LVTS was developed to enhance Canada's international reputation and global competitive position by providing an electronic payment system that offers certainty of settlement and finality of payment on a same day basis.

Most of the G10 countries have (or are in the process of implementing) similar risk proofed settlement systems. With LVTS, the international community will have more confidence in dealing with the Canadian payment system when conducting international business transactions.

Previously, wire payments were settled via the Automated Clearing and Settlement System (ACSS) on a next day basis, back-dated to the previous day. In the event that a financial institution was unable to settle wires sent the previous day, those wires could have been unwound. In addition, the failure of one institution to meet its settlement obligations could have caused another institution to fail. This is referred to as "systemic risk".

LVTS removes systemic risk as all accepted LVTS payments are backed by collateral pledged to the Bank of Canada and the Bank of Canada guarantees settlement of LVTS payments. In the event of the failure of an institution, the collateral would be used to cover that institution's settlement obligations and the Bank of Canada guarantees any shortfall. Settlement is therefore guaranteed and occurs on a same day basis.

Under LVTS rules, LVTS payments will become final and irrevocable when they pass LVTS risk control tests. A payment processed through LVTS is assigned a Payment Confirmation Reference Number (PCRN) which indicates that the payment has passed all LVTS risk control tests and is considered final and irrevocable.

Other Settlement Streams vs. LVTS

While wire payments are settled under LVTS, the remaining payments such as cheques, drafts, foreign exchange wire payments, pre-authorized debits, Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT), continue to be settled via ACSS on a next day basis.

The CPA's long term goal is to move as many large value and time sensitive payments as possible from paper to LVTS. The move to LVTS is very important as it will ensure that the majority of the value of payments exchanged within Canada during any business day will benefit from the risk proofing benefits of LVTS.

The Benefits of LVTS

• system is secure and allows for same day settlement and availability of funds
• LVTS payments which pass all risk controls tests will result in funds which are guaranteed, considered final and irrevocable
• LVTS payments are assigned a Payment Confirmation Reference Number (PCRN), which provides indisputable proof of receipt of payment by your financial institution.

If you have any questions or comments, talk to TD. We're here to help make it easier. Please contact a TD Account Manager or call 1-800-263-0287.

Frequently Asked Questions

For more information contact a Relationship Manager at the Commercial Banking Centre nearest you.