Clearing House Interbank Payments System

CHIPS
... The Clearing House Issue Specifications for New Cover Payments Message Format ... CHIPS is the most liquidity efficient payments system ...
www.chips.org

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The Clearing House Interbank Payments System (CHIPS) is the main privately held Clearing house (finance) for large-value transactions in the United States, settling well over US$1 trillion a day in around 250,000 interbank payments. Together with the Fedwire Funds Service (which is operated by the Federal Reserve Banks), CHIPS forms the primary U.S. network for large-value domestic and international USD payments (where it has a market share of around 96%).

CHIPS is owned by financial institutions. According to the Federal Financial Institutions Examination Council (FFIEC), an interagency office of the United States government, "any banking organization with a regulated U.S. presence may become an owner and participate in the network."http://www.ffiec.gov/ffiecinfobase/booklets/Wholesale/02.html

Banks typically prefer to make payments of higher value and of a less time-sensitive nature by CHIPS instead of Fedwire, as CHIPS is less expensive (both by charges and by funds required).

CHIPS differs from The Fed in three ways. First, it is privately owned, where as the Fed is a regulatory body. Second, it has around 46 members (2006), compared with the estimated 50,000 of The Fed. Third, it is a netting engine.

A netting engine consolidates all of the pending payments into fewer single transactions. For example, if Bank of America is to pay American Express US$1.2 million, and American Express is to pay Bank of America $800,000, the CHIPS system aggregates this to a single payment of $400,000 from Bank of America to American Express — only 20% of the $2 million to be transferred actually changes hands, which means that the remainder can continue to earn interest for the banks. The Fed's system would require two separate payments for the full amounts ($1.2 million to American Express and $800,000 to Bank of America), preventing that money from earning interest until it is settled in the recipient banks' accounts.

Only 46 of the largest banks dealing in U.S. dollars participate in CHIPS; 70% of these are non-U.S. banks. Smaller banks have not found it cost effective to participate in CHIPS.

Member list As of 2006, the members are:

ABN AMRO Bank N.V. Netherlands
American Express Bank Ltd. United States
Banca di Roma Italy
Banca Intesa S.p.A. Italy
Banco Bilbao Vizcaya, S.A. Spain
Banco de la Nacion Argentina Argentina
Banco do Brasil S.A. Brazil
Bangkok Bank Public Company Limited Thailand
Bank Hapoalim B.M. Israel
Bank Leumi USA United States
Bank of America, N.A. United States
Bank of China China
Bank of Communications China
The Bank of New York United States
Bank of Nova Scotia Canada
The Bank of Tokyo-Mitsubishi UFJ, Ltd. Japan
Barclays Bank PLC England
BNP Paribas New York France
Brown Brothers Harriman & Company United States
Calyon France
Citibank, N.A. United States
Commerzbank AG Germany
Credit Industriel et Commercial France
Deutsche Bank AG Germany
Deutsche Bank Trust Co Americas United States
Dresdner Bank AG Germany
HSBC Bank USA United States
Mega International Commercial Bank Co. Taiwan
Israel Discount Bank of New York United States
JPMorgan Chase Bank, N.A. United States
KBC Bank N.V. Belgium
M & T Bank United States
Mitsubishi UFJ Trust and Bkg Corp. NY Br. Japan
Mizuho Corporate Bank Ltd - NY Japan
The National Bank of Kuwait SAK Kuwait
The Northern Trust Company United States
Societe Generale France
Standard Chartered Bank England
State Bank of India India
State Street Bank and Trust Company United States
Sumitomo Mitsui Banking Corporation Japan
UBS AG Switzerland
Wachovia Bank, N.A. Charlotte United States
Wachovia Bank, N.A. - New York United States
Wells Fargo Bank, National Association United States

References

Fedwire and Clearing House Interbank Payments System Retrieved Nov. 28, 2005.

External links

The Clearing House Interbank Payment System