## 1. Payments Handled in NBRB Systems in 2001

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---

### General description of systems
- Assessment covers the Belarus Interbank Settlement System (BISS), providing real-time gross settlement facilities for transactions in Belarusian rubel (BYR).
- Automated System of Interbank Settlements (ASIS) consists of two components:
  - BISS: real-time gross settlement (RTGS) for (credit) transactions in BYR; commenced operation in 1998; primarily designed for high-value payments but with no lower (or upper) limit on individual payment value; used for time-sensitive payments of any size. There are currently 36 participants in BISS.
  - National Bank clearing system: net settlement of large volumes of low-value interbank transactions; handles both credit and debit transactions; net balances arising in the clearing system are settled in BISS. The clearing system has 35 participants.
- Additional systems:
  - Securities clearing and settlement system operated by the Belarusian Currency and Stock Exchange; final (net) delivery of securities takes place in the NBRB Depository (for government and NBRB securities) and the Republican Depository of Securities (for equities and other corporate papers). Securities trades are settled on T+0 (using a procedure replicating DVP Model 3).
  - BelCard scheme for domestic plastic card transactions; net interbank balances arising from plastic card transactions are settled in BISS.
- ASIS is the overarching name; BISS and the clearing system are independent in software and operational procedures but share a common hardware platform and common communications network arrangements.

### Organizations involved
- Belarusian Inter-Bank Settlement Center (BISC): technical operator of ASIS; develops BelCard software; provides organizational support to the telecommunication network used by BISS and the clearing system; fully owned by the NBRB.
- Center for Banking Technologies (CBT): responsible for development and maintenance of national payment system software; fully owned by the NBRB.
- Belarusian Currency and Stock Exchange (CSE): operator of securities clearing and settlement system; NBRB owns more than 99 percent of CSE share capital.
- National Processing Center (NPC): technical, organizational, and information support for bank card transactions; Belarusbank holds slightly more that 50 percent of NPC capital; NBRB about 38 percent; BISC some 6 percent; remaining part held by some major banks.

### Functioning of BISS — payment processing and controls
- Payment message formats: very similar to SWIFT MT100, MT202 or MT204.
- Telecommunication: Six alternative telecommunication networks are available to submit payment messages to ASIS.
- Security and initiation:
  - Only a limited number of persons at participating banks may initiate payments; each has a personal key (public key management scheme), digital signatures attached to each payment, and payment messages are subject to encryption.
- Routing logic:
  - Payments exceeding BYR 5 million are considered large-value and routed to BISS.
  - Time-sensitive payments (any value, if flagged) are routed to BISS.
  - Non-urgent low-value payments are routed to the clearing system.
  - All messages pass validation checks (e.g., duplicate detection).
- Settlement finality:
  - If sufficient funds exist in the correspondent account of the ordering bank, funds are debited and credited immediately and payment is final; confirmation messages are forwarded to ordering and receiving banks.
  - If insufficient funds, the payment is queued and processed when funds become available, prioritized by Priority then time of input.
  - If receiving bank cannot apply funds to an account (e.g., error in account number), settlement finality still holds; a separate “return payment” is initiated.
- Priority and queue management:
  - Priority levels range 1-999 (1 highest). Levels 1-499 reserved for time-sensitive payments; 500-999 for large-value payments.
  - Originating bank assigns Priority. Default Priority if none assigned: 250 for time-sensitive payments and 750 for large-value payments.
  - Ordering bank can change Priority at any time before settlement; changing Priority moves item in queue.
- Reservation of funds:
  - Participants can reserve funds for specified purposes.
  - Participants are required to reserve funds to cover potential net debit positions in the NBRB clearing system and the securities clearing and settlement system. Reserved funds are blocked from other uses.
- Real-time information management: participants can monitor account balances, queued payments (outgoing and incoming), change priority of queued payments, and request funds reservation.

### Statistical information (2001–2003) — key figures preserved exactly
- Overall observation (2003): some 92 percent of all interbank payments, in value terms, were settled in BISS; in volume terms, only some 8 percent were settled through BISS. Conversely, 92 percent of the traffic volume is handled in the clearing systems, representing in value terms only 8 percent.
- Classification of payments in BISS:
  - Large-value payments: any payment equal to or greater than BYR 5 million.
  - Time-sensitive payments: payments of any value flagged as time-sensitive. Time-sensitive payments represent up to 15 percent of payments volume and about one percent in value terms.

- Table 1. Payments Handled in NBRB Systems in 2001
  - ASIS in total: Number of Participants: 29; Daily value of payments handled (Millions of US$): 159.5; Average value per transaction (US$): 1,365.0; Daily volume of transactions handled: 116,881
  - BISS (RTGS system): Number of Participants: 29; Daily value of payments handled (Millions of US$): 143.5; Average value per transaction (US$): 13,349.2; Daily volume of transactions handled: 10,747
  - Clearing (net) system: Number of Participants: 29; Daily value of payments handled (Millions of US$): 16.1; Average value per transaction (US$): 151.6; Daily volume of transactions handled: 106,135

- Table 2. Payments Handled in NBRB Systems in 2002
  - ASIS in total: Number of Participants: 33; Daily value of payments handled (Millions of US$): 197.0; Average value per transaction (US$): 1,672.2; Daily volume of transactions handled: 117,827
  - BISS (RTGS system): Number of Participants: 33; Daily value of payments handled (Millions of US$): 177.6; Average value per transaction (US$): 17,861.6; Daily volume of transactions handled: 9,943
  - Clearing (net) system: Number of Participants: 32; Daily value of payments handled (Millions of US$): 19.4; Average value per transaction (US$): 180.1; Daily volume of transactions handled: 107,884

- Table 3. Payments Handled in NBRB Systems in 2003
  - ASIS in total: Number of Participants: 35; Daily value of payments handled (Millions of US$): 258.6; Average value per transaction (US$): 1,930.2; Daily volume of transactions handled: 133,971
  - BISS (RTGS system): Number of Participants: 35; Daily value of payments handled (Millions of US$): 237.0; Average value per transaction (US$): 17,645.1; Daily volume of transactions handled: 13,432
  - Clearing (net) system: Number of Participants: 34; Daily value of payments handled (Millions of US$): 21.6; Average value per transaction (US$): 179.0; Daily volume of transactions handled: 120,539

- Intraday and operational statistics:
  - Intraday pattern: only some 50 percent of payments value is processed by 4 p.m. (representing 60-70 percent in volume).
  - Peak in payments input between 4:00 p.m. and 5:00 p.m.; last queued payments settled close to closing time at 7:30 p.m.
  - Share of annulled (non-executed) payments: 0.10 percent in terms of volume and 0.16 percent in terms of value.
  - Three peak days (volumes (000’s) and values (BYR billions)):
    - Volume: 30.12. 2003: 23.6; 21.04.2004: 23.2; 31.05.2004: 24.7
    - Value: 31.12.2003: 1,449.2; 30.09.2004: 1,331.2; 29.10.2004: 1,434.4
  - Payment flow concentration: the 6 biggest banks account for some 80 percent of both value and volume.

### Preconditions, governance, and stakeholder engagement
- Macroeconomic and market context:
  - Belarus has had a fairly stable macroeconomic development in recent years, influenced by a substantial but decreasing inflation.
  - Financial market activities in BYR are still very limited but potentially emerging.
  - Some 82 percent of the banking capital is controlled by the public sector.
- Industry coordination:
  - Belarus Bankers Association exists but currently does not play an important role in payment systems issues.
  - Regular meetings between NBRB management and bank executives are held quarterly; discussions cover payment systems issues.
  - Within the NBRB, payment systems issues are discussed by the Committee on Banking and Payment Transactions, chaired by the NBRB Governor, meeting weekly.
  - Banks are consulted in advance on upcoming changes; the “Concept Document for the Development of the National Payment System of the Republic of Belarus until 2010 with an Account for Global Trends” was submitted to banks and some authorities for comments before final approval.

### Changes and reforms in process
- May 2004: NBRB Board approved the “Concept Document for the Development of the National Payment System of the Republic of Belarus until 2010 with an Account for Global Trends”.
- Major project: implementation of a new upgraded BISS system, expected to start live operations as from April 2005.
  - New BISS will divide payment flow into two: one for large-value and/or time-sensitive payments and a new path for non-time sensitive payments.
  - A mutual offset mechanism will be applied for the non-time sensitive payments queue.
  - The system will attempt to settle queued payments via an automated queue optimization procedure (searching queues for bilateral or multilateral offsetting outgoing and incoming payments and settling them as “a block” when nettable).
- Operational regime change: as from February 1, 2006, the clearing system for other payments will move from four daily clearing sessions to a single clearing session.
- Future consolidation: envisaged that after about one year of parallel operation of the new BISS and the NBRB clearing system, the clearing system would cease operation—conditional on new BISS capability to process a substantially higher payments volume.

### Assessment summary — Core Principles and Central Bank responsibilities
- Mission finding: BISS observes three Core Principles and one Central Bank Responsibility.
- Areas identified for improvement:
  - understanding and management of risks,
  - security and operational reliability and contingency procedures,
  - efficiency and practicality of the system,
  - fair and open access,
  - governance and three central banks responsibilities to ensure full adherence to the Core Principles.
- Core Principle assessments (selected):
  - CP I — Legal basis: Assessment: Observed.
    - Legal framework: two-tier legislative framework with specified laws, NBRB regulatory instruments, technical RD documents, and contractual arrangements.
    - Timing of settlement finality: payment irrevocable once accepted for processing in BISS; settlement final once funds debited from remitting bank correspondent account and credited to receiving bank correspondent account.
  - CP II — Transparency of risks and procedures: Assessment: Broadly observed.
  - CP III — Management of credit and liquidity risks: Assessment: Partly observed.
    - Liquidity specifics noted below under Key statistics and numeric constraints.
  - CP IV: Individual payments settled on a real-time gross basis in central bank money in BISS. Assessment: Observed.
  - CP V: Multilateral netting requirement. Assessment: Not applicable.
  - CP VI: Assets used for settlement are central bank money. Assessment: Observed.
  - CP VII: Security, operational reliability, and contingency arrangements. Assessment: Broadly observed.
    - Availability: In 2004, BISS availability has been 99.88 percent (in 2004, the minimum availability requirement was 97 percent). NBRB aims to achieve availability not lower than the new minimum requirement of 99.5 percent in 2005.
  - CP IX: Access and participation criteria. Assessment: Broadly Observed.
  - CP X and Central Bank responsibilities: Assessment: Partly observed for governance and oversight responsibilities.

### Key statistics and numeric constraints (preserve source numbers)
- Banks can use 10 percent of their reserve holdings for transaction purposes during the day.
- NBRB repo limit for intraday liquidity extension: currently 30 billion rubel.
- Example daily payments flow: up to 1,000 billion.
- Stock of liquidity available: BYR 40 billion.
- Implied turnover: funds have to turn over 25 times a day.
- Observed peak in input and settlement: between 4 p.m. and 5 p.m.
- Settlement of payments queued continues until 7.30 p.m.
- Availability (2004): 99.88 percent; minimum requirement (2004): 97 percent; NBRB target minimum (2005): 99.5 percent.
- Tariffs (starting March 1, 2004): BYR 355 (+18 percent VAT) for processing of large-value payments and BYR 1,027 (+18 percent VAT) for time-sensitive payments.
- Communication costs: some BYR 30 per payment.
- BISC staff allocation: 113 persons attributed to BISS activities.
- CBT software development staff: 26 persons directly involved; 50 more persons with “other related duties” attributed.

### Recommended actions (selected, preserved wording and numbers)
- Understanding and management of risks (CPs II–III)
  - Make explicit in the documentation that the current rules on the intraday use of reserve holdings and extension of credit by the NBRB pose clear limitations on the availability of liquidity in BISS;
  - Allow a greater share of reserve holdings to be used intraday for payments purposes, ideally in full;
  - Make available an instrument and procedures for the provision of intraday credit to participants. Intraday credit should ideally not be subject to any other restrictions than the availability of eligible collateral;
  - Consider replacing the current procedure, whereby successful settlement of net balances is ensured by a pre-blocking of funds, with other (more liquidity efficient) risk management arrangements;
  - Abolish the rule limiting the value of securities purchased to the amount pre-blocked in the RTGS system.
- Security and operational reliability, and contingency arrangements (CP VII)
  - Elaborate, document and implement a comprehensive risk analysis and management framework;
  - Define, document and regularly test business continuity and contingency procedures;
  - Refine change management procedures and upgrade the test system to allow testing with participants;
  - Further elaborate security and performance requirements for communication services and strengthen adherence control.
- Efficiency and practicality (CP VIII)
  - Elaborate further on the justification for the large difference in fees and ensure consistency in fees applied;
  - Develop the cost calculation methodology further and consider including at least some of the investment costs (e.g. software development) in the costs to be recovered;
  - Assess accuracy of cost allocation between BISS and the NBRB clearing system;
  - Take action to reduce (non-NBRB) staff involved in BISS activities;
  - Shorten daily operating time of BISS; the system could close much earlier (e.g. at 5 p.m.);
  - Consider introducing some throughput guidelines to banks (suggested: 50 percent of the payments volume and/or value should be processed by 1 p.m.).
- Criteria for participation (CP IX)
  - Re-assess the necessity of applicants having an agreement with BISC as an criteria for access;
  - Introduce explicit rules for (voluntary and enforced) exit.
- Governance (CP X) and Central Bank responsibilities
  - Critically assess and strengthen the governance arrangements for BISS;
  - The cost methodology and fees applied to BISS should be formally approved by the NBRB;
  - Fees charged to banks should be formally paid to the NBRB, while BISC should receive its remuneration from the NBRB;
  - Clarify roles, duties and controls in detailed service level agreements with BISC and CBT;
  - Address overstaffing in BISC and CBT, and administrative overhead in general;
  - Consider insourcing all functions related to BISS as an alternative to improve governance and economic efficiency;
  - Formally establish an oversight function, define and publish oversight objectives and policies, adopt the Core Principles formally, allocate oversight to a unit separate from operations, ensure training, and establish an action plan with a timetable for implementation and assessment of continued compliance.

### Operational history and resilience (selected)
- External audit: last external audit by Ernst & Young in April 2004.
- Secondary site: established July 2004.
- Recovery time objectives: resume normal operation within four hours after a local disaster; within one hour after a technical interruption.
- 2004 availability: 99.88 percent (minimum requirement in 2004 was 97 percent). NBRB aims for availability not lower than 99.5 percent in 2005.

*Source: IMF/World Bank FSAP assessment material on BISS as provided in the chapter “Payments Handled in NBRB Systems in 2001” of the supplied document; IMF staff mission assessment as presented in the provided content unit.*

### 1. Payments Handled in NBRB Systems in 2001 ......................................................................4

### 1. Payments Handled in NBRB Systems in 2001

### A. General description of systems
- The assessment covers the Belarus Interbank Settlement System (BISS), providing real-time gross settlement facilities for transactions in Belarusian rubel (BYR).
- The Automated System of Interbank Settlements (ASIS) consists of two components:
  - BISS: real-time gross settlement (RTGS) for (credit) transactions in BYR; commenced operation in 1998; primarily designed for high-value payments but with no lower (or upper) limit on individual payment value; used for time-sensitive payments of any size. There are currently 36 participants in BISS.
  - National Bank clearing system: net settlement of large volumes of low-value interbank transactions; handles both credit and debit transactions; net balances arising in the clearing system are settled in BISS. The clearing system has 35 participants.
- Additional systems:
  - Securities clearing and settlement system operated by the Belarusian Currency and Stock Exchange; final (net) delivery of securities takes place in the NBRB Depository (for government and NBRB securities) and the Republican Depository of Securities (for equities and other corporate papers). Securities trades are settled on T+0 (using a procedure replicating DVP Model 3).
  - BelCard scheme for domestic plastic card transactions; net interbank balances arising from plastic card transactions are settled in BISS.
- ASIS is the overarching name; BISS and the clearing system are independent in software and operational procedures but share a common hardware platform and common communications network arrangements.

### B. Organizations involved
- Belarusian Inter-Bank Settlement Center (BISC): technical operator of ASIS; develops BelCard software; provides organizational support to the telecommunication network used by BISS and the clearing system; fully owned by the NBRB.
- Center for Banking Technologies (CBT): responsible for development and maintenance of national payment system software; fully owned by the NBRB.
- Belarusian Currency and Stock Exchange (CSE): operator of securities clearing and settlement system; NBRB owns more than 99 percent of CSE share capital.
- National Processing Center (NPC): technical, organizational, and information support for bank card transactions; Belarusbank holds slightly more that 50 percent of NPC capital; NBRB about 38 percent; BISC some 6 percent; remaining part held by some major banks.

### C. Functioning of BISS — payment processing and controls
- Payment message formats are very similar to SWIFT MT100, MT202 or MT204.
- Six alternative telecommunication networks are available to submit payment messages to ASIS.
- Only a limited number of persons at participating banks may initiate payments; each has a personal key (public key management scheme), digital signatures attached to each payment, and payment messages are subject to encryption.
- Routing logic:
  - Payments exceeding BYR 5 million are considered large-value and routed to BISS.
  - Time-sensitive payments (any value, if flagged) are routed to BISS.
  - Non-urgent low-value payments are routed to the clearing system.
  - All messages pass validation checks (e.g., duplicate detection).
- Settlement finality:
  - If sufficient funds exist in the correspondent account of the ordering bank, funds are debited and credited immediately and payment is final; confirmation messages are forwarded to ordering and receiving banks.
  - If insufficient funds, the payment is queued and processed when funds become available, prioritized by Priority then time of input.
  - If receiving bank cannot apply funds to an account (e.g., error in account number), settlement finality still holds; a separate “return payment” is initiated.
- Priority and queue management:
  - Priority levels range 1-999 (1 highest). Levels 1-499 reserved for time-sensitive payments; 500-999 for large-value payments.
  - Originating bank assigns Priority. Default Priority if none assigned: 250 for time-sensitive payments and 750 for large-value payments.
  - Ordering bank can change Priority at any time before settlement; changing Priority moves item in queue.
- Reservation of funds:
  - Participants can reserve funds for specified purposes.
  - Participants are required to reserve funds to cover potential net debit positions in the NBRB clearing system and the securities clearing and settlement system. Reserved funds are blocked from other uses.
- Real-time information management system allows participants to monitor account balances, queued payments (outgoing and incoming), change priority of queued payments, and request funds reservation.

### D. Statistical information (2001–2003) — key figures preserved exactly
- Overall observation (2003): some 92 percent of all interbank payments, in value terms, were settled in BISS; in volume terms, only some 8 percent were settled through BISS. Conversely, 92 percent of the traffic volume is handled in the clearing systems, representing in value terms only 8 percent.
- Classification of payments in BISS:
  - Large-value payments: any payment equal to or greater than BYR 5 million.
  - Time-sensitive payments: payments of any value flagged as time-sensitive. Time-sensitive payments represent up to 15 percent of payments volume and about one percent in value terms.

- Table 1. Payments Handled in NBRB Systems in 2001
  - ASIS in total: Number of Participants: 29; Daily value of payments handled (Millions of US$): 159.5; Average value per transaction (US$): 1,365.0; Daily volume of transactions handled: 116,881
  - BISS (RTGS system): Number of Participants: 29; Daily value of payments handled (Millions of US$): 143.5; Average value per transaction (US$): 13,349.2; Daily volume of transactions handled: 10,747
  - Clearing (net) system: Number of Participants: 29; Daily value of payments handled (Millions of US$): 16.1; Average value per transaction (US$): 151.6; Daily volume of transactions handled: 106,135

- Table 2. Payments Handled in NBRB Systems in 2002
  - ASIS in total: Number of Participants: 33; Daily value of payments handled (Millions of US$): 197.0; Average value per transaction (US$): 1,672.2; Daily volume of transactions handled: 117,827
  - BISS (RTGS system): Number of Participants: 33; Daily value of payments handled (Millions of US$): 177.6; Average value per transaction (US$): 17,861.6; Daily volume of transactions handled: 9,943
  - Clearing (net) system: Number of Participants: 32; Daily value of payments handled (Millions of US$): 19.4; Average value per transaction (US$): 180.1; Daily volume of transactions handled: 107,884

- Table 3. Payments Handled in NBRB Systems in 2003
  - ASIS in total: Number of Participants: 35; Daily value of payments handled (Millions of US$): 258.6; Average value per transaction (US$): 1,930.2; Daily volume of transactions handled: 133,971
  - BISS (RTGS system): Number of Participants: 35; Daily value of payments handled (Millions of US$): 237.0; Average value per transaction (US$): 17,645.1; Daily volume of transactions handled: 13,432
  - Clearing (net) system: Number of Participants: 34; Daily value of payments handled (Millions of US$): 21.6; Average value per transaction (US$): 179.0; Daily volume of transactions handled: 120,539

- Intraday and operational statistics:
  - Intraday pattern: only some 50 percent of payments value is processed by 4 p.m. (representing 60-70 percent in volume).
  - Peak in payments input between 4:00 p.m. and 5:00 p.m.; last queued payments settled close to closing time at 7:30 p.m.
  - Share of annulled (non-executed) payments: 0.10 percent in terms of volume and 0.16 percent in terms of value.
  - Three peak days (volumes (000’s) and values (BYR billions)):
    - Volume: 30.12. 2003: 23.6; 21.04.2004: 23.2; 31.05.2004: 24.7
    - Value: 31.12.2003: 1,449.2; 30.09.2004: 1,331.2; 29.10.2004: 1,434.4
  - Payment flow concentration: the 6 biggest banks account for some 80 percent of both value and volume.

### E. Preconditions, governance, and stakeholder engagement
- Macroeconomic and market context:
  - Belarus has had a fairly stable macroeconomic development in recent years, influenced by a substantial but decreasing inflation.
  - Financial market activities in BYR are still very limited but potentially emerging.
  - Some 82 percent of the banking capital is controlled by the public sector.
- Industry coordination:
  - Belarus Bankers Association exists but currently does not play an important role in payment systems issues.
  - Regular meetings between NBRB management and bank executives are held quarterly; discussions cover payment systems issues.
  - Within the NBRB, payment systems issues are discussed by the Committee on Banking and Payment Transactions, chaired by the NBRB Governor, meeting weekly.
  - Banks are consulted in advance on upcoming changes; the “Concept Document for the Development of the National Payment System of the Republic of Belarus until 2010 with an Account for Global Trends” was submitted to banks and some authorities for comments before final approval.

### F. Changes and reforms in process
- May 2004: NBRB Board approved the “Concept Document for the Development of the National Payment System of the Republic of Belarus until 2010 with an Account for Global Trends”.
- Major project: implementation of a new upgraded BISS system, expected to start live operations as from April 2005.
  - New BISS will divide payment flow into two: one for large-value and/or time-sensitive payments and a new path for non-time sensitive payments.
  - A mutual offset mechanism will be applied for the non-time sensitive payments queue.
  - The system will attempt to settle queued payments via an automated queue optimization procedure (searching queues for bilateral or multilateral offsetting outgoing and incoming payments and settling them as “a block” when nettable).
- Operational regime change: as from February 1, 2006, the clearing system for other payments will move from four daily clearing sessions to a single clearing session.
- Future consolidation: envisaged that after about one year of parallel operation of the new BISS and the NBRB clearing system, the clearing system would cease operation—conditional on new BISS capability to process a substantially higher payments volume.

*Source: IMF/World Bank FSAP assessment material on BISS as provided in the chapter “Payments Handled in NBRB Systems in 2001” of the supplied document.*

### 29.      The mission has found that BISS observes three Core Principles and one Central

### _cr06177 - 29.      The mission has found that BISS observes three Core Principles and one Central

### Summary findings
- The mission has found that BISS observes three Core Principles and one Central Bank Responsibility.
- The assessment points to opportunities for further improvements in:
  - understanding and management of risks,
  - security and operational reliability and contingency procedures,
  - efficiency and practicality of the system,
  - fair and open access,
  - governance and three central banks responsibilities to ensure full adherence to the Core Principles.
- Some other, more technical refinements at the margin are recommended (see paragraph 31 in source).

### CP I — Legal basis (The system should have a well-founded legal basis under all relevant jurisdictions)
- Description:
  - The Belarusian payment system is governed by a two-tier legislative framework, complemented by contractual agreements.
  - First tier (laws and presidential decrees) includes:
    - Banking Code of the Republic of Belarus (October 25, 2000, No. 441-Z)
    - Law of the Republic of Belarus On Electronic Documents (January 10, 2000, No. 357-Z)
  - The Banking Code provides that the main functions of the NBRB include “arranging interbank settlements and specifying and adopting procedures, forms and rules relating to non-cash settlements in the national economy and penalties for non-compliance.”
  - Second tier (regulatory documents issued by the NBRB under the Banking Code) includes:
    - Rules of Interbank Settlements, approved by National Bank Supervisory Board Resolution No. 24.3, September 28, 2000
    - Instructions on Organizing Functional Operation of the Belarus Republic ASIS, approved by National Bank Board of Directors Resolution No. 29.6, December 22, 2000
    - Instructions on Bank Transfers, approved by Republic of Belarus National Bank Supervisory Board Resolution No. 66, March 29, 2001
    - Instructions on the Procedure of Bank Documentary Operations, approved by Republic of Belarus National Bank Supervisory Board Resolution No. 67, March 29, 2001
    - National Bank Supervisory Board Resolution No. 15.6, June 29, 2000 "On Liability for Violation of Settlement Operations" (as amended on July 31, 2001)
  - Tier two technical and operational guidelines (selected):
    - RD RB 07040.1404-2000 "ASIS. Automated Workstation for the Management of a Commercial Bank's Payments. General Requirements"
    - RD RB 07040.1605-2003 "ASIS. Rules of Forming Electronic Documents. Part 1. Electronic Documents and Messages of the System of Settlements of Time-Sensitive and Large-Value Payments on a Gross Basis in Real Time"
    - RD RB 07040.1601-2002 "ASIS. Formats of Electronic Messages. Part 1. Electronic Messages of the System of Settlements of Large-Value and Time-Sensitive Payments on a Gross Basis in Real Time"
    - RD RB 07040.1606-2003 "ASIS. Rules of Forming Electronic Documents. Part 2. Electronic Documents of the Clearing Settlement System"
    - RD RB 07040.1602-2002 "ASIS. Formats of Electronic Messages. Part 2. Electronic Messages of the Clearing Settlement System"
    - RD RB 07040.1001-2002 "ASIS. General Requirements on Supporting Continuous Operation and Restoration of the Performance of ASIS Participants."
  - Tier two archival requirements:
    - RD RB 07040.1101-2000 "ASIS. Electronic Document Archives. General Requirements"
    - RD RB 07040.2201-2002 "ASIS. Archives of Electronic Documents of Interbank Settlement Participants. Automation Facility. General Requirements"
  - Relevant contractual arrangements:
    - Correspondent (settlement) account agreements executed by the National Bank with banks
    - Agreement between the NBRB and the BISC on Organizing Interbank Settlements through the ASIS
    - Agreements between the BISC and participating banks on Rendering Services in Support of Interbank Settlements through the ASIS
    - Agreement on Application of Cryptographic Data Protection Resources in the ASIS
  - Terms and conditions for NBRB granting credit (including intraday credit) to BISS participants are set out in monetary policy and payment systems related legal instruments (rules and contracts).
  - Timing of settlement finality:
    - A payment is irrevocable once accepted for processing in BISS.
    - Settlement is final once funds have been debited from the correspondent (settlement) account of the remitting bank and credited to the correspondent account of the receiving bank.
  - Provisions on netting are included in the NBRB Instruction on the organization and functioning of ASIS.
  - Enforceability of security interests under collateral arrangements and repurchase agreements are defined in Chapter 5 of the Civil Code and implementing legal acts issued by the Committee of Securities (Securities Regulator).
  - All legal acts are publicly available.
  - The conformity of tier two legal acts with tier one legislation is checked in advance by the Ministry of Justice.
  - To date, there have not been any court cases evaluating provisions on finality, netting and collateral security arrangements.
  - One foreign participant in BISS: the Interstate Bank, registered in Russia, founded in 1994 by the CIS countries and Russia; NBRB does not grant credit to the Interstate Bank.
- Assessment: Observed
- Comments:
  - Legal, technical, operational and organizational issues are set forth in a complex set of documents that so far seem understandable for participants.
  - A simplification and consolidation of documentation would be welcome; NBRB has initiated work aiming at such consolidation.

### CP II — Transparency of risks and procedures (The system’s rules and procedures should enable participants to have a clear understanding of the system’s impact on each of the financial risks they incur)
- Description:
  - Rules and procedures on credit and liquidity risk management, system design, work schedule, and technical and operational risk management are set forth in documentation referred to under CP I and in monetary policy documentation (extension of credit by NBRB).
- Assessment: Broadly observed
- Comments:
  - For liquidity risk, documentation should explicitly state that current rules on intraday use of reserve holdings and extension of credit by the NBRB pose clear limitations on liquidity availability in BISS (see CP III).
  - See also comment under CP I regarding documentation complexity and consolidation.

### CP III — Management of credit and liquidity risks (The system should have clearly defined procedures for the management of credit risks and liquidity risks)
- Description:
  - BISS is an RTGS system with settlement in central bank money; credit risk does not arise for participants receiving payments.
  - NBRB is subject to credit risk to the extent it provides credit to participants; this risk is mitigated by requiring collateral with haircuts.
  - Main participant risks are legal risk, operational risk and liquidity risk.
  - Legal risk: moment when payment becomes irrevocable and time of finality are defined in the Rules of Interbank Settlements.
  - Operational risk: procedures are set out to some extent in system documentation; contact lists at NBRB and all participating banks are maintained for swift communication.
  - Liquidity risk specifics:
    - Banks can use 10 percent of their reserve holdings for transaction purposes during the day.
    - Banks can obtain credit by repo transactions; repos are originally overnight but if repaid before end of day are considered intraday repos, which are not subject to an interest charge.
    - NBRB has set a limit (currently 30 billion rubel) on the amount of liquidity it is ready to extend by repos — described as very restrictive compared with the value of payments processed in BISS.
    - There are other instruments for providing credit at NBRB's disposal, but none are designed for intraday use.
    - The money market is fairly illiquid, making it difficult for banks to raise liquidity in the market.
    - Rules require participants to reserve funds in advance for settlement of net balances arising in ancillary systems (payments clearing system and securities clearing and settlement system); the amount reserved determines maximum net debit position and also limits maximum value of securities a participant can purchase in a trading session.
    - Blocking of funds ensures net balances can be settled without delay but further limits liquidity for ongoing settlement activities.
    - No throughput rules or guidelines require a balanced flow of payments throughout the day.
    - Availability of a queuing system helps mitigate liquidity shortage problems.
- Assessment: Partly observed
- Comments:
  - There is a structural limitation on liquidity available in the RTGS system.
  - Liquidity available from the central bank is limited; banks have only very limited possibilities to raise (re-allocate) liquidity in the market.
  - Illustration: a daily payments flow of up to 1,000 billion has to be settled with a stock of liquidity of only BYR 40 billion, i.e. funds have to turn over 25 times a day.
  - Payments tend to be delayed and payment queues progressively build up during the operating day.
  - A clear peak in input and settlement of payments is observed in the afternoon, between 4 p.m. and 5 p.m.

### Key statistics and numeric constraints (preserve source numbers)
- Banks can use 10 percent of their reserve holdings for transaction purposes during the day.
- NBRB repo limit for intraday liquidity extension: currently 30 billion rubel.
- Example daily payments flow: up to 1,000 billion.
- Stock of liquidity available: BYR 40 billion.
- Implied turnover: funds have to turn over 25 times a day.
- Observed peak in input and settlement: between 4 p.m. and 5 p.m.

*Source: IMF staff mission assessment as presented in the provided content unit.*

### 4.30 p.m., the settlement of payments queued continues until 7.30 p.m.

### 4.30 p.m., the settlement of payments queued continues until 7.30 p.m.

### Liquidity, reserve use, and intraday operations
- Finding: Banks face restrictions in the availability of liquidity for intraday payments because they cannot use a larger share of their reserve holdings intraday.
- International practice noted: In countries where banks are subject to a reserve requirement, banks can as a rule use intraday these reserve holdings in full for payments purposes.
- Specific point on Belarus: Potential variations in reserve holding in individual days of individual banks are not a problem, particularly when an averaging procedure is applied (as is the case in Belarus).
- Risk if reserve ratio reduced: Liquidity in BISS would worsen further if the reserve ratio was reduced from the current level without allowing a greater share of reserve holdings to be used intraday.
- Recommendation (strong): NBRB should allow a greater share of reserve holdings to be used intraday for payments purposes, ideally in full.
- Constraint suggested by NBRB while allowing free intraday use: NBRB could still require that, at the end of each day, banks maintain at least [X] percent (where X can be any percentage) of their average reserve requirement.
- Recommendation (intraday credit): NBRB should have available an instrument and procedures for the provision of intraday credit to participants.
  - Intraday credit should ideally not be subject to any other restrictions than the availability of eligible collateral.
  - Timely re-payment discipline may be maintained by appropriate penalties for any spill over from intraday to overnight credit.

### RTGS queueing, pre-blocking, and securities trading restrictions
- Finding: Limits on net positions set by pre-blocking of funds in RTGS ensure successful settlement but restrict liquidity efficiency, delaying execution of other payments in low-liquidity systems (as in BISS).
- Recommendation: NBRB may wish to consider replacing the current pre-blocking procedure with other more liquidity-efficient risk management arrangements.
- Recommendation: The rule limiting the value of securities purchased to the amount pre-blocked in the RTGS system should be abolished to contribute to development of a more active securities trading (and arbitrage) activity.

### Core Principle assessments (selected)
- CP IV: Individual payments settled on a real-time gross basis in central bank money in BISS.
  - Assessment: Observed.
- CP V: Multilateral netting requirement.
  - Description: BISS is RTGS.
  - Assessment: Not applicable.
- CP VI: Assets used for settlement are central bank money.
  - Assessment: Observed.
- CP VII: Security, operational reliability, and contingency arrangements.
  - Description: Security framework based on NBRB Instructions, law On Electronic Documents, General Requirements on Supporting Continuous Operation and Restoration of ASIS Participants, and other documents (including “Concept on ensuring information security in payment systems”).
  - Shortcomings:
    - Security policy, requirements and control procedures not always elaborated in sufficient detail.
    - No comprehensive risk analysis yet.
    - Business continuity and contingency procedures not defined in detail.
    - Internal audit frequent but fragmented; last external audit by Ernst & Young in April 2004.
    - Recovery requirements: resume normal operation within four hours after a local disaster, and within one hour after a technical interruption.
  - Availability data: In 2004, BISS availability has been 99.88 percent (in 2004, the minimum availability requirement was 97 percent). The NBRB aims to achieve an availability not lower than the new minimum requirement of 99.5 percent in 2005.
  - Assessment: Broadly observed.
  - Recommendations:
    - Elaborate, document and implement a comprehensive risk analysis and management framework.
    - Define, document and regularly test business continuity and contingency procedures.
    - Refine change management procedures and upgrade the test system to allow testing with participants.
    - Further elaborate security and performance requirements for communication services and strengthen adherence control.

### Efficiency, operating hours, pricing, staffing, and reporting
- Structural liquidity limitation:
  - Daily payments flow of up to 1,000 billion has to be settled with a stock of liquidity of only BYR 40 billion, i.e. funds have to turn over 25 times a day.
  - Result: Very high velocity in international comparison; payments tend to be delayed and queues build up.
  - Operational timing: Although new payments can no longer be input after 4.30 p.m., settlement of payments queued continues until 7.30 p.m.
- Tariffs and costs:
  - Starting March 1, 2004, tariffs in BISS are BYR 355 (+18 percent VAT) for processing of large-value payments and BYR 1,027 (+18 percent VAT) for time-sensitive payments.
  - Communication costs of some BYR 30 per payment are in addition (paid to the communication services provider).
- Cost recovery and staffing issues:
  - NBRB approach: running (but not investment) costs of BISS should be recovered.
  - Cost calculations made by BISC and do not include running costs of the NBRB (monitoring staff, overhead, etc.).
  - BISC staff allocation: 113 persons attributed to BISS activities at BISC (noted as huge staff).
  - Software development: 26 persons directly involved in software development at the Center for Banking Technologies (CBT), and 50 more persons with “other related duties” attributed — described as clear overstaffing.
  - Result: Overstaffing implies loss in cost efficiency of BISS.
  - Recommendation: Further develop cost calculation methodology, consider including some investment costs (e.g. software development) in costs to be recovered, and take action to reduce non-NBRB staff involved in BISS activities (possibly re-allocating them).
  - Recommendation: Clarify cost allocation between BISS and NBRB clearing system where they operate on a shared hardware platform.
- Operating hours and cut-off times:
  - Present cut-off time for submitting payments: 4.30 p.m.; final processing closing at 7.30 p.m.
  - Comment: No particular financial market activities require settlement at this late time in Belarus; late closing imposes staff cost and two shifts.
  - Recommendation: System could close much earlier (e.g. at 5 p.m.). Adjust cut-off times and clearing schedules accordingly.
  - Suggested throughput guideline: advise that 50 percent of the payments volume and/or value should be processed by 1 p.m. to achieve a more balanced payments traffic.
- Transaction reporting requirement:
  - Current requirement: banks required to report on all interbank transactions to the Committee for State Control.
  - International practice: for anti-money laundering and counter-terrorist financing, only suspicious transactions are reported; statistics require pre-defined aggregate data.
  - Comment: Recording and reporting on all transactions constitutes a cost burden, affects cost efficiency, and appears inconsistent with internationally accepted confidentiality arrangements.
  - Recommendation: NBRB is invited to contribute to abolishment of the requirement to report all transactions to the Committee for State Control (see CP X).

### Access and participation criteria (CP IX)
- Access criteria set out in Instructions on Organizing Functional Operation of Belarus Republic ASIS (Resolution No. 29.6, December 22, 2000).
- Access allowed to banks and non-bank credit and financial institutions; all current participants are classified as banks.
- Remote access of foreign institutions not allowed; participants need to be licensed in Belarus.
- Conditions for access:
  - opened a correspondent account with the NBRB;
  - signed an agreement with BISC;
  - been included in the directory on bank identifier codes;
  - signed the agreement on encryption;
  - successfully passed required technical tests;
  - paid an entry fee (currently some US $120);
  - within one month from access, join an automated archiving system.
- Foreign participant example: Interstate Bank (one foreign participant).
- Assessment: Broadly Observed.
- Recommendations:
  - Access should be subject only to agreements between participants and the NBRB as system owner (re-assess necessity of applicant signing agreement with BISC as a condition for access).
  - Introduce explicit rules for voluntary and enforced exit.

### Governance, roles, and oversight (CP X and Central Bank responsibilities)
- Ownership and operational structure:
  - NBRB is owner and authority setting rules and policies for BISS.
  - Technical operation contracted to Belarus Interbank Settlement Center (BISC), fully owned by NBRB.
  - Software development and maintenance contracted to Center for Banking Technologies (CBT), owned by NBRB.
  - NBRB paid for hardware and pays CBT for development; BISC remunerates CBT for maintenance and collects transaction fees from participants.
  - Fee proposal prepared by BISC is submitted to NBRB for review but is understood not to be subject to formal NBRB Governing Bodies approval.
  - No detailed Service Level Agreements between NBRB, BISC, and CBT.
- Cooperation with banks and publications:
  - NBRB top management meets quarterly with CEOs of banks; issues discussed include payment systems.
  - NBRB published concept document on payment system development and contributed articles in national periodicals.
  - Committee on Banking and Payment Transactions (chaired by NBRB Governor) meets weekly and receives BISS reporting.
  - Reports on BISS activities published annually; statistics available on NBRB website and monthly statistical report.
- Assessment: Partly observed.
- Governance concerns and recommendations:
  - Overall organization and governance of BISS is not easy to understand and not very transparent.
  - Cost recovery arrangements among NBRB, BISC, and CBT are unconventional.
  - Proposed actions:
    - Critically assess governance arrangements for BISS.
    - Formally approve cost methodology and fees by NBRB.
    - Fees charged to banks should be formally paid to NBRB; BISC should receive remuneration from NBRB.
    - Re-assess necessity of applicants having an agreement with BISC as an access criterion.
    - Clarify roles, duties, and controls in detailed Service Level Agreements with BISC and CBT.
    - Address overstaffing in BISC and CBT and reduce administrative overhead.
    - Consider insourcing all functions related to BISS as an alternative to improve governance and economic efficiency.
    - NBRB invited to contribute to abolishment of the requirement to report all transactions to the Committee for State Control.

- Central Bank Responsibilities (selected):
  - Responsibility A: NBRB statute (Article 4) includes “ensuring efficient, reliable and secure functioning of the payment system”; statute publicly available.
    - Finding: NBRB has not yet formally established an oversight function; oversight objectives and policies are yet to be formulated.
    - Recommendation: Introduce an oversight function, define and publish oversight objectives and policies, adopt Core Principles formally, allocate oversight to a unit separate from operations, ensure training and competence.
    - Note: Legislative proposal on introduction of oversight function at NBRB has passed a first reading in the House of Representatives.
  - Responsibility B: Central bank should ensure systems it operates comply with core principles.
    - Finding: NBRB prepared a self-assessment and requested a formal assessment; BISS not yet fully compliant.
    - Recommendation: Establish an action plan with a timetable to address shortcomings; oversight function should assess implementation and continued compliance.
  - Responsibility C: Central bank should oversee observance by systems it does not operate.
    - Finding: Besides BISS, other systems include NBRB clearing system, CSE securities clearing and settlement system, and BelCard.
    - Comment: Oversight function yet to be introduced; proportional oversight to other systems likely less stringent but may extend to securities clearing and settlement in future.
  - Responsibility D: Central bank should cooperate with other central banks and authorities.
    - Finding: Cooperation exists with Bank Supervision Directorate and central banks in Russia and CIS countries; ad-hoc visits to major western central banks.
    - Assessment: Observed.
    - Recommendation: Continue collecting and studying payment systems material; progressively develop oversight relations with Committee of Securities.

### Operational history and resilience
- External audit: last external audit by Ernst & Young in April 2004.
- Secondary site: established recently (July 2004).
- Recovery time objectives: resume normal operation within four hours after a local disaster; within one hour after a technical interruption.
- 2004 availability: 99.88 percent (minimum requirement in 2004 was 97 percent); NBRB aims for availability not lower than new minimum 99.5 percent in 2005.

### Summary of Core Principle observance (table summary text)
- Observed: 3 + 1 (CP I, IV and VI; Responsibility D)
- Broadly observed: 3 + 2 (CP II, VII and IX; Responsibilities A and C)
- Partly observed: 3 + 1 (CP III, VIII and X; Responsibility B)
- Non-observed: none
- Not applicable: 1 (CP V)

*Source: IMF assessment contained in the document titled "_cr06177 - 4.30 p.m., the settlement of payments queued continues until 7.30 p.m."*

### 30.      The mission conducted an assessment of BISS relative to the Core Principles for

### _cr06177 - 30.      The mission conducted an assessment of BISS relative to the Core Principles for

### Assessment findings
- The mission conducted an assessment of BISS relative to the Core Principles for Systemically Important Payments Systems and confirmed observance of three principles and one central bank responsibility.
- The mission’s assessment points to opportunities for further improvements in:
  - understanding and management of risks;
  - security and operational reliability and contingency procedures;
  - efficiency and practicality of the system;
  - fair and open access;
  - governance; and
  - three central banks responsibilities to ensure full adherence to the Core Principles.

### Recommended actions to improve observance of CPSS Core Principles and Central Bank Responsibilities in applying the CPs — BISS
- Legal foundation (i.e. CP I)
  - -- 

- Understanding and management of risks (i.e. CPs II-III)
  - Make explicit in the documentation that the current rules on the intraday use of reserve holdings and extension of credit by the NBRB pose clear limitations on the availability of liquidity in BISS;
  - Allow  a  greater  share  of  reserve  holdings  to  be  used  intraday for payments purposes, ideally in full;
  - Make available an instrument and procedures for the provision of intraday credit to participants. Intraday credit should ideally not be subject to any other restrictions than the availability of eligible collateral;
  - Consider replacing the current procedure, whereby successful settlement of net balances is ensured by a pre-blocking of funds, with other (more liquidity efficient) risk management arrangements, and;
  - Abolish the rule limiting the value of securities purchased to the amount pre-blocked in the RTGS system.

- Settlement (i.e. CPs IV – VI)
  - -- 

- Security and operational reliability, and contingency arrangements (i.e. CP VII)
  - A comprehensive risk analysis and management framework should be elaborated, documented and implemented;
  - A risk analysis should be made regularly;
  - Business continuity and contingency procedures should be defined, documented and subsequently, regularly tested;
  - Change management procedures should usefully be refined;
  - the test system should be upgraded to allow testing also with participants, and;
  - As regards communication services, security and performance requirements should be further elaborated and adherence control strengthened.

- Efficiency and practicality of the system (i.e. CP VIII)
  - On issues related to liquidity, see comment under “understanding and management of risks” above;
  - Elaborate further on the justification for the large difference in fees and ensure consistency in fees applied;
  - Develop the cost calculation methodology further and consider including at least some of the investment costs (e.g. soft-ware development) in the costs to be recovered;
  - Assess accuracy of cost allocation between BISS and the NBRB clearing system;
  - Take action to reduce (non-NBRB) staff involved in BISS activities;
  - The daily operating time of BISS should be shortened, i.e. the system should close much earlier;
  - Consider introducing some throughput guidelines to banks.

- Criteria for participation (i.e. CP IX)
  - Re-assess the necessity of applicants having an agreement with BISC as an criteria for access;
  - Introduce explicit rules for (voluntary and enforced) exit.

- Governance of the payment system (i.e. CP X)
  - Critically assess and strengthen the governance arrangements for BISS;
  - The cost methodology and fees applied to BISS should be formally approved by the NBRB;
  - Fees charged to banks should be formally paid to the NBRB, while BISC should receive its remuneration from the NBRB;
  - The roles, duties and the controls thereof could be further clarified in detailed service level agreements with BISC and CBT;
  - Address overstaffing in BISC and CBT, and administrative overhead in general;
  - Alternatively, the NBRB could examine whether an insourcing of all functions related to BISS would provide a better route in ensuring an effective and transparent governance, including overall economic efficiency.
  - The NBRB is invited, in its relations among authorities, to contribute to the abolishment of the requirement to report all transactions to the Committee for State Control.

- Central Bank Responsibilities in applying the CPs (i.e. Responsibilities A-D)
  - The NBRB should formally establish an oversight function, and, subsequently, define and make publicly available the main payment system oversight objectives and policies;
  - Formally adopt the Core Principles for Systemically Important Payment Systems, to become part of the NBRB oversight standards;
  - Allocate the oversight function to an organizational unit within the payment systems domain and, in so doing separate clearly the oversight function from the operational function;
  - Ensure sufficient training in building up oversight competence;
  - Establish an action plan, accompanied by a timetable for implementation, in addressing the shortcomings identified in the assessment of BISS against the Core Principles. Implementation and continued compliance should be assessed by the oversight function to be established.

### Additional technical refinements recommended
- To ensure clarity and understanding, a simplification of the legal, technical, operational and organizational documentation would be welcome. This could be achieved by consolidating the documentation or, at a minimum, by establishing a comprehensive list on all relevant documents;
- The NBRB is encouraged to continue its efforts to collect and study material published on payment systems related issues, in particular, information available on the internet. As there are currently limited opportunities for close co-operation with central banks and authorities in many countries, continued activities with Russia and other CIS countries will likely prove being most helpful, and;
- Oversight relations with the Committee of Securities could usefully be progressively developed.

### Authorities’ response
- The authorities generally agree with the assessment.
- At the same time it should be noted that even though the National Bank does not have a formally defined task to supervise payment systems, it does engage in a broad set of measures associated with the fulfillment of that function.

*Source: _cr06177 - 30.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06177.pdf_