Clearing House Interbank Payments System

The Clearing House Interbank Payments System (CHIPS) is the main privately held clearing house for large-value transactions in the United States, settling well over US$1 trillion a day in around 250,000 interbank payments. Together with the Fedwire Funds Service (which is operated by the Federal Reserve Banks), CHIPS forms the primary U.S. network for large-value domestic and international USD payments (where it has a market share of around 96%). CHIPS transfers are governed by Article 4A of Uniform Commercial Code.

CHIPS is owned by financial institutions. According to the Federal Financial Institutions Examination Council (FFIEC), an interagency office of the United States government, "any banking organization with a regulated U.S. presence may become an owner and participate in the network."^[1] CHIPS participants may be commercial banks, Edge Act corporations or investment companies. Until 1998, to be a CHIPS participant, a financial institution was required to maintain a branch or an agency in New York City. A non-participant wishing to make international payments using CHIPS was required to employ one of the CHIPS participants to act as its correspondent or agent.

Banks typically prefer to make payments of higher value and of a less time-sensitive nature by CHIPS instead of Fedwire, as CHIPS is less expensive (both by charges and by funds required).

CHIPS differs from the Fedwire payment system in three key ways. First, it is privately owned, whereas the Fed is part of a regulatory body. Second, it has 47 member participants (with some merged banks constituting separate participants), compared with 9,289 banking institutions (as of March 19, 2009)^[2] eligible to make and receive funds via Fedwire. Third, it is a netting engine (and hence, not real-time).

A netting engine consolidates all of the pending payments into fewer single transactions. For example, if Bank of America is to pay American Express US$1.2 million, and American Express is to pay Bank of America $800,000, the CHIPS system aggregates this to a single payment of $400,000 from Bank of America to American Express — only 20% of the $2 million to be transferred actually changes hands. The Fedwire system would require two separate payments for the full amounts ($1.2 million to American Express and $800,000 to Bank of America).

Only the largest banks dealing in U.S. dollars participate in CHIPS; about 70% of these are non-U.S. banks. Smaller banks have not found it cost effective to participate in CHIPS,^{[citation needed]} but many have accounts at CHIPS-participating banks to send and receive payments.

Member list

As of 2009^[update], the member participants (with country of ownership) are:^[3]

• ABN AMRO Bank N.V. Netherlands
• American Express Bank Ltd. United States
• Banco Bilbao Vizcaya, S.A. Spain
• Banco de la Nacion Argentina Argentina
• Banco do Brasil S.A. Brazil
• Bangkok Bank Public Company Limited Thailand
• Bank Hapoalim B.M. Israel
• Bank Leumi USA United States
• Bank of America, N.A. United States
• Bank of China China
• Bank of Communications China
• The Bank of New York Mellon United States
• Bank of Nova Scotia Canada
• The Bank of Tokyo-Mitsubishi UFJ, Ltd. Japan
• Barclays Bank PLC England
• BNP Paribas New York France
• Brown Brothers Harriman & Company United States
• Calyon France
• Citibank, N.A. United States
• Commerzbank AG Germany
• Credit Industriel et Commercial France
• Deutsche Bank AG Germany
• Deutsche Bank Trust Co Americas, formerly Bankers Trust United States
• Dresdner Bank AG Germany
• Habib Bank Limited Pakistan
• HSBC Bank USA United States
• Mega International Commercial Bank Taiwan
• Intesa Sanpaolo Italy
• Israel Discount Bank of New York United States
• JPMorgan Chase Bank, N.A. United States
• KBC Bank N.V. Belgium
• Mashreq Bank United Arab Emirates
• M & T Bank United States
• Mitsubishi UFJ Trust and Banking Corporation NY Branch Japan
• Mizuho Corporate Bank - NY Japan
• The National Bank of Kuwait SAK Kuwait
• The Northern Trust Company United States
• Societe Generale France
• Standard Chartered Bank England
• State Bank of India India
• State Street Bank and Trust Company United States
• Sumitomo Mitsui Banking Corporation Japan
• UBS AG Switzerland
• Wachovia Bank, N.A. - Charlotte United States
• Wachovia Bank, N.A. - New York United States
• Wells Fargo Bank, National Association United States

References

1. ^ Fedwire and Clearing House Interbank Payments System (CHIPS)
2. ^ Fedwire Participant Directory
3. ^ CHIPS Customers

• Fedwire and Clearing House Interbank Payments System Retrieved Nov. 28, 2005.

See also

• Electronic Payments Network

External links

• The Clearing House Interbank Payment System