Society for Worldwide Interbank Financial Telecommunication (SWIFT) System

21.10.2024

Society for Worldwide Interbank Financial Telecommunication (SWIFT) System

Why in the news?               

           A Russian envoy in India recently called for an alternative to the SWIFT system used for global payments, from which Russia was expelled after the beginning of war in Ukraine.

About SWIFT System:

• It is a member-owned cooperative that provides safe and secure financial transactions for its members.
• Establishment: It was founded in 1973 by 239 banks from 15 countries.
• It is a network that banks use to communicate with each other securely, mainly to give instructions for transferring funds between accounts.
• It is the largest and most streamlined method for international payments and settlements.
• It works by assigning each financial organization a unique code with either eight or 11 characters, known as a bank identifier code, or BIC.
• By standardizing communication protocols, SWIFT ensures that financial institutions can reliably conduct cross-border transactions, reducing the risks and inefficiencies associated with international banking.
• Although SWIFT is crucial to global financial infrastructure, it's not a financial institution.
• It does not hold or transfer assets but facilitates secure, efficient communication between member institutions. It transmits essential details such as the recipient’s account information and transfer amount.
• Headquartered in La Hulpe, Belgium, the system is overseen by the central banks of the G10 countries, the European Central Bank, and the National Bank of Belgium.

○Its shareholders represent around 3,500 member organizations.

○SWIFT shareholders elect a board of 25 directors who govern the organization and oversee management of the SWIFT system.

• Because membership in SWIFT allows countries to easily conduct international financial transactions, exclusion from SWIFT is an economic sanction that can be used against countries whose actions are condemned by the global community.

                                                                 Source: The Hindu

With reference to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) System, consider the following statements:

1. It provides safe and secure financial transactions for its members.

2. It is used by banks mainly to give instructions for transferring funds between accounts.

3. It is overseen by the Basel Committee on Banking Supervision (BCBS).

How many of the statements given above are correct?

A.Only one

B.Only two

C.All three

D.None

Answer B