How CIPS Powers Global RMB Payments: Participants, Liquidity, and Settlement Explained

1. About CIPS

The Cross‑border Interbank Payment System (CIPS) is a wholesale payment system approved by the People’s Bank of China, dedicated to RMB cross‑border payment and settlement. It offers both real‑time gross settlement (RTGS) and delayed net settlement (DNS) modes, providing global financial institutions with time‑zone‑spanning clearing services.

2. CIPS Participants

Participants are divided into direct and indirect participants. Direct participants include domestic direct participants and overseas direct participants. Indirect participants access the system through direct participants.

Overseas direct participants hold a CIPS account and a unique CIPS bank code, enabling them to conduct RMB cross‑border payments directly. As of the latest data, CIPS has 170 direct participants.

Because overseas direct participants do not have settlement accounts in the large‑value payment system, they must rely on domestic custodial banks to open custodial accounts. By August 2024, there were 10 such custodial banks.

3. Account System Under CIPS

CIPS uses a unified central bank account. Each participant must fund this account, but because the central bank account is shared, CIPS maintains an internal accounting system to record each participant’s balance separately. These internal accounts also perform the actual clearing functions and are reconciled with the central bank account at the end of each business day.

4. CIPS Operating Schedule

CIPS operates on a “5×24 hours + 4 hours” schedule, running continuously on legal workdays. The system has day‑time and night‑time sessions and seven operational states: business preparation, day‑time processing, day‑time cut‑off, session‑end processing, night‑time processing, night‑time cut‑off, and day‑end processing.

5. Participant Liquidity Management

All participants must maintain sufficient funds in their zero‑balance CIPS accounts to guarantee liquidity. They can adjust liquidity through injection, pre‑injection, increase, or decrease operations.

Injection and increase represent payments from participants to CIPS via the large‑value payment system, while decrease and zero‑balance clearing represent payments from CIPS back to participants.

Because the large‑value payment system does not operate at night, participants must perform pre‑injection or pre‑injection adjustments for night‑time liquidity, effectively freezing the required funds in their central bank custodial accounts.

5.2 Liquidity Risk Controls

CIPS employs several measures to mitigate liquidity risk, including net‑settlement margin requirements, queue mechanisms, and balance‑alert thresholds. Detailed tools are presented in the original documentation.

6. Payment and Information Business

CIPS processes two main categories of business: payment‑type messages (customer remittance, financial institution remittance, batch payments, and market fund settlement) and information‑type messages (queries, etc.). The article uses the “111 customer remittance” message as a representative example.

6.1 Customer Remittance (Payment)

Customer remittance involves at least one non‑financial institution on either the payer or payee side. Single‑transaction customer remittances are processed via RTGS.

1) Remittance Processing Flow

The payer submits a payment request to an indirect participant (F), which debits the payer’s account. F forwards the instruction to a direct participant (A), which debits its interbank deposit. A then sends the instruction to CIPS, which records the debit to A and credit to the receiving direct participant (B). B debits the interbank deposit of the indirect participant, and finally F credits the payee’s account.

2) Message Interpretation

Key parameters of the CIPS 111.001.02 message are listed to help readers understand the content of a payment instruction.

3) Optimal Settlement Path Selection

Because an indirect participant may have multiple direct participants, multiple payment paths exist. CIPS calculates the optimal path to minimize cost and processing time.

6.2 Session‑End and Day‑End Processing

During day‑time, after business processing, the system enters session‑end processing, automatically returning queued or pending payments and clearing day‑time account balances. It then reconciles with the large‑value payment system and sends reconciliation messages.

Day‑end processing follows a similar pattern, finalizing balances and completing settlement.

7. New vs. Old Business Rules

The People’s Bank of China has revised the “RMB Cross‑border Payment System Business Rules” (originally 2018) and released a draft for public comment. The article compares the new draft with the previous version.

8. CIPS Standard Transceiver

The standard transceiver, compliant with ISO 20022, serves direct participants, indirect participants, and enterprises. It supports both API integration and GUI operation, providing out‑of‑the‑box message handling.