The smooth running of the payment and settlement systems is essential to financial stability. Therefore, one of the roles of the Central Bank of Uruguay (CBU) is to promote the smooth running of payment systems which, pursuant to its Organic Charter, aims at regulating and supervising its operations. Within this framework the CBU, in agreement with the market, has adopted a global approach to reform the payment systems in Uruguay under an implementation plan with actions that started in 2008, in order to have a secure and efficient Payment System.
In this role the CBU will:
• Operate and manage the payment system of high interbank value, where interbank transfers and the final settlement of low value payment systems are performed.
• Supervise the system as a whole, and promote the development of more efficient systems and payment instruments, in many cases, with the participation of and in co-ordination with the private sector, and in other cases improving their own system platforms.
• Facilitate the development of an efficient and secure capital market through the construction of a Central Securities Depository.
Reform process
Over the last years a number of improvements to the Payment System have been promoted, both by the CBU and the main institutional players in the market.
Some of the tasks carried out include:
• Drafting, passing and enacting Act 18.573 on Payment Systems and Securities Settlement.
• Integration of the interbank money market to the Real-time Gross Settlement System, to the settlement platforms and to the custody of securities.
• Integration of the interbank foreign exchange market to the Real-time Gross Settlement System and payment-versus-payment (PvP) settlement.
• The CBU has worked in coordination with the National Treasury in order for their check payments to be done through electronic procedures.
• Settlement of securities and related funds linked in a way that enables all transactions to be settled on the delivery against payment basis so as to mitigate system risks.
• Legal explanation and exercise of the supervisory role over the operation of the Payment System in the Central Bank of Uruguay.
Additionally, and in line with the reform process of the Payment System, the CBU is implementing a turnkey solution that includes software for Real-time Gross Settlement as well as a System to operate a Central Securities Depository, which by 2011 will substitute the current Payment and Securities Settlement systems. Some of the expected improvements are:
• Faster and more efficient operation processes, which will reduce time and increase the number of transactions.
• Better alternatives for liquidity management. Incorporation of new instruments for automatic processing (e.g. Intraday Liquidity Facilities).
• More operational availability through the incorporation of adequate contingency and operational continuity mechanisms.
• Include the use of the network and Swift format to send instructions, aligned with international standards and recommendations, achieving uniformity in information management.
• Connectivity improvement and functional change that minimizes operational risks.
• Comprehensive management of priorities for the settlement of transactions.
• Include gridlock resolution mechanisms (related gridlock operations), thus enabling the settlement of operations which are awaiting confirmation due to lack of liquidity.
• Improvement of coupon and amortization payment process, including prior consent and authorization from the payment agent at the time of crediting the amounts into the accounts of the holders.
