System

Architecture

for

Central Banks

Financial Services

Jean-Marc Lepain

Central Bank Specialist

The World of Central Banking

• Central Banks moving toward more

independence

• Exchange rate more difficult to manage

• More focus on Monetary Policy

• Tighten control on Commercial Banks

• More dynamic reserves management

• More need for risk management

IT Evolution in Central Banking

• Reducing the number of systems

• Moving to standard applications

• Developing Internet based applications

• Data Warehousing

• OLAP based Decision Support tools

Special Requirements of Central

Banks Systems • No concept of profitability

• Different sets of activities loosely integrated (Settlement,

Credit to Com. Banks, Monitoring of the Banking System, Foreign Reserves Mgt.,

Monetary Policy, Balance of Payment, Macro and Micro-economic analysis)

• Necessity to cross information between different

activities (Ex: BoP and Com. Banks’ statutory reports)

• Accounting view rather than a transactional view

• Different Charts of Account and accounting rules

• Use of GL information for Monetary Policy and

Macro economic analysis

• Importance of the interface with the Payment System

1. GENERAL ARCHITECTURE

Central Bank IT Architecture in the 70s, 80s, 90s…..

MM. & Open Market

General

Ledger

Regulatory Compliance I

State Treasury

Settlement Accounts

Foreign Reserves

Cash Management

Staff Operations

Portfolio Management

Back

Office

I

Back

Office

III

Back

Office

II

Format

Managt Regulatory Compliance II

Finance

Budgeting

Economic Analysis

Mandatory Reserves

Oracle E-Business

Suite

Integrate Architecture through Oracle 8i

Management Information System

Real

Time

Gross

Settlement

System

Law

Value

System

Other

Payment

Systems

Banking

System

Settlnt.

accounts

Central Banks and the E-business

paradigm

• The Web will become the main mean of

communication between central banks and

commercial banks and other institutions

• Web centric applications allow a complete

centralisation of information

• Web application reduce drastically the cost

of implementation and the cost of

ownership

Net 8

TCP/IP

HTTP

Database

Client

Workstation

Database

Servers

Application

Servers

Information Centre

Internet Architecture

KEY BENEFITS

• A package based on standard IT architecture for Central Banks

• A fully integrated package using Oracle 8i as common technology platform

• All applications accessible through the Web

• Timely information for critical decisions

• Improvement of staff efficiency and of process flows

• Promotion of world best practices

Fix Assets

Vault

Management

System

G.L.

Payment

System

Accounting

B.o.P.

Foreign Debt

Management

Foreign Op.

System

Banking

&

Settlement

System

Payables &

Receivables

Portfolio

Management

Financial

System

Regulatory

Compliance

Analysis

Management Information System and Decision Support

Internal

Control

Monetary

Policy

Risk

Managnt.

Macro-

Economy

Banking

System

TCP/IP

HTTP

Client

Workstation

RTGS

Symbols

System

External

Sources

Financial

Institutions

Management

Data

Depository

ERP

Vault

Management

Policies &

Procedure

Statistical

System

Market

Operations

Monetary

Policies

Macro

Economy

State

Treasury

Front Office Back Office Head Office

Central Bank: Standard System Architecture

2. ENTERPRISE RESOURCE

PLANING APPLICATION

Oracle Enterprise Resources

Planning Application

• GL can be fully integrated with the Banking

System and the Payment System

• Webanabled

• Central Bank references

• Special functionalities for Central Banks

• Flexible use of the Chart of Account

Oracle ERP Modules

Oracle ERP includes Fixed Assets

Human Resources

General Ledger

Payroll

Purchase Order

Inventory Control

Accounts Payables

Financial Analyser

Accounts Receivables

Modules Common Components

• Oracle Financial Analyser

• Oracle Business Intelligence

• Oracle Implementation Wizard

• Workflow

• Alert

General Ledger

• All types of journal entries and accounting

rules

• Fully Multi-Currencies

• Consolidation of multiple sets of books

• High level of security in managing posting

and transaction processing

• Large reporting capability

Oracle GL Special Features for

Central Banks

• Precious Metal Management

• Coins and Bills Issuance Management

• Cash Management

• Budgeting

• Monitoring of the Money Supply and of the

Monetary Base

• Balance of Paymen

Account Structure

• Independence from Chart of Account

• Account Structure on-line

• Up to 30 segments

• Intuitive Account Hierarchy Editor

• Reflect the organisation (branches, departments,

cost centres, instruments)

• Flexible calendar structure (Up to 366 periods,

uneven periods adjustment periods, multiple calendar)

• Multiple closing dates

Benefits of Oracle General

Ledger

• Software easily tailored to the Bank’s

requirements

• Seamless integration with other applications

• High number of automated functions (periodic

journals, data import and data validation, etc.)

• Customisation of reports without programming

• Reduce time in the closing process

• Improve productivity

• Improve accounting controls

Cash Issuance and Vault

Management

Oracle Inventory plus some custom development

• Track bills of different denominations

• Track serial numbers

• Track bank note status

• Manage precious metals (gold coins, ingots, etc.)

• Manage paper securities, monetary exhibits, etc.

• Perform reconciliation with General Ledger

Events

Cash Issuance

and

Central Vault

Management

System

Branches

Commercial

Banks

Banking System

Cash Management

Financials

Precious

Metals

Monetary

Exhibits

Securities, etc.

Issuance of

new notes

Counting/sorting

of old notes

Cash Issuance and Vault Management Process Flows

System Modules

Inventory

Order Processing

Payables

Vault Management System

Optional

3. PAYMENT SYSTEMS

Payment Systems

RTGS Architecture

• Telecommunication layer (Hardware,

Network X25, Protocol TCP/IP, etc.)

• Messaging System

• Queuing mechanism

• Settlement mechanism

• Payment auditing system (statistics, control, etc.)

Why RTGS ?

• To secure large value payments

• To make payments final and unconditional

• To reduce systemic risk in the banking system

• To raise intra-day liquidity

• To provide key information and efficient

instruments for monetary policy

• To increase efficiency through queuing

mechanism

• To embrace the standard technology

• Payment versus Delivery for security settlement

• Possibility to connect to other national RTGS,

Payment versus Payment for FX

Issues with Payment Systems

• Number of Settlement windows and number of

sub-systems (RTGS, PVS, Net Settlement, Card

Settlement, Cheques Clearing, Securities Settlement, etc.)

• Number of payment instruments and volume

• Queuing mechanism and prioritisation of

payments

• Architecture (T, L, V, Y)

• Intra-day credit and intra-day liquidity

• Other regulation issues

Payment Systems Architecture

Settlement Accounts

RTGS

High Value

Payments

NSS

Law Value

Payments

FX

Settlement

(PvP)

Securities

Settlement

(DvP)

Check

Clearing

House

Bill Exchange

Giro

RTGS

E-commerce

ATM Settlement

Korea KFTC Payment Architecture

Low Value Payments

Cheque Clearing

Basic Structure of KFTC Financial Network

Leased Lines (256K)

Leased Lines

(256K)

InterbankFund

Transfer Host

Intermediation of

Fund Transfer

Bulk Payment

Bill Exchange

Giro Host

CD Host

Head Office Center

Bank 1 Bank 2 Bank 3 Bank 4 Bank 5

Bank N

Communicaton

UNIT NMS

PST

N PST

N

PST

N

Regional Centers

Packet Switch

Bank of Korea

Internet GIRO E-Commerce

Gateway

RTGS Market

• IMS

• Logica

• Montran

• CMA

• CBS

• Perago

• Custom Development (Sema, etc.)

Central Messages

Switch Mechanism

RTGS Queue

Manager

RTGS

Driver Settlement

Queue

Collateral &

Loan Accts.

Queue

Optimiser

Settlement

Account

Monitoring Payments Comms &

Security

Bank 1 Bank 2 Bank 3

General Ledger

Control

Mechanism

RTGS Functionalties

• Payment and Settlement finality

• Queue Management and optimisation

facility

• Collateral Management, Repo transactions

• Payment versus Delivery (PvD)

functionalities

RTGS Functionalities

• Gridlock resolution

• Liquidity Management

• Forecasting tools to predict end of day

position

• Risk Management

• Enhanced security features

• Comprehensive audit controls

Account Management

• Queued Payment account and suspended

payments

• Settlement Account management

(mandatory reserves, other reserves, etc.)

• Collateral Account

• Securities Account (DvP)

Parameterisation

• Criteria for prioritisation of payments

• Possibility of intra-day credit

• Possibility of settlement against collateral

deposits

• Possibility of adjustment of Mandatory

reserves

4. BUSINESS INTELLIGENCE

AND

DECISION SUPPORT SYTEM

Data Depository and Analysis

System

A Data Depository is a Data Warehouse on

top of which we can perform analysis in

different business areas.

“A Data Warehouse is a subject-oriented,

integrated, time-variant, non-volatile

collection of data for management

purposes.” Bill Inmon

Oracle

Financial

Analyser

&

Oracle

Discoverer

Market

Operation

Monitoring

Policy

Regulatory

Requirements

State

Treasury

Data

WarehouseStaging

Area

Symbols

Core Banking

Oracle

e-business

External

Systems

(Reuters)

Research

System

Ministry

of

FinanceCredit

Risk

Management

Foreign

Exchange

Data Warehouse Solution

Data Warehouse

Data

Repository

Financial

Institutions

Transactional

Systems

External

Information

Macro

Economic

Analysis

Monetary

Policy &

Market

Operations

Data Depository and Decision Support System

Foreign

operations

State

Treasury

Operations

Cost &

Internal

Control

Regulatory

Compliance

System

Data Marts

Candidate Data marts

• Market Operations

• Monetary Policy

• Foreign Operations and portfolio management

• Regulatory Compliance Analysis

• Macro-economic Analysis

• State Treasury

• Risk Analysis

Multi-dimensional Analysis

Time

Q1 Q2 Q3 Q4

Instruments T-bill Open Market

Operations

Repo

Operations

Mandatory

Reserves

Nizhni Novgorod

St. Petersburg

Moscow

Branches/Offices

Free MM Deposits

Reporting structure

Board of Gov. Reports

Senior Management Reports

Consolidation

Medium Management Level

Dep. 1 Dep. 2 Dep. 3 Dep. 4

Spe. 1 Spe. 2 Spe. 2 Specialist Level

Monetary Committee

Regulatory Compliance and Risk

Analysis System

Three modules:

• Bank Registry

• Statutory Reporting Data Collection and

Analysis – Report collection

– Report authentication and validation

– Report Analysis

• Failing Institution Management

Regulatory Compliance and Risk Analysis System

Bank

Registry

Data

Communication

Infrastructure

Data

Generation

System

Data

Generation

System

Collection

and

Validation

of data

Oracle

Financial

Analyser

R.T.G.S. Banking

System

Oracle

Data

Warehouse

Statutory

Reports

Analysis

Failing

Institution

Management

Policy & Procedure Monitoring

System

• Capture policies

• Track decisions associated to policy design

• Follow up on implementation

• Store on line policy documents

• Store on line manuals and procedures

Economic Information System

Financial Institution

Risk Analyser System

Oracle Financial

Application

National

Statistics

Institute

Data

Entry

System

Economic

Returns

OFA

Macro

Economy

Analysis

Monetary

Policy

Ecomometric

Modelling

Tools

Statistical

Tools

Data

Dissemination

System

Populate

MB

Website

Data

Presentation

Facilities

Reporting

Institutions

Other

Central

Banks

Oracle 8i

time

Series

Database

Oracle

Express

Database