What is LVTS?

What are the benefits of LVTS?

How can customers arrange to make an LVTS payment?

How much does it cost to send a payment via LVTS?

How are the certainty of settlement and irrevocability of LVTS payments achieved?

Why don’t all CPA members have direct access to LVTS?

What are the criteria for financial institutions to participate in LVTS?

What happens if a corporation making an LVTS payment fails?

How does LVTS compare with systems in other countries?

If LVTS is only for Canadian dollar payments, why would it make our financial system more attractive internationally?

What is LVTS?

The Large Value Transfer System (LVTS) is an electronic funds transfer system introduced in February 1999 and operated by the Canadian Payments Association (CPA). As Canada’s wire payment mechanism, it facilitates the electronic transfer of Canadian dollar payments across the country in real time. Although the benefits of LVTS are particularly relevant for large-value transactions, it can be used for payments of any amount, especially those that are time-sensitive.

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What are the benefits of LVTS?

LVTS payments are final and irrevocable once they have been received by the payee’s financial institution. Because they cannot be revoked, there is no risk of reversal due to stop payment orders, insufficient funds, or forged endorsement. Funds transferred via LVTS are immediately available to the payee upon request.

LVTS is a fast, secure and efficient payment option. It can replace many paper-based payments and thereby save the time required to handle cheques or drafts.

Financial institutions are assured of same-day settlement for LVTS transactions, even in the unlikely event that a participating institution were to fail. This certainty of settlement virtually eliminates systemic risk (i.e., the risk that the inability of one financial institution to meet its settlement obligations could cause other institutions to fail in a domino effect).

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How can customers arrange to make an LVTS payment?

Customers can arrange LVTS payments through their CPA member financial institutions. All wire transfers within Canada, in Canadian dollars, will be made via LVTS; however, financial institutions may offer the LVTS payment service under various proprietary names.

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How much does it cost to send a payment via LVTS?

The CPA does not play a role in the pricing of LVTS services. Each financial institution will establish its own pricing structure for LVTS payments, just as they do for other products and services.

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How are the certainty of settlement and irrevocability of LVTS payments achieved?

LVTS payments are backed by collateral pledged to the Bank of Canada by the participants. Before an LVTS payment is approved, the system checks it against risk controls to verify there is sufficient collateral available to support it. The level of credit available to participants is adjusted in real time to reflect incoming and outgoing payments.

The risk controls ensure there is enough collateral available in the system to permit settlement of any participant’s obligations on the books of the Bank of Canada, even if a participant is declared insolvent.

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Why don’t all CPA members have direct access to LVTS?

Each CPA member has to consider its own business case for participating directly in LVTS. At present, 14 institutions have made the decision to do so.

However, all CPA members can offer LVTS payment services, even if they do not participate directly in the system. They can send or receive payments through one of the direct participants.

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What are the criteria for financial institutions to participate in LVTS?

Any deposit-taking financial institution that is a member of the CPA can participate in LVTS, provided that it maintains a settlement account at the Bank of Canada, has the facilities to pledge collateral for LVTS purposes and meets certain technical requirements set out in the CPA’s LVTS Rules.

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What happens if a corporation making an LVTS payment fails?

All payments processed through LVTS are final and irrevocable, even if the payor (in this case, the corporation) were to fail. The sending institution is legally responsible for providing funds for all payments it sends, either on its own behalf, or on behalf of its clients.

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How does LVTS compare with systems in other countries?

LVTS is equivalent in all important respects (including, in particular, the settlement and risk mitigation properties) to large value systems in other countries. Moreover, as a hybrid system, it combines key features of the two main payment system models. It provides the certainty of settlement of a Real Time Gross Settlement (RTGS) system, together with the lower collateral costs of a netting system. This feature makes LVTS unique.

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If LVTS is only for Canadian dollar payments, why would it make our financial system more attractive internationally?

Many international transactions are composed of several key parts. LVTS permits the Canadian dollar leg of such transactions to be completed with the assurance that it is final and irreversible.

In addition, because LVTS significantly reduces systemic risk, it makes investments and other business dealings more attractive in Canada, thereby making a significant contribution to the stability of the Canadian financial system.

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