PAYMENT SYSTEMS IN LEBANON BANQUE DU LIBAN (The Central Bank of Lebanon) RAMZY HAMADEH Senior Director Head of the Current Operations Department.

PAYMENT SYSTEMS IN LEBANON

BANQUE DU LIBAN (The Central Bank of Lebanon)

RAMZY HAMADEHSenior Director

Head of the Current Operations Department

Manama - March 2005 Payment Systems In Lebanon2 Ramzy Hamadeh

Lebanese Banking/Financial sectors

Before 1975 regional financial center 1975 -1990 political and economic instability 1990 -1992 transitional period Since 1993 economic recovery & rebuilding 2002 Final Roadmap for RTGS ( SeBIL)


Exchange and Payment Systems

Multi-currency system foreign currencies circulate in the market

Free exchange rate system no restrictions on the purchase or sale of foreign currencies

Free movement of capital no restrictions on flows into or out of the Lebanese markets.


Central Bank 1 9

Commercial Banks 53 799 10 - foreign

Med & long term Banks 10 10

Financial Institutions 35 32

Financial intermediaries 5

Money dealers 370

Mutual Funds 962 952 foreign

Leasing Companies 3

ATM SWITCHES 3

Lebanese Banking/Financial Sectorsbranches


Role of Banque Du LibanCode of Money & Credit

Issuing notes and coins Safeguarding the national currency Providing banking and settlement services Monitoring and safeguarding the soundness

of the banking sector Developing the money and financial markets Maintaining economic stability

Amendment (Law # 133 dated 26/10/99 ) gave power to Banque Du Liban on

different areas related to Payments and Securities Systems.


Payment Systems:

The card networks The check clearing (CCS) The Interbank Transfers System (ITS) The Securities Settlement


Clearing and Settlement of Payment Cards ATMs

Must accept all types of cards recognized and listed by Banque Du Liban

Must be linked to ATM networks connected to all other networks for domestic transactions

Clearing and settlement relating to the use of cards issued domestically and used in Lebanon should be done domestically without passing through international networks.

Clearing and settlement of POS transactions effected through international networks

Clearing and settlement of ATM transactions recently transferred to BDL


Procedure:

*1st level : 3 ATM switches in Lebanon clear interbank transactions

*2nd level: at BDL

a) Settle (debit/credit) banks’ accounts based on the results of level 1

b) Clearing and settlement of ATM switches

Clearing and Settlement of Payment Cards


Clearing and Settlement of Check

Deffered system

Owned & operated by BDL

Checks cleared in LBP,USD,GBP & EURO

Clearing in 6 branches

Instruments: checks & gov. payments

Participants: BDL & banks

VD: LBP = T+1 FX= T+2


Management of risks related to the check clearing: Stand alone Agreements (right of set-off) Other deposits Ownership of exchanged checks Information on rejected checks Unwind process

Clearing and Settlement of Checks


Clearing and Settlement of Checks Future initiatives

Full automation Check imaging Online debit / credit Charge backs for

returned checks Centralized clearing Include clearing of

other retail payments


Interbank Transfer System Deferred system

Owned & operated by BDL

Payment instructions settled by BDL over the accounts of the participant members.

Participants: BDL, banks, financial institutions & public sector

Value date (VD): same day & future dates

Use of SWIFT for domestic and cross-border transfers

SAMA :Introduction of SWIFT Automated Messages Application to automate data entry for domestic SWIFT messages


--------------------------------------------------------------------------

ForeignCorrespondent

Bank A acc

BDL Beirut -------------------------------------------------------------

Bank A (Master acc) Bank A (Sub acc)

Bank B (Master acc)

instructions

-------------

Bank C (Master acc)Bank D (Master acc)Bank E (Master acc)Bank F (Master acc)

A

TRANSFERS

BDL BranchBank A acc

Cross boarderTo Other branch/es

In the same branch


VD=DD

PC1

IF

P1

VD >DD

SWIFT

UNIT

COD

The Route of a SWIFT Message Directed to COD

Interbank Transfer System

BIC = BDLCLBBXCOD

From SWIFT members


Summery of IMF Assessment (June 2003) SIPS

CORE PRINCIPLES Check clearing Transfer system

1-Legal basis Partly observed Partly observed

2-Undestanding risks Observed Broadly observed

3-Managing risks Broadly observed Partly observed

4-Prompt settlement Observed Observed

5-Default of net debtor Partly observed Partly observed

6-Settlement Observed Observed

7-Security & reliability Observed Broadly observed

8-Efficiency Broadly observed Broadly observed

9-Open access Observed Observed

10-Governance Broadly observed Broadly observed


Organizational Issues

“COBIT”: Committee on Modern Banking and Financial Techniques and Information Technology Established March 2001 Capital: 2.8 Billion LBP Chaired by the First Vice- Governor Forum for cooperation between

Banque Du Liban, the banking sector and other private and public entities


Organizational Issues Objectives:

Modernizing banking operations and services to include advanced electronic means of payments

Issuing circulars to keep pace with developments in the fields of electronic banking and financial services

Establishing an interbank communication network between Banque Du Liban and the financial and banking sectors

Designing training programs for the staff involved in the implementation of modern banking and financial techniques


Securities Settlement System

Midclear: “Custodian and Clearing Center of financial instruments for Lebanon and the Middle East” Formed as a corporation (Joint-stock company) 1994 Approved as per Law # 139 dated 1999 Majority owned by Banque Du Liban Custodian for financial instruments Mandatory for bank shares and listed securities Clearing and settlement services for financial instruments Trading by book-entry Dematerialization of Securities Brokers communicate orders to the BSE Transactions transmitted are irrevocable


Securities Settlement System(5)


E-banking Initiatives

Banque Du Liban’s head office and its branches linked electronically

Banks’ head offices linked electronically with all their branches

E-banking based on norms of transparency and integrity Requirements before engaging in any e-banking activities:

Banks and other registered institutions (e.g. Financial inst.) should give Banque Du Liban prior notification

Other companies offering e-banking services to the public should acquire a prior authorization from Banque Du Liban’s


E-Signature Initiatives in Lebanon

Draft Law amending the Lebanese Code of Civil Procedure to recognize e-signatures and admit e-documents as evidence in a court of law

Public key infrastructure Characteristics: Confidentiality/Integrity/

Authenticity/Non-repudiation Banque Du Liban:

Root Certificate authority (CA) for banks & financial institutions

Licensing banks as CAs to issue certificates to clients & other banks


Banking System: CA Hierarchy

CA/Bank z

CA/Bank x

CA/Bank w

CA/Bank y

Root CA/ BDL


Legal Infrastructure

Current Legislation Code of Money and Credit Commercial Code Arab clearinghouse: settle operations between

Arab financial markets as well as other international markets (1999)

Law # 159(1999) Authorizing the opening of securities accounts

Law # 520(1996) Developing financial markets and regulating fiduciary contracts

Law 308(2001) on bank share / bond issuing and trading(bank share dematerialization)


Legal Infrastructure BDL decision #8341(2003):

• ATM e-clearing house BDL decision #7548(2000):

• E-banking BDL decision #7547(2000):

• Mandatory bank IT network BDL decision #7299(1999):

• Regulation of ATMs BDL decision #6367(1996):

• Interbank transfers BDL decision #6911(1998):

• Check clearinghouse rules


Legal Infrastructure

Relevant draft laws

Dematerialization of traded instruments Netting recognition/Finality of

settlement/Irrevocability/Elimination of Zero-hour rule

Securities lending Repurchase agreements E-signature Organization of the Financial Markets and the

creation of a securities regulator


Key Elements for a Payment System Reform Define clearly the strengths and the weaknesses of the

actual system and any system planned for the future Build a supportive legal framework Ensure enough safety and efficiency to fit participants

and customers’ needs Evaluate resources costs along with budget and

infrastructure constraints Ensure continuous review and update of the system

design to keep with economic and technological advances


Recommended

“PSPC” Payment System Policy Committee Recommended by the IMF Includes all relevant Banque Du Liban departments Establish Banque Du Liban policy line To be implemented in the near future

“NPC” National Payment System Council Recommended by the IMF Formal consultative body Assist Banque Du Liban in formulating policies to oversee,

promote and develop payment systems To be implemented in the near future


SeBIL: An Ambitious Leapfrog into the future

Secure Banking and Information for Lebanon: A virtual private network

Platform for secure payments (Banks, Financial Institutions, Public Sector)

Increased ability to manage market liquidity & risks Electronic end-to-end processing at all levels of

interaction Assured reliability & integrity of strategic information Electronic Reporting Web-based Application Real Time Settlement System Automated Clearing House Treasury Management System Help desk


Communications Layer

SeBIL: Logical Layout

Application Layer

Banks Financial Institutions Public Sector

Infrastructure Layer (SITI)

SeBIL

BDL BCC


Web

bas

ed A

pplic

atio

ns

E-mailCircularReport

Transaction

CommonCommunicationsNetwork

Clearing

Automated Clearing House

Real Time Settlement

System

GovernmentBonds

Registry

Help Desk

Treasury

Data Warehouse

Data Repository

BDL BCC

BANKS Electronic Reporting

Reporting

Direct Money Transfer

ChequesPayment

Cards

RTSS

Treasury Management Solution

CDR & UC Queries

DvPEvP

LegacySystem

PermissionRequiringTransactio

n


Application Layer: Logical Architecture for Transactions

workflow

help desk

Banks

RTSS

BDL branches

landing zonemailboxesweb server

clearing house

host host db

datawarehouse

(DSS)

application server

SWIFTnode

middleware

treasury dealing

datarepository

workflow

help desk


banks BDL

branches

landing zone mailboxesweb server

workflow

host host db

help desk

datawarehouse

(DSS)

external data

applicationserver

mail server

middleware

Staging Area Verify & Load Data Repository

Application Layer: Logical Architecture for Reporting


RTSS

BDLGovernment Bonds Registry

Gen

eral Led

ger

Settlement

Automated Clearing

House

Swift / Domestic Network

Visa & Master Card

BanksStock

exchangeGovernment

ClearingLarge value Transactions

Checks

Cards Payments

BDL

Real-Time Settlement Systems Process Flow

Dealing/Domestic Network

Midclear


More onPAYMENT SYSTEMS

IN LEBANON @

www.bdl.gov.lbBanque Du Liban

( central bank of Lebanon )

• BIS Red Book - 1998• BIS Red Book - 2003


Banque Du Liban

Ramzy [email protected]

Fax : + 961(1) 750 420 - Tel: + 961(1) 343 317 Mobile : + 961(3) 600 619

P.O.Box : 11 - 5544 BEIRUT – LEBANON

PAYMENT SYSTEMS IN LEBANON BANQUE DU LIBAN (The Central Bank of Lebanon) RAMZY HAMADEH Senior Director Head of the Current Operations Department.

Documents

ramzy hamadeh manama

lebanon banque

securities systems

securities settlement

bdl slide

settlement of atm transactions

settlement of atm switches

atm networks