Red Book

3 key takeaways:

• The Red Book is a publication by the Bank for International Settlements (BIS) that provides detailed information on the payment and settlement systems of CPMI member central banks.
• It is periodically updated to reflect changes and developments in payment, clearing, and settlement infrastructures across member countries.
• The Red Book serves as a valuable resource for policymakers, researchers, and financial institutions to understand and compare different payment and settlement systems globally.

What is the Red Book?

The Red Book is a detailed report published by the Bank for International Settlements (BIS) that describes the payment, clearing, and settlement systems in place at the member central banks of the Committee on Payments and Market Infrastructure (CPMI).

The publication aims to provide an in-depth understanding of how these systems operate, their structure, and their role in the financial system. The Red Book is periodically updated to ensure it reflects the latest developments and changes in these critical infrastructures.

For example, the Red Book might include sections on the payment systems of the United States, detailing the operations of systems like Fedwire and the Clearing House Interbank Payments System (CHIPS), as well as updates on new initiatives or regulatory changes affecting these systems.

Importance of the Red Book

The Red Book is important for several reasons:

• Transparency: It provides detailed and transparent information about the functioning of payment and settlement systems, enhancing understanding and trust among market participants.
• Comparative Analysis: The Red Book’s standardized format allows for easy comparison of different countries’ systems, helping identify best practices and areas for improvement.
• Policy Development: Policymakers and regulators use the Red Book as a reference to develop and refine policies related to payment and settlement systems.
• Market Confidence: By providing comprehensive and reliable information, the Red Book contributes to market confidence in the robustness and efficiency of payment and settlement systems.

These aspects highlight the Red Book’s role as a critical resource in the financial sector.

Structure of the Red Book

The Red Book typically includes the following sections:

• Overview of the Payment and Settlement Systems: An introduction to the country’s financial system, focusing on the key institutions involved in payment and settlement processes.
• Payment Systems: Detailed descriptions of major payment systems, including large-value payment systems, retail payment systems, and emerging payment methods.
• Clearing Systems: Information on the various clearing systems used for processing payments, including their operational frameworks and risk management practices.
• Securities Settlement Systems: Descriptions of the systems used for the settlement of securities transactions, including both domestic and cross-border operations.
• Recent Developments and Trends: Updates on recent changes, technological advancements, and trends in payment and settlement systems.

These sections provide a comprehensive view of the payment and settlement infrastructure in each country covered by the Red Book.

Examples of Red Book content

Here are some examples of the type of content you might find in the Red Book:

• United States: Detailed descriptions of the Fedwire Funds Service, CHIPS, the Automated Clearing House (ACH) network, and the Depository Trust Company (DTC) for securities settlement.
• European Union: Information on the TARGET2 system, the Single Euro Payments Area (SEPA) initiatives, and the role of the European Central Bank (ECB) in overseeing payment and settlement systems.
• Japan: An overview of the Bank of Japan Financial Network System (BOJ-NET), the Japanese Government Bond Clearing Corporation (JGBCC), and other key infrastructures.

These examples illustrate the depth and breadth of information provided in the Red Book.

Updates and revisions

The Red Book is periodically updated to reflect:

• Technological Advancements: Incorporation of new technologies, such as blockchain and real-time payment systems, that impact the functioning of payment and settlement systems.
• Regulatory Changes: Updates on new regulations and compliance requirements affecting the operations of payment and settlement infrastructures.
• Market Developments: Information on new market practices, emerging trends, and significant changes in the financial landscape.

Regular updates ensure that the Red Book remains a relevant and valuable resource for understanding global payment and settlement systems.

Usage of the Red Book

The Red Book is used by a wide range of stakeholders, including:

• Policymakers and Regulators: To inform policy decisions and regulatory frameworks related to payment and settlement systems.
• Financial Institutions: To gain insights into the operation and structure of payment systems in different countries, facilitating cross-border transactions and collaborations.
• Researchers and Academics: As a reference for studies and analyses related to financial infrastructure and market practices.
• Industry Professionals: To stay informed about best practices, technological advancements, and regulatory changes in payment and settlement systems.

By providing detailed and standardized information, the Red Book helps various stakeholders understand and improve the functioning of payment and settlement systems globally.