Case study The Central Bank of Egypt Central Bank of Egypt The Central Bank of Egypt celebrates its first anniversary using SWIFT’s Y Copy service, settling over 2.5 trillion US Dollars during the first year. “The Egyptian RTGS now uses the SWIFT Y Copy service – the most secure and trustworthy medium of transferring funds.” Tarek Raouf, Sub-Governor, the Central Bank of Egypt The Central Bank of Egypt Benefits The CBE wanted the banks to use their existing infrastructure. (CBE) has introduced important Security “The Egyptian RTGS uses SWIFT’s Y payment system improvements Cost effectiveness in recent years. The CBE has Copy service – the most secure and Focus on core business trustworthy medium of transferring funds,” assumed a leadership role to Fast track implementation says Tarek Raouf, Sub-Governor, the coordinate the necessary actions Central Bank of Egypt. No negative impact on banks to achieve an overall upgrade All messages sent through the of the Egyptian payment RTGS system fully comply with systems. The CBE is committed The Central Bank of Egypt (CBE) wanted SWIFT messaging formats – they are to concentrate on its core business as to the modernisation of the internationally recognised and conform a settlement agent, while outsourcing with best market practice. payments system in Egypt. the networking and routing services to a These efforts crystallized with trustworthy institution - SWIFT. The RTGS has proven to be vital to the Egyptian banking sector as it evidenced the introduction of an RTGS The CBE recognised the need to maintain that on average 54 billion Egyptian system, the introduction of the confidentiality of payment messages. Pounds are settled and circulated within direct credit and direct debit It needed only the data required to settle the system on a daily basis, with a daily within the automated clearing payments on RTGS without exposing average of 4,800 settlement requests on customer information exchanged between closing its first year. house system, the vast increase sender and receiver banks. in cards, the regulations related During the first 12 months of operation, a The CBE required the carrier to confirm to payment systems, and total of 13 trillion Egyptian Pounds have delivery of each and every payment settled in the system (over 2.5 trillion US electronic transfer of money. message, while confirming settlement Dollars). This means that Egypt’s GDP The CBE introduced its finality and irrevocability. circulates in the system in roughly 20 oversight framework, explaining The CBE wanted to apply the highest level working days. objectives of the CBE in regards of security possible among exchanged to payment systems and services. messages. 1 Payment instructions 2 Authorisation request SWIFTNet Y- Copy Authorisation response 1 4 3 Bank A Bank B 4 Final payment instruction received 2 3 5 Sender notification and 5 SWIFT 5 reporting (optional) Interface Central Central application institution FIN Y-copy for RTGS The benefits of using Y Copy for the Solution overview Communications with SWIFT were very RTGS are manifold: strong throughout the project. SWIFT The Central Bank of Egypt is a major assigned a project manager from its side — Security - A secure channel to transfer catalyst for change in the Egyptian to be a focal point with CBE. “We shifted funds financial market. The decision to the SWIFT test environment to Y topology launch an RTGS was made by the top — Cost effectiveness - No extra cost one year and half before launch,” says management of the Central Bank. On 15 for the banks, as they were already Ahmed Faragallah, Head of Payments March 2009, it introduced the national connected to SWIFT Systems Department, the Central Bank RTGS system with SWIFT’s Y Copy of Egypt. “We applied heavy tests on — Focus on core business – the CBE topology. concentrates on the settlement the environment. We tested the disaster function while outsourcing non-core recovery site connection with SWIFT in a business like networking and routing “ The RTGS has proven to couple of drills before launch. And finally, to SWIFT all final preparations before going live were be vital to the Egyptian communicated on an hourly basis with — Fast track implementation - banking sector” SWIFT. Everything went smoothly, and implementation was rapid, as no during first day of launch, all stakeholders major changes were required to the noted that we are moving in the best banks’ connection or message format, “Introducing the system required the expected scenario.” and only minimal changes to internal Central Bank to take tough decisions procedures related to credit extension policies, — No negative impact on banks - The liquidity management techniques and the “ The central bank of Egypt only significant change occurred at the carrier of the payment messages,” says CBE, which consisted of changing the Tarek Raouf. wanted to concentrate SWIFT topology from ‘T’ to ‘Y’ Planning for the introduction of the on its core business as a RTGS was important to avoid impacting settlement agent, while a sophisticated financial sector with a outsourcing the networking long history of banking traditions and experience. A detailed project plan was and routing services to a put in place to set clear expectations to trustworthy institution - the market, and policies related to the SWIFT” RTGS model were set in coordination with all stakeholders, aimed at a smooth introduction of the backbone of payment systems in Egypt. 56013 - SEP 2010 SWIFT © 2010 Features of the system Current situation Conclusion — The Egyptian RTGS system is owned The RTGS – which is in its first phase - The RTGS system monitors individual and operated by the Central Bank of processes Egyptian pounds payments. banks, market trends and patterns in Egypt. Clearing houses payment systems, including indications — The Egyptian RTGS is based on latest Three clearing houses settle their netting for shortage in liquidity, early versus late business concepts in large value results in the RTGS: CBE Cheque payment behaviour, and effects of high payment systems and state of the art Clearing House, National Switch and demand/supply of foreign currency. technology. ACH, and the Stock Exchange. — Settlement in the RTGS is final and Next Steps irrevocable. Participants — Multicurrency processing All banks holding accounts with the — The RTGS system settles both single Central Bank of Egypt are direct — Integration with the new central payment requests and netting results participants in the RTGS, and participation securities depository of clearing houses. is mandatory for all banks. — The RTGS settles the cash leg of securities transactions, on a delivery For more information, please contact your versus payment model 1, once a day. Compliance with international standards SWIFT account manager or visit Egypt’s RTGS system fully complies with www.swift.com — The Central Bank of Egypt offers a free the Core Principles of BIS Systemically and collateralised intraday loan facility Important Payment Systems; an to banks based on a haircut. appropriate oversight is performed to Accepted collaterals within the system ensure such compliance. are treasury bills (through intra-day repos with the Central Bank) and deposits at the Central Bank - by blocking deposits..