General Overview
According to the International Monetary Fund's (IMF) December 2006 Financial System Stability Assessment, including the Report on the Observance of Standards and Codes (ROSC) on Payment Systems in Uruguay, the Sistema Electrónico de Comunicaciones (SEDEC) is the main operating system of the Central Bank of Uruguay (BCU). Within it, there is a module through which some of the institutions holding a current account at the BCU may transfer funds among them under a real-time gross settlement (RTGS) mode. Due to the high value settled through it, this funds transfer system is considered systemically important. The check clearinghouse operated by Bolsa Electrónica de Valores del Uruguay (BEVSA) is also a major funds transfer system in the country; checks are sometimes used as an instrument for the exchange of large value payments. The check clearinghouse still presents some elements of systemic importance. (IMF 2006, pp. 33-34)
The SEDEC does not fully comply with several Committees on Payments and Settlement Systems (CPSS) Core Principles (CPs), though improvements are underway. The BCU is addressing some shortfalls of the existing system to make it fully compliant with the CPSS. A project to migrate the current RTGS payment system to a new platform, AGATA, is underway. Areas for further improvement include the development of clear rules and procedures, the establishment of a secondary processing site, and the development of business continuity and disaster recovery plans. A comprehensive external audit of the new system should be conducted once the upgrade is completed. (IMF 2006, pp. 20-21)
The BEVSA-operated check clearinghouse, a major funds transfer system that handles some large-value payments, does not observe most CPSS core principles. Payments safety and stability would be greatly enhanced by requiring large-value payments to move to the RTGS system. BEVSA is developing an automated clearinghouse (ACH) to settle electronic credit transfers, direct debits, and other new means of payment. The BCU needs to provide oversight and play a catalytic role in encouraging agreements among potential system users in order to help ACH begin operations on a large scale and with a sound legal backing. (IMF 2006, p. 21)
The IMF also observes that the BCU does not observe fully some of the CPs and responsibilities in applying the CPSIPS. It therefore needs to establish formally its oversight function over the payment system as a whole and have the ability to exercise its oversight function effectively. Important efforts to upgrade the payment system and integrate the government securities infrastructure with the large-value system should be put in place soon, to guarantee both the smooth functioning of the payment system and the creation of a more active market for government securities. Security settlement oversight is done in a limited way by the stock exchange in its self-regulatory capacity. This function should be complemented by stronger, adequately resourced BCU oversight, to increase investor confidence in the market. The IMF recognizes that the BCU's reform program will address many of the weaknesses in the payment and securities settlement system. It encourages the authorities to make early implementation of the program a priority. (IMF 2006, pp. 21, 34)
The IMF states that as for other cashless payment instruments, debit cards and credit cards use is still very limited. There are 5 major credit card issuing companies, OCA, VISA, MASTERCARD, DINERS and AMEX. Settlement of card transactions takes place through the local networks in the case of OCA and VISA, regional networks (Argentina) in the case of MASTERCARD, and international networks for the rest. Debit cards are used almost exclusively for cash withdrawals. There are 4 major ATM networks, BROU, REDBANC, BANCOMAT, and CABAL with more than 575 ATMs. The two major private sector networks, REDBANC and BANCOMAT merged in July 2005. There is not a national Electronic Funds Transfer at Point of Sale (EFTPOS) switch. In addition, there are two companies that provide payment services (payment and collection of utilities and taxes), Abitab and Red Pagos, with about 900 agencies throughout the country. (IMF 2006, pp. 31-32)
Regarding cross-border payments, the IMF notes that the BCU and the commercial banks are connected to the Society for Worldwide Interbank Financial Telecommunication (SWIFT). Normally banks send funds to their foreign correspondents through the BCU. In some cases, related to export/import activity, commercial banks and other non-bank financial institutions send payment instructions directly through SWIFT (via the BEVSA network). Remittances are not a very important source of funding for Uruguay. Net inbound remittances in 2004 represented approximately 0.5 percent of GDP. (IMF 2006, p. 32)
A 2006 report of the BCU stated that for the improvement of the payment system there were going to be changes and modernization in the system. The BCU would implement the electronic transactions into the system, for a more efficient payment system. The BCU stated that all the payments systems and implementation of these would be under the jurisdiction of the CPSS. The BCU would also pass a law on payment systems; this law would be the legal framework of all the payment systems in the country. (BCU 2006, p. 2)
However, there is no information as when this law is going to be passed or when the migration from SEDEC to AGATA is going to be completed.
The Principles
I. The system should have a well-founded legal basis under all relevant jurisdictions. |
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There is insufficient information publicly available as to Uruguay's compliance with this Principle.
With regard to this principle, the IMF's 2006 FSSA notes that the BCU Charter (Carta Orgánica del Banco Central del Uruguay) dated March 30, 1995, includes as a basic function of the BCU "to ensure a smooth functioning of the domestic and foreign payments" (Article 3b). Thus, the law is specific about the role of the central bank in payment systems as it establishes the basis for its regulatory and oversight powers (although not explicitly) and, if necessary, for the operation of some systems if necessary. Articles 6 and 26 regulate the issue of currency and its legal tender. In addition, the law empowers the BCU to establish arrangements with private and public institutions regarding payments and its settlement (Article 29). This law also regulates reserve requirements (Article 27), open market operations, and financial assistance (Articles 27, 36 and 37). Article 55 refers to the securities issues by the central bank. (IMF 2006, p. 33)
The IMF recommends that pending legal issues should be addressed as a priority by the BCU, including the finality of settlement, protection of the systems against bankruptcy procedures, legal basis for netting arrangements, legal basis for public securities, legal definition of the repo, improvement of the legal basis for custody arrangements and legal basis for electronic signatures and documents. (IMF 2006, p. 35)
A 2006 report of the BCU stated that a New Law on Payments Systems was being drafted by the BCU; this law would be a legal framework of the new modern payment system for Uruguay. (BCU 2006, p. 2)
II. 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 through participation in it. |
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The IMF's 2006 FSSA recommends that the BCU should develop a clear strategy to effectively migrate all large-value payments from the check clearinghouse to the real-time gross settlement (RTGS) system. (IMF 2006, p. 35) However, there is insufficient information publicly available as to Uruguay's compliance with this Principle.
III. The system should have clearly defined procedures for the management of credit risks and liquidity risks, which specify the respective responsibilities of the system operator and the participants and which provide appropriate incentives to manage and contain those risks. |
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The IMF's 2006 FSSA recommends that the BCU should develop a clear strategy to effectively migrate all large-value payments from the check clearinghouse to the real-time gross settlement (RTGS) system. (IMF 2006, p. 35) However, there is insufficient information publicly available as to Uruguay's compliance with this Principle.
IV. The system should provide prompt final settlement on the day of value, preferably during the day and at a minimum at the end of the day. (Systems should seek to exceed the minima included in this Core Principle.) |
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The IMF's 2006 FSSA recommends that amendments to legislation regarding irrevocability of a settled payment are necessary. (IMF 2006, p. 35) However, there is insufficient information publicly available as to Uruguay's compliance with this Principle.
According to the International Monetary Fund's (IMF) December 2006 Financial System Stability Assessment, there is a single national check clearinghouse in local currency and in U.S. dollars regulated by the central bank and operated by Bolsa Electrónica de Valores del Uruguay (BEVSA), a private sector entity owned by the banking sector. BEVSA settles the outgoing balances at the BCU. Checks can be endorsed several times without any limit. Exchange of physical items takes place between 11:00 p.m. and 11:45 p.m. Checks information is sent to BEVSA by banks before 12:30 a.m. on T+1. On T+1 between 10:30 a.m. and 11:30 a.m. a rejected items session takes place and new debit positions are settled at BCU accounts. The BCU ensured settlement even if no funds were available in the banks' accounts at BCU until August 2005. Currently, the BCU provides collateralized credit for a maximum value of 15 percent of the Responsabilidad Patrimonial Neta (with a cap of two times the minimum amount required to create a bank in Uruguay, Responsabilidad Patrimonial Básica) or the market value of securities available to collateralize, whichever is lower. BCU and government securities are accepted as collateral with the application of a haircut. (IMF 2006, p. 31)
There is a funds transfer system operated directly by the BCU that affects the accounts financial institutions hold at the central bank through Sistema Electrónico de Comunicaciones (SEDEC). In addition to the automated system, participants are still able to move funds in their accounts with Cartas (paper instructions). The great majority of payments are denominated in local currency or U.S. dollars, although participants can also request transactions in other currencies like the euro. Banks have access to credit from the BCU for payment system purposes. Since August 2005 this credit facility is collateralized as explained in the paragraph above. Reserve requirements can be mobilized throughout the day. Although in principle banks have to comply with a monthly average, only in four days of the month the reserves could be under the established limit in the case of local currency and never below 90 percent in the case of foreign currency. The funds transfer system within SEDEC is migrating to a new platform, AGATA. (IMF 2006, p. 31)
A 2006 report of the BCU stated that with the modernization of the Payment System with electronic methods, the BCU expected a faster response of the payment system. (BCU 2006, p. 2)
V. A system in which multilateral netting takes place should, at a minimum, be capable of ensuring the timely completion of daily settlements in the event of an inability to settle by the participant with the largest single settlement obligation. (Systems should seek to exceed the minima included in this Core Principle.) |
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The IMF's 2006 FSSA recommends that amendments to legislation regarding irrevocability of a settled payment are necessary. (IMF 2006, p. 35) However, there is insufficient information publicly available as to Uruguay's compliance with this Principle.
VI. Assets used for settlement should preferably be a claim on the central bank; where other assets are used, they should carry little or no credit risk and little or no liquidity risk. |
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There is insufficient information publicly available as to Uruguay's compliance with this Principle.
VII. The system should ensure a high degree of security and operational reliability and should have contingency arrangements for timely completion of daily processing. |
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There is insufficient information publicly available as to Uruguay's compliance with this Principle.
With regard to this principle, the IMF's 2006 FSSA observes that some shortfalls in the existing funds transfer system are already being addressed. Areas that require further measures include: (1) setting-up of a secondary processing site; (2) definition and implementation of a broader business continuity plan (BCP) as well as a disaster recovery plan (DRP) and test them on a regular basis; (3) periodic training and tests of these procedures are recommended; (4) the re-location of the back-up servers to a location with a different risk profile compared to the main site; (5) strict enforcement of security requirements to overcome possible risks which might be brought into the system by the participants; and (6) training programs for the participants to increase the system security as well as participants' awareness regarding safety and efficiency issues. (IMF 2006, p. 35)
The IMF notes that the BCU is undertaking an important upgrade of the current real-time gross settlement (RTGS) system. Due to its systemic importance the IMF recommends the BCU to undertake a comprehensive external audit of the system once the upgrade has been completed. (IMF 2006, p. 35)
VIII. The system should provide a means of making payments which is practical for its users and efficient for the economy. |
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There is insufficient information publicly available as to Uruguay's compliance with this Principle.
IX. The system should have objective and publicly disclosed criteria for participation, which permit fair and open access. |
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With regard to this principle, the IMF recommends that the BCU should develop clear access criteria and also define criteria regarding the exclusion of participants from the system. Samples to establish and adapt these requirements to needs of the BCU are available at various real-time gross settlement system (RTGS) operators. This measure would ease all the participants and increase the confidence into the system as a whole. (IMF 2006, p. 35) However, there is insufficient information publicly available as to Uruguay's compliance with this Principle.
X. The system's governance arrangements should be effective, accountable and transparent. |
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With regard to this principle, the IMF recommends the creation of a system users' group to support the BCU and in general the Payment System Council and its working groups in terms of initiating new services, accelerating the development of the system, and enhancing the compliance with the user needs, thereby emphasizing and improving the governance function significantly. (IMF 2006, p. 35) However, there is insufficient information publicly available as to Uruguay's compliance with this Principle.
A. The central bank should define clearly its payment system objectives and should disclose publicly its role and major policies with respect to systemically important payment systems. |
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The International Monetary Fund's (IMF) December 2006 Financial System Stability Assessment recommends that the BCU in exercising its oversight role should have the ability to carry out this function effectively. To this end, the BCU should establish appropriate organizational arrangements and staffing. This includes the smooth integration of functions between the role of the central bank as payment system operator and its responsibility as payments system overseer. (IMF 2006, p. 36) However, there is insufficient information publicly available as to Uruguay's compliance with this Principle.
Important actions, according to the IMF, will need to be carried out by the BCU as payment system overseer. They include: (1) ensuring that an adequate degree of participant cooperation exists; (2) verifying that individual payment systems satisfy user needs; (3) defining and implementing appropriate actions should participants not comply with published rules and regulations; and (4) collecting and distributing relevant statistical information to demonstrate the use being made of each system and the extent to which the systems are satisfying end-user and other market needs. (IMF 2006, p. 36)
B. The central bank should ensure that the systems it operates comply with the Core Principles. |
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The International Monetary Fund's (IMF) December 2006 Financial System Stability Assessment recommends that the BCU should move toward compliance of all systemically important payment systems in the country with international standards. To this end, the BCU should continuously review and seek to improve the design and operation of the systems. (IMF 2006, p. 36) However, there is insufficient information publicly available as to Uruguay's compliance with this Principle.
C. The central bank should oversee compliance with the Core Principles by systems it does not operate and it should have the ability to carry out this oversight. |
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The International Monetary Fund's (IMF) December 2006 Financial System Stability Assessment recommends recommends that the BCU should move toward compliance of all systemically important payment systems in the country with international standards. To this end, the BCU should continuously review and seek to improve the design and operation of the systems. (IMF 2006, p. 36) However, there is insufficient information publicly available as to Uruguay's compliance with this Principle.
D. The central bank, in promoting payment system safety and efficiency through the Core Principles, should cooperate with other central banks and with any other relevant domestic or foreign authorities. |
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There is insufficient information publicly available as to ruguay's compliance with this Principle.
Uruguay