slide1 l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
AMEDA LEADERSHIP FORUM PowerPoint Presentation
Download Presentation
AMEDA LEADERSHIP FORUM

Loading in 2 Seconds...

play fullscreen
1 / 20

AMEDA LEADERSHIP FORUM - PowerPoint PPT Presentation


  • 260 Views
  • Uploaded on

AMEDA LEADERSHIP FORUM. Risk Management and Depository Services. Interbank Money Markets and Payment Systems: A Two Way Relationship. PRESENTED BY: Anthony van Eden DATE: 28 th April 2009. Glossary of Terms and Acronyms. Presentation Overview. South African Money Market statistics;

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'AMEDA LEADERSHIP FORUM' - Patman


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1

AMEDA LEADERSHIP FORUM

Risk Management and Depository Services

Interbank Money Markets and Payment Systems: A Two Way Relationship

PRESENTED BY: Anthony van Eden

DATE: 28th April 2009

slide3

Presentation Overview

  • South African Money Market statistics;
  • Background to the South African Money Market;
  • Risk management through the deployment of infrastructure in MM - The South African Dematerialisation of MM Project;
  • Other benefits associated with a dematerialised MM.
slide4

South African Money Market Statistics

Average Duration per Issue -100 days

slide5

Background to the South African Money Market

  • Informal market– no exchange or Automated Trading Systems;
  • Clearing and settlement unchanged since inception of MM;
  • No formal Market Association;
    • Bearer certificates; telephonic trading ; paper based settlement instructions; physical custody; manual recording of “ownership” and coupon calculations; no guaranteed SFIDvP; certificate splitting; physical delivery against Capital Events;
  • Stringent exchange controls;
slide6

Background to the South African Money Market (continued)

  • Securities Services Act;
  • National Credit Act;
  • Deposit Taking Institutions Act;
  • Central Bank (SARB) responsible for monetary policy and supervision;
  • Capital Adequacy Ratio: Required 9,75%; Actual 2008 between 12% - 14%;
  • Liquid Asset Requirement - Banks can only use 50 % intra-day and 25% of collateral at SARB inter-day;
  • Banking IT systems, processes and procedures robust and relatively advanced;
slide7

Risk Management Through the Deployment of Infrastructure in Money Markets

  • Risk Reduction:
    • Operational;
    • Credit;
    • Settlement;
    • Systemic; and
    • Reputational.
slide9

High Level Interaction

2

JSE

(NNA)

MMS

Issuers

1

MFA

4

A

Traders

A

4

2

MMPBPR

MMCCR

MMSR

5

1

2

Message Router

3

4

3

1

Optional

Message Router

Issuer

1

ETME

A

4

Issuer Agent

2

Bulk

Matching

1

Issuer Agent

3

2

Custodian

5

3

2

A

CLIENTS

Custodian

4

A

Bilateral Bulk

Trade Allocation

SOR

4

3

Trader

Optional

5

4

4

Trader

7

9

12

Ref Nos.

5

FULL

Participant

8

Corporate

Participant

6

13

Settling Bank

Ref Nos.

7

Message Router

8

14

9B

9A

13

11

10

Settling

Banks

11

SAMOS RTL

11

10

10

Information Flows:

14 - Cash Movement…

slide10

Reduction of Operational risk

  • Accurate and complete recording
    • End to end STP – from ISIN issue to Maturity;
    • Standardised electronic communication with MMSS – ISO 15022 message types;
    • All MM securities will be:-
      • standardised into four generic categories;
      • allocated an ISIN real-time via the CSD;
      • issued, traded and settled electronically;
    • Use of unique identifiers - Participants, Business Partners, investors, security issuing, SOR Securities Accounts, trade matching, clearing and settlements trades and Capital Events;
    • Electronic Trade Matching Engine (“ETME”) – post trade/pre-settlement validation trade information;
slide11

Reduction of Operational risk (continued)

  • Accurate and complete recording (continued)
    • Any change in beneficial ownership must be reported to ETME;
    • Trade details cannot be modified or cancelled once matched;
    • Carries, Repurchase Agreements (Repos) and Reverse Repos treated as Sale and Buy Back transactions –change in beneficial ownership of Securities;
    • Both legs to Buy Backs reported simultaneously - all four legs must match;
    • Amendment to 2nd leg of Buy Back reported by both counterparties to ETME for matching;
    • ETME warns trading party where counterparty leg match not made within Market agreed time interval;
    • Standardised generic settlement procedures for trades and Capital Events;
slide12

Reduction of Operational risk (continued)

  • Security
      • Securities issued into and retained in electronic format in the SOR in CSD;
      • SOR legally regarded as record of definitive ownership;
      • Communication with MMSS via SWIFT or Strate WAN – reliable, secure and robust;
      • Use of unique identifiers for Participants and Business Partners linked to roles in the MMSS;
      • Transfer of ownership based on SFIDvP;
      • Capital Events paid to entitled investors’ Participants in total for dissemination.via accounting entry.
      • Existing secure and proven inter-bank settlement systems via SARB SAMOS RTL using ISO 15022 messages over SWIFT infrastructure;
slide13

Reduction of Settlement Risk

  • Carries; Repurchase and Reverse Repurchase Agreements treated as change in beneficial ownership i.e. Buy Backs;
  • All four legs to Buy Backs reported MUST matched for settlement of 1st leg;
  • Amendment to 2nd leg of Buy Back reported to ETME;
  • Matched bulk trades cleared and settlement instructions processed on a gross principal-to-principal basis;
  • Participants have access to real time records of client Securities accounts.
  • Participants commit to delivery of securities/settlement for client’s matched trades “Against” and “Free” of Payment;
slide14

Reduction of Settlement Risk (continued)

  • Payment instructions only sent to Participant by CSD once commitments for delivery and settlement matched by MMSS;
  • Securities committed to delivery “reserved/locked” in SOR Securities Account pending confirmation of final and irrevocable settlement;
  • Pledged securities reserved/locked in SOR Securities Account until Pledge Release instructions received or security matures;
  • Participants notified immediately by CSD when insufficient securities for delivery ;
  • Trade settlement only fails at close of SARB settlement windows;
slide15

Reduction of Settlement Risk (continued)

  • Settlement status messages sent by MMSS to Participants which can also query on-line, real-time ;
  • “Real-time” settlement in Central Bank funds (SAMOS RTL) or intra-bank (“on-us”;) for trades and Capital Events;
  • Existing secure and proven inter-bank settlement systems via SARB SAMOS RTL using ISO 15022 messages over SWIFT infrastructure;;
  • Transfer of securities simultaneous with confirmation “Final and Irrevocable” settlement in Central bank Funds or “on us.”
  • Capital Events settled electronically on payment date;
  • Standardised generic settlement procedures for trades and Capital Events;
slide16

Reduction of Credit Risk

  • Participants have to commit to cash settlement before securities are reserved/locked;
  • Use of SARB SAMOS RTL:-
    • Final and irrevocable settlement;
    • Real time availability of funds on settlement date;
    • Facilitates more efficient and accurate credit management – cash flow forecasting;
  • SARB has real time statistics of compliance with Liquid Asset Requirements;
slide17

Reduction in Systemic risk

  • Bulk trades cleared and settled on Gross principal to principal settlement – avoid one “fail all fail;”
  • Participants have ability to electronically freeze Securities Accounts of its clients;
  • Curator appointed by the SARB has the ability to place freeze over all of a banks Securities Accounts.
  • SARB has real time statistics of compliance with Liquid Asset Requirements;
slide18

Reduction in Reputation risk

  • Combating Money Laundering
    • Ownership maintained in CSD at beneficial owner level in SOR;
    • Only foreign companies can open Nominee accounts in SOR;
    • SOR legally regarded as the “definitive record of ownership.”
  • Settlement excellence
    • Achieved through risk mitigation outlined above.
slide19

Other Benefits Associated with a Dematerialised MM

  • Improvement in Liquidity
      • More timely settlement of trades and Capital Events via SAMOS RTL should increase activity in the secondary market;
  • Enhanced STP
    • Commensurate Cost savings associated with paper driven issuing, recording, custody and settlements.