This document discusses system architecture for central banks. It proposes an integrated Oracle ERP system to consolidate various applications including banking, payments, general ledger, cash management, and regulatory reporting. A data warehouse would store transactional and external data to power decision support tools for monetary policy, risk management, and economic analysis. Standardizing on Oracle applications and a web-centric architecture allows centralization of information and reduces costs.

1. Financial Services
System
Architecture
for
Central Banks
Jean-Marc Lepain
Central Bank Specialist

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. 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. 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

5. 1. GENERAL ARCHITECTURE

6. Central Bank IT Architecture in the 70s, 80s, 90s…..
MM. & Open Market Back
Office
I General
Settlement Accounts
Ledger
Mandatory Reserves Back
Office
Portfolio 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. 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. 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. Internet Architecture
Client Application Database
Workstation Servers Servers
Database
TCP/IP
Net 8
HTTP
Information Centre

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. Management Information System and Decision Support
Internal Monetary Risk Macro- Banking
Control Policy Managnt. Economy System
Financial Foreign Op.
System
G.L.
Regulatory System
Portfolio
Compliance
Analysis Accounting Management
Payables &
Receivables Banking
&
Fix Assets B.o.P. Payment
Settlement
System
System
Vault
Management Foreign Debt
System Management

12. Central Bank: Standard System Architecture
Front Office Back Office Head Office
Statistical
System
RTGS ERP
Client
Workstation Market
Symbols Vault Operations
System Management
TCP/IP Monetary
Policies
External
Sources
Data
Depository Macro
Economy
Financial
Institutions
HTTP Management Policies &
State
Treasury
Procedure

13. 2. ENTERPRISE RESOURCE
PLANING APPLICATION

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. Oracle ERP Modules Accounts Receivables
Financial Analyser
Human Resources
Payroll
General Ledger
Oracle ERP includes Accounts Payables
Fixed Assets
Inventory Control
Purchase Order

16. Modules Common Components
• Oracle Financial Analyser
• Oracle Business Intelligence
• Oracle Implementation Wizard
• Workflow
• Alert

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. 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. 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. 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. Cash Issuance and Vault
Management
Oracle 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. 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
Commercial
Counting/sorting Banks
of old notes
Monetary
Precious
Exhibits
Metals Securities, etc.

23. System Modules
Vault Management System
Payables
Optional Order Processing
Inventory

24. 3. PAYMENT SYSTEMS

25. Payment Systems
RTGS Architecture
• Telecommunication layer (Hardware,
Network X25, Protocol TCP/IP, etc.)
• Messaging System
• Queuing mechanism
• Settlement mechanism
• Payment auditing system (statistics, control, etc.)

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. 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. Payment Systems Architecture
Settlement Accounts
RTGS NSS
High Value Law Value
Payments Payments
FX Securities Check
Settlement Settlement Clearing
(PvP) (DvP) House

29. Korea KFTC Payment Architecture
Giro
Bill Exchange
E-commerce
RTGS
Low Value Payments
Cheque Clearing
ATM Settlement

30. Basic Structure of KFTC Financial Network
Head 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. RTGS Market
• IMS
• Logica
• Montran
• CMA
• CBS
• Perago
• Custom Development (Sema, etc.)

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. RTGS Functionalties
• Payment and Settlement finality
• Queue Management and optimisation
facility
• Collateral Management, Repo transactions
• Payment versus Delivery (PvD)
functionalities

34. RTGS Functionalities
• Gridlock resolution
• Liquidity Management
• Forecasting tools to predict end of day
position
• Risk Management
• Enhanced security features
• Comprehensive audit controls

35. Account Management
• Queued Payment account and suspended
payments
• Settlement Account management
(mandatory reserves, other reserves, etc.)
• Collateral Account
• Securities Account (DvP)

36. Parameterisation
• Criteria for prioritisation of payments
• Possibility of intra-day credit
• Possibility of settlement against collateral
deposits
• Possibility of adjustment of Mandatory
reserves

37. 4. BUSINESS INTELLIGENCE
AND
DECISION SUPPORT SYTEM

38. Data Depository and Analysis
System
A 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. Data Warehouse
Data Warehouse Solution
Symbols
Core Banking
Market
Operation
Oracle
e-business
Oracle
Staging Data Financial
External Area Warehouse Monitoring
Systems Policy Analyser
(Reuters) &
Oracle
Research Discoverer
System
Regulatory
Requirements
Ministry
of
Finance
Credit Foreign State
Risk Exchange Treasury
Management

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. Candidate Data marts
• Market Operations
• Monetary Policy
• Foreign Operations and portfolio management
• Regulatory Compliance Analysis
• Macro-economic Analysis
• State Treasury
• Risk Analysis

42. Multi-dimensional Analysis
Branches/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. 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. Regulatory Compliance and Risk
Analysis System
Three modules:
• Bank Registry
• Statutory Reporting Data Collection and
Analysis
– Report collection
– Report authentication and validation
– Report Analysis
• Failing Institution Management

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. 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. Economic Information System
OFA
Ecomometric
National
Modelling Macro
Statistics Financial Institution Tools Economy
Institute Risk Analyser System
Analysis
Statistical
Tools Monetary
Policy
Reporting
Data Oracle
Institutions 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