The launch is aimed at positioning the country closer towards its goal of modernising the domestic payment infrastructure.
Central Bank Governor Julian Francis had told the Bahamas Institute of Financial Services seminar on May 18 that the system was implemented at a cost of $2 million to the bank.
The system was “successfully implemented” on Friday. It allows for more than $10,000 Bahamian dollars to be transferred between banks, and hopes to eliminate the long process of clearing cheques.
In a demonstration in the bank’s gallery on Market Street, Minister of State for Finance, Senator James Smith, explained that the Bahamas Interbank Settlement System (BISS) is a real time gross settlement system (RTGS), which utilises the software developed by Montran Corporation and is owned and operated by the Central Bank.
“Membership in this large value scheme is limited to the current seven clearing banks, which all participated in its development,” Senator Smith said.
He noted that the introduction of BISS culminated Phase I of the larger Payment System Modernisation Initiative (PSMI), which commenced in 1999 with technical assistance from the World Bank.
Objectives of the PMSI are to bring the domestic system into compliance with international best practices, to mitigate risk inherent in payment systems, to increase the efficiency of payment services and to provide an infrastructure that can support the growth of new products and services, and satisfy the business needs of all sectors of the economy.
Consistent with the strategic and collaborative approach taken to reforming The Bahamas’ payment system, a National Payment Council (NPC) was constituted in May 2003, comprising representatives of the Central Bank and the CEOs of participating clearing banks. The NPC, which is charged with overseeing the development of the national payment strategy, has been the decision-making body in framing this process.
“International best practices suggest that RTGS is a requirement for a modern payments infrastructure,” Senator Smith said.
The BISS is based on the Core Principles for Systematically Important Payment Systems (SIPS) as developed by the Committee on Payment and Settlement Systems (CPSS) of the Bank for International Settlements; and, as a RTGS, BISS enables participating clearing banks to settle Bahamian dollar payments electronically, on a transaction by transaction basis in real time among each other and between themselves and the Central Bank.
“Consistent with international best practices, funds transferred through BISS are immediate, final and irrevocable, bringing the system in line with generally accepted principles for safe and efficient national payment system,” Senator Smith said.
He added that, although it typically handled large-value and time-critical payments, payments of any magnitude may be submitted via the BISS. The system is supported by rules, procedures, and a service level agreement between the Central Bank and the participants to underpin the overall safety and efficiency objectives.
Shortly, BISS will also handle Delivery versus Payment (DvP) for securities trades, which will ensure that the transfer of title to the security (delivery) occurs simultaneously with the transfer of the underlying financial consideration (payment), Senator Smith said.
The BISS operates during weekdays from 8:30 am to 5:00 pm, except on holidays. BISS participants communicate in a Closet User Group (CUG) environment via the SWIFT network and access the system via a web browser.
With the completion of Phase I of the PMSI programme, Senator Smith said that work had already commenced on Phase 2, the establishment of an Automated Clearing House (ACH), which is expected to be implemented in the first quarter of 2005.
Domestic cheques are still cleared manually at the Central Bank, and the resulting interbank obligations are settled through the BISS. With the advent of the ACH, the current manual system of cheque processing will be eliminated and a full range of facilities, including direct debits and credit services and interpretability of domestic ATMs would be available to customers, he said.
Lindsay Thompson, The Nassau Guardian
