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PAYMENT AND SETTLEMENT SYSTEMS - Bank Negara …

PAYMENT AND SETTLEMENT SYSTEMS . PAYMENT AND SETTLEMENT SYSTEMS . financial STABILITY AND PAYMENT SYSTEMS REPORT 2011. 91 Promoting the Smooth Operation of PAYMENT and SETTLEMENT SYSTEMS 95 PAYMENT Trends 97 Promoting Ef cient and Effective PAYMENT Services 98 Driving E- payments in Priority Sectors 99 Modernising RENTAS to Support the Strengthening of financial Integration with the Region 100 Broadening Regional Cooperation in PAYMENT Infrastructure Development 100 Building an Integrated E- PAYMENT Infrastructure 100 Moving Forward 89. PAYMENT AND SETTLEMENT SYSTEMS financial STABILITY AND PAYMENT SYSTEMS REPORT 2011 90. PAYMENT AND SETTLEMENT SYSTEMS . In 2011, the PAYMENT and SETTLEMENT SYSTEMS thus promote public con dence and trust in the continued to support the growth of the banking retail PAYMENT SYSTEMS and instruments. The sector and the broader economic and nancial Bank's primary focus of oversight is directed at system . Apart from promoting the smooth operation the major interbank clearing and SETTLEMENT of the PAYMENT and SETTLEMENT SYSTEMS and SYSTEMS and the widely used PAYMENT strengthening the mitigation of associated risks, the instruments listed in Table These SYSTEMS Bank's efforts were also directed towards fostering supported PAYMENT transactions amounting to ef cient and effective PAYMENT services to support trillion in 2011, which is equivalent to Malaysia's transition towards becoming a high 58 times of Malaysia's gross domestic product v

FINANCIAL STABILITY AND PAYMENT SYSTEMS REPORT 2011 91 PAYMENT AND SETTLEMENT SYSTEMS In 2011, the payment and settlement systems continued to support the …

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Transcription of PAYMENT AND SETTLEMENT SYSTEMS - Bank Negara …

1 PAYMENT AND SETTLEMENT SYSTEMS . PAYMENT AND SETTLEMENT SYSTEMS . financial STABILITY AND PAYMENT SYSTEMS REPORT 2011. 91 Promoting the Smooth Operation of PAYMENT and SETTLEMENT SYSTEMS 95 PAYMENT Trends 97 Promoting Ef cient and Effective PAYMENT Services 98 Driving E- payments in Priority Sectors 99 Modernising RENTAS to Support the Strengthening of financial Integration with the Region 100 Broadening Regional Cooperation in PAYMENT Infrastructure Development 100 Building an Integrated E- PAYMENT Infrastructure 100 Moving Forward 89. PAYMENT AND SETTLEMENT SYSTEMS financial STABILITY AND PAYMENT SYSTEMS REPORT 2011 90. PAYMENT AND SETTLEMENT SYSTEMS . In 2011, the PAYMENT and SETTLEMENT SYSTEMS thus promote public con dence and trust in the continued to support the growth of the banking retail PAYMENT SYSTEMS and instruments. The sector and the broader economic and nancial Bank's primary focus of oversight is directed at system . Apart from promoting the smooth operation the major interbank clearing and SETTLEMENT of the PAYMENT and SETTLEMENT SYSTEMS and SYSTEMS and the widely used PAYMENT strengthening the mitigation of associated risks, the instruments listed in Table These SYSTEMS Bank's efforts were also directed towards fostering supported PAYMENT transactions amounting to ef cient and effective PAYMENT services to support trillion in 2011, which is equivalent to Malaysia's transition towards becoming a high 58 times of Malaysia's gross domestic product value-added, high-income economy.

2 These included (GDP). The objective of the Bank's oversight is speci c initiatives to create an integrated PAYMENT to: (i) mitigate systemic risks that can arise from ecosystem that would accelerate the country's disruptions in the operations of the PAYMENT migration to electronic payments (e- payments ), thus SYSTEMS , including through the application of delivering greater economic ef ciency. The year appropriate prudential and operating standards also saw the broadening of regional cooperation in for the PAYMENT SYSTEMS ; (ii) promote the developing the market infrastructure for payments ef ciency of PAYMENT SYSTEMS ; and (iii) accord and nancial instruments, and greater nancial adequate protection for users of the PAYMENT integration with regional and global economies SYSTEMS and instruments. supported by resilient and robust PAYMENT and SETTLEMENT SYSTEMS . Table Major PAYMENT SYSTEMS and Instruments Apart from promoting the in Malaysia in 2011. smooth operation of the PAYMENT Volume Value system /Instrument and SETTLEMENT SYSTEMS and (million) (RM billion).

3 RENTAS1 47, financial STABILITY AND PAYMENT SYSTEMS REPORT 2011. strengthening the mitigation National Electronic Cheque of associated risks, the Bank's Information Clearing system (eSPICK) 1, efforts were also directed towards Interbank GIRO (IBG), financial Process Exchange (FPX) and fostering ef cient and effective Direct Debit PAYMENT services to support Shared ATM Network (SAN) Malaysia's transition towards Debit Card and Credit Card Touch n Go Prepaid Card becoming a high value-added, 1. Comprises Interbank Funds Transfer system and Scripless Securities high-income economy Depository system Source: Bank Negara Malaysia PROMOTING THE SMOOTH. OPERATION OF PAYMENT AND RENTAS. SETTLEMENT SYSTEMS The Real-time Electronic Transfer of Funds and Securities system (RENTAS) is a real-time gross In providing oversight of PAYMENT SYSTEMS in SETTLEMENT system designed primarily for the Malaysia, the Bank aims to ensure the continued transfer and SETTLEMENT of high-value interbank reliability of the major PAYMENT SYSTEMS and payments and securities transactions.

4 In 2011, 91. Chart Chart PAYMENT AND SETTLEMENT SYSTEMS . RENTAS: Daily Average by Value and Volume Intraday Credit Usage RM billion '000 RM billion %. 200 14 4,900 30. 180. 12. 160 4,200 25. 140 10. 120 8 3,500. 20. 100. 80 6 2,800. 60 4 15. 40 2,100. 2. 20 10. 0 0 1,400. 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011. 700 5. Volume (RHS) Value 0 0. Source: Bank Negara Malaysia 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011. % of intraday credit utilisation (RHS). Intraday credit utilisation Total value of transactions transactions settled through RENTAS continued Source: Bank Negara Malaysia to increase in value to times of Malaysia's GDP (2010: times), with a higher daily average turnover following the increase in foreign direct investments and higher portfolio reduction was also observed in participants'. capital ows (Chart ). Third party payments request for the extension of operating hours in RENTAS by individuals and corporates were from 29 incidents in 2010 to only ve in 2011, also higher by 33% as efforts to promote the re ecting improvements in market ef ciency and use of e- payments intensi ed further.

5 While liquidity management by participants, which, third party payments accounted for only 22% combined with ample liquidity in the system , of the total SETTLEMENT value in the system , allowed participants to settle their payments the share of the number of transactions had early. Consequently, the share of intraday progressively increased from 55% in 2007 to collateralised credit granted to participants to 69% in 2011. meet temporary liquidity shortages during the day fell from in 2010 to of the total SETTLEMENT value (Chart ). financial STABILITY AND PAYMENT SYSTEMS REPORT 2011. Throughout the year, RENTAS To promote a sound and ef cient infrastructure achieved 100% SYSTEMS for PAYMENT and SETTLEMENT SYSTEMS , the Bank requires MyClear to ensure that RENTAS meets availability, with a signi cant the international best practices as outlined in the Core Principles for Systemically Important PAYMENT reduction in the request for SYSTEMS (CPSIPS) issued by the Bank for International extension of operating hours Settlements Committee on PAYMENT and SETTLEMENT SYSTEMS (CPSS) and Recommendations for Securities SETTLEMENT SYSTEMS (RSSS) jointly issued by CPSS and the Technical Committee Oversight over RENTAS of the International Organisation of Securities RENTAS is operated by the Bank's wholly-owned Commission (CPSS-IOSCO).

6 Self-assessments to subsidiary, Malaysian Electronic Clearing evaluate RENTAS's operations against the CPSIPS and Corporation Sdn. Bhd. (MyClear), in accordance RSSS were carried out by MyClear on a regular with supervisory expectations and service basis. In 2011, MyClear has taken steps to further level standards set by the Bank. These improve its observance of the three Core Principles standards include having in place an effective that deal with operational risks (Core Principle VII), risk management and control framework ef ciency (Core Principle VIII) and access criteria that supports the uninterrupted operations (Core Principle IX). These involved a review of of RENTAS. Throughout the year, RENTAS the participation rules, operational procedures achieved 100% SYSTEMS availability. A signi cant and risk management framework for RENTAS, 92. Table required to comply with the regulations and Assessment of RENTAS against CPSIPS and RSSS conditions for the operations, including minimum PAYMENT AND SETTLEMENT SYSTEMS .

7 Capital requirements, sound governance and risk 10 Core Principles 19. for Systemically Recommendations management practices, adequate transparency Important PAYMENT for Securities including disclosures on fees and charges, effective SYSTEMS SETTLEMENT SYSTEMS anti-money laundering and counter nancing Observed 6 15 of terrorism (AML/CFT) measures, and ef cient Broadly observed 3 2 operational procedures. Not applicable 1 2. Source: Bank Negara Malaysia Security of retail payments While technological advancements continue to transform the PAYMENT landscape and resulting in more stringent conditions for the bring signi cant improvements in operational extension of operating hours, more transparent ef ciencies and greater convenience to access criteria, the adoption of higher standards consumers, of importance is preventing the misuse with respect to system downtime and recovery of technology to defraud consumers. Overall period for business continuity, and more fraud losses have remained negligible, accounting comprehensive coverage of disaster recovery live for only of total value of retail PAYMENT runs.

8 With these measures, RENTAS now fully transactions in 2011, a trend since 2006 following or largely observes all applicable core principles the industry-wide migration to chip-based and recommendations (Table ). Automated Teller Machine (ATM) cards and the Europay-MasterCard-Visa standard for credit cards. The Bank continues to monitor signs of emerging fraud trends and maintains collaborative efforts The Bank's oversight activities with the enforcement agencies, the PAYMENT are directed towards ensuring industry and consumer associations to avert fraud incidents involving retail PAYMENT SYSTEMS . This operators of retail PAYMENT SYSTEMS has contributed to ongoing enhancements to business practices to better protect consumers and issuers of PAYMENT instruments against new methods of perpetrating fraud, while operate in a secure and reliable a sustained consumer education programme has also helped to increase public awareness on fraud manner while safeguarding prevention measures.

9 financial STABILITY AND PAYMENT SYSTEMS REPORT 2011. consumer interests In combating fraud, greater focus was given to promote the secure use of credit cards which is a widely used e- PAYMENT instrument in Malaysia. As Oversight over retail payments a result, credit card fraud losses were contained The Bank's oversight activities also cover the safety to less than since 2006 (Chart ). More and ef ciency of prominent retail PAYMENT SYSTEMS and instruments to maintain public con dence Chart in using such SYSTEMS and instruments. Although PAYMENT transactions using these PAYMENT SYSTEMS Credit Card Fraud: % of Total Transaction Value and instruments tend to be of relatively low value, %. the volume involved was substantial, accounting for of the non-cash payments in 2011. In discharging the oversight responsibility on the retail PAYMENT SYSTEMS , the Bank's resources have been directed on those PAYMENT SYSTEMS , PAYMENT instruments and market infrastructure whose failure or disruption in operations could cause widespread public inconvenience, and 0.

10 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011. which, if prolonged, could undermine con dence in the SYSTEMS . Operators and issuers of prominent Source: Bank Negara Malaysia retail PAYMENT SYSTEMS and instruments are 93. than 60% of credit card fraud losses in 2011 strengthened in 2011 following upgrades to involved card-not-present (CNP) transactions the infrastructure supporting payments and PAYMENT AND SETTLEMENT SYSTEMS . that did not require the presence of physical securities settlements through RENTAS. This cards, such as for purchases made over the was reinforced by monthly disaster recovery Internet, or through mail and telephone (DR) exercises that were undertaken by orders a trend also observed globally with MyClear which affirmed the robust business the continued rise in online transactions and continuity strategy for RENTAS and eSPICK. e-commerce. Further measures have thus The DR live exercises were designed to test been taken to enhance the security features the readiness and reliability of the recovery of the credit card infrastructure, including SYSTEMS for RENTAS and eSPICK in the event of the introduction of transaction alerts via an operational failure at the production sites.


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