System architecture for central banks
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System
Architecture
for
Central Banks
Financial Services
Jean-Marc Lepain
Central Bank Specialist
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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
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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
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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
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1. GENERAL ARCHITECTURE
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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
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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
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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
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Net 8
TCP/IP
HTTP
Database
Client
Workstation
Database
Servers
Application
Servers
Information Centre
Internet Architecture
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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
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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
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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
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2. ENTERPRISE RESOURCE
PLANING APPLICATION
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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
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Oracle ERP Modules
Oracle ERP includes Fixed Assets
Human Resources
General Ledger
Payroll
Purchase Order
Inventory Control
Accounts Payables
Financial Analyser
Accounts Receivables
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Modules Common Components
• Oracle Financial Analyser
• Oracle Business Intelligence
• Oracle Implementation Wizard
• Workflow
• Alert
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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
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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
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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
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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
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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
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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
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System Modules
Inventory
Order Processing
Payables
Vault Management System
Optional
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3. PAYMENT SYSTEMS
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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.)
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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
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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
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Payment Systems Architecture
Settlement Accounts
RTGS
High Value
Payments
NSS
Law Value
Payments
FX
Settlement
(PvP)
Securities
Settlement
(DvP)
Check
Clearing
House
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Bill Exchange
Giro
RTGS
E-commerce
ATM Settlement
Korea KFTC Payment Architecture
Low Value Payments
Cheque Clearing
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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
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RTGS Market
• IMS
• Logica
• Montran
• CMA
• CBS
• Perago
• Custom Development (Sema, etc.)
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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
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RTGS Functionalties
• Payment and Settlement finality
• Queue Management and optimisation
facility
• Collateral Management, Repo transactions
• Payment versus Delivery (PvD)
functionalities
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RTGS Functionalities
• Gridlock resolution
• Liquidity Management
• Forecasting tools to predict end of day
position
• Risk Management
• Enhanced security features
• Comprehensive audit controls
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Account Management
• Queued Payment account and suspended
payments
• Settlement Account management
(mandatory reserves, other reserves, etc.)
• Collateral Account
• Securities Account (DvP)
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Parameterisation
• Criteria for prioritisation of payments
• Possibility of intra-day credit
• Possibility of settlement against collateral
deposits
• Possibility of adjustment of Mandatory
reserves
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4. BUSINESS INTELLIGENCE
AND
DECISION SUPPORT SYTEM
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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
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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
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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
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Candidate Data marts
• Market Operations
• Monetary Policy
• Foreign Operations and portfolio management
• Regulatory Compliance Analysis
• Macro-economic Analysis
• State Treasury
• Risk Analysis
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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
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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
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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
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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
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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
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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