Settlement & reversal requirements on IPSs
The Source IPS must only send a pacs.008 payment instruction to the Source Nexus Gateway, if it can meet following requirements:
The Source IPS must have ensured that the funds from the Source PSP are secured. This means that if the Source PSP were to declare insolvency whilst the payment is being processed (or within the settlement cycle, in the case of deferred net settlement systems), the Source SAP must still receive the funds immediately or at the end of the settlement cycle.
Specifically, the funds in the Source IPS must be either:
- Immediately transferred from the Source PSP’s settlement account to the Source SAP's settlement account (ie settled immediately in central bank money); OR
- Reserved against the Source PSP’s account, so that they cannot be used for other purposes while the payment is being processed; OR
- If a Deferred Net Settlement process is used, a pre-funding or collateral regime must ensure that even if the Source PSP were to be declared insolvent before the end of the settlement cycle, the Source SAP would still be paid in full in central bank money at the end of the settlement cycle.
The Source IPS must have the ability to reverse this payment in the case that the payment fails in the Destination IPS (for any reason). This means that the Source IPS must be able to move funds from the S-SAP back to the S-PSP. Again, the exact process will depend on the IPS in question.
The Destination IPS must only send a pacs.002 payment acceptance to the Source Nexus Gateway, if it can meet following requirements:
The Destination IPS must ensure that the funds from the Destination SAP are secured. As before, this means that if the D-SAP were to declare insolvency whilst the payment is being processed (or within the settlement cycle, in the case of deferred net settlement systems), the Destination PSP must still receive the funds immediately or at the end of the settlement cycle. As before, this assurance may be achieved in a number of different ways.
The Destination PSP must have responded with either:
- 1.ACCC status (the funds have been accepted and credited to the reciepient) or
- 2.ACWP status (the funds have been accepted by the Destination PSP but not yet credited to the Recipient. This may be used in the case that the Destination PSP has a sanctions hit for the Recipient, and needs further time to resolve the hit.)
The Destination IPS must have the ability to reverse the payment in case the Destination PSP is ultimately unable to credit the Recipient. This means the Destination IPS must be able to move funds from the Destination PSP back to the D-SAP.
Assuming that all of the requirements above are met, the role of Nexus is quite simple:
- Nexus will wait to receive a pacs.008 payment instruction from the Source IPS
- When it receives this, it assumes that the funds are secured and that the payment can be reversed if necessary
- Nexus transforms this payment instruction and sends it to the Destination IPS, then waits for a pacs.002 response confirming whether the payment has been successful or not.