Real-Time Gross Settlement System of Eesti Pank (EP RTGS)

EP RTGS is the real-time gross settlement system of Eesti Pank

EP RTGS is suitable for settling express and large-value payments. Payment orders sent to the settlement system are processed and settled one-by-one. Payments may be transferred from the payment initiator's account into the payee's account in 5 minutes.

The system settles domestic payments

Domestic express transfers denominated in kroons can be made via the EP RTGS.

Operating hours of the settlement system

EP RTGS is open every business day from 8.00 to 19.00. Payments are not settled on national holidays and at weekends. Payments initiated by bank customers are settled on settlement days from 8:00 to 18:00 and settlements initiated by banks from 8:00 to 19:00.

Figure 2. Operating hours and functioning of EP RTGS

System participants are banks and the Estonian CSD

Every credit institution established in the European Economic Area (incl. Estonia) and is under supervision of a competent authority can join EP RTGS. In order to join EP RTGS, the applicant credit institution must meet the requirements set by Eesti Pank, conclude an agreement with Eesti Pank and open an account with Eesti Pank.

As at 1 June 2008, EP RTGS has 13 participants: ESTA had 13 participants: AS Hansapank, AS SEB Pank, AS Sampo Pank, AS Eesti Krediidipank, Tallinna Äripanga AS, Marfin Pank Eesti AS, Nordea Bank Finland Plc Estonia Branch, Parex Banka Estonia Branch, AS UniCredit Bank Estonian Branch, Svenska Handelsbanken AB Estonian Branch, Bank DnB Nord AS Estonian Branch, Eesti Pank and Estonian CSD.

Principles of settling payments in EP RTGS

EP RTGS allows settling the following payments between system participants:
       payments from their accounts into another participants' account;
       net settlements of the net settlement systems.

EP RTGS processes all payment orders one-by-one. Payments can be sent to EP RTGS ten banking days in advance. A payment under the payment order sent to Eesti Pank by a participant, is settled at the first opportunity on the value date set in the payment order. A payment order is executed regarding first its order of priority and then the order of its receipt.

A payment order submitted by a system participant will first undergo technical validation in order to check the format of the payment order. A successful technical validation of the payment order is followed by financial validation. This is to check whether the system participant has sufficient funds in its account with Eesti Pank for the execution of the payment order. If funds are insufficient, the payment will be queued.

Payments are immediately settled by EP RTGS after the relevant payment orders have passed financial validation. The payment is settled by debiting the account of the sending participant with Eesti Pank and by crediting the payee's account with Eesti Pank.

The time of settling the payment is the time when EP RTGS debits the account of the sending participant by the amount indicated in the payment order. As of this time, the payment is final for the sending participant. The payment under the payment order is final for the receiving participant from the moment when its account is credited by the amount of the payment order.

The system closes at 19:00. All queued customer payments for the same day are rejected upon the end of their settlement period (18:00) and all queued payment orders initiated by banks are rejected upon closing of the system.

EP RTGS is a secure payment channel for banks and their customers

EP RTGS, which is managed by Eesti Pank, does not create credit risks because the system settles payments only when the payer has a sufficient amount of money in its account to settle the payment. The payee is informed only when the payee's account has been credited.

In order to reduce potential liquidity problems, a credit institution can use all its funds in its Eesti Pank account deposited for meeting the minimum reserve requirement for settling its payments. Owing to the fairly large minimum reserve requirement, liquidity problems rarely occur while settling payments in EP RTGS. Should it actually occur that a credit institution does not have sufficient funds, it may borrow the required amount of money from the credit institutions' money market, sell foreign currency to Eesti Pank, or sell foreign assets which meet the requirements of Eesti Pank, or request intraday credit against this collateral from Eesti Pank.

Volume of work

In 2007, an average of 310 payments per day at a total value of 5.1 billion kroons were settled via EP RTGS. Cross-border payments via TARGET account for 30% (70 transactions per day) of the number of payments settled through EP RTGS and 2% of the value (99 million kroons).

Compared to 2006, both the value and the number of payments have grown (annual increase in payment value is 70% and the number has gone up by 20%). TARGET1 payments and the rise in foreign currency transactions contributed to the increase in the volume of the system.

Figure 2. Number and value of payments settled through RTGS

Fees

Fees for payments are determined by Eesti Pank. A precondition to participation in EP RTGS is opening an account with Eesti Pank. The fee for opening a current account with Eesti Pank is 100,000 kroons. Accession to EP RTGS is free of charge.

The fee for each payment settled is 9.39 kroons. The fee for each withdrawn payment order is 93.88 kroons.

Legal framework of EP RTGS

EP RTGS statistics