Exchange Settlement Account System

ESAS is the Reserve Bank of New Zealand's Exchange Settlement Account System and along with Real-Time Gross Settlement (RTGS) allows individual transactions between financial institutions to be settled electronically as the transactions happen.

What is ESAS?

ESAS is the Reserve Bank of New Zealand's Exchange Settlement Account System (ESAS) which is used by banks and other approved financial institutions to settle their obligations on a Real-Time Gross Settlement (RTGS) basis. ESAS came into live operation in March 1998 as part of the implementation of RTGS in New Zealand.

ESAS is operated by the Reserve Bank's Banking Department.

In RTGS, final and irrevocable settlement of transactions is achieved in real-time by the simultaneous crediting and debiting of Exchange Settlement Accounts (ESAs) held at the Reserve Bank.

Previously, at the end of the day banks tallied up all their inter-bank obligations, and then settled net amounts with each other through their accounts at the Reserve Bank. However, with RTGS, individual settlement requests between banks are settled electronically as the settlement requests happen.

RTGS was introduced to reduce the settlement risk associated with deferred high- value interbank payments. It makes the financial system as a whole more robust. Previously, if a bank collapsed during the working day, other banks could have been owed very large sums of money from incomplete settlement requests with the failed bank. This could potentially put these other banks at risk, or have seen banks attempt to reverse payments, creating financial chaos.

However, with RTGS, large payments are completed transaction-by-transaction throughout the day, and are posted irrevocably to banks' accounts at the Reserve Bank before value is credited/debited to customers.

ESAS is a designated settlement system under Part 5C of the Reserve Bank Act 1989. Designation also gives legislative backing to the finality of settlements effected in accordance with the rules of the system. The Reserve Bank's Prudential Supervision Department is the regulator of the system. Controls are in place to ensure that the Reserve Bank's Financial Services Group and Prudential Supervision Department operate at arm's length.

Thus, RTGS markedly reduces the risk that the collapse of one bank would lead to the collapse of others, or to attempts to reverse settlement requests.

Each ESAS accountholder has an ESA with the Reserve Bank. The operation of those accounts is governed by the Exchange Settlement Account System Terms and Conditions.

Current ESAS accountholders include several registered banks, the Reserve Bank, CLS Bank and New Zealand Depository Limited However access rules permit other organisations meeting certain criteria to have accounts as well. Accountholders submit transactions to ESAS through a number of feeder systems (known as "authorised submitting systems"). The feeder systems include:

  • NZClear, New Zealand's central securities depository and principal securities settlement platform for the financial services industry. The Reserve Bank is the system operator of NZClear.
  • the ESAS-SWIFT Interface using the SWIFT Y copy protocol for a closed user group administered by the Reserve Bank; and
  • the Settlement Before Interchange (SBI) interface. This service settles the transactions submitted to ESAS in respect of files containing retail transactions between bilateral pairs of accountholders. Once the transaction is settled in ESAS, the associated file of retail transactions is released to the destination bank. The SBI service involves a closed user group administered by Payments NZ Limited. SBI utilises SWIFT FileAct and SWIFT Y copy.

ESAS Scheduled Outages

Find out more information about scheduled NZClear and ESAS outages and maintenance windows.


ESAS Settlement Accounts

ES accounts are basic current accounts. An accountholder has the ability to conduct settlements with other accountholders in central bank funds enabling the receiver of those funds to have absolute faith in the quality of the funds received. For more information on the Bank’s policy for accessing Exchange Settlement Accounts, please visit - Policy on Access to Exchange Settlement Accounts page.


Payments data is changing

The New Zealand banking industry is moving to ISO 20022, the emerging global standard for payments messaging creating a common language for payments data shared across the globe.

Find out more about ISO 20022

This includes changes our payment system ESAS. We will adopt a coexistence strategy from November 2022 to support the existing FIN (MT) and new ISO 20022 (MX) messaging format.

NZClear does not have any changes for securities messaging and transfers at this time.

Adopting ISO 20022 will enable innovation in the NZ payments industry to be able to utilise richer data becoming available at the transactional level within the payments ecosystem. Already used by payment systems in over 70 countries, in the coming years ISO 20022 will be the de facto standard for high-value payment systems of all reserve currencies.

To adapt to the new messaging standard and accompanying data requirements, ESAS account holders will have to make process and technology changes. A program of work is currently underway at the Reserve Bank to manage this.

Timings

Q1-Q3 2022

ESAS testing activities

Q4 2022+

International market infrastructures switch to ISO 20022

November 2022

ESAS ISO 20022 processing goes live

November 2022

Eurozone market switches to ISO 20022

November 2022 - November 2025

ESAS settlement system supports coexistence of FIN (MT) format and ISO 20022 format messaging

Late 2023

ESAS ISO 20022 reconciliation messages & statements goes live (equivalent of MT900 series)

November 2025

FIN (MT) messaging format retired

If you have any questions contact us at [email protected]


Key publications

More information about ESAS, including our operating guidelines and rules can be accessed below:

Operational Information

Archived documents

Further documents can be found on our archive page:

  • Annual Reports
  • Independent Assurance Practitioners reports
  • Industry bulletins/updates
  • User Advisory Committee meetings
  • Survey Results

Requests for Audit Reports

The Annual Audit report for the ESAS system has been completed. This report is available to participants and account holders upon request made to:

Head of Banking
Reserve Bank of New Zealand
Email: [email protected]