2. The Evolution of The National Payment systems in Egypt Manama 15-17 March 2005

3. Contents Objectives of the modernisation project of the CBE Design of the Target National Payment System Implementation Strategy of the Target National Payment System Creation of the Payment System Department The Automation of Clearing Houses Development of the enhancement of systemically important payment system Integration of the T-bills transactions settlement into the Fin copy system Development the link between the MCSD’s securities Clearing system and the FIN-Copy system. Egyptian Law and regulations related to the Payment Systems The Way Towards Real Time Gross Settlement RTGS The Red Book

4. Objectives of the modernisation project of the CBE Ensure proper execution of all types of payments Reduce the delay of the payment process Increase the level of security Progressively applying the international standards in terms of rules and systems Restore confidence in the payment system towards its users Promote the use of payment instruments in order to progressively reduce cash payments Implement the RTGS to have a better control economic indicators and set up the base of a sound monetary policy

5. Central Accounting System RTGS National Clearing System Book-Entry System MCSD system RT End-of-Day postings Trading system ClearingBank Broker Book-keeper Card Switch Book-keeperBank Bank DT PrimaryDealer Investor CBEParticipant RT DT Design of the Target National Payment System Overall design Principle: grouping of all payments executed on banks’ accounts at the Central Bank

6. The Target National Payment System Implementation strategy Priority 1: Creating a Department responsible of the management of the Payment System at the CBE Priority 2:  Implementation of the National Bulk Payments Clearing System Installation of Alexandria and Port Said  Creation of the Interbank Card Authority  Creation of the Legal Task Force Priority 3:  Development of the enhancements to the Systemically- important payments system  Development of the link between MCSD’s securities Clearing system and the FIN-Copy system

7.  Contacting State Authorities to obtain their support for the implementation of the measures to increase cash-less payments Priority 4: Integration of the T-bills transactions settlement into the Fin-Copy system  Integration of the Cross-border transactions cover in Egyptian pounds into the Fin-Copy system

8. Creation of the Payment Systems Department The PSD Mission  To manage the various projects related to the implementation of the National Payment System’s modules.  To ensure the continuous follow-up and supervision of the system and permanently watch the liquidity in the system.  To be the constant contact at the Central Bank of Egypt for banks and the National Payments Council

9. Banking Operation Sector Port Said br Payment systems Dept. Cairo Br. Payment Systems Dept. Organization Alex Br. Moh. Br.

10. Executive Manager NPC unit Oversight section High value Payment section Swift operation RTGS operation Bulk clearing Payment section Clearing Houses + Data base for cards Sub-governor for banking operations sector

11. The Clearing Houses Statues - Cairo Clearing Has been automated since June 2002 -Developing the methods of checks processing in commercial banks. - By June 2005, the clearing houses of Alexandria and Port Said will have been automated. -Establishing an advanced network between the head offices of banks and their branches; and between banks and the Central bank.

12. Design of the Target National Payment System The National Bulk Payments Clearing System consolidation RTGSRTGS Cent ral Acco un- ting or Assiout Clearing House Local Processing Port Said Clearing House Local Processing Cairo Clearing House Local Processing Alexandria Clearing House Local Processing Bank A Local Branch Bank A Local Branch Bank A Local Branch Bank B Local Branch Clearing Houses Network Central Processing Bank C Local Branch Cairo Bank B Local Branch Bank B Local Branch Bank C Local Branch Architecture

13. CBE’s Gross settlement system today Real-time finality of payments guaranteed by the regulation of the system Deferred posting to banks’ accounts

14. Intraday Liquidity Management time-frame Till Jan.2003 2:30 pm D 4:00 pm 10:00 pm Cover Period D-1 Balance Central Accounting System Intraday Liquidity Management System FIN-Copy System D Opening Balance NoReal-Time Monitoring and Updates for Central Bank operations NoReal-Time Monitoring and Updates for Central Bank operations 3:00 pm Impacts of FIN- Copy payment orders Impacts of Clearing Systems and Cover payments D Temporary Balance Closing Manual Entry of daily postings D Balance 2:30 pm 4:00 pm 10:00 pm Daily Entries Batch Exchanges of payment orders in the FIN-Copy system

15. (Step1) Intraday Liquidity Management time-frame after Jan.2003 2:30 pm D 4:00 pm 10:00 pm Cover Period D-1 Balance Central Accounting System Intraday Liquidity Management System FIN-Copy System D Opening Balance Real-Time Monitoring and Updates for Central Bank operations Real-Time Monitoring and Updates for Central Bank operations 3:00 pm Impacts of FIN-Copy Payment orders Impacts of Clearing Systems and Cover payments D Temporary Balance Closing Manual Entry of daily postings D Balance 2:30 pm 4:00 pm 10:00 pm Daily Entries Batch 2:00 pm 12:00 am 10:00 am 8:00 am Exchanges of payment orders in the FIN-Copy system Temporary Impacts of FIN-Copy payment orders

16. Collecting Gov. receipts-Taxes on Sales- FIN Copy System The receipts of the taxes on sales from the customers’ accounts at the different banks transferred to the accounts Ministry of Finance (crediting taxes on sale) at the Central Bank via the FIN Copy System

17. Securities Settlement Systems The clearing and delivery versus payment of listed securities transactions including treasury bonds transactions are processed by a private company Misr for Clearing, settlement and Central Depository (MCSD). The payment of the cash-legs is ensured by the clearing banks (presently NBE and Misr), as well as the settlement of the final clearing balance between them. In order to ensure finality of payment, the final clearing balance between the Clearing banks is settled through bilateral accounts, but by means of the system prepared by the Central Bank for systemically-important payments (FIN-Copy) mechanism, then RTGS. This settlement mode allows the DVP process to comply with highest international standards, thus giving confidence to international investors to operate in the Egyptian market.

18. MCSD System Functions Book-Entry Subsystem Settlement Subsystem Matching Subsystem Book-keeping System Communication Link Order Capture Issuance Management Payment Orders

19. Securities Settlement Systems cont. The CBE manages the public debt on behalf of the government. It supervises the issue of government securities, establishing the amount, maturity and interest rate. The CBE also acts as central depository for such securities. Cash settlement of transactions takes place on accounts held with the CBE. The T-Bills is fully processed by means of a dedicated system and the cash legs is settled by CBE through the FIN Copy system

20. CBE Book-entry system Functions Book-Entry Subsystem Settlement Subsystem Matching Subsystem Order Matching Capture Subsystem Auctions and Order Capture Issuance Management ? ? FIN-Copy system Payment Orders Accounting System

21. The RTGS Pilot Project The RTGS pilot project was conducted for two months from March to May 2003 between the biggest five banks in Egypt. The project provided access to the banks via the CBE’s private network together with the SWIFT network.

22. Infrastructure "V" scheme CBE Payment instruction Authorized Payment instruction Confirmation of debit Bank A Bank B

23. SWIFT Delivery mechanisms Private network (MT) Bank A Bank B Bank C Bank D

24. Egyptian Laws and regulation Related to the Payment Systems “The Banking Law” Article (6) in the Law No.88 of 2003 stipulates that the CBE may exclusively perform the following tasks: “…Oversight of the National Payment Systems.” and as a result the PSD was established.

25. Egyptian Laws related to the Payment Systems Cont. -The board of the Central Bank of Egypt (CBE) approved on 28 February 2002 the supervisory regulations to be applied in all banks operating in Egypt when offering electronic banking services and issuing e-money payment instruments. -Anti-money laundering Law no. 80 (2002)and in 2003 the board of the CBE approved supervisory regulations applicable to all banks.

26. Egyptian Laws related to the Payment Systems Cont. - The Executive Regulations of the Electronic Clearing House. -The Law no. 15 for 2004 concerning the Digital Signature was promulgated and the Executive Regulations is Underway.

27. The Way towards Real Time Gross Settlement (RTGS) We obtained aid from the European Union to implement the RTGS. We expect launching the tender in May 2005 and the cut-off date will be effective August 1, 2006.

28. Overall architecture of RTGS system and its interfaces

29. Study about Debit and Credit Cards in Egypt In 2004, the following facts have been realized: - The number of Automated Teller Machines (ATMs) reached 1200, increasing annually by 40%. - The number of Points of Sale (POS) reached 13815, rising annually by 31%.

30. Contd. - The number of credit cards reached 800,000 with an annual growth rate of 23%. - The number of debit cards amounted to 1,795, 788, increasing annually by 30%.

31. otal Cards Number of Credit Cards Change 23% Number of Debit cards Change 30% YEAR 823,143352,168473,8122000 1,106,661433,167676,8742001 1,495,892532,795966,9632002 2,034,248652,8731,381,3752003 2,778,400803,0341,795,7882004 3,812,505987,7322,334,5242005 5,254,3361,214,9103,034,8812006 7,270,7191,494,3393,945,3452007 10,098,2601,838,0375,128,9492008 14,072,9052,260,7866,667,6332009 Prospective Study of the Number of cards until 2009

32. Clearing Houses Activity in the Central Bank Change RateValue of Cheques (Millions) No. of Cheques (Thousands) FY Value% 8.13.4350246837798/99 (3.5)2.1338083855599/2000 (13.6)(3.8)29216882282000/2001 (7.4)(3.8)27054379182001/2002 (9.6)26.6244581100252002/2003 1.5(4.3)24822495912003/2004

33. Coming Soon: The Red Book The Central Bank of Egypt has started discussing with the Bank of International Settlements (BIS) about compiling the Egyptian Red Book. And the process is currently underway.

34. Thank you Dr. Nadia Abdel Aal nadia5564@yahoo.com paysys@cbe.org.eg nadia5564@yahoo.com