1

Regional Experience on Clearing and Settlement

Systems

Johannesburg 19 June 2003

Alice ZanzaReserve 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 stakeholdersClear cut division between Competition and

CooperationTechnical efficiencyCompatibility with monetary policyAccess criteriaCompatibility 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 DefinitionGross Settlement

One to oneHigh value paymentsHigh liquidity requirementsLow riskCredit push

Net settlementLower liquidity requirementsHigher riskLegal basisHigh and low value payments

Clearing CyclesSettlement Time

– End of day– Deferred

8

Goal DefinitionFinality and IrrevocabilityDelivery versus Payment (DVP)

-Securities market-How are you going to achieve this-Various modelsG30 Recommendations for SSSBIS Report: Recommendations for SSS( RSSS)

CPSS + IOSCO- Nov 2001 “Assessment methodology for “RSSS”- Nov 2002

Central Securities DepositoryGovernment securities vs EquitiesImmobilisation / Dematerialisation

9

Regional TrendsMEFMI (10 )

– Angola

– Botswana

– Lesotho

– Malawi

– Namibia

– Swaziland

– Tanzania

– Uganda

– Zambia

– Zimbabwe

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

10

SADC REGION 

11

SADC Developments9 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 ProjectPublications

– Green Book– Vulindhlela ( SADC Newsletter)– Strategy documents– Guide to Developing Payment Systems Reform– Requirements for SADC suitable RTGS system

Internet Connectivity– Interactive website

Capacity buildingMEFMI, World Bank, IMF, BIS

Payment systems agenda itemImproved 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

ChallengesInfrastructural constraints

Telecomms and Electricity ResourcesLegal issuesStandardsCountry specific policiesManagement of changeBuy inReform of securities settlement systemsResilienceScope 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 traffic:necessary 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 processesFinancial 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