Media Release Payments System Issues: Exchange Settlement Account Policy

The Reserve Bank has amended its Exchange Settlement Account (ESA) policy to remove the requirement that all banks must have an ESA, whether or not they use an agent to settle their real-time gross settlement (RTGS) transactions. The change follows amendments to the Banking Act 1959 that will allow all authorised deposit-taking institutions (ADIs) to use the term ‘bank’.

ADIs that have average aggregate wholesale Reserve Bank Information and Transfer System (RITS) RTGS transactions that are at or above a specified threshold will continue to be required to settle their RTGS transactions across their own ESAs. This threshold remains at 0.25 per cent of the total value of wholesale RITS RTGS transactions. As with the previous policy, banks with transactions falling below this threshold may use a settlement agent for their RTGS transactions. However, as a result of the policy changes, these banks will no longer be required to maintain an ESA for use in a contingency; for these banks, the maintenance of an ESA will be an optional service offered by the Bank. The changes mean that smaller financial institutions that choose to become banks will not be obliged to go through the process of obtaining an ESA which then sits dormant while they use a settlement agent for their RTGS transactions.

The ESA Policy has also been amended to reflect that the Head of Payments Settlements Department will be responsible for approving ESA applications. All new ESA applications should be addressed to the Head of Payments Settlements Department.