THE COMESA REGIONAL PAYMENTS AND SETTLEMENT SYSTEM

(REPSS)

By J. BOSCO SEBABIDirector

Payment Systems Department National Bank of Rwanda

Cape TownApril 2009

Content Background COMESA Clearing House The Regional Payments and Settlement System

(REPSS) REPSS main features Roles and responsibilities of Participants The Advantages The Challenges

Background 1981 - TREATY ESTABLISHING PTA SIGNED. 1982 – PTA TREATY, WHICH ENVISIONED ITS

TRANSFORMATION INTO A COMMON MARKET IN 10 YEARS RATIFIED.

1993 – TREATY ESTABLISHING COMESA SIGNED1994 – COMESA TREATY RATIFIED2000 – FREE TRADE AREA (FTA)2009 – LAUNCH OF CUSTOMS UNION

COMESA Membership Burundi, Comoros Democratic Republic of

Congo Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar

Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe

COMESA Objectives Attainment of sustainable growth and development for

its Member States Promotion of joint development in all fields of

economic activity Creation of an enabling environment for foreign, cross

border and domestic investment Promotion of peace, security and stability among its

Member States

COMESA in a NutshellTOTAL AREA 12.8MILLION SQ. KM

POPULATION 380 MILLION

MEMBERSHIP 20 COUNTRIES

FTA MEMBERSHIP 13 COUNTRIES

GDP AT CURRENT PRICES $180 BILLION

PER CAPITA GDP $600

INTRA-COMESA TRADE $ 7.5 BILLION

EXTERNAL DEBT $130 BILLION

COMESA Institutions COMESA Trade and Development Bank (PTA Bank ) COMESA Clearing House (CCH) COMESA Leather and Leather Products Institute in

Ethiopia COMESA Re-Insurance Company (ZEP-RE) COMESA Court of Justice in Khartoum African Trade Insurance Agency

COMESA Clearing House (CCH)• COMESA Clearing House (CCH) was established in

1984 (as the PTA Clearing House) to facilitate the payment and settlement of cross border payments amongst COMESA States

CCH Cont…objectives Establishment of adequate machinery for the settlement of

payments among Member States Saving on the use of foreign exchange by the Member

States in their inter-state transactions Supporting Member States in liberalisation of trade

through appropriate facilitation instruments Promotion of monetary and financial co-operation among

Member States and closer relations among banksthroughout the COMESA region

The Regional Payment and Settlement System Principles SETTLEMENT OF TRANSACTION AT SPOTT+0 VALUE T+2 (with possibility of T+0)

AGREED SPOT EXCHANGE RATE (MID-RATE)DOMESTIC RTGS/NPS SYSTEMSINGLE CURRENCY NET SETTLEMENT (USD/EURO)SINGLE NOSTRO CORRESPONDENT

Principles Cont… COMESA CLEARING HOUSE (CCH) WILL ACT AS AGENT ON

BEHALF OF CENTRAL BANKS SECURITY AND OPERATIONAL RELIABILITY CONTINGENCY PLANNING (BRP/DRP) NO RISK ACCRUING TO CENTRAL BANKS AUTONOMY OF COMESA CLEARING HOUSE

REPPS FEATURES

PAYMENT & SETTLEMENT FLOWS

‘REPSS’ PAYMENT & SETTLEMENT FLOW

IMPORTER EXPORTER

COMMERCIALBANK A

COMMERCIALBANK B

CENTRAL BANK A

CENTRALBANK B

CENTRALBANK AUSD/EUR NOSTROBANK OF MAURITIUS

CENTRALBANK BUSD/EUR NOSTROBANK OF MAURITIUS

COMESACLEARING HOUSEUSD/EUR NOSTROBANK OF MAURITIUS

COMESACLEARINGHOUSE

(1)

(7)

(8)

(6)

(12)

(11)

(10)

(9) (8)(5)

(4)

(2) (3) (13)

Advantages of REPPS

REDUCTION IN FOREIGN FUNDING REDUCTION IN SETTLEMENT

TRANSACTIONSREDUCTION IN FOREIGN CORRESPONDENT

BANKING CHARGESREDUCTION IN SETTLEMENT TIME PERIODSETTLEMENT FINALITYREDUCTION IN COLLATERAL

REQUIREMENTS

The Roles of ParticipantsCCH will ensure that: Each participating Central Bank’s exchange rate is

received; There is sufficient funds under the respective limits for

the Central Banks (Importer/Exporter) prior to processing the transaction

Confirmation of successful payments will be advised to the paying Central Banks

Notification of incoming payments will be made to the receiving Central Banks

CCH Roles Cont… All Central Banks are advised of the EOD positions on

their account in REPSS; All discrepancies that may arise with a Central Bank

are resolved; Confirmation of the EOD position from all Central

Banks are received prior to initiating the EOD settlement process;

CCH Roles Cont… If it is a net payer, an instruction is issued to the

Settlement Bank by CCH to effect payment of the net balance to the account of the receiving Central Bank for value T+2 or as otherwise specified. If a net receiver, CCH will advise the Settlement Bank to receive payment from the paying Central Bank for the credit of CCH account;

All queries arising from participants are attended to.

Roles Cont..The Central Bank will ensure that: They advise CCH of their exchange rate against the

USD & Euro within the set time frame; Funds are available in the Commercial Bank

account (importer) prior to processing the transaction;

Central Bank roles Cont… If funds have been pushed through in local

currency via NPS, it will converted to USD/Euro for onward processing on to REPSS. Transaction will be processed on T+0 for value T+2 or as otherwise specified;

There are sufficient funds under their respective limits at CCH prior to submitting the payment instruction;

Central Bank roles Cont… Confirmation of the successful transaction is advised

to the Commercial Bank. If not successful, an advice is also sent to the Commercial Bank;

On receipt of funds from CCH, it is converted to the local currency for the credit of the Commercial Bank;

EOD position as reflected in their records agrees with the one in REPSS as advised by CCH. Any discrepancy is investigated with the CCH immediately;

Central Bank roles Cont… A confirmation is sent to the CCH once the EOD position is

agreed; They receive advice that EOD settlement process has been

initiated from the CCH; If a net payer, they advise the Settlement Bank to effect

payment of the net balance for the credit of CCH account for value T+2 or as otherwise specified;

Central Bank roles Cont… If a net receiver, they advise the settlement bank to

receive payment of the net balance from the CCH for the credit of their account for value T+2 or as otherwise specified;

Their account held at the Settlement Bank is adequately funded prior to effecting settlement in favour of the CCH;

Roles Cont…Commercial Banks will ensure that: LCs are drawn either in the currency of the exporter or

in USD or Euro and that settlement is effected over REPSS;

They use the agreed daily exchange rate, obtained from CCH from their Central Bank to convert the LC currency to their (Importers) currency if payment is over the NPS or other currency as may have been agreed upon between the importer and the exporter;

Commercial Banks Cont… Sufficient funds are available on their settlement

account maintained at their Central Bank ; The transaction is processed on T+0 for value T+2 or as

otherwise specified; On receipt of incoming funds from the Central Bank,

they verify the details against the LC and advise the exporter accordingly;

They update their liquidity management system in respect of payments effected and funds received through their Central Bank.

The Challenges• Absence of RTGS in some countries• Different levels of Payment Systems advancement• Recruitment of commercial banks into the project• Legal and regulatory issues

THANK YOU VERY MUCH FOR YOUR ATTENTION