European Central Bank has published for the first time its regular Survey on Correspondent Banking in Euro. A total of eight surveys have been carried out since 1999 in order to monitor the importance, size and development of correspondent banking.

The survey confirmed that correspondent banking remains an important channel for effecting payments in euro. The total daily turnover of euro transactions settled through correspondent banking arrangements averaged more than €1.1 trillion.

The survey also confirmed the growing concentration in correspondent banking, with the largest four correspondent banks representing more than 80% of the total value turnover. This warrants the attention of payment system overseers, as disruption in any of the larger and most interconnected correspondent banks could quickly spillover to interdependent payment systems. Besides operational risk, liquidity and credit risks also pose a significant threat in correspondent banking business, with intraday credit exposures normally being uncollateralised.

Closer cooperation between overseers and banking supervisors could better ensure that potential risks in correspondent banking are covered uniformly throughout the euro area. The prospective transfer of supervision of euro area credit institutions to the ECB is likely to facilitate such closer cooperation.