- Vision and Action Plan Central Bank of the Republic of Kosovo - PDF document

The strategy for development of the National Payments System - Vision and Action Plan Central Bank of the Republic of Kosovo Gjylfidane Kastrati Kadrijaj, Drector Interbank Payment Systems Directorate Pristina, March 9 2010 Content Part 1 • What is a payments system? • Current system and the need for new developments Part 2 - Strategy definitions - Vision - Action Plan 2 1

What is a payments system? “is everything that has to do with the movement of money from the payer / debtor to the payee / creditor” 1 Real Economy (Buying & Selling) Banking System (Payment Services) Interbank Transfer Systems Clearing Final Settlement 3 1 BIS (2006) General Guidance for National Payment System Development Oversight and Regulation of Payments System “organizational structure, oversight and regulation organized by the CBK in agreement and coordination with stakeholders and in full transparency with the public" Central Bank of Kosovo Treasury, Commercial Banks, and Operators of payment services Companies and individuals Real Economy (Buying & Selling) 4 2

Elements of National Payments System 1 1. Payment instruments used to transfer money/funds – paper and electronic form (ex. Cash, Kos-Giro, cards, Direct Debit, etc) 2. Payment infrastructure for transacting and clearing payment instruments 3. Financial institutions that provide payment accounts, instruments and payment services 4. Market arrangements such as conventions, regulations and contracts 5. Laws, standards, rules and procedures 1 BIS (2006) General Guidance for National Payment System Development The role of the Central Bank in payments system The role of CBK in the Payments System is: Operational role – offer clearing and settlement services; The role of reformer / catalyst - encourage and help in improving the legal and technological environment, and in problem solving; Supervisory role - oversee the payments system; 3

The current payment system in Kosovo MANUAL CLEARING (May 7, 2001 – April 2, 2002) Interbank Clearing System (ICS) SKN cleared two types of payments : • Individual Payments (direct credit), • Priority Payments For individual payments one NETO clearing session (15:00). For priority payments (8-15:30), in gross basis. ELECTRONIC CLEARING (April 2, 2002 - today) Manual clearing report from the date March 8, 2002. Electronic Interbank Clearing System (EICS) EICS clears five types of payments: • Individual Payments (direct credit) (2001) • Priority Payments (2001) • Massive Payments (2003) • Kos Giro (2005) • Direct Debit (2009) Four NETO clearing sessions (8:00; 10:30;13:30 dhe 15:00). For priority payments (8-16:00), in real time gross basis. News of the Electronic Interbank System switch from a daily newspaper on April 3, 2002. Title: “Electronic Interbank System is applied” • Instruments and other payment services offered by commercial banks, such as: debit and credit cards, POS, e-banking, etc. 7 Legal Framework Legal framework for payment system: • Law No. 03/L-074 on the Central Bank of the Republic of Kosovo (2008) • Regulation 2001/26 on Payment Transactions • CBK Banking Rule No. XVIII on Clearing and Operation of Settlement Accounts • CBK Banking Rule No. XIX On Kosovo Bank Account Numbering System • CBK Banking Rule No. XVII On Minimum Required Liquidity Reserves • CBK Banking Rule No. XXXI On the Direct Debit Scheme • EICS Rules and Standard Procedures • CBK Banking Rule No. XI On Reporting of Banks, (point 4) for reporting payment instruments (cash and non cash) • Law No. 02/L-23 on the Information Society Services (MTI) 4

EICS statistics • In 2009, EICS processed 3,763,390 payments with a total value of € 3,975,813,933.01 3,975,813,933.01 3,763,390 Value Number 3,166,222,722.73 2,725,175 2,460,258,416.32 2,325,049,960.63 1,919,156,425.49 1,314,710 990,887 627,702 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Statistics (Normal Payments) - Minimum value of payments LIMIT 2,000 5,000 10,000 Nr. % Value % Nr. % Value % Nr. % Value % Statistics ICS 370,653 81.13% 161,662,229.31 6.78% 411,184 90.00% 293,631,920.29 12.32% 430,634 94.26% 440,337,086.31 18.47% RTGS 86,211 18.87% 2,222,241,778.97 93.22% 45,680 10.00% 2,090,272,087.99 87.68% 26,230 5.74% 1,943,566,921.97 81.53% TOTAL Normal Payments (year 2009) : 456,864 100.00% 2,383,904,008.28 100.00% VISION - based on nine main pillars of the strategy I. Legal Framework II. Large-Value and Time-Critical Payments III. Retail Payment Systems IV. Government Transactions V. Securities Depository, Clearance and Settlement VI. Money Markets VII. International Remittances VIII.Oversight IX. Co-operation 10 5

The vision of the development strategy for the national payments system I. Review the current legal framework (the preparation of laws, regulations and other adaptations to new environmental and legal infrastructure) II. Project preparation and implementation of RTGS (Real Time Gross Settlement), considered and in accordance with Target-2 as well as new adaptations of existing systems (in accordance with ISO 15022) III. Project development and implementation of national processing center (electronic interbank card switch) Automated electronic interface (Tresasury/MEF – CBK – Banks IV. and vice versa) ACTION PLAN (scheduled to be implemented according to the nine pillars of the vision adopted by the management board of the CBK on September 23, 2009) Pillar Action Time-Frame All Structured TA programme for payments system reform 2009-2011 I Review the legal framework and introduce necessary new/revised legislation and/or June 2009 - regulations March 2010 Sept 2009 – II Procure and implement a real time gross settlement (RTGS) system Dec 2010 Implement a back-up computer site (business continuity centre) Sept -Dec II-III-V 2009 Evaluate whether to replace EICS Sept -Dec III (part of RTGS procurement) 2009 Procure and implement a national interbank card switch Sept 2010 - III Sept 2013  Direct connection Treasury/CBK June - Dec IV  Working party to improve efficiency of revenue collections 2009  “Facilitate „one - stop‟ Internet portal for payments to government In process Procure and implement a central securities depository (CSD) Sept 09 - Dec V (tightly coupled with RTGS – see Pillar II) 2010 Procure and implement an interbank money market system After Dec VI 2010 Review the Kosovo remittances market Sept 2009 – VII March 2010 Develop CBK payments system oversight function June 2009- VIII June 2011 Establish a national payments council (NPC) Sept – Dec IX 2009 6

Planed structure of working groups for implementing the strategy for the development of NPS Strategy National Group The Board Payments (Management / of CBK DSPN and World Council Bank) Payments System Team leader of the Directorate in the CBK Contracting Company Implementation team of the Working Individual Working Contracting Groups of Banks, Groups and Treasury / MEF; Company 8 groups in CBK 8 working groups ( WB assistance and (finalized ) (finalized in March 1, contracts with the company, 2010) in July, 2010/2011) 13 Preconditions for successful implementation of strategy Sufficient human resources – SKP development will depend on human 1. resources (in number and experience) available from the CBK and commercial banks. Raising the financial resources – The strategy document (Action Plan) 2. shows the necessary financial resources needed for developing the projects envisioned in the Vision. The financial resources will be provided by the World Bank. The CBK aim is to minimize the commercial banks individual costs for the development of these projects. Project deadlines – Initially the postponement of the deadlines for 6 months 3. (due to coordination with World Bank). In case there is a need for further changes based on strong reasons, the management and the board of CBK will be notified in time. 4. Controlling and Evaluating Management, collaboration, analysis and regular evaluation of achievements and results in implementing the projects, according to the principles of the nine pillars of the Vision. 14 7

Thank you! Gjylfidane Kastrati-Kadrijaj, Director Interbank Payment Systems Directorate gjylfidanek@bqk-kos.org http://www.bqk-kos.org/?cid=1,59 8