January 13, 2022
Japanese Bankers Association

JBA Comments on “Extending and aligning payment
system operating hours for cross-border payments”

We, the Japanese Bankers Association (JBA), appreciate the opportunity to provide
comments on “Extending and aligning payment system operating hours for crossborder payments”, dated November 18, 2021.
We hope that our comments will contribute to further discussions.

Comments to the questions in the consultative report Extending and aligning payment system operating hours for cross-border payments

Questions for consultation
1. Can the extension of real-time gross settlement (RTGS) systems’ operating

Our commentsThis is dependent on the situation. Improving the speed of cross-border payments requires an extension of operating hours of not only RTGS systems but also each participant.

hours materially contribute to achieving the cross-border payments targets

Given that RTGS systems handle a relatively high volume payments, it is critical to take companies’ needs and liquidity into consideration. If many companies do not wantendorsed by the G20, especially in terms of speed? Please explain.

to receive funds outside of current operating hours, the liquidity would be limited. In terms of interbank funding, it is expected that the extension of RTGS systems’ operating
hours would enable those foreign exchange (FX) transactions that cannot be settled at Value Today due to the time zone difference and thus would be settled on the next
business day at Value Today. If, however, the improvement in speed is realized by settling FX transactions on T+0, the impact on the Payment-Versus-Payment (PVP)
mechanism and liquidity needs to be carefully assessed.
The G20 has set the following speed targets: By the end of 2027, 75% of cross-border payments are to be credited/to provide availability of funds for the recipient within
one hour of payment initiation, and the remainder should be credited within one business day of payment initiation. We need to confirm whether the number of those crossborder payments received outside the operating hours or overnight and processed next business day exceeds 25% of total cross-border payments (in our country, it would be
unlikely that the extension of RTGS systems’ operating hours can contribute to achieving the speed target).

Since RTGS systems in domestic have already covered the global settlement window, the improvement of speed expected from the extension of RTGS systems’ operating
hours would be limited.

2. What additional actions would be needed by the public sector and/or private

sector entities, beyond those described in the G20 roadmap (see Annex 3 of thecurrent report), to facilitate the extension of RTGS operating hours and realize

The additional action would be to expand the coverage of participants who will benefit from extended RTGS operating hours. Unless operating hours of other relevant
payment systems (e.g. bond market) are also extended to align with RTGS operating hours, the benefits of extending RTGS systems’ operating hours would not be realised.

It is also necessary to clarify the purposes of extending RTGS systems’ operating hours and challenges associated with such an extension.

Provided that the coverage of participants is expanded, we expect that the extension of RTGS operating hours will expand FX transactions and also enable banks to takethe benefits that could result from extended RTGS operating hours?
3. What benefits for cross-border payments other than speed do you perceive
would accrue from an extension of RTGS operating hours? What additionaldomestic benefits for a jurisdiction do you perceive?

care of settlement delays caused by, for example, participant’s system failures or operational errors.
While Japan has already extended the settlement of JGBs to 21:00, activities in the evening primarily comprise of the recovery of transactions that failed during the day.
This indicates that the extension of operating hours has not contributed to stimulating transactions. If the settlement window expands, the number of transactions might
increase. However, there is not a particularly strong demand from customers for expanding the settlement window. Collateralised transactions, for which customers areincreasingly seeking advice, do not involve fund transfer, and hence the benefits of the extension of RTGS operating hours would be limited.

4. How well do the three identified end states capture key scenarios that individual

End states should be considered from a broader perspective, rather than focusing solely on the RTGS systems’ operating hours. Every identified end state will impose additional

central banks/RTGS system operators should consider as they assess current

burdens on private-sector entities and the public-sector. For example, the extension of RTGS operating hours will call for additional resources or development of payment

RTGS operating hours and plan for the future? What additional end states orsystems.

refinements to the end states would you suggest?
5. Which end state, out of the three identified or another one you may want to

We think that end state 1 strikes the best balance between potential benefits and additional burdens.

consider, do you believe strikes the best balance between improving cross-In order to realise real-time settlement by extending operating hours, it is critical to first determine how we should consider the concept of a global settlement window,

border payments and managing the associated challenges?
6. If the RTGS system in your jurisdiction has not yet reached the end state

before discussing the three end states. In addition, concept of each country’s payment systems, including that of FX transactions, also needs to be considered.
N/Asignaled in the previous question, what time horizon (number of years fromnow) would you envision for reaching it?
7. As a result of end state 3, which involves 24/7 RTGS operating hours, do you

Given actual activities currently conducted during the period outside of the core hours, we think that there is no demand for 24/7 operations of RTGS systems at the moment.

anticipate demand for 24/7 operations of RTGS systems in the future? If so,24/7 operations are meaningful only if recipients also have a framework for monitoring funds received and allocating such funds to next transactions on a 24/7 basis.

what do you expect to be the main drivers and over what time horizon do you

Therefore, we should consider whether there are such needs and framework in discussing the extension of operating hours of settlement systems. With regard to the question

expect this to happen?

on time horizon, it is unlikely that demand for 24/7 operations of RTGS systems will spread widely across societies at least within the G20’s timeframe for enhancing crossborder payments.

Questions for consultation

Our comments

8. Would your organisation make use of and/or benefit from extended RTGS

Considering comments from customers on the extensions of operating hours of payment systems implemented in the past, we believe that in our country, there are not sufficient

operating hours?
9. How useful do you view the global settlement window as a concept forneeds for outward payment requests after business hours and also not sufficient needs (benefits) for accelerating receipts of inward payment.
In order to realise real-time settlement by extending operating hours, it is critical to first determine how we should consider the concept of a global settlement window. In

considering the aggregate implications of extensions to RTGS operating hours

addition, concept of each country’s payment systems, including that of FX transactions, also needs to be considered. Based on this, feasibility of expanding the global

in individual jurisdictions? What alternatives or refinements, if any, would you

settlement window (i.e. to extend operating hours) should be considered. Unless there is demand from markets and societies for using funds received overnight or during

propose in order to consider the aggregate implications of extensions to RTGS

weekends/public holidays and an initiative to build infrastructures for supporting such demand other than settlement systems, benefits would not outweigh huge investments

operating hours in individual jurisdictions?

in extending RTGS operating hours. We believe that the concept of a global settlement window of RTGS systems is not important for payments that do not involve FXtransactions.
The use case in Box 3 (cross-border payment from the euro area to Indonesia) should clarify the assumptions regarding FX transactions and bank account structures. The
use case in Box 3 should also discuss for what purposes companies receiving funds can use them.

10. To what extent have the operational and risk considerations related to anAnalysis from business perspectives, system development and required human resources (back-office) should also be considered.

extension of RTGS operating hours been adequately identified? What additional
considerations would you consider relevant?
11. What would you identify as the top five considerations related to an extensionof RTGS operating hours in your preferred scenario (Q5)?

12. To what extent do the relevant considerations differ substantially depending onCosts (e.g. human resources, IT systems)Customers’ needsInterfacing with other relevant settlement systems

Establishing a programme in response to, or guidelines regarding, the extension of RTGS operating hours

Feasibility

Compared to end state 1, end state 2 and end state 3 are difficult in terms of their costs and feasibility.

the end state being considered?
13. For the top five considerations that you identified in Q11, what mitigation

There are no mitigation measures that could be taken immediately.

measures could be taken to address them?
14. In your view, to what extent will the above measures require coordinated action

As the extension of RTGS systems’ operating hours will have diverse effects, support/guidance from central banks/supervisors is essential. Even with such support/guidance, it

by industry participants and/or support/guidance from authorities, such as

would not be feasible unless the coverage of RTGS system participants is expanded because the costs for system investments and human resources (back office and systemcentral banks, standard-setting bodies and supervisors (as opposed to actions byoperation) will be enormous.

individual stakeholders)?
15. If you are a stakeholder of an RTGS system that has extended its operating hours

in the recent past, what were the key lessons learnt?

Understanding customer needs is important. Responding to the extension of RTGS systems’ operating hours requires investments in IT systems and securing humanresources. If there are no customer needs, such an extension will only increase burdens of maintaining the systems and back-office structure. Furthermore, extending RTGS
operating hours does not drive demand for receiving funds overnight. We expect that many companies do not have strong needs for settling payments overnight at additionalcost.

According to a questionnaire survey on cross-border yen-denominated settlement services for non-financial entities conducted by the central bank in the past, Japanesefinancial institutions and non-financial entities are conservative in conducting overnight payments due to labor and management-related concerns.

The extension of the settlement system’s operating hours alone will not increase the use by users. In order to eliminate labor and management concerns arising from overnight
payment operations of financial institutions and non-financial firms, this issue needs to be considered in conjunction with the initiatives for implementing full automationand straight-through processing. In such a consideration, ensuring liquidity and business feasibility would be a critical element. In addition, a market infrastructure thatenables funding during the extended operating hours need to be built.

End