2. Egypt Payments Landscape Dr. Nadia Abd Al-Aal Alexandria-Egypt 27-29 April, 2009

3. Agenda Objectives of Payment Systems Project Clearing House Statues CBE’s Fin-Copy (T Shape) Towards an RTGS Current RTGS The Cash-less Society - Cards in Egypt –Automation of Government Employee Payroll Distribution Egyptian Laws and regulation

4. CBE Modernization Project Objectives Proper execution of all types of payments Reduce payment process delay Transaction Security Progressively applying the international standards Restore confidence in the payment system Promote the use of payment instruments Implement the RTGS

5. The Clearing Houses Status Cairo Clearing: Automated since June 2002 1/1/2006 the manual clearing house in Alexandria and Port Said were cancelled. Build infrastructure between the head offices of banks and the Central bank.

6. Clearing Houses Activities

7. What is RTGS? funds transfer system that is able to provide continuous intraday finality for individual transfers. (BIS)

8. What is RTGS? Final settlement continuously rather than periodically. Real-time transfer of central bank money. Transfers are settled individually, that is, without netting debits against credits. Both processing and final settlement of funds transfer instructions can take place continuously.

9. Why RTGS? Liquidity risk minimization. Better liquidity management. Faster and safer online settlement of transactions. More effective achievement of Monetary Policy objectives. Coping with worldwide modern economic changes and modernization.

10. T vs. Y

11. CBE ’ sFin-Copy (T) Netting System Real-time finality of payments guaranteed by the regulation of the system Deferred posting to banks’ accounts FIN-Copy system S.W.I.F.T. Networ k ¶ CBT, Single BICaddress Head Office Branch CBT, Several BICaddresses Head Office Branch · Head Office Branch ¸ CBT

12. 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 No Real-Time Monitoring and Updates for Central Bank operations No 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 Exchanges of payment orders in the FIN-Copy system Interday Liquidity Management Till Jan 2003

13. Grouping of all operations impacting the banks ’ accounts with the Central Bank in one pool, Liquidity monitoring several times during the day Second stage: Replacing the Netting FIN-Copy system (T) with a full-fledged RTGS software throught SWIFT ( Y) Towards RTGS First stage:

14. 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 Intraday Liquidity Management time-frame after Jan.2003

15. 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 Principle: grouping of all payments executed on banks’ accounts at the Central Bank Target Real Time Gross Settlement System

16. 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 Exchanges of payment orders in the FIN-Copy system Real-Time Impacts of each FIN-Copy payment orders CBE Target

17. The RTGS pilot project was conducted for two months Starting March-2003 and targeting the largest five banks in Egypt. The project provided the banks access to the CBE’s private network together via the SWIFT network. RTGS: Pilot Project

18. RTGS Structure Today

19. RTGS Elements ATM/POS MCSD ACH FSC SSS Book Entry

20. Implications for the Central Bank Elimination of implicit settlement guarantee by central bank. Better control of system liquidity. More effective control by commercial banks of their exposures. Greater confidence in national payment system. Reduced risk (Credit, Liquidity, Systemic & Legal).

21. Operational Impact on CBE Commercial bank settlement accounts operate throughout the day Timing of monetary policy operations becomes important Timing of settlement by other clearings becomes more important Need for faster decision making and clear operational procedures

22. Business Model of RTGS Single Settlement Account for each bank. Usage of SWIFT message Two concurrent networks (SWIFT, VPN). SWIFT Fin-Copy Y topology. Strong Security on VPN Intra-day liquidity against Collaterals. Queue Management is based on FIFO, if failed, based on FAFO. Settlement of Government Securities is based on DVP. Special Arrangements for Multilateral payments (ACH, FSC, ATM, MCSD). Compliance with Standards of BIS core principles.

23. How does the Settlement work?

24. The Cash-less Society Cards in Egypt

25. Banking Habit in Egypt

26. Currency Circulation

27. Cards per 1000 inhabitants CreditDebityear 67 2000 710 2001 815 2002 1021 2003 1229 2004 1440 2005 1757 2006 2179 2007 25111 2008 30156 2009

28. Cards per 1000 inhabitants

29. Debit & Credit Cards in Egypt Automated Teller Machines (ATMs) reached 3,000 and increasing annually by 40%. Points of Sale (POS) reached 28,000and increasing annually by 31%. Credit Cards reached 1,800,000 and increasing annually by 23%. Debit Cards reached 3,000,000 and increasing annually by 30%. (As per a study conducted on 2007/2008)

30. Government Employee Card

31. The Need Length of time in which money is in transit. Need to achieve “Zero Balance” in ministry service outlets. Need to achieve" Treasury Single Account”. Need to activate tools to enable e- Governmental. Need to create unified financial database for employees.

32. The Concept Every employee receives a salary distribution card. Issuing of the cards and servicing the employees in assigned to commercial banks. Salary information is sent to the banks through a secure network. Funds are sent to the banks through the Central Bank of Egypt.

33. Objectives & Benefits Perform payroll process rapidly and powerfully. Increase users of e-Government tools and outlets. Build secure payroll database for government employees. Increase the government’s role in developing electronic payment systems. Move toward cash-less and more bankcards. Build statistical and strategic planning tools as a base for decision making.

34. “ 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. ” RTGS & Egyptian Laws Feb-2002: CBE board approved the Supervisory Regulations 2003: CBE approved regulations for anti-money laundry Executive Regulations for electronic clearing Digital Signature – Law #15 RTGS Regulations

35. “ To accomplish great things, we must not only act but also dream, not only plan but also believe”. Anatole France

36. Dr. Nadia Abd Al-Aal