The Italian Banking Association’s Spunta and Digital Euro Projects

Disruptive technologies. Even better, technology that explicitly aims to disintermediate traditional banks. There are three possible reactions: you can simply ignore it, you may hope they disappear, or you can try to understand and embrace the change.

In 2017, Italian banks opted for the third option and started the Spunta project, promoted by the Italian Banking Association (ABI) and coordinated by ABI Lab, the research and innovation centre promoted by ABI itself. Spunta began with an initial working group composed of 18 pilot banks, representing 78 percent of the Italian banking sector in terms of employees. The project sees the commitment of technical partners NTT Data as application designer and developer and SIA as infrastructure operator, in addition to R3 with the Corda Enterprise platform.

Applying DLT to Interbank Reconciliation

In detail, the Spunta project is about the matching of correspondent (or bilateral) accounts that involve two different banks. The interbank reconciliation procedure in Italy is linked to processes traditionally carried out by back offices and are aimed at reconciling the transaction flows that generate accounting entries in the bilateral accounts and at managing pending transactions. After the automatic matching, the operators deal with the suspended movements. The implementation of a new process using a private permissioned distributed ledger technology (DLT) for interbank reconciliations makes it possible to automatically detect non-matching transactions using a shared algorithm, standardizes both the process and the single communication channel, and provides a comprehensive view of the transactions among the interested parties. As a consequence, the principles within Spunta envisage full visibility of transactions, including those of the counterparty; rapid management of flows with daily, rather than monthly, reconciliations; shared rules for the symmetrical reconciliation of transactions between counterparty banks; and the integrated management of communications and processes in the event of an imbalance.

The interbank reconciliation process is a niche back-office process and, due to its limited impact on the IT systems of the bank and the fact that it does not impact final customers and the need for better standardisation, was seen as an excellent candidate to test with this technology. The process is ruled by an interbank agreement, issued by ABI itself, whose first formulation dates back to 1978. After the redesign of the process, an important milestone of the project was reached in May 2019 when the Executive Committee of ABI approved the new interbank agreement, officially starting the path to the production phase for the entire Italian banking sector.

After the simulations and 1,680 tests, carried out between the end of January and the beginning of February by the final operators in the back offices of the pilot banks, all the target times were reached. From the beginning of March 2020, on time with the deadlines stated one year before, the process became ...

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