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

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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

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Content

Part 1

• What is a payments system?
• Current system and the need for new developments

Part 2

• Strategy definitions
• Vision
• Action Plan

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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

1BIS (2006) General Guidance for National Payment System Development

Real Economy (Buying & Selling) Banking System (Payment Services) Interbank Transfer Systems Clearing Final Settlement 4

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"

Real Economy (Buying & Selling) Companies and individuals Treasury, Commercial Banks, and Operators of payment services Central Bank of Kosovo

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Elements of National Payments System1

• 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

1BIS (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;

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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

ELECTRONIC CLEARING (April 2, 2002 - today) 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)
• Instruments and other payment services offered by commercial banks, such as: debit

and credit cards, POS, e-banking, etc.

News of the Electronic Interbank System switch from a daily newspaper on April 3, 2002. Title: “Electronic Interbank System is applied” Manual clearing report from the date March 8, 2002.

For individual payments one NETO clearing session (15:00). For priority payments (8-15:30), in gross basis. Four NETO clearing sessions (8:00; 10:30;13:30 dhe 15:00). For priority payments (8-16:00), in real time gross basis.

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)

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EICS statistics

• In 2009, EICS processed 3,763,390 payments with a total value of €3,975,813,933.01

1,919,156,425.49 2,325,049,960.63 2,460,258,416.32 3,166,222,722.73 3,975,813,933.01 2005 2006 2007 2008 2009

Value

627,702 990,887 1,314,710 2,725,175 3,763,390 2005 2006 2007 2008 2009

Number

LIMIT 2,000 5,000 10,000 Statistics Nr. % Value % Nr. % Value % Nr. % Value % 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%

Statistics (Normal Payments) - Minimum value of payments

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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

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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) IV. Automated electronic interface (Tresasury/MEF – CBK – Banks and vice versa)

The vision of the development strategy for the national payments system 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 regulations June 2009 - March 2010

II

Procure and implement a real time gross settlement (RTGS) system Sept 2009 – Dec 2010

II-III-V

Implement a back-up computer site (business continuity centre) Sept -Dec 2009

III

Evaluate whether to replace EICS (part of RTGS procurement) Sept -Dec 2009

III

Procure and implement a national interbank card switch Sept 2010 - Sept 2013

IV

• Direct connection Treasury/CBK
• Working party to improve efficiency of revenue collections
• “Facilitate „one-stop‟ Internet portal for payments to government

June - Dec 2009 In process

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Procure and implement a central securities depository (CSD) (tightly coupled with RTGS – see Pillar II) Sept 09 - Dec 2010

VI

Procure and implement an interbank money market system After Dec 2010

VII

Review the Kosovo remittances market Sept 2009 – March 2010

VIII

Develop CBK payments system oversight function June 2009- June 2011

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Establish a national payments council (NPC) Sept – Dec 2009

7 Planed structure of working groups for implementing the strategy for the development of NPS

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National Payments Council The Board

• f CBK

Strategy Group

(Management / DSPN and World Bank)

Payments System Directorate in the CBK Team leader of the Contracting Company Working Groups 8 groups in CBK (finalized) Implementation team of the Contracting Company

(WB assistance and contracts with the company, in July, 2010/2011)

Individual Working Groups of Banks, and Treasury / MEF; 8 working groups

(finalized in March 1, 2010)

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Preconditions for successful implementation of strategy

1. Sufficient human resources – SKP development will depend on human resources (in number and experience) available from the CBK and commercial banks. 2. Raising the financial resources – The strategy document (Action Plan) 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. 3. Project deadlines – Initially the postponement of the deadlines for 6 months (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.

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Thank you!

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