How does a bank connect into the broader financial system?
Banking
Asked by Question Bot05/Nov/20161 answer
1 Answer
F
Faisal Khan
Answered 05/Nov/2016
Almost every bank in the world will first have a ledger account with the Central Bank of the country. This is how wealth distribution and recording starts.
By having a ledger with the central bank implies that the banks, deposits, etc. are now being tracked by the financial regulator on a daily basis. The next step usually is for the bank to get on board the RTGS system. Universally, almost all countries have some form of a real-time gross settlement system, this allows large payments to be settled via the system with other banks.
The next logical step is to connect the CBS (Core Banking Software) to the central payments switch. In some countries they don't have it (US for example), and in other countries they do (India, Pakistan, UK, etc.). Needless to say, this varies in each country. Some may have a single payment system other multiple, etc.
From here onwards, it is just a matter of how many payment systems and networks the bank would like to connect to. The central bank usually assigns a minimum criteria.
By having a ledger with the central bank implies that the banks, deposits, etc. are now being tracked by the financial regulator on a daily basis. The next step usually is for the bank to get on board the RTGS system. Universally, almost all countries have some form of a real-time gross settlement system, this allows large payments to be settled via the system with other banks.
The next logical step is to connect the CBS (Core Banking Software) to the central payments switch. In some countries they don't have it (US for example), and in other countries they do (India, Pakistan, UK, etc.). Needless to say, this varies in each country. Some may have a single payment system other multiple, etc.
From here onwards, it is just a matter of how many payment systems and networks the bank would like to connect to. The central bank usually assigns a minimum criteria.