STR is the hub of the Brazilian payment system, since:
- under legal provision (Law 4,595), all banking financial institutions are obligated to deposit their available funds at accounts held at the Banco Central do Brasil (reserves accounts);
- according to Banco Central do Brasil’s Circular 3,057, net positions stemming from systemically important clearing system have to be settled in central bank money;
- as provided by Banco Central do Brasil’s Circular 3,101, all funds transfers between accounts hold at the Banco Central do Brasil have to be made through STR.
Interbank funds transfers are as well settled by means of SITRAF, SILOC and COMPE. SITRAF is a hybrid settlement system that is considered systemically important and, as in the case of STR, allows intraday funds transfers. SILOC and COMPE are non-systemically important multilateral netting systems.
For the smooth functioning of the Brazilian payment system, the following aspects are especially important:
- Banco Central do Brasil extends fully collateralized, unlimited and free of charge intraday credit to banks holding reserves accounts. For this purpose, repo transactions with government securities are used;
- balances at the end of day are used to verify banks’ compliance with reserves requirements, so these funds can be freely used throughout the day to settle obligations;
- Banco Central do Brasil can activate STR´s optimization routines should a gridlock situation arises.