How Addressing Works in the RTGS Component of T2

Addressing in T2 RTGS starts with the BIC, the Bank Identifier Code that names a bank or a branch in the payment. A pacs.008 carries BICs in several places, including the instructing agent, the instructed agent, the debtor agent and the creditor agent, and each BIC must name a party that T2 recognises. A payment from Deutsche Bank in Frankfurt, BIC DEUTDEFFXXX, to BNP Paribas in Paris, BIC BNPAFRPPXXX, names both banks by BIC, and RTGS uses those BICs to check that both parties are registered, that the payee can receive the payment, and that the settlement account exists. A BIC that is not registered is rejected before any funds move. The RTGS Directory is the list that tells every participant which BICs it can send payments to in T2. The directory holds every direct participant, every multi-addressee, every addressable BIC holder and every indirect participant, with the participation type and the direct participant that settles for each one. A bank that wants to pay EUR 2 million to a small savings bank in Germany checks the directory first, finds the savings bank BIC, sees that it is an addressable BIC settled through a direct participant, and addresses the pacs.008 to that direct participant for settlement. Without the directory, the sender would not know where the payment must go. Addressing has two layers, and both must be correct for a payment to settle. The technical layer names the party that sends or receives the message through ESMIG, while the settlement layer names the RTGS Dedicated Cash Account that is debited or credited. In a simple direct to direct payment, the two layers match, because the bank that sends the message also holds the account. In a multi-addressee payment, the layers differ, because a branch sends the message while the head office holds the account. A payment that confuses the two layers will be rejected, even when the amount and the currency are correct. The value date, the currency and the priority also form part of addressing, because they decide when and how RTGS processes the payment. A pacs.008 with a value date of today, a currency of EUR and a priority of urgent will settle as soon as liquidity allows. A pacs.008 with a future value date will wait in RTGS until that date, and a pacs.008 in a currency other than EUR will be rejected, because T2 RTGS settles euro payments in the live system. A bank that sends a EUR 750,000 payment with the wrong value date will see it sit in a queue, not settle, and its operations team must check the date before it calls the payee bank. Addressing errors are common, costly and easy to prevent with a directory check. A payment addressed to a BIC that left T2, a payment addressed to a branch that is not authorised, and a payment addressed to an indirect participant as if it held its own account will all fail validation. Each failure produces a pacs.002 status report with a reason code, and each failure delays the customer payment while operations investigate. A bank that validates every BIC against the current RTGS Directory before it sends the pacs.008, and that refreshes its directory copy each week, will catch most addressing errors before the payment leaves the bank.