Jamclear: settling financial transactions in real time
Published:Friday | February 4, 2011 | 12:00 AM
Sabrina Gordon, Staff Reporter
The Bank of Jamaica (BOJ) on Wednesday officially launched its real time clearing and settlement system, Jamclear, which now allows commercial banks and securities dealers to transact and make settlement immediately. Previously, the system entailed a net deferred-settlement arrangement.
"Jamaica is now listed among a group of countries that have successfully completed the programme for modernising the financial system infrastructure to eliminate risk and to promote system stability," said Livingstone Morrison, deputy governor of the BOJ and chairman of the national payment council.
A reform of the payment system in Jamaica was recommended back in 2003, following a detailed assessment by the International Monetary Fund (IMF) and World Bank.
One of the major elements of the reform was to launch a Real Time Gross Settlement (RTGS) system for the settlement of large-value, inter-bank payments.
It allows commercial banks, primary dealers and other financial institutions to transfer funds amongthemselves and on behalf of clients in real time.
The RTGS system now in use replaces the Customer Inquiry and Funds Transfer System, a deferred-settlement system previously in use that allowed for the electronic transfer of funds in local currency among the accounts of primary dealers, commercial banks, as well as the Central Securities Depository and its broker members.
A second component, the creation of an electronic central securities depository (CSD) to issue Government Of Jamaica (GOJ) and BOJ securities, was also recommended as part of the reform of the payments system.
With the CSD, it also eliminates the need for printing paper certificates to show ownership.
Instead, ownership is now recorded in the CSD.
Together, the RTGS and the CSD which are now in place will ensure that payment for and transfer of all securities traded or purchased are executed simultaneously, guaranteeing delivery and payment immediately.
To date, Morrison said that at least 14,000 investors' accounts have been recorded in Jamclear with securities totalling $680 billion.
Electronic payments
Along with the RTGS and CSD, the Automated Clearing House (ACH), a private network that connects banks to one another and enables electronic payments, such as automatic payroll deposits and debit card purchases to be handled and processed, will continue to be in operation dealing only with settlements for small retail transactions up to a certain limit.
"The ACH was designed as a low-value system, so it will operate in that space, and large-value transactions will be done through the RTGS," said Morrison, at the launch.
The limit on transactions passing through the ACH has been set at $1 million, but is one which will be phased in over time.
"For this year, we are working with $5 million, but we are going to reassess where we are at in January next year," said Morrison.
"We think that during the course of this year, we will be able to impact not just $5 million but also values between $1 million and $5 million as well," he said.
"So we will do a comprehensive assessment of our successive migration of large-value transactions from the ACH, then we will make a decision whether to accelerate the pace or not."
At the same time, Morrison was quick to note that there was not a huge quantity of large-value transactions going through the ACH.
"Most of the transactions going through the ACH are not large-value transaction, 97 per cent are small value, so it's a relatively small number of transaction to target and relatively small number of customers," said Morrison.
But Morrison warned that if financial institutions don't keep to the limit, a penalty will be applied.
For each transaction that goes through the ACH above the limit set, a fee of $5,000 will be charged.
In the meantime, Morrison said that through an oversight function, the bank will continue to closely monitor, assess and bring about changes to improve the safety and efficiency of the national payment system.
"Jamclear was deliberately designed to support the delivery of safe efficient payment of funds transfer and securities-settlement service to the people of Jamaica," said Morrison.