The main contributors to this paper were Kai Barvell, Udaibir S. Das and Peter Allsopp (Consultant) from the IMF; and Massimo Cirasino and Mario Guadamillas from the World Bank.
The SIPS in the following countries have been assessed under the FSAP program from 1999 to the end of 2001 (not all assessment reports have yet been completed): Argentina, Armenia, Bulgaria, Cameroon, Canada, Colombia, Costa Rica, Croatia, Czech Republic, Dominican Republic, El Salvador, Estonia, Finland, Gabon, Georgia, Ghana, Guatemala, Hungary, Iceland, India, Iran, Ireland, Israel, Kazakhstan, Latvia, Lithuania, Luxembourg, Mexico, Nigeria, Peru, the Philippines, Poland, Slovenia, South Africa, Sri Lanka, Sweden, Switzerland, Tunisia, Uganda, UAE, Uruguay, and Yemen. In addition, some further SIPS have been assessed under the Core Principles, although not formally under the FSAP program (e.g., in the Western Hemisphere Payments and Securities Clearance and Settlement Initiative and Fund’s Technical Assistance Program).
Variants of the basic RTGS system, so called hybrid systems, which take into account liquidity saving features that exist in net settlement systems, are also being introduced in some countries.
A participant in an RTGS system requires a substantial balance on its account with the central bank to be able to release its outward payments smoothly throughout the day. If this required balance exceeds the participant’s overnight balance (together with any statutory or other reserves that can be drawn down during the day) the participant will have to borrow the necessary funds from another institution in the intraday interbank money market (if one exists); or, more typically, from the central bank.
A multilateral net settlement system is a system in which each settling participant settles at the end of the day, or at some other specified time(s) (typically by means of a single payment or receipt) the multilateral net-settlement position, which results from the transfers made and received by it, for its own account and on behalf of its customers or non-settling participants for which it is acting.
In fact, appropriate regulatory and supervisory arrangements are per se a crucial element for sound and efficient payment systems, see below Section D.
To reduce the need to transport checks, some countries use a system of “truncation”, under which the essential content of each check is transferred electronically between the presenting bank and the paying bank, but the check itself is archived, usually by the presenting bank.
Securities Settlement Systems (SSS) incorporate the clearing and settlement function as well as the function of the Central Securities Depository (CSD).
A Delivery-versus-Payment facility establishes a link between the SSS and the payment system, such that the final transfer of title to the securities passes in the SSS from the seller to the purchaser if, and only if, a final and irrevocable payment has been made to the seller through the payment system.
The Financial Stability Forum (FSF) has agreed that the Recommendations would be reflected in the key standards highlighted by the FSF for sound financial systems .
These settlement flows, which are estimated to amount to between $3 trillion and $4 trillion per day, are typically effected by means of gross payments through relevant SIPS.
The PvP is a mechanism in a foreign exchange settlement system, which ensures that a final transfer of one currency occurs, if and only if, a final transfer of the other currency or currencies takes place.
Thus, the tasks of the overseer should include ensuring that operational aspects of the system, such as the flow of information attached to each payment, help to prevent its use for money laundering.
In a growing number of countries, the oversight function extends beyond the SIPS.
Preliminary drafts of the CPSIPS, and of the accompanying notes on their interpretation and implementation, were published for public consultation, and received extensive comments. The Report is available on the BIS website: www.bis.org/publ/cpss34.pdf.
For a more comprehensive description of the IMF’s activities, see, for instance, “The IMF and Payment Systems: Technical Assistance, Surveillance and Research” by Omotunde E.G. Johnson, Payment Systems Worldwide, Spring 1999.
A number of SIPS were not individually assessed during the pilot phase of the FSAP program. For some SIPS their observance of the Core Principles was assessed, but not their observance of the central bank responsibilities for applying the principles Because many of the assessments are essentially judgmental, the exact percentages are not cited. Instead, broad qualitative descriptors (taken from the Supporting Document to the Code of Good Practices on Transparency in Monetary and Financial Policies - July 2000) are used to indicate the prevalence of a particular finding, as follows: “Few/Some” <33%; “Many” >33%; “Most/Majority” >50%; “Significant majority” >66
Under the FSAP, in conjunction with the assessment of the CPSIPS and the associated central bank responsibilities, an assessment is also made of the transparency practices relating to payment system oversight, as set out in the IMF Transparency Code (see Box 6). As of December 2001 payment system transparency had been assessed in over 40 countries.
The grouping of countries is based on that applied in the IMF’s World Economic Outlook.
Of the 12 countries in this category, which have been assessed by FSAP missions, 8 are EU Accession Countries.
CP V is only applicable to net settlement systems, and most of these countries do not have a SIPS that is a net settlement system.
IMF, World Bank: Financial Sector Assessment Program—Technical Consultations on Strengthening the Assessment of Financial Sector Standards, Memo to Bank-Fund Financial Sector Liason Committee (March 2002).