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Regional Efforts in the Financial Sector: The Successful Case of the Western
Hemisphere Payments & Securities Clearance and Settlement Initiative… and
its clones
Washington DC September 22, 2004
Fernando Montes-Negret , World Bank Massimo Cirasino, World Bank
Mario Guadamillas, World Bank
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ContentA. WHI: Origin, Pillars and Organization of the
Initiative
B. From the Initiative to the Forum
C. WHF Activities, Outcomes and Success Factors
D. The LAC Working Group on Payment System
Issues
E. The Payments “Clones”: the CIS Initiative, the
Arab Initiative
F. Cloning the model for other financial sector
topics: the WHCRI
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A. ORIGIN OF THE INITIATIVE
March 2, 1998WH Finance Ministersrequest the WB to lead theInitiative
March 25, 1998WB President sent a responseletter accepting the task of coordinating this effort
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CountryOwnership
Integration ofsecurities andpayments
Cooperation withinternationalorganizations
A. PILLARS OF THE STRATEGY
OBJECTIVE: Assessing and recommending improvements to payments and securities settlement systems in the Hemisphere
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A. ORGANIZATION OF THE INITIATIVE
CORETEAM
(WB)
CEMLASecretariatWorking Group
LOCALAUTHORITIES
COUNTRY TEAM
IAC Chair: WB Secretariat:
CEMLA BIS Bank of Italy Bank of Portugal Bank of Spain COSRA European Central
Bank Federal Reserve
Board Fed New York IADB IMF IOSCO CNMV Spain US SEC
COUNTRYASSESSMENT• Public Report• Statistical Tables• Glossary• Recommendations
Report/Action Plan
COSRAWorking Party
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A. CORE TEAM RESPONSIBILITIES
Implementation of the Initiative
Developing a common methodological framework for the studies (e.g., Working Papers)
Coordination with CEMLA for initiative activities
Organization of country studies
Informing IAC about initiative activities and organize its meetings
Dissemination of information about the initiative inside and outside the World Bank
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A. CEMLA RESPONSIBILITIES
Administration of the web page in Spanish and English
Management of the network of communications within and outside of the Initiative with participants and interested parties
Administer the relevant documentation, in Spanish, English and Portuguese, for the development of payments and securities clearance and settlement systems in the Hemisphere
Participate and assist in the country studies being undertaken by the Initiative
Provide support for conferences and workshops sponsored by the Initiative
Support Hemispheric Committees/Groups on Payments and Securities Clearance and Settlement
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A. IAC ROLE
Bring to bear international and national expertise on the initiative strategy and content (policy and practice) from institutions with diverse experience
Convene central bankers and securities commissioners to develop constructive approaches to payments & securities clearance and settlement issues
Help identify appropriate areas and resources for technical assistance and for initiative support
Assure consistency with the most up-to-date thinking on payments & securities clearance and settlement
Provide advice and ideas to the Hemispheric Committees/Groups on Payments and Securities Settlement Systems
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Phase 1 (From March 1998 to March 1999) Phase 1 (From March 1998 to March 1999)
PreparatoryWorkshop
January 1999
B. INITIATIVE ACTIVITIES
IAC meetingMarch 1999
MeetingsWorkshopsPreparatoryWork
- Preparation of relevant documents
- Initial contactswith IAC members
-Initial contacts withcountries in the Region
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Phase 2 (From March 1999 to June 2001)Phase 2 (From March 1999 to June 2001)
ChileDecember 1999
ArgentinaJuly 1999
PeruJune 1999
Trinidad & TobagoFebruary 2000
10 Country AssessmentsArgentinaJuly 1999
Trinidad&TobagoFebruary 2000
B. INITIATIVE ACTIVITIES
El SalvadorFebruary 2000
Costa Rica June 2001
OECS-ECCBApril 2000
Colombia February 2001
Brazil November 2000
Mexico March 2001
IAC meetingNovember 1999
Meetings Workshops
IAC meeting January 2001
Groups
COSRAWorking Party
December 1999
CEMLAWorking Group
January 2001
CEMLAWeb Page
www.ipho-whpi.org
Tools
OECS / ECCBApril 2000
Core Principles MatrixSecurities Matrix
WG TORWorking papers 1 to 4
BrazilNovember 2000
CEMLA-WBJanuary 2001
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Phase 3 (From June 2001 to June 2003)Phase 3 (From June 2001 to June 2003)
The BahamasMarch 2002
UruguayNov-Dec 2001
Costa Rica June 2001
JamaicaJune 2002
Country Assessments The Bahamas (CBB)May 2001
B. INITIATIVE ACTIVITIES
Ecuador August 2002
VenezuelaNovember 2002
Dominican Republic January 2003
Netherlands Ant.December 2002
IAC meetingApril 2002
MeetingsWorkshops
COSRAWorking PartyFebruary 2001
CEMLAWorking Group
April 2002
Web Pagewww.ipho-whpi.org
Tools
Core Principles MatrixSecurities Matrix
IMF-WB Guidance NoteWorking papers 1 to 4
GlossariesStandardized Tables of Contents and Statistics
Cartagena (Securities)November 2001
COSRAWorking PartyOctober 2001
CEMLAWorking GroupNovember 2001
WHI Research Series
Payments WeekApril 2002
HondurasMarch 2003
IAC meetingJune 2003
CEMLAWorking GroupDecember 2002
Payments WeekJune 2003
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B. Yellow Books1. Peru (English and Spanish) 2000
2. Argentina (English and Spanish) 2000
3. Trinidad y Tobago (English and Spanish) 2000
4. El Salvador (English) 2000
5. Chile (English and Spanish) 2001
6. Colombia (English and Spanish) 2001
7. Costa Rica (English and Spanish) 2002
8. Mexico (English and Spanish) 2003
9. Ecuador (English and Spanish) 2003
10. Venezuela (English and Spanish) 2003
11. Dominican Republic (English and Spanish) 2003
12. Brazil (English, Spanish and Portuguese) 2004
13. OECS (English and Spanish) 2004
14. Guatemala (English and Spanish) 2004*
15. Paraguay (English and Spanish) 2004*
16. Bolivia (English and Spanish) 2004*
* estimated
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B. Public Reports Updates
Peru 2002
Upcoming:
Argentina 2004
Chile 2004
* Date of first posting for Public Comments ^ Estimated dates
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B. IAC and WGPS-LAC Participation to Country Studies
Peru Bank of Spain, CNMV Spain, IADB
Argentina Bank of Italy, Fed NY, CNMV Spain, IADB
Chile CNMV Spain, IADB
El Salvador* COSRA (CONASEV Peru)
Trinidad & Tobago Bank of Italy, CEMLA (Bank of the Netherlands Antilles) COSRA
(CMV Argentina), Fed, US SEC
OECS Bank of Italy, CEMLA (Bank of the Netherlands Antilles), Swiss
National Bank
Brazil Bank of Italy, Bank of Portugal, Fed Board,
US SEC
Colombia Bank of Italy, CEMLA, CEMLA (Bank of the Netherlands Antilles), CNMV Spain* Coordinated with the FSAP
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B. Participation to Country Studies
Mexico * Bank of Spain, CNMV Spain,
Costa Rica Banco de la Republica (Colombia), de Nederlansche Bank, Swiss National
Bank
Jamaica Swiss National Bank, US SEC
Ecuador Banco Central de Costa Rica, de Nederlansche Bank
Venezuela Banco Central de la Republica Argentina, Bank of Spain, CNVM Spain
Netherlands Antilles Central Bank of TT, de Nederlansche Bank
Dominican Republic Swiss National Bank
* Coordinated with the FSAP
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B. FROM THE INITIATIVE TO THE FORUM
The Initiative has become a regional Forum for payments and securities settlement issues, following the guidelines presented in a Strategy Paper, which counted on the advice of the IAC and the approval of CEMLA Governors
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B. From the Initiative to the Forum
The Forum was formally launched in June 2003 at the WHI’s Payments Week.
The Forum, with an enhanced role of the Working Groups and other local authorities, will undertake the following tasks:
Knowledge dissemination, including administration of web page
Preparation of reports on topics of regional interest
Country studies, update of Yellow Books and Statistical Information
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B. NEW ORGANIZATION OF THE FORUM
CoordinationGroup
CEMLA
LOCALAUTHORITIES
CONTINUATION OF PROJECT ACTIVITY
WB
Working GroupCEMLA
Working GroupCOSRA
IAC Chair: WB Secretariat:
CEMLA BIS Bank of Italy Bank of Portugal Bank of Spain COSRA De Nederlansche
Bank European Central
Bank Federal Reserve
Board Fed New York IADB IMF IOSCO CNMV Spain Swiss National
Bank US SEC
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B. Activities of the Forum (June 2003-June 2004)
Country missions: Nicaragua (November
2003), Guatemala (January 2004), Paraguay
(April 2004)
Ad-hoc technical assistance: Central Bank
of Brazil (April 2004)
Coordination with COSRA: Brazil (October
2003), Dominican Republic (March 2004)
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B. Activities of the Forum:The Annual Payments Week
Since 2003, LAC central banks, through the
regional Working Group on Payment System
Issues (WGPS-LAC), select the topics for
discussion (one topic per day)
WGPS-LAC members engage in high-level
discussions among them and with extra
regional experts and prepare action points to
be submitted to Central Bank Governors for
their consideration
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B. Activities of the Forum:The Annual Payments Week
As a result of the discussions held during
the 2003 Payments’ Week, a total of 16 action
points were prepared in the following areas:
Securities Settlement Systems and their Interactions with
Funds Transfer Systems (5 action points)
The Oversight of the Payments System (8 action points)
A Regional Agenda for payments and securities clearance
and settlement issues on the basis of international
developments and their impact in LAC (3 action points)
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B. Activities of the Forum:The Annual Payments Week
2004 Payments Week
San Jose, Costa Rica, 14-18 June, 2004
Topics selected by the WGPS-LAC:
Integration and Regionalization of Securities Settlement
Systems in LAC (trading, custody, settlement, role of
authorities)
Cross-Border Payments (large value and retail)
Retail Payment Systems (innovative instruments,
business, clearance and settlement circuits, role of
authorities)
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B. Activities of the Forum (June 2004 – June 2005)
Publication of country reports (Guatemala, Paraguay, Bolivia, Barbados)
Publication of Updates of country reports (Argentina, Chile)
Assessments of remaining countries (Bolivia, Aruba, Uruguay)
Further strengthening of the Forum organizational arrangements
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B. NEXT STEPS
Publication of country reports and updates
Assessments of the remaining countries
Further strengthening the Forum’s organizational arrangements
Supporting the activity of the Working Groups
Coordination with COSRA activities
Payments Week 2005
Expanding research activities (through the Research Series)
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B. NEXT STEPS Responding to ad hoc demands for technical assistance from other countries in the Region
Preparing models for training courses in coordination with IAC institutions
Preparing the second round of country missions
Assisting other regions in launching similar efforts in the area of payment systems
Assisting other regional initiatives in LAC on other issues related to the development of financial infrastructure: the Western Hemisphere Credit&Loan Reporting Initiative
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C. OUTCOMES
Effective diagnostics and cost effective access to international experts
Improved information on the region’s financial infrastructure (“Yellow Books”)
Raising awareness in the region, creating momentum for the implementation of reforms
Creating conditions for sub-regional harmonization and eventual integration
Establishment of working groups to give continuity to the reform process
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C. OUTCOMES
Strengthening of the Secretariat
Strengthening of CEMLA’s in-house expertise
Development of specific country-studies tools
based on international standards
Economies of scale with FSAPs
Demand from additional countries for
assessment
Demand from other Regions to replicate the
model
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C. OUTCOMES
The WHI helped created momentum for the
reform in all visited countries and resulted in:
World Bank directly supported reform projects Loans:
Dominican Republic Brazil Ecuador Guatemala Honduras Paraguay
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C. OUTCOMES Fee Based Services
Barbados
The Bahamas
Trinidad and Tobago
Venezuela
Ad Hoc Support to Payment System Reform
Brazil
Chile
Colombia
El Salvador
Peru
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C. OUTCOMES
In the pipeline Bolivia
Jamaica
Nicaragua
Uruguay
Other countries that engaged in reforms without direct support from the Bank
Mexico
Netherlands Antilles
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C. SUCCESS FACTORS
High Level Mandate
A coordinated approach for assessing both
securities and payment settlement systems
Country ownership
Cooperation with a broad spectrum of
relevant international organizations
Effective Role of the IAC
Involvement of Regional Organizations
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C. SUCCESS FACTORS
Effective and committed technical team
Reform-oriented approach
Continuous consultation with regional
authorities
Effective and coordinated use of the
expertise within the WB
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D. The Working Group on Payment System Issues of
Latin America and the Caribbean
(WGPS-LAC)
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D. GENERAL OBJECTIVES OF THE WGPS-LAC
1. Promote the knowledge of payment system issues in the region.• Develop training programs.• Research and publications.
2. Promote the preparation of ad hoc Reports which might serve as a reference point for the on-going reforms in the region.
• Help with the implementation of the relevant international standards throughout the LAC Region.
3. Promote cooperation with other institutions active in payment and settlement systems within LAC and at the International level.
The Group meets regularly twice a year. As a general rule, it tries to synchronize its meetings with other relevant events in the payment and settlement systems area.
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D. CURRENT STRUCTURE
As of June 2004, a total of 19 LAC Central Banks are “full members” (membership was formally requested by the corresponding Central Bank Authorities)
Argentina, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, ECCU, Ecuador, El Salvador, Guyana, Jamaica, Mexico, Paraguay, Peru, Trinidad &Tobago, Uruguay and Venezuela.
The remaining central banks in the LAC Region are represented in an indirect manner for the time being.
Formal Observers: Bank of Canada, COSRA, CPSS, U.S. Federal Reserve, IDB, IMF and The World Bank.
Observers actively support the Group through expert advise and by facilitating its insertion in the international discussion of the major trends in the payments and settlement systems area.
Current Organization (June 2003-June 2004)
Chair: Brazil
Vice-Chairs: Colombia and the Eastern Caribbean Currency Union (ECCU)
Secretariat: CEMLA (permanent)
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D. WGPS-LAC FINISHED PRODUCTS(in chronological order)
1. Model for the Update of Country “Yellow Books” Model published at the WHF’s web page in November 2001.
Peru was the first country to update its Yellow Book following this model in April 2002. Argentina and Chile will follow.
2. Glossary of Terms Used in Payment and Settlement Systems Based on the CPSS Glossary in English.
Spanish version published in July 2002.
Portuguese version published in May 2003.
Periodical updates will follow in the WHF’s website.
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D. WGPS-LAC PRODUCTS(in chronological order)
1. Model for the update of Country “Yellow Books” Model published at the WHI’s web page on November 2001.
2. Glossary of Terms Used in Payment and Settlement Systems Based on the CPSS Glossary in English.
Published in Spanish in July 2002 (hard copy) and at the WHI’s web page.
Published in Portuguese at the WHI’s web page in June 2003. Hard copy will follow during the second semester of 2003.
Periodical updates, including the introduction of new sections, will be posted in the electronic version.
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3. Self Assessment of the Region’s SIPS vs. the CPSS Core Principles
• Methodologies included the CPSS Core Principles Report and the IMF-World Bank Guidance Note for the Assessment of SIPS as part of FSAP missions.
• A total of 15 LAC central banks participated in this exercise.
• An article describing the main outcomes was published in June 2003 (English and Spanish in the same volume) in the WHF’s “Research Series”.
4. Payment System Statistics
• Country and Comparative Tables:
The 17 country tables model being used is that of the Statistical Appendix of the “Yellow Books”.
Comparative tables: a model of 43 tables (in 15 groups) developed by the WHF Core Team.
• A Standard Methodology developed by the WHF Core Team (available at the WHF’s website) was used by all countries to prepare the information.
• The final version covering 1997-2001 for 17 LAC countries was published at the WHF’s website in January 2004 (English and Spanish).
• Portuguese and hard copies by year-end. Updates will follow every year.
D. WGPS-LAC PRODUCTS (cont.)
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Settlement Risks in Domestic Foreign Exchange Transactions
• Objectives: to gather information on current practices and increase awareness throughout the region to move forward in the adoption of “best practices”
• A questionnaire was prepared and distributed in early 2004. The questionnaire targets the wholesale market only and covers the following areas:
Features of the domestic FX market
Trading and settlement mechanisms and systems
Awareness and measurement of settlement risks
Methodologies being used to mitigate counterparty risk
Legal aspects
• By the end of May 2004, nine central banks had answered the questionnaire.
• The preliminary findings will be presented and discussed at the 2004 Payments’ Week (Wednesday sessions on cross-border payments) and at the WGPS-LAC meeting next Friday
D. WGPS-LAC CURRENT WORK
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Payment System Oversight Models throughout LAC
• Objective: to analyze and describe the current situation throughout LAC regarding the internal organization of the region’s central banks for the operation and oversight of payment systems
• A questionnaire was prepared and sent to the region’s central banks in early 2004. The questionnaire was based in the following documents:
• Arango and Bernal, “Systemically Important Payment Systems in LAC: Results of the Self-Assessment Exercises”
• Bossone and Cirasino, “The Oversight of the Payments System: a Framework for the Development and Governance of Payment Systems in Emerging Economies”, 2002
• CPSS Core Principles Report, 2001
• By the end of May 2004, fifteen central banks had answered the questionnaire.
• A document prepared by the Central Bank of Venezuela containing an analysis of the current situation and preliminary conclusions will be presented and discussed at the WGPS-LAC meeting later this week (Friday, June 18)
D. WGPS-LAC CURRENT WORK (cont.)
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Proposed Agenda for 2004-2005 (subject to change)
a. Liquidity Management in the National Payments and Securities Settlement System (NPSSS)
b. The Impact of Financial Crises over the NPSSS
c. Increased Harmonization, particularly of the legal and regulatory environments, with a view to increasing the safety and efficiency of cross-border transactions to support integration.
d. The need for increased Interoperability of payment and securities settlement systems.
e. The need for increased Resilience of the NPSSS.
Permanent efforts
a. More and better Education, for both private sector participants and government authorities, in order to further support reforms to the NPSSS.
b. Enhanced Cooperation, with market participants and amongst authorities.
c. Improving Technical Assistance.
D. PERMANENT EFFORTS AND THE AGENDA FOR THE NEAR FUTURE
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E. The Payments “Clones”:
• the CIS Initiative
• the Arab Initiative