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System architecture for central banks


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Published in: Economy & Finance, Business
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System architecture for central banks

  1. 1. Financial Services System Architecture for Central BanksJean-Marc LepainCentral Bank Specialist
  2. 2. The World of Central Banking• Central Banks moving toward more independence• Exchange rate more difficult to manage• More focus on Monetary Policy• Tighten control on Commercial Banks• More dynamic reserves management• More need for risk management
  3. 3. IT Evolution in Central Banking• Reducing the number of systems• Moving to standard applications• Developing Internet based applications• Data Warehousing• OLAP based Decision Support tools
  4. 4. Special Requirements of Central Banks Systems• No concept of profitability• Different sets of activities loosely integrated (Settlement, Credit to Com. Banks, Monitoring of the Banking System, Foreign Reserves Mgt., Monetary Policy, Balance of Payment, Macro and Micro-economic analysis)• Necessity to cross information between different activities (Ex: BoP and Com. Banks’ statutory reports)• Accounting view rather than a transactional view• Different Charts of Account and accounting rules• Use of GL information for Monetary Policy and Macro economic analysis• Importance of the interface with the Payment System
  6. 6. Central Bank IT Architecture in the 70s, 80s, 90s…..MM. & Open Market Back Office I GeneralSettlement Accounts LedgerMandatory Reserves Back OfficePortfolio Management II Regulatory Compliance I Format State Treasury Back Managt Regulatory Compliance II Office III Foreign Reserves Finance Budgeting Cash Management Economic Analysis Staff Operations
  7. 7. Integrate Architecture through Oracle 8i Management Information System Banking Settlnt. Law Real Value accounts Time System System Gross Settlement System Other Oracle E-Business Payment Suite Systems
  8. 8. Central Banks and the E-business paradigm• The Web will become the main mean of communication between central banks and commercial banks and other institutions• Web centric applications allow a complete centralisation of information• Web application reduce drastically the cost of implementation and the cost of ownership
  9. 9. Internet ArchitectureClient Application DatabaseWorkstation Servers Servers Database TCP/IP Net 8 HTTP Information Centre
  10. 10. KEY BENEFITS• A package based on standard IT architecture for Central Banks• A fully integrated package using Oracle 8i as common technology platform• All applications accessible through the Web• Timely information for critical decisions• Improvement of staff efficiency and of process flows• Promotion of world best practices
  11. 11. Management Information System and Decision Support Internal Monetary Risk Macro- Banking Control Policy Managnt. Economy System Financial Foreign Op. System G.L.Regulatory System PortfolioCompliance Analysis Accounting ManagementPayables &Receivables Banking & Fix Assets B.o.P. Payment Settlement System System VaultManagement Foreign Debt System Management
  12. 12. Central Bank: Standard System Architecture Front Office Back Office Head Office Statistical System RTGS ERPClientWorkstation Market Symbols Vault Operations System Management TCP/IP Monetary Policies External Sources Data Depository Macro Economy Financial Institutions HTTP Management Policies & State Treasury Procedure
  14. 14. Oracle Enterprise Resources Planning Application• GL can be fully integrated with the Banking System and the Payment System• Webanabled• Central Bank references• Special functionalities for Central Banks• Flexible use of the Chart of Account
  15. 15. Oracle ERP Modules Accounts Receivables Financial Analyser Human Resources Payroll General Ledger Oracle ERP includes Accounts Payables Fixed Assets Inventory Control Purchase Order
  16. 16. Modules Common Components• Oracle Financial Analyser• Oracle Business Intelligence• Oracle Implementation Wizard• Workflow• Alert
  17. 17. General Ledger• All types of journal entries and accounting rules• Fully Multi-Currencies• Consolidation of multiple sets of books• High level of security in managing posting and transaction processing• Large reporting capability
  18. 18. Oracle GL Special Features for Central Banks• Precious Metal Management• Coins and Bills Issuance Management• Cash Management• Budgeting• Monitoring of the Money Supply and of the Monetary Base• Balance of Paymen
  19. 19. Account Structure• Independence from Chart of Account• Account Structure on-line• Up to 30 segments• Intuitive Account Hierarchy Editor• Reflect the organisation (branches, departments, cost centres, instruments)• Flexible calendar structure (Up to 366 periods, uneven periods adjustment periods, multiple calendar)• Multiple closing dates
  20. 20. Benefits of Oracle General Ledger• Software easily tailored to the Bank’s requirements• Seamless integration with other applications• High number of automated functions (periodic journals, data import and data validation, etc.)• Customisation of reports without programming• Reduce time in the closing process• Improve productivity• Improve accounting controls
  21. 21. Cash Issuance and Vault ManagementOracle Inventory plus some custom development• Track bills of different denominations• Track serial numbers• Track bank note status• Manage precious metals (gold coins, ingots, etc.)• Manage paper securities, monetary exhibits, etc.• Perform reconciliation with General Ledger
  22. 22. Cash Issuance and Vault Management Process Flows Events Financials Banking System Cash Management Issuance of new notes Cash Issuance Branches and Central Vault Management System CommercialCounting/sorting Banks of old notes Monetary Precious Exhibits Metals Securities, etc.
  23. 23. System Modules Vault Management System PayablesOptional Order Processing Inventory
  24. 24. 3. PAYMENT SYSTEMS
  25. 25. Payment SystemsRTGS Architecture• Telecommunication layer (Hardware, Network X25, Protocol TCP/IP, etc.)• Messaging System• Queuing mechanism• Settlement mechanism• Payment auditing system (statistics, control, etc.)
  26. 26. Why RTGS ?• To secure large value payments• To make payments final and unconditional• To reduce systemic risk in the banking system• To raise intra-day liquidity• To provide key information and efficient instruments for monetary policy• To increase efficiency through queuing mechanism• To embrace the standard technology• Payment versus Delivery for security settlement• Possibility to connect to other national RTGS, Payment versus Payment for FX
  27. 27. Issues with Payment Systems• Number of Settlement windows and number of sub-systems (RTGS, PVS, Net Settlement, Card Settlement, Cheques Clearing, Securities Settlement, etc.)• Number of payment instruments and volume• Queuing mechanism and prioritisation of payments• Architecture (T, L, V, Y)• Intra-day credit and intra-day liquidity• Other regulation issues
  28. 28. Payment Systems Architecture Settlement Accounts RTGS NSS High Value Law Value Payments Payments FX Securities CheckSettlement Settlement Clearing (PvP) (DvP) House
  29. 29. Korea KFTC Payment Architecture Giro Bill Exchange E-commerce RTGS Low Value Payments Cheque Clearing ATM Settlement
  30. 30. Basic Structure of KFTC Financial NetworkHead Office Center Internet GIRO E-Commerce Gateway InterbankFund CD Host Transfer Host Giro Host Bulk Payment Bill Exchange Intermediation of Fund Transfer Communicaton UNIT Packet Switch NMS Bank of Korea Leased Lines (256K) Leased Lines (256K) PST PST PST N N N Regional Centers Bank N Bank 1 Bank 2 Bank 3 Bank 4 Bank 5
  31. 31. RTGS Market• IMS• Logica• Montran• CMA• CBS• Perago• Custom Development (Sema, etc.)
  32. 32. Bank 1 Bank 2 Bank 3 Comms &Monitoring Payments Security Control Central Messages Mechanism Switch Mechanism RTGS Queue Queue Queue Manager Optimiser Collateral & RTGS Settlement Settlement Loan Accts. Driver Account General Ledger
  33. 33. RTGS Functionalties• Payment and Settlement finality• Queue Management and optimisation facility• Collateral Management, Repo transactions• Payment versus Delivery (PvD) functionalities
  34. 34. RTGS Functionalities• Gridlock resolution• Liquidity Management• Forecasting tools to predict end of day position• Risk Management• Enhanced security features• Comprehensive audit controls
  35. 35. Account Management• Queued Payment account and suspended payments• Settlement Account management (mandatory reserves, other reserves, etc.)• Collateral Account• Securities Account (DvP)
  36. 36. Parameterisation• Criteria for prioritisation of payments• Possibility of intra-day credit• Possibility of settlement against collateral deposits• Possibility of adjustment of Mandatory reserves
  38. 38. Data Depository and Analysis SystemA Data Depository is a Data Warehouse on top of which we can perform analysis in different business areas.“A Data Warehouse is a subject-oriented, integrated, time-variant, non-volatile collection of data for management purposes.” Bill Inmon
  39. 39. Data Warehouse Data Warehouse Solution Symbols Core Banking Market Operation Oraclee-business Oracle Staging Data Financial External Area Warehouse Monitoring Systems Policy Analyser (Reuters) & Oracle Research Discoverer System Regulatory RequirementsMinistry ofFinance Credit Foreign State Risk Exchange Treasury Management
  40. 40. Data Depository and Decision Support System Macro Economic Data Marts Analysis External Information Monetary Policy & Market Operations Transactional Foreign Data operations Systems Repository State Treasury Operations Financial Institutions Cost & Regulatory Internal Compliance Control System
  41. 41. Candidate Data marts• Market Operations• Monetary Policy• Foreign Operations and portfolio management• Regulatory Compliance Analysis• Macro-economic Analysis• State Treasury• Risk Analysis
  42. 42. Multi-dimensional AnalysisBranches/Offices Moscow Instruments St. Petersburg T-bill Open Market Operations Nizhni Novgorod Repo Operations Free MM Deposits Mandatory Reserves Q1 Q2 Q3 Q4 Time
  43. 43. Reporting structure Board of Gov. Reports Senior Management Reports Consolidation Monetary Committee Medium Management Level Dep. 1 Dep. 2 Dep. 3 Dep. 4 Spe. 1 Spe. 2 Spe. 2 Specialist Level
  44. 44. Regulatory Compliance and Risk Analysis SystemThree modules:• Bank Registry• Statutory Reporting Data Collection and Analysis – Report collection – Report authentication and validation – Report Analysis• Failing Institution Management
  45. 45. Regulatory Compliance and Risk Analysis System Banking R.T.G.S. Data System Generation System Collection Oracle Data and Financial Communication Oracle Validation Analyser Infrastructure Data of data Warehouse Data Statutory Failing Generation Bank Institution System Reports Registry Management Analysis
  46. 46. Policy & Procedure Monitoring System• Capture policies• Track decisions associated to policy design• Follow up on implementation• Store on line policy documents• Store on line manuals and procedures
  47. 47. Economic Information System OFA Ecomometric National Modelling Macro Statistics Financial Institution Tools Economy Institute Risk Analyser System Analysis Statistical Tools Monetary Policy Reporting Data OracleInstitutions Economic Entry Express Returns System Database Data Oracle 8i Dissemination time System Series Database Other Central Oracle Financial Data Banks Populate Application Presentation MB Facilities Website