V. Kulipanov3 IRSF, LondonApril 16, 2008 1 BESP settlement system Recent developments and progress report 3 IRSF, London, April 16, 2008

V. Kulipanov 3 IRSF, London April 16, 2008

1

BESP settlement system

Recent developments and progress report

3 IRSF, London,

April 16, 2008


2

General characteristic of BESP

• Voluntary participation;

• Gradual introduction;

• Real Time Gross Settlement system;

• Some liquidity saving features, generally attributed to Net Settlement systems;

• Centralization at the federal level.


3

Information on the Web

The relevant information about BESP settlement system, applicable regulations and statistics will be available in the “English” part of Internet site www.cbr.ru in mid May 2008.


4

Options of membership

• Special participation

• Direct participation

• Associated participation


5




• Associated participationCBR Head Office

BESP system

CBR Branches


6





BESP system

CBR BranchesBank DSP


7





BESP system

CBR BranchesBank DSP

Bank ASP

Non-bank ASP


8

UFEBM

BESP

CBR Transport system

CBR Transport system

DSP

ASP

DSP

ASPDSPDSP

SWIFT transport

SWIFT transport

SSPSSP

ConversionSWIFTformats

UFEBM

V – scheme

Transport


9

Functions of Central Bank in BESP

Regulator and oversight authority

Operator User


10

Time scheduleUntil BESP was implemented

Interregional Settlement System

$

Bank

$

Bank

Up to 2 days

7 56

121110

8 4

21

9 3

Vladimir Kulipanov

(совокупность МЭР и ВЭР). Когда надо было отправить платеж с востока, чтобы он пришел на запад в день X. Когда надо было отправить платеж с запада, чтобы он пришел на восток в день X. Негарантированность времени прохождения по МЭРу.


11

Time scheduleAfter implementation of BESP

Core of BESP system

$

Bank

$

Bank

$

Bank

• System runs in Real time

• Unified Schedule for all time zones


12

Three phases of BESP business day

08-00 09-00 21-00 21-30

Preliminary phase Regular phase

Final phase


13

Preliminary phase

• Updating regulatory and reference information;• Registration /exclusion/ temporary suspension of BESP participants;• Initial liquidity setting in BESP by DSP• Setting (multilateral, bilateral, etc) limits to benefit from liquidity saving mechanism


14

Regular phase

•Payment acceptance and processing;•Queue maintenance and management;•Information exchange with BESP participants;•Liquidity management by DSP;•Temporary suspension/release of DSP participation by CBR.


15

Final phase

•Daily completion of BESP settlement;•Generation and transmission of statements and reports to BESP participants;•Generation and transmission of output report to the General Ledger;• Information archiving.


16

Views on DSP liquidity

En

tire

liq

uid

ity

of

DS

P

Ava

ilab

le li

ne

of

ove

rdra

ft c

red

it

Acc

ou

nt

bal

ance

Total liquidity

Liq

uid

ity

for

BE

SP

Liq

uid

ity

for

Lo

cal P

S

Acc+Ovdrft BESP+LocalPS


17

Liquidity bridgebetween BESP and Local payment system

Liquidity in BESPLiquidity in Local PS

Vladimir Kulipanov

куда вводится запрос на перераспределение ликвидности по направлению из ПСТУ в БЭСП: в ПСТУ или в БЭСП?


18

Liquidity in BESPLiquidity in Local PS

Liquidity bridgebetween BESP and Local payment system

Vladimir Kulipanov

куда вводится запрос на перераспределение ликвидности по направлению из ПСТУ в БЭСП: в ПСТУ или в БЭСП?


19

Single transaction Business process

• Technical checks.

• Logical checks.

• Liquidity sufficiency check (Queue).

• Payment settled. Finality and irrevocability.

• Synchronization request from BESP system to accounting systems.

• Debit/Credit confirmation.


20

Queuing in BESP

Ordinary payments

Time-critical paymentsThis payment will be

processed first

This payment will be processed only after all time-critical

payments are settledThis payment will be processed last

This payment will be settled before any ordinary

payment is processed


21

Queuing in BESP

Ordinary payments

Time-critical payments


22

Queuing in BESP

Ordinary payments


Set-off


23

Queuing in BESP

Ordinary payments


Set-off


24

Queuing in BESP

Ordinary payments


Set-off


25

Queuing in BESP

Ordinary payments


Set-off


26

Queuing in BESP

Ordinary payments


Set-off


27

Queuing in BESP

Ordinary payments


Optimization


28

Queuing in BESP

Ordinary payments


Optimization


29

Queuing in BESP

Ordinary payments


Optimization


30

Queuing in BESP

Ordinary payments


Optimization


31

Queuing in BESP

Ordinary payments


Optimization


32

Queuing in BESP

Ordinary payments


Optimization


33

Queuing in BESP

Ordinary payments


Optimization


34

Queuing in BESP

Ordinary payments


Optimization


35

Queuing in BESP

At the end of day all payments in queues are

automatically cancelled !


36

Information services for DSP

• Results of processing of the recently input document;

• Debit/Credit confirmation based on the recently input document

• Final daily statement

Without request On request

• Correspondent account balance;• BESP Liquidity statement;• Total overnight line of credit, and it’s

available value;• Aggregated value of incoming payment

orders in the queues of other DSP Banks• Liquidity statement for affiliates• Intraday statement• … and some other minor issues…


37

New business opportunitiesthat were enabled by BESP

• Extension and unification of business day schedule throughout entire territory of the country, which result in acceleration of payments, stop discrimination of banks on “the geographical” basis;

• Concentration of liquidity flows over nostro accounts of Direct participants, who may now provide their fast payment services to non-member banks.


38

Joining BESP membership

• How to apply. Where to apply.• Requirements to be met by applicant.• Terms of expected reply.• Necessity of pilot run.• Self-evaluation act for security recommendations

of CBR.• Terminal of DSP. Functionality and integration.• Available STP features.

Vladimir Kulipanov

I) How to apply. Where to aaply 1) Application form is available from 303-П.2) Application is submited to CBR Branch;II) Requirements1) CBR Branch, which provides services,has to be BESP Special member;2) Reserve requirements must be met;3) No outdated outstanding obligations to CBR, including payment system services;4) No other payments in "unpaid paymets file" kept with CBR Branch;5) Electronic documet turnover;6) Data and Information security measures in place;III) REplyWithin 15 days CBR Branch must reply. SHould there be denial, the reasons must be disclosedIV) Pilot runAccording to 303-П testing procedures are prescribed as obligatory. CBR maintains Pilot BESP environment, which is used to train personell, test and evaluate the


39

BESP tariffs

• 25 RUR per ordinary payment• 30 RUR per time-critical payment

Applicable to Direct Settlement Participants

Applicable to Associated Settlement Participants

• 20 RUR per payment


40

Pattern of Contracts

Bank DSP

Amendments toBanking AccountContract

Amendments toTechnical interfacesContract


41

Launch Date of BESP

•July 1, 2007.All regulated documents were adopted and became effective by that date. Technical preparations were finished. The first participants were in. The system started, however there were no payments until…

•December 21, 2007The first few payments came through.


42

BESP in figuresQuantity of Direct, Associated and Special participants.

0

20

40

60

80

100

120

140

160

Dec2007

Jan2008

Feb2008

Mar2008

Presenttime

Special Participants

Direct Participants

AssociatedParticipants


43

BESP in figuresVolume and total Value of payments.

110

1001 000

10 000100 000

1 000 00010 000 000

100 000 0001 000 000 000

10 000 000 000

Dec2007

Jan2008

Feb2008

Mar2008

PresentTime

Value

Volume


44

There were 161 payment instructions in BESP since Dec 21, 2007 up to April 11, 2008

A.S.P. (banks) -17; (10,56%) A.S.P. (affiliates of

banks) -12; (7,45%)

D.S.P. (banks) -78; (48,45%)

D.S.P. (others) -1; (0,62%)

D.S.P. (affiliates of banks) -

53; (32,92%)


45

BESP in figures Comparison of active participants to their total quantity

0

5

10

15

20

25

D.S.P. (banks) D.S.P. (affiliatesof banks)

D.S.P. (others) A.S.P. (banks) A.S.P. (affiliatesof banks)

active total quantity


46

BESP in figures

• The average daily value of liquidity in the system was 92 mln. RUR

• The average processing time of single transaction is 30 seconds.


47

BESP Pilot Run

• BESP Pilot Run continues even after the system itself was successfully launched on Dec 21, 2007. The reason is to provide testing facilities to new prospective BESP participants.

• BESP Pilot Run provides entire collection of BESP services, that are available in the real system.

• BESP Pilot Run is performed in the real-time manner, where the prospective participants experience liquidity control mechanisms, Limits control mechanisms, Queuing control mechanisms, and, of cause, try sending and revoking their payment instructions.


48

By the date April 11, 2008 BESP Pilot Run was covering 55 regions of Russian federation, located in 11 time zones. The overall amount of registered participants totals to 698, including:

D.S.P. S.S.P.A.S.P.

Banks others

302 153 160 83

BESP Pilot Run


49

The future possible participants

• MICEX Settlement House and National Clearing Centre to join BESP;

• Anticipating for SBERBANK to come during 2008;

• Estimates for Critical quantity of members to join BESP.


50

The future possible participants from top 30

• Citibank• Zenit• Transcreditbank• Russian Standard• Promsvyazbank• Micex Settlement

House

• Petrocommerce• Raiffeisenbank• Uralsib

Already BESP members

• GasprombankPilot run completed

CBR consent received


51

What’s next?anticipated and discussed steps

• Extending the schedule to enable almost non-stop operations during the business week.

• Introduction of obligatory membership in BESP for banks;

• Introduction of Max cap of payment for local Payment Systems when every bank joins the BESP system;

• Tariff policy encouraging the use of BESP.


52

Thank you for attention!

Questions welcome!

Documents

V. Kulipanov3 IRSF, LondonApril 16, 2008 1 BESP settlement system Recent developments and progress report 3 IRSF, London, April 16, 2008