Here’s a detailed explanation of the ISO 20022 settlement methods INGA, INDA, COVE, and CLRG, along with their practical applications:
Table of Contents
1. INDA (Instructed Agent)
- Definition: Settlement is performed by the Instructed Agent, which is the bank or financial institution receiving the payment instruction. The settlement account (e.g., a nostro account) is held by this agent, and they debit/credit the account upon receiving the message.
- Example: If Bank A (Instructing Agent) sends a payment instruction to Bank C (Instructed Agent), and Bank C maintains Bank A’s USD nostro account, the settlement method is INDA since Bank C handles the account debiting.
- Key Point: Used when the settlement responsibility lies with the receiver of the message.
2. INGA (Instructing Agent)
- Definition: The Instructing Agent (the sender of the payment message) handles settlement. The settlement account is maintained by this agent, and they credit/debit the account before forwarding the payment instruction.
- Example: If Bank D (Instructing Agent) sends a payment to Bank B (Instructed Agent) and informs them that the nostro account held at Bank D has already been settled, the settlement method is INGA.
- Key Point: Settlement occurs at the moment the Instructing Agent sends the message.
3. COVE (Cover Method)
- Definition: Settlement occurs via a separate cover payment (pacs.009 message), where funds are transferred between correspondent banks before the final payment is processed.
- Example: If Bank A initiates a payment to Bank B but uses a cover payment through Bank C (intermediary), the initial pacs.008 message will use COVE, indicating the actual settlement will follow via a pacs.009 cover message.
- Key Point: Used for cross-border transactions requiring intermediary banks.
4. CLRG (Clearing System)
- Definition: Settlement is routed through a clearing system or market infrastructure (e.g., RTGS or domestic clearing systems). This method is typically used for high-value or bulk payments.
- Example: In domestic transactions between Bank C and Bank D, if both use a central clearing system (e.g., CHAPS or Fedwire), the settlement method is CLRG.
- Note: CLRG is not applicable for CBPR+ messages and is reserved for specific high-value systems.
Key Differences Summary
| Method | Responsibility | Use Case |
|---|---|---|
| INDA | Instructed Agent | Cross-border, nostro account at receiver |
| INGA | Instructing Agent | Pre-settled payments |
| COVE | Cover Payment | Transactions requiring intermediaries |
| CLRG | Clearing System | High-value or domestic clearing systems |
For further details, refer to the SWIFT guidelines or ISO 20022 documentation.