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· Awaiting Govt., RBI guidelines on SWIFT transactions with Russian entities: PNB
· SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication.
· It is a global payments system, which is used by more than 11,000 financial institutions and companies around the world, across over 200 countries.
· SWIFT is a messaging network that financial institutions use to securely transmit information and instructions through a standardized system of codes.
· Although SWIFT has become a crucial part of global financial infrastructure, it is not a financial institution itself: SWIFT does not hold or transfer assets.
· Rather, its utility lies in its power to facilitate secure, efficient communication between member institutions.
· SWIFT assigns each financial organization a unique code that has either eight characters or 11 characters.
- Prior to SWIFT, telex was the only available means of message confirmation for international funds transfer.
- Telex was hampered by low speed, security concerns, and a free message format.
- To circumvent these problems, the SWIFT system was formed in 1973.
- Six major international banks formed a cooperative society to operate a global network that would transfer financial messages in a secure and timely manner. (message-switching project)
- SWIFT was then founded in 1973 with 239 banks in 15 countries. By 1977, it expanded to 518 institutions in 22 countries.
- The wide coverage of SWIFT – covering over 11,000 institutions in more than 200 countries around the world – makes it an almost-universally accepted system.
- It counts central banks of countries like the US, UK, Germany, France, Japan, India, China, Singapore and others among its list of overseers.
- In the beginning, SWIFT founders designed the network to facilitate communication about Treasury and correspondent transactions only.
- The robustness of the message format design allowed for the huge scalability through which SWIFT gradually expanded to provide services to the Banks, Brokerage institutes and trading houses, Securities dealers, Asset management companies, Clearinghouses, Depositories, Exchanges, Corporate business houses etc.
- SWIFT is overseen by central banks from Group of Ten (G10) countries, but it is a neutral organization operating for the benefit of all of its members.
- In recent years, the possible use of SWIFT membership as a potential sanction against members has emerged multiple times.
- In 2012, for example, the European Union passed a sanction against Iran that compelled SWIFT to disconnect sanctioned Iranian banks.
- More recently, leaders from the U.K., EU, U.S., and Canada announced selected banks in Russia would be disconnected from SWIFT over its February 2022 invasion of Ukraine.
- The National Bank of Belgium (NBB) acts as the lead overseer, and is supported by the G-10 central banks.
- Headquartered in Belgium
- As powerful as SWIFT is, keep in mind that it is only a messaging system.
- SWIFT does not hold any funds or securities, nor does it manage client accounts.
- SWIFT is a cooperative society under Belgian law and is owned and controlled by its shareholders.