Page 4  RTGS and ISO 20022: enhancing the quality of payments data In the UK the way that payments are made and settled is being transformed with the renewal of the Bank’s Real Time Gross Settlement (RTGS) Service. This is the critical infrastructure which delivers final and risk free settlement and virtually every sterling payment is settled over RTGS eventually. As an integral part of upgrading its hard payments infrastructure the Bank is joining to global push to enhance the soft infrastructure of payments by introducing ISO 20022 messages in the renewed RTGS and in CHAPS. As everyone at this conference will no doubt be aware ISO 20022 is a gamechanger for the financial system. It is an open international data standard that allows financial institutions to communicate through a common data language. It will enable financial systems to understand each other wherever they are in the world. One of you could walk down the road and send a payment from a local bank branch in Kaunas and the information conveyed within the message would be the same information as available to my local bank here in London. ISO 20022 also allows for more structured and enhanced data, which can be user driven. In other words it can develop according to the user’s needs either through adapting the language by adding new data fields or by adapting to meet different technology needs.
They enhance the public’s understanding of what central banks do and why they do it. Sovereign wealth fund The SNB’s balance sheet has expanded sharply since 2008. It is this growth that inspired the idea to set up a sovereign wealth fund to manage the SNB’s foreign exchange reserves. A number of different options are being proposed for the structure of the sovereign wealth fund. Although proponents’ goals differ quite considerably, they all draw parallels with the sovereign wealth funds of countries such as Norway. However, comparisons with Norway are misleading, since this country supplies its sovereign wealth fund with tax revenues, licence fees and dividends from the oil sector. When companies in a country discover new natural resources, the country becomes richer as a result of the revenue generated and its wealth increases. By contrast, the exceptional growth in the SNB’s balance sheet since 2008 is primarily attributable to foreign currency purchases based on monetary policy considerations. We bought foreign currency in order to limit the appreciation of our own currency, thereby putting more Swiss francs into circulation. Such an expansion of the money supply, however, does not create any real value. This difference between oil revenues and foreign exchange reserves is important when contemplating setting up a sovereign wealth fund. Norway is able to transfer oil-sector tax revenue and other receipts into its sovereign wealth fund, because they constitute profit for the country as a whole. The SNB’s foreign exchange reserves, however, do not represent profit.