Capital enhancement, risk reduction and compliance benefits

Liquidity

  • Reduction in payment value reduces size of required liquidity buffers.
  • Reduced debt costs and associated improved income from profitable reuse of assets estimated at 100-150bp for major currencies.
  • Netting efficiency (modelled at over 90% reduction in payments volumes) delivers savings of $’00 millions per annum to international banks.

Capital

  • CNS (treated as other netting services) can reduce capital held against Liquidity Coverage Ratio, releasing significant HQLA to the business.

Operations

  • CNS requires minimal operational change; banks maintain existing settlement and reconciliation workflows.

Risk

  • Fewer interbank payment transactions reduces transaction failures (netting community is de facto reconciliation agent).
  • Coordination of payment timings across banks leads to lower net exposures.
  • Session times and maximum gross exposures agreed between each netting pair further reduces counterparty risk.

Costs

  • Reduced payments volumes means lower payment transaction costs and associated messaging charges.

Technical

  • CNS re-uses well tried and tested software utilised by major CLS members and RTGS systems. Implementation is simple and straightforward.