The new initiative aims to improve global liquidity by improving the reconciliation of nostro account (accounts held by one bank in a foreign bank and denominated in the foreign bank’s domestic currency) databases.
“Under the current correspondent banking model, banks need to monitor the funds in their overseas accounts via debit and credit updates and end-of-day statements,” Swift said.
“The maintenance and operational work involved represents a significant portion of the cost of making cross-border payments. This proof-of-concept will test whether distributed ledgers may be able to help banks reconcile those nostro accounts more efficiently and in real time, lowering costs and operational risk.”
ANZ, BNP Paribas, BNY Mellon and Wells Fargo are among the participating banks, and are working with the company to “identify the challenges, define the specifications, build the application and ultimately test the concept”, with another 20 banks slated to join the program later, Swift said.
“Whilst existing distributed ledger technologies [blockchains] are not currently mature enough for cross-border payments, this technology – bolstered by some additional features from Swift – may be interesting for the associated account reconciliation,” said Swift head of banking market and Swift gpi Wim Raymaekers.
“This proof-of-concept gives us the opportunity to test distributed ledger technology and determine if it can be applied to this particular use case.”
