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Booklet:
Wholesale
Payment Systems Section: Introduction Subsection: Spacer |
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This
Wholesale Payment Systems Booklet (Booklet) is one of several that comprise
the Federal Financial Institutions Examination Council (FFIEC) Information
Technology (IT) Examination Handbook (IT Handbook). It provides guidance
to examiners and financial institution management regarding the risks
and risk-management practices when originating and transmitting large-value
payments. It replaces and rescinds Chapter 18 of the 1996 Information
Systems Examination Handbook.
This booklet is organized into the following four sections describing
the various aspects of wholesale payment systems, followed by examination
procedures, a glossary, a discussion of the legal framework for interbank
payment systems, a discussion of the Federal Reserve Board’s Payments
System Risk (PSR) Policy, and a discussion of the “Interagency Paper
on Sound Practices to Strengthen the Resiliency of the U.S. Financial
System.” Management action summaries are included in each of the
four sections providing a snapshot of the risks and risk management practices
described in the text.
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Interbank Payment and Messaging Systems – The first section includes a discussion of interbank funds transfer and messaging systems, and interbank clearing and settlement systems. This section concludes with a discussion of Internet-based wholesale payment systems. |
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Intrabank Payment and Messaging Systems – The second section provides an overview of the funds transfer and messaging systems employed by typical financial institutions. |
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Securities
Settlement Systems – The third section provides an overview
of the major securities markets and securities settlement systems.
Securities settlement generates a large volume of wholesale payments
typically processed by financial institutions. The information presented
in this section describes these settlement processes. While securities
settlement generally involves both the delivery of a security and
the corresponding payment, this section focuses on the wholesale payments
generated by these transactions, and does not cover the complete range
of activities associated with securities processing, including the
transfer and delivery of securities, custodial arrangements, and related
trading activities.
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Wholesale Payment Systems Risk Management – The fourth section describes the risks associated with wholesale payment systems, using various risk categories, including reputation, strategic, credit, liquidity, legal/compliance, and operational/transaction risk. This section also describes the risk management measures management should establish to mitigate the risks described. |
The
booklet references a number of other IT Handbook booklets, including the
“Information Security Booklet,” “Business Continuity
Planning Booklet,” “Outsourcing Technology Services Booklet,”
and the “FedLine Booklet.”
In addition to describing the information technology risks and controls,
the booklet also describes certain credit and liquidity risks that may
be present when conducting wholesale payment services. A full review of
a financial institution’s wholesale payment system environment may
require the use of examiners with experience in credit, liquidity, and
compliance issues and additional agency-specific examination procedures.
Examiners should use the examination procedures (detailed in Appendix
A) for reviewing risks in wholesale payment systems. These procedures
address services and products of varied complexity, and examiners should
adjust the procedures for the scope of the examination and the size and
risk profile of the institution. Examiners may use the procedures independently
or in combination with procedures from other IT Handbook booklets and
agency specific handbooks and guidance.
For financial institutions whose primary method for originating, transmitting,
and receiving large-value payment orders is the use of the FedLine Funds
Transfer (FT) application, examiners should use the “FedLine Booklet”
to assess the wholesale payment systems and funds transfer environment.
In addition, examiners should also review the “Legal Framework”
and “PSR” discussions in Appendices D and E, respectively,
if an expanded evaluation of the funds transfer operation is necessary.
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