Regional Experience on Clearing and Settlement Systems

1
Regional Experience on Clearing and Settlement
Systems

• Johannesburg 19 June 2003
• Alice Zanza
• Reserve Bank of Zimbabwe

2
Relevance of clearing and settlements

• Trading has to be settled
• Barter
• Cash
• Electronic payments
• Investor confidence in the payment system
• Financial stability
• Systemic risk

3
Systemic Risk

• The risk that the failure of one participant, in
  financial markets generally, will cause other
  participants to be unable to meet their
  obligations
• Effects
• Significant liquidity problems
• Threat not only to whole financial sector but
  economy as a whole
• Nightmares for the Central bank

4
Components of Payment System

• Banks
• Financial Institutions
• Government
• Rules and Regulations
• Processes and Procedures
• Legal Framework
• Infrastructure
• Transactions ( Payment and Settlement)
• End users/ Customers
• Service Providers
• Other Stakeholders

5
Building Safe and Efficient Payment System

• Combined action by central bank and banking
  industry
• Shared vision
• Cooperation from other stakeholders
• Clear cut division between Competition and
  Cooperation
• Technical efficiency
• Compatibility with monetary policy
• Access criteria
• Compatibility with payment systems from other
  countries

6
Building Safe and Efficient Payment System

• Driver
• Support from the top
• Troublemaker
• Long term approach
• Avoid quick fix
• Commitment, commitment and commitment
• Continuity

7
Goal Definition

• Gross Settlement
• One to one
• High value payments
• High liquidity requirements
• Low risk
• Credit push
• Net settlement
• Lower liquidity requirements
• Higher risk
• Legal basis
• High and low value payments
• Clearing Cycles
• Settlement Time
• End of day
• Deferred

8
Goal Definition

• Finality and Irrevocability
• Delivery versus Payment (DVP)
• -Securities market
• -How are you going to achieve this
• -Various models
• G30 Recommendations for SSS
• BIS Report Recommendations for SSS( RSSS)
• CPSS IOSCO- Nov 2001
• Assessment methodology for RSSS- Nov 2002
• Central Securities Depository
• Government securities vs Equities
• Immobilisation / Dematerialisation

9
Regional Trends

• SADC (14)
• Angola
• Botswana
• Lesotho
• Malawi
• Namibia
• Swaziland
• Tanzania
• Zambia
• Zimbabwe
• DRC
• Seychelles
• South Africa
• Mauritius
• Mozambique

• MEFMI (10 )
• Angola
• Botswana
• Lesotho
• Malawi
• Namibia
• Swaziland
• Tanzania
• Uganda
• Zambia
• Zimbabwe

10
SADC REGION
 
11
SADC Developments

• 9 million SQ Km
• Estimated population of 190 million
• Diverse capabilities
• Dominant use of cash
• Wide use of cheque
• Credit transfers and direct debits
• Payment cards
• Developing electronic payments

12
SADC Payment Systems Project

• Launched July 1996
• Funded by World Bank
• South Africa
• 1993 NPS reform discussions
• 1995 Strategic Framework published
• 1996-1998 Development of SAMOS
• Mauritius
• 1991 to 1992 embarked on phased programme of
  monetary policy reforms
• 1993 NPS reform discussions
• Zimbabwe
• 1995 NPS reform discussions
• Preceded by economic reform programme

13
SADC Payment Systems Project

• Phase One
• Creation of awareness
• Building of common language
• Understanding current situation as foundation for
  vision and strategy setting
• BIS Publication ( Green Book 1996)
• Phase Two
• SADC future payment systems
• Shared vision documented strategy (1999)

14
SADC Payment Systems Project

• Publications
• Green Book
• Vulindhlela ( SADC Newsletter)
• Strategy documents
• Guide to Developing Payment Systems Reform
• Requirements for SADC suitable RTGS system
• Internet Connectivity
• Interactive website
• Capacity building
• MEFMI, World Bank, IMF, BIS
• Payment systems agenda item
• Improved payment systems environment
• Risk awareness

15
SADC RTGS Systems

• Implemented
• South Africa 9 March 1998 (92 gross settlement)
• Mauritius December 2000 (66)
• Malawi 19 March 2002 (72)
• Namibia 10 June 2002 ( not available)
• Zimbabwe 18 November 2002 (26)
• In progress
• Tanzania
• Selection process
• 5 countries

16
Challenges

• Infrastructural constraints
• Telecomms and Electricity
• Resources
• Legal issues
• Standards
• Country specific policies
• Management of change
• Buy in
• Reform of securities settlement systems
• Resilience
• Scope of Oversight
• how far do you go?

17
Question

• Should we continue to strive for regional
  initiatives given disparities?
• YES based on a number of considerations incl
• Realised benefits
• Benefits of synergy
• Global trends cannot be ignored
• Search for financial stability
• SADC subscribes to various initiatives
• E.g. Core principles for SIPS
• Recommendations for SSS
• FSAP

18
Quote

• Payment and settlement systems are to economic
  activity what roads are to trafficnecessary but
  typically taken for granted, unless they cause an
  accident or unless bottlenecks develop
• BIS Annual Report 1994

19
Quote

• Its no good stopping the fraud in your own
  backyard, only for it to migrate to the country
  next door
• Bert Morris- National Westminster Bank

20
CONCLUSION

• World never stands still. This is true of
  payments and their clearing processes
• Financial sector developments, expansion in cross
  border capital flows as well as growth in foreign
  exchange transactions and securities trading are
  here to stay.
• While we tackle the challenges posed by these
  developments, we must not lose the opportunities
  for innovation, investment as well as doing
  things better
• Payment systems reform is a cooperative
  affair,without cooperation there would be no
  payment systems..etc

21
THANK

• YOU

22
RISK