The Bank for International Settlements (BIS), ‘the central bank of central banks’ run by the G20, has outlined its recommendations for cross-border payments facilitators to create optimal service level agreements (SLAs).
The newly released guide [pdf], created by the BIS’s Committee on Payments and Market Infrastructures (CPMI), contains high-level recommendations, key features and guiding questions to help parties involved in cross-border payments determine best practice for creating or reviewing an SLA.
The recommendations help payments providers identify, implement and achieve certain outcomes of SLAs that can enhance cross-border payments, such as interoperability, safety and efficiency.
What is more, the BIS said, properly designed SLAs “can help to meet the G20 goals of making cross-border payments cheaper, faster, more transparent and more accessible, while also ensuring their safety”.
These SLAs, or payment arrangements, are bilateral or multilateral agreements between the supply side actors of cross-border payments, primarily payment service providers (PSPs), correspondent banks and/or payment system operators.
SLAs, among other things, define minimum service levels to be met by these supply side actors, such as KYC rules or payments messaging standards.
The report focuses on SLAs that form part of cross-border payment arrangements, defining minimum service levels for correspondent banking relationships, the links between payment systems, and payment instrument rulebooks.
“Inadequate design and lack of harmonisation across service level agreements can lead to uncertainty, heightened risks, longer transaction chains or reduced interoperability, thus amplifying frictions impacting cross-border payments,” the BIS wrote in its report.
“Applying the recommendations in a proportionate way can contribute to increased harmonisation of elements covered by these arrangements, without putting an undue burden on new and smaller payment arrangements.”
The BIS said the report would inform the ongoing work of the CPMI on the governance and oversight of interlinking arrangements, specifically between fast payment systems.
