities collaterals are pledged for the MNB in advance. To preserve the liquidity security-enhancing feature of the instant credit instrument, the interest rate of instant credit will be 2 percentage points higher than the interest rate of the O/N collateralised loan instrument.
F or more details, see MNB Decree 10/2005 (VI.11.) on the calculation, the method of allocation and placement of minimum reserves, effective from 1 July 2019.
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