PAYMENT SYSTEMS IN LEBANON
BANQUE DU LIBAN (The Central Bank of Lebanon)
RAMZY HAMADEHSenior Director
Head of the Current Operations Department
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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)
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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.
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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
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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.
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Payment Systems:
The card networks The check clearing (CCS) The Interbank Transfers System (ITS) The Securities Settlement
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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
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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
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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
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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
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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
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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
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--------------------------------------------------------------------------
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
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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
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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
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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
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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
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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
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Securities Settlement System(5)
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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
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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
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Banking System: CA Hierarchy
CA/Bank z
CA/Bank x
CA/Bank w
CA/Bank y
Root CA/ BDL
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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)
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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
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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
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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
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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
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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
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Communications Layer
SeBIL: Logical Layout
Application Layer
Banks Financial Institutions Public Sector
Infrastructure Layer (SITI)
SeBIL
BDL BCC
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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
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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
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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
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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
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More onPAYMENT SYSTEMS
IN LEBANON @
www.bdl.gov.lbBanque Du Liban
( central bank of Lebanon )
• BIS Red Book - 1998• BIS Red Book - 2003
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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