THE CBRT PAYMENT SYSTEMS

HISTORY

In the fourth Article of the Law on the Central Bank of the Republic of Turkey No. 1211, it is stated that “to regulate the volume and circulation of the Turkish Lira, to establish payment, securities transfer and settlement systems, to ensure the uninterrupted operation and oversight of the systems established and to be established and to make necessary regulations, to determine the methods and instruments including electronic environment that shall be used for payments” is one of the fundamental duties of the Bank. Within this framework, Electronic Fund System (EFT) and Electronic Security Transfer and Settlement (ESTS) System were successively established in 1992 and 2000.

First generation of EFT System which started to operate in 1992 was followed by the reconstructed second generation of EFT System in 2000. With this reconstruction, Center of Recovery also started to operate to back up all the data of the system. Following these projects which the CBRT carried out with its own human resources and technical facilities during 2011-2013, a functional separation was realized. With this functional separation, the EFT System was divided into Banking Payment System which operates high-value and time critical payments and Retail Payment System which operates low- value payments. Thus, Retail Payment System started to operate on 7 December 2012 and new generation Banking Payment System has started to operate on 12 July 2013.

Electronic Securities Transfer and Settlement (ESTS) System ensures the book entry deposit, interbank transfer and settlement of securities on electronic environment on a real time basis. Second generation of the ESTS System started to operate on 12 July 2013 under the reconstruction program of the CBRT Payment Systems.

Information messages of CBRT’s market auctions process has started to be conveyed via Auction System (AS) since 30 September 2012 in order to decrease operational risks. In this manner, fund or securities transfer has transported to a different platform. In the current situation, EFT System and ESTS System are named as "The CBRT Payment Systems”.

IMPORTANCE of the CBRT PAYMENT SYSTEMS

The CBRT established the payment systems taking into consideration the positive influences of such systems on the economy of a country.

Having a sound, reliable and fast payment system is not only important for the economy in general, the financial system or the monetary policy of a country, but also for the institutions and people that take place in the economic world.

Any bottleneck in the payment systems, will successively affect the banks, the production sector, individuals and ultimately the whole economy of a country. Hence, the payment system infrastructure, the presence of which cannot be noticed under normal circumstances, has a strategic importance for our country.

If the EFT System were not present, billions of Turkish Liras transferred through the system each day would either be physically carried or be transferred among bank accounts with money orders causing a delay of at least one day. Through the EFT System, however, banks and their customers can instantly monitor their account balances and quickly manage their funds.

EFT System has a wide range of usage, including customer transactions stemming from services offered by commercial banks as a part of their telephone and internet banking applications.

Today, due to the infrastructure provided by the EFT System, institutions and individuals can make any kind of payments right on time by using telephone banking or internet banking services.

OPERATIONAL FLOW

Institutions and individuals use EFT System when they need to transfer funds from one bank to another.

For example, you may want to use your deposit at Bank A to send a payment to a person having an account at Bank B (see Figure, Step 1).

Upon your order, Bank A sends a payment message, which includes necessary details such as the sender, the beneficiary and the value, to the EFT System (Step 2).

EFT System promptly processes the incoming payment message. If the balance of the account of Bank A at the EFT System is sufficient, the payment is transferred from Bank A to Bank B within a few seconds (Step 3). Otherwise, the payment is queued.

Bank B credits the account of the beneficiary (Step 4). Although EFT System carries out the operations in real time, bank customers may sometimes notice delays that may arise from operations and internal practices of Bank A and Bank B.

EFT System is a crediting system. In other words, a participant can only credit another participant’s account.

Settled payments cannot be cancelled or revoked. In case of an erroneous payment, Bank A and Bank B should agree for the reimbursement.

KEY ISSUES ABOUT THE CBRT PAYMENT SYSTEMS

The CBRT Payment Systems are comprised of EFT System which carry out Turkish lira inter banks payment transactions electronically and ESTS System which carry out securities transfers such as government debt securities and liquidity bills. The CBRT is both the owner and the operator of the CBRT Payment Systems. Rules related with the CBRT Payment Systems are defined at “The CBRT Payment Systems Operating Rule Book”.

The CBRT Payment Systems enable,

In this way, the organizations and individuals, by using internet banking, mobile banking and ATM services which offered by the banks, can quickly make their payments to other persons, like credit card debts, bill payments, school installments and also monitor their money movements instantaneously..

Besides, the CBRT Payment Systems increase the effectiveness of the CBRT's monetary policy implementation.

Working hours

The CBRT Payment Systems operate between 08:30 and 17:30 every day of the week except in official holidays, but on half working days, the system closes at 13:00. However, the banks can set different working hours to realise their customer payments.

The irreversibility principle

It is not possible to cancel the payments settled on accounts in the CBRT Payment Systems. Payments can only be refunded by the receiving bank. In order to refund of an inaccurate payment, customers are required to apply to their own banks.

Transaction Durations

In the CBRT Payment Systems; the payments among banks are processed and transferred in less than 1 second whereas the retail payments are processed and transferred to the receiver’s account in approximately 30 seconds.

Payments are transferred to the receivers’ accounts provided that the sender banks’ balances are available. In other words, the payments that are settled in the system are not queued in the CBRT Payment Systems if the sender banks’ balances are available. The payments that are settled in the system are not authorised by the CBRT. Payments are transferred to the customer’s accounts in different periods depended on the banks’ internal processes. The customers have to contact sender and receiver banks for their payments transactions.

Participation Conditions

Banks which have activity in Turkey can participate in the CBRT Payment Systems. The Central Registry Agency of Turkey (MKK) is also a participant of the ESTS System.

a) Make a written application to the CBRT with banking license and authorization certificate documents,
b) Receive the approval of the CBRT ,
c) Sign the CBRT Payment Systems Participant Agreement,
d) Have an account at the CBRT,
e) Complete necessary process at the Banks Association of Turkey,
f) Complete the necessary technical preparations.

Charging

In order to cover the investment and operational costs, the CBRT, without pursuing profit, charges fee from the participants for the payment messages they send. In accordance with the 2017 rates, the CBRT charges fee for the EFT messages as to their values. The CBRT charges 20 Krs for each message that has a value lower than 8.000 TL and 21,85TL for each message that has a value higher than 874.000 TL. The Banks may apply different fee schedules to their customers.

For detailed information:
The CBRT Internet Page

COMPATIBILITY OF THE CBRT PAYMENT SYSTEMS TO INTERNATIONAL STANDARDS

The Principles for Financial Market Infrastructures (PFMI) that are released by the Committee on Payments and Market Infrastructures of the Bank for International Settlements (BIS) and the International Organization of Securities Commission (IOSCO) are accepted as core standards about the assessment and oversight of financial market infrastructures.

The components of the CBRT Payment Systems are assessed in terms of current principles and the compatibility of international standards that are ensured by appropriate interventions and regulations.

Public declaration that briefly reports compatibility of systems to the PFMI by means of the PFMI Assessment Methodology was prepared in Turkish and English and published at the CBRT Payment Systems Internet Page

For detailed information:
The CBRT Internet Page

CROSS-BORDER PAYMENTS

Cross-border payments are mainly carried out through the SWIFT (Society for Worldwide Interbank Financial Telecommunication) via correspondent banks. The CBRT has been a SWIFT member since 1989. However, the CBRT is not a center or an operator but a user of the SWIFT just as other banks in Turkey. The CBRT’s intervention to other banks’ SWIFT transactions is out of question. Thus, those who are concerned should communicate with their banks for the issues related those transactions.

OBJECTIVES AND POLICIES REGARDING PAYMENT AND SECURITIES SETTLEMENT SYSTEMS

The Law on the Central Bank of the Republic of Turkey No. 1211 and the Law on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions No. 64932 granted the Central Bank of the Republic of Turkey certain duties and powers in payment and securities settlement systems area.

In this framework, in the fifth paragraph of Article 5 of the Regulation on Oversight of Payment and Securities Settlement Systems, which came into force by being published on the Official Gazette No. 29044, dated 28/06/2014, it is stated that the objectives to be achieved with and the policies to be pursued in oversight activities shall be disclosed to public by the CBRT.

In this context, by taking into account the relevant national regulations and international practices and standards, the CBRT’s main objective regarding payment and securities settlement systems and its oversight activities to be carried out in this area, is to ensure the “safe, uninterrupted, efficient and effective functioning of the systems”.

Main policies and activities pursued by the CBRT in order to achieve this objective, which is critical for sustaining financial stability and for effective implementation of monetary policy, are as follows:

1 Law No.1211 Article 4: “The fundamental duties of the Bank shall be: ..... (I/f) to regulate the volume and circulation of the Turkish Lira, to establish payment, securities transfer and settlement systems, to ensure the uninterrupted operation and oversight of the systems established and to be established and to make the necessary regulations, to determine the methods and instruments including electronic environment that shall be used for payments,,.....”

2 Law No. 6493 Article 4: (3)“The Bank shall be authorized to make the necessary arrangements to ensure smooth and uninterrupted operation of the systems.”

Law No. 6493 Article 8: (1) "The Bank shall be authorized to conduct oversight of the systems established or to be established in order to ensure their uninterrupted operation."

3 As of 1 September 2014, the name of the Committee on Payment and Settlement Systems (CPSS) has been changed to the Committee on Payments and Market Infrastructures (CPMI).

RELATION WITH OTHER PAYMENT SYSTEMS

The CBRT Payment Systems are closely associated with other payment systems operating in Turkey such as Takasbank (transactions that are settled at Borsa Istanbul, netting), The Interbank Card Center (BKM) (credit cards-netting), and Interbank Check Clearing House (BTOM) (check-netting). Settlement of amounts that are being net in other payment systems is realized through the EFT System. Furthermore, EFT System has an integrated structure with Electronic Securities Transfer and Settlement (ESTS) System for the settlement of government debt securities according to delivery versus payment (DvP) principle. Currently, EFT comprises Payments System of Consumer Payments and Payments System of Interbank as well as Auction System, a communication system rather than a payment which supports the CBRT payment systems.

The relationship with other payment systems can be seen below.

THE CBRT PAYMENT SYSTEMS STATISTICS

The total number of transactions in 1992, the first year of EFT System, was 534,853. In the following years the number of transactions drastically increased and reached to 377.299.097 in 2016. This increase mainly stems from the gradually involvement of every interbank payment and widespread usage of the EFT system in the area of customer banking.

Nominal volumes of transactions which is TL 15 trillion in 2006 (USD 10 trillion for 2006 TL/USD parity) increased up to TL 56 trillion (USD 18 trillion for 2016 TL/USD parity) at the end of 2016.

Value of Transactions in the CBRT Payment Systems (Trillion TL)

Volume of Transactions in CBRT Payment Systems (Million Messages)