The move follows last year's news that the Bush administration was using emergency powers to secretly scrutinise suspect transactions sent over the network.

Swift came under fire from Belgian and EU data privacy officials and politicians following disclosure of the programme. The furore led to a call from MEPs in February for Swift to stop its current practice of mirroring all data concerning EU citizens and enterprises in its US site or to move its alternative database site outside US jurisdiction.

Currently, Swift has operating centres in Europe and the US. Messages are processed simultaneously at both locations to prevent data loss.

Under the proposed new architecture, Swift will adopt a more distributed data processing and storage model. This will allow for intra-European data to be stored only in Europe.

Swift CEO, Lázaro Campos says the project "is an important sign of how seriously we take data privacy concerns; we continue to make the protection of customer data our absolute priority".

He says the programme of works will also expand Swift's messaging capacity and reinforce network resilience bringing considerable benefits to the community as a whole.

The Board will be asked to approve final details of the investment plans at its meeting in September this year. Swift has not disclosed the costs of the programme.

The Brussels-based co-operative has also set up a working group composed of data privacy and compliance experts from European and non-European banks. The group has been asked to propose contractual solutions to further enhance compliance and transparency and is due to complete its work in the third quarter of 2007