Agenda
• Where the region started
• When the integration agenda got going
• Strategic approach to integration
• Where are we now
• Where to next
• Questions
SADC – Financial Integration foundation
• SADC region is made up of 15 Southern African Countries (Angola; Botswana; DRC;
Lesotho; Madagascar; Malawi; Mauritius; Mozambique; Namibia; Seychelles; South
Africa; Swaziland; Tanzania; Zambia; Zimbabwe)
• Heads of State and Government of SADC signed the SADC Treaty. Articles 21 and 22
became the instruments used to establish the SADC Finance and Investment Protocol.
• Committee of Central Bank Governors of SADC (CCBG) working on the Regional
Indicative Strategic Development Plan (RISDP) which maps out out the phased strategy
to achieve a monetary union by 2018. Free Trade Area by 2008, Customs Union by 2010
and a Common and Monetary Union by 2016 and a SADC currency by 2018.
• FIP has been ratified by member states therefore it is legally binding on all SADC
countries.
2003 The work began
• The SA Reserve bank as chair of the Committee of Central Bank Governors (CCBG) Payments sub-Committee initiated a project, funded by the World Bank, to introduce financial market infrastructures in the SADC countries.
• These infrastructures are payment clearing houses, securities depositories, real time gross settlement systems etc.
SADC – RTGS Implementation
Source: SARB: SADC 2018 Opportunities and Issues Presentation to the SADC Banking Association – October 2009
Overview of Payment Infrastructure in SADC
RTGS
BA
NK
RTGS
CHEQUE/EFT CLEARING HOUSE
CARD SWITCH
ATM SWITCH
CSD
BA
NK
BA
NK
RTGS RTGS RTGS RTGS
CMA
SADC COUNTRY B
RTGS
CHEQUE/EFT CLEARING HOUSE
CARD SWITCH
ATM SWITCH
BA
NK
BA
NK
D SADC COUNTRY
CHEQUE/EFT CLEARING HOUSE
CARD SWITCH BA
NK
BA
NK
CHEQUE/EFT CLEARING HOUSE
CARD SWITCH
ATM SWITCH
BA
NK
BA
NK
C SADC COUNTRY
Source: SADC Banking Association
CHEQUE/EFT CLEARING HOUSE
CARD SWITCH
ATM SWITCH
CSD
SADC COUNTRY A
BA
NK
When the integration agenda got going
• As can be seen from the previous slides much progress has been achieved
• Using this situation as a base the CCBG then decided to move to the next phase in 2010
• The next phase entailed inter-linking the financial infrastructures of the SADC countries
• The pre-planning phase commenced in late 2009
Key Strategic Principles
1. Project focus: cross border & intra-SADC transactions
2. Use of existing infrastructures wherever possible – banks choose providers
3. Use of international standards to ensure interoperability
4. Invest for straight through processing
5. Each country will keep its own currency and financial infrastructure
6. Regional settlement currency to be the ZAR (South African Rand)
7. Start with Common Monetary Area and build out
8. Cross-border cheques to be phased out
Proposed Infrastructures
The following key infrastructures were proposed for the SADC region:
1. A regional inter-bank settlement system to be run by the CCBG – SIRESS
2. A regional clearing capability for EFT credits and debits
3. A regional clearing capability for Card/ATM transactions
4. A clearing and settlement capability for cross border securities transactions
Cooperation Between CCBG & SADC-BA
Regulatory
Issues &
Settlement
Infrastructure
CCBG
Level
Payment
Streams &
Linkage to
Settlement ACH
BANK BANK
At commercial bank level
KEY DECISIONS AND PRINCIPLES ON PAYMENTS
INTEGRATION
CCBG & SADC-BA
Areas of
Cooperation
All Aspects Relating to
Central RTGS
CARD/ATM
DVP/HVP
Learning from Europe SADC focussed on the non-competitive space
•Mobile •ATMs •Internet •Branch Banking •3rd Party Outlets (retailers) •Postal Networks •Ecommerce Providers
SADC Banking Association Organization
• The SADC Banking Association was given the mandate to develop the various payment processes and standards as well as self regulatory framework
• The SADC BA obtained funding from its members
• Members committed resources for each payment stream
• Each participating SADC country lead the work in a particular payment stream
SADC-BA Resourcing for the Payments Project
CCBG Payments Sub-Committee
SADC-BA
In Country Payments Leader
RTGS Experts Retail Payment
Expert
Sec DVP Expert
Card/ATM Group
Legal Group
In country standards
expert
Bank Notes P2P
Cheque Elimination
Stakeholders
• Stakeholders were identified
• Strategies were put in place to deal with each stakeholder group
• Excellent relationship with the CCBG sub-Committee
• Other have been more challenging – other overlapping regions for example
SADC-BA
CCBG
Banks in SADC
3rd parties
SAD
SADC SEC: Trade Facilitation • Trade Barrier payments • trade finance, • infrastructure finance
SADC Banks Securing Participation • Business rules • Governance • Funding
3RD PARTIES: ECB, EPC, PCH’s, CSD’s, SWIFT, World Bank, etc. • Best practices • Advisory • Information Sharing
CCBG: Payments & Financial Markets Sub-committee • Road Map • Legal Implications • Decisions & Principles for linkage to settlement • Standards • Governance
INTERACTION WITH STAKEHOLDERS
EAC, COMESA
COSSE
EAC COMESA Position Paper on implications and solutions for banks with multiple regional membership
COSSE MOU Cooperation in the post trade settlement space (DVP)
SADC Secretariat
SADCBA: Project Execution • Dedicated Project Team • Funding in place • Project plan Approved
ISO/SADC STAN
ISO/ SADCSTAN: Standards Adoption Setting up TC to drive standards adoption (ISOTC68) in SADC
Challenges of Regional Integration
• Lack of political will
• Fear of loss of sovereignty
• Countries at different levels of infrastructural development.
• Countries at different levels of institutional capacity.
• Larger economies marginalising smaller ones – “Big Brother syndrome” or perception thereof.
• Challenges observed in other regions e.g. Euro-Zone
Presented by T.E Mawocha to the Onstitute of Internal Auditors – 22 April 2010 – Orion Hotel – Piggs Peak
SADC Central RTGS
Banks test with each other
Select operators/ methods
Agree message standards, rules
Agree business flows
Test with SADC Central RTGS & Operators
Set up payment stream groups
SADC BA Approach & Progress
Settlement P2P RTGS Cash EFT Card/ATM Cheque Forex DVP
Where are we now?
• The SADC Integrated Real-Time Electronic Settlement System (SIRESS) went into production on 21 July 2013
• The CMA countries i.e. Namibia, Lesotho, South Africa and Swaziland went live in 22 July 2013
• System is stable and values/volumes have far exceeded expectations
• The process is simple and banks are now investing to Straight Through Processing (STP) into/out of core banking applications
• Cross-border cheques have been eliminated
SADC Inter-bank Transfer System
A copy function is used in the process to ensure immediate settlement
SIRESS
Debit sending bank Credit receiving bank
Copy of settlement detail sent to SIRESS
Advice of settlement
Payment instruction from sending bank to receiving bank
SWIFT MT103/MT202 BANK BANK
Low value credit transfers
• This payment stream is now in implementation phase
• If all goes to plan the first transfers should take place in June 2014
• Message format will be ISO 20022
SADC ACH Transfer System
Regional Automated Clearing House
SIRESS
Domestic RTGS
Send files to banks Send files to banks domestic transactions are kept separate from regional transactions
Send inter-bank settlement figures to SADC Central Bank in regional settlement currency
If regional ACH processes transactions on behalf of banks in a particular country figures are sent in currency of that country
Daily clearing process
Direct debits
• The business model, operator model, mandate model and operating rules and standards have been finalised
• Implementation is scheduled for June 2015
Card based transaction
• Here SADC is working with VISA/MasterCard etc. to introduce regional settlement of their branded card transactions
• Operators in SADC are working on linking their domestic switches to enable external usage of domestic and other cards
• Implementation will be scheduled once all relevant models and, agreements and documents have been completed - 2015
Possible hub and spoke model or card transactions
Switch
Hub
Zim Switch
Malswitch
Namclear
Bankserv
Governance
SIRESS
All domestic switches switch domestic and settle domestic through domestic RTGS
Settle regional transactions
SADC self governance structure
Regional transactions Processed ITO regional clearing message standards and rules
Issuing banks to negotiate with accepting banks to accept their proprietary cards
Cash leg of securities transactions
• SADC BA and a work group from the Committee of SADC Stock Exchanges (COSSE) are working on the business model and related agreements, rules etc. for the settlement of the cash leg of securities trades.
• Cash dividends will also be settled via SIRESS
• Implementation will be scheduled once all models, agreements etc. have been signed off.
Proposed SADC Securities DVP Model
Trade
Namibia Custodian
RSA Custodian
Namibia CSD
Match/ Clear/ Settle Operator
RSA CSD
Namibian Commercial Bank
SIRESS
Receive vs payment instructions
Deliver vs payment instructions
Client
Fund a/c at SIRESS
RSA Commercial Bank
Report Trades
Client
Where to next?
• Four non-CMA countries will be brought into the SIRESS Settlement System in the first quarter of next year
• The remaining non-CMA countries will be scheduled thereafter
• Other payment streams (retail) will be implemented in 2014/2015
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