International payment transactions
Each country has its own payment system. Transactions between bank customers in different countries therefore normally require more resources to effectuate than domestic payments. Cross-border payments often involve two or more banks, many manual tasks and payment systems that are not always well coordinated. As a result, cross-border payments often take longer and are more costly than domestic payments. International payment systems are discussed in more detail in the Annual Report on Payment Systems.
In Europe, work has been in progress for a long time to improve the efficiency of payment systems through the development of rules in the EU (see the EU Commission and the ECB) and bank collaboration on the development of common standards and shared infrastructure for customer payments (see the European Payments Council). The objective of payments within the euro area is that cross-border transfers should take place as rapidly and at the same cost as domestic payments. The work of making cross-border payments more efficient is discussed in more detail in the Annual Report on Payment Systems.
Traditionally, banks' obligations in connection with the purchase and sale of foreign currency have been settled in independent national payment systems. This entails a risk for banks, since they normally deliver foreign currency that has been sold before receipt of the purchased foreign currency has been confirmed. If one party does not fulfil its commitment, the counterparty can at worst incur a loss equivalent to the transaction sum. In order to eliminate this credit risk, a new international system was introduced in 2003 whereby settlement takes place simultaneously in different currencies. This system is called Continuous Linked Settlement (CLS). A number of banks in the Norwegian market are participants in this international settlement system. CLS is described in more detail on the CLS website.