## _cr11285

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---

### Key statistics and systemically important payment systems (2010)
- RIX: values as presented in Table 1
  - 2448740,228,000                      12,                      106
- BGC: values as presented in Table 1
  - 2239.411,530                      3,416,667
- Table 2. RIX Payments Statistics 2005–2010 (as presented)
  - Years: 2005200620072008             20092010
  - Number of participants
    - 21202121                 2324
  - Volume, million transactions
    -    1,501,701,952,01 2,582,96
  - Value, billion SEK
    - 111,174124,750122,873136,600        174,562    137,370

### Institutional arrangements and market structure
- Legal and institutional responsibilities
  - Sveriges Riksbank (RB): task to promote a safe and efficient payment system under the Sveriges Riksbank Act; may make available systems for settlement of payments and runs the funds transfer system RIX.
  - Finansinspektionen (FI): supervises companies in credit, insurance, and securities markets, including clearing organizations and payment systems—except RIX, which is operated and overseen by RB; FI reports to the MoF.
  - Ministry of Finance (MoF): responsibility for legislation to make the financial system efficient and stable; follows market developments and assesses legislative needs; much legislation derives from EU law.
  - Konkurrensverket (Swedish Competition Authority): mandate to safeguard competition; new Competition Act entered into force on November 1, 2008.
  - Swedish National Debt Office (SNDO, Riksgälden): central government cash management, debt management, state guarantees and loans, deposit insurance and investment schemes; participates in RIX for government payments.
  - Swedish Consumer Agency (Konsumentverket): responsible for consumer protection issues related to payment system (mainly debit and credit card sector).
  - Swedish Bankers’ Association (SBA): private sector coordination on payment processing and technical/regulatory issues; participants in RIX (excluding public entities) enter agreements on cut-off times and processing; SBA owns Data Clearing System operated by BGC.
- Market structure
  - Swedish banking sector in 2010: highly concentrated; four largest commercial banks account for almost three-quarters of household and corporate lending and an even higher proportion of payment activities.
  - Foreign banks: 27 foreign banks represented, almost all through branches.

### Payment infrastructure and ownership
- RB owns and runs RIX (operational since 1990; technical platform replaced in February 2009 by SIA-SSB).
- RIX operating hours: 7:00 a.m. until 5:00 p.m.
- RIX participants: 24.
- Central Securities Depository: Euroclear Sweden operates the Securities Settlement System (SSS) for dematerialized equities, bonds, and money market instruments.
- Market venues and CCPs
  - NASDAQ OMX: runs stock exchange, derivatives exchange, electronic inter-dealer exchange; acts as CCP for derivatives and repo transactions.
  - EMCF introduced in 2009: acts as CCP for cash equity transactions on NASDAQ OMX exchanges in Stockholm, Copenhagen and Helsinki.
- Retail payment system
  - Bankgirocentralen (BGC) offers ACH services; settlements occur at participants' accounts in RIX; majority of clearing positions settled bilaterally and gross.

### Functioning of RIX: message flow, settlement, and participant tools
- Message and settlement flow
  - Payment messages (MT 103 or MT 202) are submitted via SWIFT FIN Y-Copy; a settlement request (MT 096) is forwarded to RTGS via the RTGS CBT.
  - Six-stage processing procedure in RIX:
    - Step 1: Interpretation of payment instruction (simplification/complementation per rules).
    - Step 2: Validation of format requirements and applicable specifications.
    - Step 3: Check for special (conditional) instructions; conditional instructions placed in RIX Conditional Release Mechanism (CRM).
    - Step 4: Check for Stop Receiving / Stop Paying and bilateral limits.
    - Step 5: Renewed validation of instructions in CRM.
    - Step 6: Settlement effected after check of sufficient funds; sender debited and recipient credited; SWIFT FIN-Copy notified by MT 097; sending party may receive MT 012 via SWIFT if subscribed; additional notifications available directly from RIX if subscribed.
- Participant tools and liquidity management
  - Settlement options: immediate settlement via principal account real-time settlement mechanism (RTM) or use of five liquidity optimization mechanisms (LOMs).
  - Liquidity transfers: flexible transfers between principal account and LOMs, and between LOMs.
  - Queuing and prioritization: all LOMs have queuing facilities; priorities may be assigned/changed; time codes (first/latest time) can be set.
  - Principal account payments: settled only if sufficient funds; otherwise rejected (no queuing).
  - LOMs: RIX-LOM (most payments), BGC-LOM (retail), VPC-LOM (securities), OMX-LOM (CCP), CLS-LOM (foreign exchange).
  - Optimization/Gridlock Buster: used in RIX-LOM and BGC-LOM for bilateral or multilateral offsetting (all-or-none logical block); for other LOMs primarily used to reserve liquidity for special settlement cycles or time-critical payments.
- Participant interfaces and agreements
  - RIX Online: participants can view their transactions, positions, queued transactions, and change priority; collateral and intraday liquidity information available.
  - Settlement Agreement (voluntary Code of Conduct): participants agree on times for settling different types of payments and minimum liquidity to maintain for settlement.

### Liquidity, collateral, and intraday credit
- Reserve policy and balances
  - RB has not imposed reserve requirements; banks aim for zero central bank overnight balance.
  - As at mid-March 2011: banking sector some SEK 11 billion long vis-à-vis RB; RB conducts fine-tuning operations each afternoon.
- Intraday credit and collateral framework
  - Intraday credit: provided free of interest as account overdrafts against eligible collateral.
  - Collateral management: delivered to RB are held in COLIN (closely interfaced with RIX); daily mark-to-market valuation of pool sets maximum credit limit in RIX; collateral can be added or substituted quickly.
  - Delivery channels for eligible collateral: via Euroclear Sweden and Euroclear Bank (and approved links); participants from Denmark and Norway may use Scandinavian Cash Pool (SCP) to pay domestic currency cash to RB’s account with local NCB (possibly generated against collateral); participants may deposit euros in RB’s account with Deutsche Bundesbank.
  - RB assigns daily collateral value (subject to haircuts) to such currencies for credit in SEK.
  - Stock of eligible assets: very large; only some 1.7 percent of the eligible collateral is held with the central bank.
  - Accepted collateral: subject to a rating threshold, debt instruments issued in OECD countries or currencies.
- Overnight facility
  - Overnight lending facility at penalty interest rate: repo rate + 75 basis points.

### System usage patterns, concentration, and system traffic
- Intraday flows and concentration
  - Good flow of payments throughout the day; majority settled in accordance with the “Agreement on domestic settlement and netting between participants in the RIX system.”
  - Payment concentration: four biggest banks account for some 75 percent of both value and volume processed in RIX.
- System traffic and capacity
  - Around 12,000 payments per day (end of 2010).
  - Peak-days: more than 18,000 payments.
  - System maximum processing capacity: 36,000 payments per hour.
  - Availability target: 99.85 percent on a yearly basis.
  - Availability achieved: 99.98 percent in 2009 and 99.93 percent in 2010.

### Pricing, cost recovery, and participant charges
- Pricing principles
  - RIX pricing principle: achieve full cost recovery (including fixed and running costs, capital cost, overhead).
  - RB contribution: covers 5 percent of total RIX costs.
  - COLIN costs: 75 percent of the cost of the collateral processing system must be paid by participants.
- Fee schedule
  - One-off entry fee: SEK 125,000.
  - Fixed monthly fee: SEK 70,000 for all participants.
  - Additional fixed fee for those wishing to receive credit: SEK 10,000.
  - Transaction fee: SEK 4.50.
  - Additional cost-sharing: agreed monthly sum of SEK 2,650,000 shared between institutions with domestic income above SEK 1 billion; distribution based on a “key” received once a year from the SBA.
  - Access right administration fee: SEK 1,000 to 4,000 (dependent on number of users).
  - Total annual cost to be recovered: some SEK 66 million.
  - RB covers 5 percent of RIX costs and 25 percent of COLIN costs.
  - Exchange rate: as at mid-March 2011, 1 euro = SEK 8.91.
  - Cost recovery rates achieved: 94 percent in 2009, 98.2 percent in 2010, expected some 106 percent in 2011.
- Comment: Participants’ overall cost (bank internal cost + fixed fees + transaction fee) for making a payment in RIX is relatively high.

### Operational reliability, security, and business continuity
- System development and operation
  - RIX developed by SIA-SSB / Perago; RB holds license and copy of software code; supplier remote support via remote access with special security measures.
  - IT Department responsible for technical operation; RIX Division (Asset Management Department) responsible for business operation; SLAs between RB and supplier and internal departments.
  - Security aligns with ESCB Information Risk Management Baseline Security Catalogue (based on ISO/IEC 27002:2005); regular risk analyses and external IT-Security Auditors.
  - Communications via SWIFT and RIX Online; redundancy via leased lines, internet, and dedicated RB workstation terminals.
- Business continuity and contingency arrangements
  - Two operational centres for RIX, although within limited geographical distance: secondary site ~4 kilometers from primary; third site ~80 kilometers away (no independent equipment).
  - Data replicated in real-time; network redundancy; secondary can be operated remotely from primary and vice versa.
  - Secondary required to be fully operational within four hours from problem onset (current business recovery requirement: four hours).
  - Failover tests and contingency testing conducted at specified frequencies; Extreme Contingency Facility: PC-based; can process some 30 payments per hour.
  - Two developments that may impact RIX:
    - Considerations in RB regarding a possible outsourcing (to a third party) of all information technology (IT) operations—this would affect the location of primary and secondary sites and possibly their staffing.
    - RB together with some other central banks are engaged in an initiative by SWIFT to create a business continuity solution/service for payment systems using SWIFT communication; this work is still at an early stage.
- Assessment and recommendations
  - RIX security objectives and policies are documented, implemented, and tested.
  - Recommendation: consider moving from a four hours business recovery requirement to a more stringent requirement (such as two hours).
  - Recommendation: re-assess site separation and staffing of secondary site to reduce dependence on staff movement from primary to secondary and to align with best business practice; consider a hot/standby staffed secondary site.

### Assessment against CPSS Core Principles and Central Bank Responsibilities
- Summary observance (core findings)
  - Observed: CP II, CP III, CP IV, CP VI, CP VII, CP VIII; Central Bank Responsibilities B, C, D (8 + 3).
  - Broadly observed: CP I and Responsibility A (1 + 1).
  - Partly observed: none.
  - Non-observed: none.
  - Not applicable: CP V (1).
- Key systemic legal uncertainty
  - Important uncertainties remain regarding treatment of funds transfers and collateral transactions completed after, but within the same business day of, a court decision on opening of bankruptcy or reorganization procedures of a participating entity.
- Legal foundation (CP I) — findings
  - Principal laws: Sveriges Riksbank Act (1988:1385); Settlement Systems Act (1999:1309) (based on Directive 98/26/EC); Financial Instruments Accounts Act (1998:1479); Securities Market Act (2007:528) (based on MiFID 2004/39/EC); Banking and Financing Business Act; Rights of Priority Act (1970:979); Bankruptcy Act (1987:672); Contracts Act (1915:218).
  - RIX governed by Swedish law; Terms and Conditions for RIX and Monetary Policy Instruments define finality (Master Document, Chapter 2.6) and participation.
  - Assessment: Broadly Observed.
  - Comment: Due to transposition deviations of the Settlement Finality and Financial Collateral Directives, problematic uncertainties exist for transactions completed after, but within the same business day of, a court decision; Ministry of Finance is aware and seeking to address the shortcoming.
- Risk understanding & management (CPs II–III)
  - RIX is an RTGS system with central bank money as settlement asset; credit risk does not arise for participants in the system.
  - RB is subject to credit risk to the extent it provides credit to participants; this risk is mitigated by requiring collateral (subject to daily valuation and haircuts).
  - Main financial risk for participants: liquidity risk; intraday credit and system tools available to manage liquidity.
  - Assessment: CP II and CP III Observed.
- Settlement (CPs IV–VI)
  - Individual payments are settled on real-time gross basis in the RIX RTM module or in liquidity-saving mode (but still gross) in one of the five LOMs.
  - Settlement of payments takes place on a first-in first-out (FIFO) basis; in a queue situation, settlement is in accordance with "FIFO- next first fit bypass."
  - Payments are settled with immediate finality.
  - Assessment: CP IV Observed; CP V Not applicable; CP VI Observed.
- Operational reliability & security (CP VII)
  - RIX is stable and reliable with strong availability records and documented security/operational procedures.
  - Assessment: Observed.
- Efficiency and practicality (CP VIII)
  - RIX is state-of-the-art; pricing follows full cost recovery; users report high satisfaction with technical and liquidity features.
  - Assessment: Observed.
- Criteria for participation (CP IX)
  - Access rules clear, objective, documented, and publicly available; RIX open to remote participants; as of mid-March 2011, 24 participants (including RB): 17 credit institutions (including six branches of foreign banks); others: BGC, Euroclear Sweden, EMCF, NASDAQ OMX, SNDO.
  - Assessment: Observed.
- Governance (CP X)
  - RB owns and operates RIX; internal governance documented; operational and oversight functions separated; stakeholder engagement via RIX Council and RIX User Group.
  - Assessment: Observed.
- Central bank responsibilities (A–D) — summary
  - Responsibility A: Broadly Observed. Recommendation: lay out and publish up-to-date and comprehensive information on RB’s oversight objectives, policies, scope, standards, methodologies, and division of responsibilities with FI; formalize proactive change assessments.
  - Responsibility B: Observed.
  - Responsibility C: Observed. Recommendation: strengthen RB’s legal powers (e.g., right to issue regulations) and further specify MoU with FI; RB and FI should take more straightforward positions when concerns are identified and not addressed timely.
  - Responsibility D: Observed. Comment: MoU with FI could be further specified to clarify division of responsibilities and avoid overlaps or gaps.

### Recommended actions (consolidated)
- Legal framework
  - Address legal uncertainties arising from transposition of Settlement Finality and Financial Collateral Directives to remove risk that payments/collateral transactions completed after, but within same business day of, a court decision may be challenged; Ministry of Finance to pursue amendment at earliest opportunity.
- Oversight transparency and powers
  - Lay out and publish up-to-date and comprehensive information on RB’s oversight objectives, policies, scope, standards, methodologies, and the distribution of responsibilities with FI.
  - Formalize change assessments for new systems/products/functions and provide high-level public information on outcomes.
  - Strengthen RB’s statutory powers (e.g., right to issue regulations applicable to relevant parties/activities).
  - Clarify and further specify MoU division of responsibilities between RB and FI to avoid overlaps or gaps.
- Operational resilience and business continuity
  - Re-evaluate business recovery requirement; consider moving from four hours to two hours.
  - Re-assess site separation and staffing of secondary site to align with best business practice; consider hot/standby staffed secondary site.
- Cost and access considerations
  - Consider measures to address relatively high overall participant cost per payment while maintaining full cost recovery principles.

### Authorities' response (summary)
- Swedish authorities welcome the IMF assessment and share its views; they provided comments and indicated follow-up actions.
- Core Principle 1 — Legal foundation
  - Ministry of Finance is looking for a way to address perceived shortcomings in current law at first opportunity.
- Core Principle VII — Operational risk
  - Authorities agree demands must be high but feasible; they will request the RIX operator to include IMF recommendations in current analysis to strengthen contingency arrangements.
- Central bank responsibility A
  - Work initiated to make oversight more efficient and clear; aim to publish a paper with comprehensive information regarding the Riksbank’s oversight role and to describe roles of the Riksbank and Finansinspektionen.

*Source: IMF staff mission assessment material on RIX (Riksbank’s Funds Transfer System) contained in the chapter titled "2. RIX Payments Statistics 2005–2010."*

### 2. RIX Payments Statistics 2005–2010 ..................................................................................9

### 2. RIX Payments Statistics 2005–2010

### Key statistics and systemically important payment systems (2010)
- RIX: values as presented in Table 1
  - 2448740,228,000                      12,                      106
- BGC: values as presented in Table 1
  - 2239.411,530                      3,416,667
- Table 2. RIX Payments Statistics 2005–2010 (as presented)
  - Years: 2005200620072008             20092010
  - Number of participants
    - 21202121                 2324
  - Volume, million transactions
    -    1,501,701,952,01 2,582,96
  - Value, billion SEK
    - 111,174124,750122,873136,600        174,562    137,370

### Institutional arrangements
- Legal and institutional responsibilities
  - Sveriges Riksbank (RB): task to promote a safe and efficient payment system under the Sveriges Riksbank Act; may make available systems for settlement of payments and runs the funds transfer system RIX.
  - Finansinspektionen (FI): supervises companies in credit, insurance, and securities markets, including clearing organizations and payment systems—except RIX, which is operated and overseen by RB; FI reports to the MoF.
  - Ministry of Finance (MoF): responsibility for legislation to make the financial system efficient and stable; follows market developments and assesses legislative needs; much legislation derives from EU law.
  - Konkurrensverket (Swedish Competition Authority): mandate to safeguard competition; new Competition Act entered into force on November 1, 2008.
  - Swedish National Debt Office (SNDO, Riksgälden): central government cash management, debt management, state guarantees and loans, deposit insurance and investment schemes; participates in RIX for government payments.
  - Swedish Consumer Agency (Konsumentverket): responsible for consumer protection issues related to payment system (mainly debit and credit card sector).
  - Swedish Bankers’ Association (SBA): private sector coordination on payment processing and technical/regulatory issues; participants in RIX (excluding public entities) enter agreements on cut-off times and processing; SBA owns Data Clearing System operated by BGC.

- Market structure
  - Swedish banking sector in 2010: highly concentrated; four largest commercial banks account for almost three-quarters of household and corporate lending and an even higher proportion of payment activities.
  - Foreign banks: 27 foreign banks represented, almost all through branches.

### Payment infrastructure in Sweden
- Ownership and key components
  - RB owns and runs RIX (operational since 1990; technical platform replaced in February 2009 by SIA-SSB).
  - RIX operating hours: 7:00 a.m. until 5:00 p.m.
  - RIX participants: 24.
  - Central Securities Depository: Euroclear Sweden operates the Securities Settlement System (SSS) for dematerialized equities, bonds, and money market instruments.
  - Market venues and CCPs:
    - NASDAQ OMX: runs stock exchange, derivatives exchange, electronic inter-dealer exchange; acts as CCP for derivatives and repo transactions.
    - EMCF introduced in 2009: acts as CCP for cash equity transactions on NASDAQ OMX exchanges in Stockholm, Copenhagen and Helsinki.
  - Retail payment system: Bankgirocentralen (BGC) offers ACH services; settlements occur at participants' accounts in RIX; majority of clearing positions settled bilaterally and gross.

### Functioning of the RIX system
- Message and settlement flow
  - Payment messages (MT 103 or MT 202) are submitted via SWIFT FIN Y-Copy; a settlement request (MT 096) is forwarded to RTGS via the RTGS CBT.
  - Six-stage processing procedure in RIX:
    - Step 1: Interpretation of payment instruction (simplification/complementation per rules).
    - Step 2: Validation of format requirements and applicable specifications.
    - Step 3: Check for special (conditional) instructions; conditional instructions placed in RIX Conditional Release Mechanism (CRM).
    - Step 4: Check for Stop Receiving / Stop Paying and bilateral limits.
    - Step 5: Renewed validation of instructions in CRM.
    - Step 6: Settlement effected after check of sufficient funds; sender debited and recipient credited; SWIFT FIN-Copy notified by MT 097; sending party may receive MT 012 via SWIFT if subscribed; additional notifications available directly from RIX if subscribed.
- Participant tools and liquidity management
  - Settlement options: immediate settlement via principal account real-time settlement mechanism (RTM) or use of five liquidity optimization mechanisms (LOMs).
  - Liquidity transfers: flexible transfers between principal account and LOMs, and between LOMs.
  - Queuing and prioritization: all LOMs have queuing facilities; priorities may be assigned/changed; time codes (first/latest time) can be set.
  - Principal account payments: settled only if sufficient funds; otherwise rejected (no queuing).
  - LOMs: RIX-LOM (most payments), BGC-LOM (retail), VPC-LOM (securities), OMX-LOM (CCP), CLS-LOM (foreign exchange).
  - Optimization/Gridlock Buster: used in RIX-LOM and BGC-LOM for bilateral or multilateral offsetting (all-or-none logical block); for other LOMs primarily used to reserve liquidity for special settlement cycles or time-critical payments.
- Participant interfaces and agreements
  - RIX Online: participants can view their transactions, positions, queued transactions, and change priority; collateral and intraday liquidity information available.
  - Settlement Agreement (voluntary Code of Conduct): participants agree on times for settling different types of payments and minimum liquidity to maintain for settlement.

### Liquidity, collateral, and intraday credit
- Reserve policy and balances
  - RB has not imposed reserve requirements; banks aim for zero central bank overnight balance.
  - As at mid-March 2011: banking sector some SEK 11 billion long vis-à-vis RB; RB conducts fine-tuning operations each afternoon.
- Intraday credit and collateral framework
  - Intraday credit: provided free of interest as account overdrafts against eligible collateral.
  - Collateral management: delivered to RB are held in COLIN (closely interfaced with RIX); daily mark-to-market valuation of pool sets maximum credit limit in RIX; collateral can be added or substituted quickly.
  - Delivery channels for eligible collateral: via Euroclear Sweden and Euroclear Bank (and approved links); participants from Denmark and Norway may use Scandinavian Cash Pool (SCP) to pay domestic currency cash to RB’s account with local NCB (possibly generated against collateral); participants may deposit euros in RB’s account with Deutsche Bundesbank.
  - RB assigns daily collateral value (subject to haircuts) to such currencies for credit in SEK.
  - Stock of eligible assets: very large; only some 1.7 percent of the eligible collateral is held with the central bank.
  - Accepted collateral: subject to a rating threshold, debt instruments issued in OECD countries or currencies.

### System usage patterns and concentration
- Intraday flows and concentration
  - Good flow of payments throughout the day; majority settled in accordance with the “Agreement on domestic settlement and netting between participants in the RIX system.”
  - Intraday pattern: depicted in Figure 3 (RIX Traffic—Cumulative Intraday Distribution, average for period March 7–11, 2011).
  - Payment concentration: four biggest banks account for some 75 percent of both value and volume processed in RIX.
- System traffic and values (see Table 2 for annual details)
  - RIX operating hours and participant count reiterated: open 7:00 a.m. until 5:00 p.m.; 24 participants.

### Pricing, cost recovery, and charges
- Pricing principles
  - RIX pricing principle: achieve full cost recovery (including fixed and running costs, capital cost, overhead).
  - RB contribution: covers 5 percent of total RIX costs.
  - COLIN costs: 75 percent of the cost of the collateral processing system must be paid by participants.
- Fee schedule (as presented)
  - One-off entry fee: SEK 125,000.
  - Fixed monthly fee: SEK 70,000 for all participants.
  - Additional fixed fee for those wishing to receive credit: SEK 10,000.
  - Transaction fee: SEK 4.50.
  - Additional cost-sharing: agreed monthly sum of SEK 2,650,000 shared between institutions with domestic income above SEK 1 billion; distribution based on a “key” received once a year from the SBA.

### Changes and reforms in process
- System lifecycle and planned changes
  - Current RIX system operational for some two years (technical replacement in February 2009); no plans for major changes reported.

*Source: IMF assessment material on RIX (Riksbank’s Funds Transfer System) contained in the chapter titled "2. RIX Payments Statistics 2005–2010."*

### 34.      There are two independent developments under way that may impact RIX in the

### _cr11285 - 34.      There are two independent developments under way that may impact RIX in the

### Developments that may impact RIX
- Considerations in RB regarding a possible outsourcing (to a third party) of all information technology (IT) operations—this would affect the location of primary and secondary sites and possibly their staffing.
- RB together with some other central banks are engaged in an initiative by SWIFT to create a business continuity solution/service for payment systems using SWIFT communication; this work is still at an early stage.

### MAIN FINDINGS—SUMMARY
- The mission conducted an assessment of the RIX system relative to the CPSIPS and confirmed a high degree of observance of these principles.
- The mission’s assessment points to opportunities for further improvements in the legal basis and in clearly defining and publicly disclosing its major policies with respect to systemically important payment systems to ensure full adherence to the CP.

### Legal foundation (CP I)
- There is a generally sound legal basis and clear documentation for the system, with contractual force.
- There are problematic uncertainties regarding finality and collateral security in Swedish legislation.
- The Settlement Finality and the Financial Collateral Directives have been transposed into Swedish legislation in a way deviating from what is foreseen in the directives.
- As a result, there is certainty as regards netting, finality, and collateral for transactions completed before the opening of bankruptcy or reorganization procedures of a participating entity.
- There are uncertainties regarding the treatment of funds transfers and collateral transactions completed after, but within the same business day of such a court decision.

### Understanding and management of risks (CPs II–III)
- RIX is an RTGS system with central bank money as settlement asset; credit risk does not arise for participants in the system.
- RB is subject to credit risk to the extent it provides credit to participants; this risk is mitigated by requiring collateral (subject to daily valuation and the application of haircuts) for any credit provided.
- The main financial risk to which participants are exposed is liquidity risk.
- To manage liquidity during the day, participants can obtain intraday credit from RB and they have a number of tools available in the system to control their payment flows.

### Settlement (CPs IV–VI)
- Individual payments are settled on real-time gross basis in the RIX RTM module or in liquidity-saving mode (but still gross) in one of the five LOMs.
- Settlement of payments takes place on a first-in first-out (FIFO) basis, but in a queue situation, settlement is in accordance with "FIFO- next first fit bypass."
- Payments are settled with immediate finality.

### Security and operational reliability and contingency arrangements (CP VII)
- RIX is a stable and reliable system with a good track record as regards availability.
- RIX security objectives and policies are documented, implemented, and tested.
- RIX operational and technical procedures are extensively documented in system documentation.
- There are two operational centers for RIX, although within limited geographical distance and with no guarantee that there will in all circumstances be staff available to operate the secondary site.
- Data is replicated in real-time and there is network redundancy between the two sites.
- There are technical back-up procedures to handle different types of operational interruption in the system.
- RB regularly organizes contingency testing exercises.
- Crisis management procedures are set out in a manual defining decisions, responsibilities and roles played by different actors.
- RB currently has a business recovery requirement of four hours; it may wish to consider moving to a more stringent requirement (such as two hours, as used in some major economies or currency areas).

### Efficiency and practicality of the system (CP VIII)
- RIX is state-of-the-art; after two years of live operation, its technical operation and business and liquidity management features have been welcomed with satisfaction by its users.
- There is a good flow of payments throughout the day.
- RB has adopted a full cost recovery principle, which is in line with best practice.
- Participants’ overall cost (bank internal cost + fixed fees + transaction fee) for making a payment in RIX is relatively high.

### Criteria for participation (CP IX)
- Access rules to payment and SSS are clear, objective, documented, and publicly available.
- These rules provide potential participants advance information on technical matters and on type and regulatory arrangements for the institutions they would face as a participant in the system.

### Governance of the payment system (CP X)
- RB owns and operates the RIX system.
- Internal governance arrangements are clearly defined and documented.
- Documentation providing relevant information on the system and its operations is readily available both internally and to users; it is complete and is being kept up-to-date.
- The operational and oversight functions of RB are clearly separated.
- External user involvement is provided via the RIX Council and the RIX User Group.
- Many regular monitoring reports are shared with the users—including those on availability and cost recovery.
- RB regularly conducts a customer satisfaction survey.

### Central bank responsibilities in applying the CPSIPS and oversight arrangements
- Information published in 2001 gave insight into the rationale for oversight, some information on the oversight work and the oversight standard applied; at the time, this was in line with good practice.
- The financial system has become more complex since 2001; to provide transparency and clarity, it will be beneficial to lay out and publish up-to-date and comprehensive information on:
  - the RB’s oversight objectives and policies,
  - scope of oversight,
  - standards applied and methodologies used,
  - distribution of responsibilities and work between the RB and FI.
- For a number of years, all systemically important systems have been subject to annual oversight assessments, which have been published in full on RB’s website.
- New systems, products or functions are subject to an oversight review informally before going live; it should be considered to make proactive reviews more formal and to inform the public of their existence and provide high-level information on the outcome.
- Formalizing change assessments could allow for a move to somewhat lower frequency for the conduct of work-intensive, full-scale assessments.
- RB lacks formal legal powers in relation to payment, clearing and settlement activities that are not operated by itself; it can only use moral suasion regarding arrangements operated by other parties.
- It would be desirable to provide in the statute the right to issue regulations (applicable to any relevant parties or activities) in conjunction with the RB’s critical payment, clearing and settlement system responsibility.
- The Mission encourages RB and FI to take more straightforward positions if they identify areas of concern in their assessments of market infrastructures, or if identified shortcomings would not be addressed within an appropriate period of time.
- Oversight assessments of the RIX system are conducted by the RB alone, while those of other key infrastructures are conducted jointly with FI.
- Cooperation is guided by a high-level Memorandum of Understanding (MoU) between RB and FI, which could be further specified to clarify the division of responsibilities and avoid overlaps or gaps in the assessment work.

*Source: IMF staff mission assessment as summarized in the provided content.*

### 49.      Each recommendation was assessed on a qualitative basis based on a five-fold

### _cr11285 - 49.      Each recommendation was assessed on a qualitative basis based on a five-fold

### Assessment methodology
- Assessment categorization: observed, broadly observed, partly observed, non-observed, and not applicable.
- Definitions:
  - Observed: all assessment criteria are generally met without any significant deficiencies.
  - Broadly observed: only minor shortcomings; corrective actions scheduled and realistically achievable within a prescribed period of time.
  - Partly observed: shortcomings sufficient to raise doubts about ability to achieve observance within a reasonable time frame.
  - Non-observed: major shortcomings in adhering with the assessment criteria.
  - Not applicable: judged not to apply given structural, legal, and institutional conditions.
- When assessed broadly, partly, or non-observed, suggestions are proposed for achieving full observance and additional suggestions to follow best practice.

### Summary observance — core findings (Table 3 / Table 5)
- Overall assessment summary for RIX:
  - Observed: CP II, CP III, CP IV, CP VI, CP VII, CP VIII; Central Bank Responsibilities B, C, D (8 + 3).
  - Broadly observed: CP I and Responsibility A (1 + 1).
  - Partly observed: none.
  - Non-observed: none.
  - Not applicable: CP V (1).
- Key systemic legal uncertainty:
  - Important uncertainties remain regarding treatment of funds transfers and collateral transactions completed after, but within the same business day of, a court decision on opening of bankruptcy or reorganization procedures of a participating entity.

### Legal foundation (CP I)
- Description of legal framework:
  - Principal laws: Sveriges Riksbank Act (1988:1385); Settlement Systems Act (1999:1309) (based on Directive 98/26/EC); Financial Instruments Accounts Act (1998:1479); Securities Market Act (2007:528) (based on MiFID 2004/39/EC); Banking and Financing Business Act; Rights of Priority Act (1970:979); Bankruptcy Act (1987:672); Contracts Act (1915:218).
  - RIX governed by Swedish law; Terms and Conditions for RIX and Monetary Policy Instruments define finality (Master Document, Chapter 2.6) and participation.
- Assessment: Broadly Observed.
- Findings and comments:
  - Legal basis provides certainty for netting, finality and collateral security for transactions completed before opening of bankruptcy or re-organization.
  - Due to transposition deviations of the Settlement Finality and Financial Collateral Directives, problematic uncertainties exist for transactions completed after, but within the same business day of, a court decision.
  - Resulting legal risk: payments settled after court decision may be called back; in securities transactions, counterparties may face replacement cost risk; potential for cherry picking by a bankruptcy administrator; risk that collateral provided (e.g., margin to a CCP) may be called back.
  - In December 2010 RB and other parties informed the Ministry of Finance; Ministry aware but could not address the issue in the referenced legislative proposal; Ministry is seeking to address the shortcoming at first opportunity.

### Risk understanding & management (CP II)
- Description:
  - Rights and obligations set out in Terms and Conditions (Master Document and Annexes H0 to H9); documentation publicly available on RB’s website.
  - Intraday credit accessible against eligible collateral; operative risk procedures described in RIX Instructions, Annex A7.
  - Training and test exercises provided; participants can be excluded under defined conditions.
  - Settlement Agreement (SBA) specifies settlement times and voluntary code of conduct.
- Assessment: Observed.
- Comment: See CP I comment re legal uncertainties.

### Credit and liquidity risk management (CP III)
- Description and operational arrangements:
  - Payments settled in central bank money with immediate finality — no credit risk on payments received in RIX.
  - Intraday credit: free of interest against eligible collateral; SNDO has unlimited intraday credit without collateral (arrangement ensures it does not remain debit at end of day).
  - As at mid-March 2011, banking sector was some 11 billion SEK long vis-à-vis the central bank (neutralized by RB fine-tuning operations each afternoon, on request).
  - Only some 1.7 percent of eligible collateral is held with the central bank.
  - Collateral processing via Euroclear Sweden, Euroclear Bank, SCP option for Denmark/Norway participants, and option to deposit euro in RB account at Deutsche Bundesbank.
  - Collateral pool managed in COLIN; daily mark-to-market and re-valuation; intraday substitution possible.
  - Overnight lending facility at penalty interest rate: repo rate + 75 basis points.
  - Liquidity management tools: RTM and five LOMs (RIX-LOM, BGC-LOM, VPC-LOM, OMX-LOM, CLS-LOM); queuing; priorities; Gridlock Buster optimization for RIX-LOM and BGC-LOM.
  - Conditional Release Mechanism; Stop Receiving / Stop Sending; RIX Online interface for positions, queues, collateral.
  - Integrated DvP with Euroclear Sweden via VPC-LOM; integrated settlement available until 2 p.m.; RIX closes at 5 p.m.
- Assessment: Observed.

### Settlement finality (CP IV) and Multilateral netting (CP V)
- CP IV:
  - Payments settled on RTGS in RTM module or liquidity saving in LOMs with immediate finality.
  - Assessment: Observed.
  - Comment: See CP I comments.
- CP V:
  - Payments in RIX are settled on a gross basis.
  - Assessment: Not applicable.

### Settlement assets (CP VI)
- Settlement takes place in central bank money.
- Assessment: Observed.

### Operational reliability & security (CP VII)
- System and operations:
  - RIX developed by SIA-SSB / Perago; RB holds license and copy of software code; supplier remote support via remote access with special security measures.
  - IT Department responsible for technical operation; RIX Division (Asset Management Department) responsible for business operation; SLAs between RB and supplier and internal departments.
  - Security aligns with ESCB Information Risk Management Baseline Security Catalogue (based on ISO/IEC 27002:2005); regular risk analyses and external IT-Security Auditors.
  - Communications via SWIFT and RIX Online; redundancy via leased lines, internet, and dedicated RB workstation terminals.
- Operational capacity and availability:
  - At end of 2010, around 12,000 payments settled per day; peak-days more than 18,000.
  - System maximum processing capacity: 36,000 payments per hour.
  - Availability target: 99.85 percent on a yearly basis.
  - Availability achieved: 99.98 percent in 2009 and 99.93 percent in 2010.
- Business continuity and crisis management:
  - Two operational centres: secondary site ~4 kilometers from primary; third site ~80 kilometers away (no independent equipment).
  - Data replicated in real-time; network redundancy; secondary can be operated remotely from primary and vice versa.
  - Failover tests conducted; secondary required to be fully operational within four hours from problem onset.
  - Extreme Contingency Facility: PC-based; can process some 30 payments per hour.
  - Contingency testing: manual routines tested twice a year; RIX Online twice a year; SWIFT contingency once a year; terminal input at RB once a year.
  - RB participates in Financial System Private and Public Sector Forum for business continuity.
  - Two developments may impact business continuity: possible outsourcing of IT operations; joint SWIFT business continuity initiative (early stage).
- Assessment: Observed.
- Comments and recommendations:
  - Limited distance (four kilometers) between primary and secondary sites implies deviation from best practice for differing risk profiles.
  - Secondary site dependence on staffing from primary site risks lack of available staff if primary site destroyed.
  - Current business recovery requirement: four hours; recommendation to consider more stringent requirement (such as two hours).
  - For a backbone market infrastructure, lack of staffed / hot standby, limited site separation, and four hours recovery requirement are not aligned with best business practice.

### Efficiency and practicality (CP VIII)
- System role and user feedback:
  - New RIX system introduced February 2009; backbone for interbank, retail, securities, derivatives, and foreign exchange settlement.
  - Users welcomed technical operation, business, and liquidity management features after two years live.
  - Payments introducible anytime during opening hours; timed payments possible; no limits on amounts.
  - STP enabled by SWIFT-message formats.
- Pricing and cost recovery:
  - Pricing principle: full cost recovery over a three years period on average.
  - Fees:
    - One-off entry fee: SEK 125,000.
    - Fixed monthly fee: SEK 70,000 for all participants.
    - Additional fixed fee for credit recipients: SEK 10,000.
    - Transaction fee: SEK 4.50.
    - Additional agreed monthly sum to recover cost: SEK 2,650,000 distributed among institutions with domestic income above SEK 1 billion.
    - Access right administration fee: SEK 1,000 to 4,000 (dependent on number of users).
  - Total annual cost to be recovered: some SEK 66 million.
  - RB covers 5 percent of RIX costs and 25 percent of COLIN costs.
  - Exchange rate noted: as at mid-March 2011, 1 euro = SEK 8.91.
  - Cost recovery rates achieved: 94 percent in 2009, 98.2 percent in 2010, expected some 106 percent in 2011.
- Assessment: Observed.
- Comment: Despite full cost recovery in line with best practice, participants’ overall cost (bank internal cost + fixed fees + transaction fee) for making a payment in RIX is relatively high.

### Access and participation (CP IX)
- Access criteria:
  - Categories accepted: credit institutions (EU definition), investment firms (permitted to trade in financial instruments or provide guarantees in connection with issues of securities), clearing organizations, and the SNDO.
  - Qualifying criteria (Annex H9): compliance with capital adequacy and large exposure requirements applicable within the EEA, subject to supervision, appropriate organization, systems and routines for risk management, secure technical systems, valid license. Non-Swedish entities must provide legal (country) opinion.
  - Technical equipment and communications requirements for all participants.
  - Alternative: institutions may be customers of RIX participants (banker/agent).
- Participation count:
  - As of mid-March 2011, RIX had 24 participants (including the RB): 17 credit institutions (including six branches of foreign banks); others: BGC, Euroclear Sweden, EMCF, NASDAQ OMX, SNDO.
  - RIX open to remote participants; current remote participant: CLS Bank.
- Assessment: Observed.

### Governance (CP X)
- Governance structure:
  - RB owns and operates RIX; Executive Board has overall responsibility.
  - Head of Asset Management Department designated “system owner” and decides Terms and Conditions and pricing.
  - RIX Management Committee (chaired by Head of Asset Management Department) is internal decision-making body consulted before Executive Board submissions and active in crisis situations.
  - Legal issues considered by internal Committee on Legal Framework.
  - Operational technical operation by IT Department; business management by RIX Division (Asset Management Department); SLAs in place.
- Stakeholder engagement:
  - RIX Council (consultative body) discusses policy/strategic issues; chaired by RB; meets about two times a year.
  - RIX User Group (operational/technical) with all participants; meets quarterly; bank provides chairperson.
  - Important changes normally submitted for 30-day consultation to all participants.
  - Documentation, monitoring reports, and customer satisfaction surveys available and shared.
- Oversight and audit:
  - RIX subject to RB Internal Audit Department reviews and external IT-security audits; oversight function separated and part of Financial Stability Department.
- Assessment: Observed.

### Central bank responsibilities (Responsibilities A–D)
- Responsibility A (define objectives and disclose role/policies):
  - Legal basis: Sveriges Riksbank Act includes mandate to “promote a safe and efficient payments system” and authority to issue regulations related to RB’s payment systems and cash-provision mandate.
  - Historical public information: articles in Economic Review No. 3/2001 and Financial Stability Review 2/2001; Financial Stability Report 2007 referenced oversight role and international standards.
  - Annual oversight assessments published in full on RB’s website; proactive reviews of new systems/products conducted informally and not public.
  - Assessment: Broadly Observed.
  - Comment/recommendation:
    - Need to lay out and publish up-to-date and comprehensive information on RB’s oversight objectives, policies, scope, standards, methodologies, and division of responsibilities with FI.
    - Consider formalizing proactive change reviews and provide high-level public information on outcomes to allow lower frequency of full-scale assessments.
- Responsibility B (ensure systems it operates comply with CPs):
  - RB has subjected RIX to oversight since 2001 using CPSIPS; oversight evaluations prior to material changes (e.g., new RIX in February 2009); annual assessments published in full.
  - Assessment: Observed.
- Responsibility C (oversee systems not operated by it and have ability to carry out oversight):
  - RB jointly assesses BGC with FI; BGC oversight annual and published; informal pre-live evaluations for material changes.
  - RB lacks formal legal powers over systems not operated by it; can only use moral suasion; RB requested legislator review of RB Act in 2009; Committee established has started work.
  - Assessment: Observed.
  - Comment/recommendation:
    - Strengthening RB’s legal powers in payments system issues would be highly welcome.
    - Desirable to provide in the statute the right to issue regulations applicable to any relevant parties or activities in conjunction with RB’s critical payment, clearing and settlement system responsibility.
    - RB and FI encouraged to take more straightforward positions where assessments identify concerns not addressed within an appropriate period.
- Responsibility D (cooperate with other central banks and authorities):
  - RB cooperates closely with FI, Ministries of Finance and Justice, competition and consumer protection authorities; active in G20 (CPSS), ESCB, EU committees, Nordic-Baltic cooperation; party to EU MoUs and international cooperative oversight arrangements (CLS, EMCF, Euroclear, SWIFT).
  - Assessment: Observed.
  - Comment: MoU with FI could be further specified to clarify division of responsibilities and avoid overlaps or gaps in assessment work.

### Key statistics and exact figures (preserved as in source)
- Assessment categorizations: observed, broadly observed, partly observed, non-observed, not applicable.
- System volumes and capacity:
  - Around 12,000 payments per day (end of 2010).
  - Peak-days: more than 18,000 payments.
  - Maximum processing capacity: 36,000 payments per hour.
- Availability targets and achievement:
  - Target availability: 99.85 percent (yearly basis).
  - Availability achieved: 99.98 percent (2009); 99.93 percent (2010).
- Liquidity and collateral:
  - As at mid-March 2011, banking sector some 11 billion SEK long vis-à-vis the central bank.
  - Only some 1.7 percent of the eligible collateral is held with the central bank.
  - Overnight lending facility penalty rate: repo rate + 75 basis points.
- Fees and costs:
  - One-off entry fee: SEK 125,000.
  - Fixed monthly fee: SEK 70,000.
  - Additional fixed fee (credit recipients): SEK 10,000.
  - Transaction fee: SEK 4.50.
  - Additional monthly sum to recover cost: SEK 2,650,000 (distributed among institutions with domestic income above SEK 1 billion).
  - Total annual cost to be recovered: some SEK 66 million.
  - RB contribution: 5 percent of RIX costs and 25 percent of COLIN costs.
  - Exchange rate: as at mid-March 2011, 1 euro = SEK 8.91.
  - Cost recovery rates: 94 percent (2009); 98.2 percent (2010); expected some 106 percent (2011).
- Participation:
  - As of mid-March 2011: 24 participants (including RB); 17 credit institutions (six branches of foreign banks); other participants: BGC, Euroclear Sweden, EMCF, NASDAQ OMX, SNDO.

### Recommended / suggested actions drawn from assessments (excerpted from comments)
- Legal framework:
  - Address legal uncertainties arising from transposition of Settlement Finality and Financial Collateral Directives to remove risk that payments/Collateral transactions completed after, but within same business day of, a court decision may be challenged.
  - Ministry of Finance to pursue amendment at earliest opportunity.
- Oversight transparency and powers:
  - Lay out and publish up-to-date and comprehensive information on RB’s oversight objectives, policies, scope, standards, methodologies, and the distribution of responsibilities with FI.
  - Consider formalizing proactive oversight reviews of new systems/products/functions and providing high-level public information on outcomes.
  - Strengthen RB’s statutory powers (e.g., right to issue regulations applicable to relevant parties/activities) to enhance ability to enforce payment system safety and efficiency objectives.
  - Clarify and further specify MoU division of responsibilities between RB and FI to avoid overlaps or gaps in assessment work.
- Operational resilience and business continuity:
  - Re-evaluate business recovery requirement; consider moving from four hours to a more stringent requirement (such as two hours).
  - Re-assess site separation and staffing of secondary site to align with best business practice (reduce dependence on staff movement from primary to secondary; increase geographic separation).
  - Consider moving toward a hot/standby staffed secondary site to ensure continuity if primary site incapacitated.
- Cost and access considerations:
  - Consider measures to address relatively high overall participant cost per payment (bank internal cost + fixed fees + transaction fee) while maintaining full cost recovery principles.

*Source: IMF staff assessment text in the provided PDF excerpt.*

### 50.      The mission conducted an assessment of the RIX system relative to the CPSIPS

### _cr11285 - 50.      The mission conducted an assessment of the RIX system relative to the CPSIPS

### Mission assessment — overall findings
- The mission confirmed a high degree of observance of the CPs and the central bank Responsibilities (CPSIPS) for the RIX system.
- The mission identified opportunities for further improvements in:
  - the legal basis; and
  - clearly defining and publicly disclosing major policies with respect to systemically important payment systems to ensure full adherence to the CP.
- The mission noted observance of a CP or central bank Responsibility in areas other than the above, but highlighted specific issues needing attention.

### Table 6 — Recommended actions to improve observance of CPSS Core Principles and Central Bank Responsibilities in applying the CPs — RIX
- Legal foundation (CP I)
  - Observation: "Due to the way in which the Settlement Finality and the Financial Collateral Directives have been transposed into Swedish legislation, in deviation from what is foreseen in the directives there are some very problematic uncertainties regarding the treatment of funds transfer and collateral transactions completed after, but within the same business day of such a court decision."
  - Recommended action: "Authorities to address at first opportunity problems in legislation related to finality and collateral security."
- Settlement / Understanding and management of risks / Security and operational reliability, and contingency arrangements (CP VII)
  - Observation: "Whereas the RB currently has a business recovery requirement of four hours, in view of increased national and international interdependencies, compliance with best practice would suggest moving to a more stringent requirement."
  - Recommended action: "Consider implementing a business recovery requirement of two hours for RIX."
- Central bank responsibilities in applying the CPs — Responsibility A
  - Recommended actions:
    - "To provide for transparency and clarity on its oversight function, it will be beneficial to lay out and publish up-to-date and comprehensive information on the RB’s oversight objectives and policies, scope of oversight, standards applied and methodologies used, as well as on the distribution of responsibilities and work between the RB and FI."
    - "In view of proactive oversight, new systems, products or functions are being reviewed, but informally, before their going live and no reference to them is made in public documents. It is recommended to formalize change assessments, and consider moving to somewhat lower frequency for the conduct of work-intensive full-scale assessments."
- Central bank responsibilities in applying the CPs — Responsibility C
  - Recommended actions:
    - "RB has few formal legal powers in relation to payments system issues and can only use moral suasion in its endeavors to achieve its oversight objectives. It will be beneficial to provide in the RB’s statute the right to issue regulations in conjunction with its critical payments system responsibility."
    - "Further specify the MoU between RB and FI in view of avoiding overlaps or gaps in the assessment of key market infrastructures."
    - "In assessing market infrastructures against oversight standards, RB (and FI) should take more straightforward positions when areas of concern are identified, or in the event identified shortcomings would not be addressed within an appropriate period of time."

### Authorities' response (paragraphs 51–54)
- Paragraph 51
  - "The Swedish authorities welcome the detailed assessment of the RIX system conducted by the IMF. We highly appreciate the insights and suggestions for improvements and overall we share the views expressed. The Swedish authorities would like to extend the following comments to some of the views highlighted in the assessment."
- Core Principle 1 — Legal foundation (paragraph 52)
  - "As mentioned in the assessment, several authorities have highlighted perceived shortcomings in current law, and the Ministry of Finance is looking for a way to address these issues at first opportunity."
- Core Principle VII — Operational risk (paragraph 53)
  - "The Swedish authorities agree that the demands on security, operational reliability and contingency must be extremely high due to the RIX system’s importance for the Swedish financial market. However, the demands must be feasible and in accordance with the central bank’s size and resources. But in line with the recommendation from the IMF, improvements may be made and the Swedish authorities will request the operator of the RIX system to include the recommendations from the IMF in their current analysis on how the contingency arrangements for RIX can be strengthened."
- Central banks responsibility A in applying the Core Principles (paragraph 54)
  - "The Swedish authorities agree with the recommendations and work has been initiated that aims to make the oversight of the financial infrastructure more efficient and clear. The aim of such work is to publish a paper with comprehensive information regarding the Riksbank’s oversight role and to describe the roles of the Riksbank and Finansinspektionen."

*Source: _cr11285 - 50.      The mission conducted an assessment of the RIX system relative to the CPSIPS*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2011/_cr11285.pdf_