1. Payments in Russia: the background for revisal
4th Ruble Forum
08 October 2008 By
Anna Zolotova
Head of Correspondent Banking and Development of Settlement Procedures

2. Contents Overview of Russian settlement system features
Subjects to revisal
Interim solutions
MICEX Settlement House as settlement services provider
Contact details of the MICEX Settlement House

3. Overview of Russian settlement system features
The system currently in use is batch-based, having 5 batch sessions per day:
Payment processing cycle for Moscow region:
Tomorrow
received by Bene
18:00
4th batch
16:00
payment
20:00
4th session results
20:00
4th session results
Russian Correspondent Bank
Beneficiary Bank
Ordering Customer
Beneficiary
The Bank of Russia

4. Overview of Russian settlement system features
Considerable time is taken by full payment processing cycle
Most payments are processed in the 4th or the 5th sessions and, therefore received in a beneficiary bank at about 20:00 or 22:00 Moscow time respectively, which is too late in the context of liquidity management
The geographic time lag for non-Russian customers aggravates the above mentioned problems

5. Overview of Russian settlement system features
The BESP system recently introduced by the Bank of Russia is purposed to provide RTGS between its participants
But
There are a number of the system technical shortcomings, due to which it is still not complying general RTGS principles.
At the moment (as of 22 September 2008) the system involves only 369 participants (including branches), and the biggest Russian banks are not yet live in the system.

6. Overview of Russian settlement system features
The system uses specific format standard for payment orders :
No use of code input in bank name fields (like SWIFT BIC and IBAN used in SWIFT standards)
No intermediary bank field is available
Only Russian language is accepted:
This creates one of the biggest difficulties to non-Russian banks accessing the Russian market through their Russian correspondent banks.

7. Overview of Russian settlement system features
There is a requirement to indicate special currency control codes for payments with a non-Russian counterparty involved:
Foreign banks have to explore purposely the special Bank of Russia’s rules and regulations that specifies the relevant requirements
Due to the possibility of varying interpretation of the codes description given by the Bank of Russia, foreign banks often indicate the codes incorrectly.

8. Overview of Russian settlement system features
RECEIVED = 202 GENERAL FINANCIAL INSTITUTION TRANSFER
Destination MICURUMMAXXX
Session/Sequence1464/ date rcvd08-OCT :10
Originator BANKGB2LAXXX
BANK
LONDON,UNITED KINGDOM
Session/Sequence1111/ date send08-OCT :10
:20 : KT111
:21 : KT111
:32A : RUB
:57D : /RU
OAO RUSSIAN BANK
MOSKVA
:58A : /
BANKRU2P
:72 : /NZP/ {vo052080}
//SOGL. DOG-RA N 1
//NDS NE OBLAGAETSa
Currency Control Code

9. Subjects to revisal The regulatory normative base
The current technological base and software
The settlement system ideology
There is no need to “reinvent the wheel”, we should use the accumulated experience of the international banking practice and further keep pace with it.

10. Interim solutions
The Bank of Russia’s working group for development of its payment system is keeping its awareness of the above listed challenges and setting up the relevant missions
The language problem solution is provided by ROSSWIFT in “SWIFT-RUR” formats, whereby the special Latin crypt should be used in a SWIFT payment order, which is further translated into Cyrillic, however this way requires significant modification of a foreign bank’s software, as well as involving of Russian-speaking staff
Russian banks with wide customer base and network of domestic correspondent banks offer their customers settlements through that network using international payment standards via SWIFT/telex or client-bank system.

11. MICEX Settlement House as settlement services provider
MICEX Settlement House is working on a technological solution that would provide a simple ruble settlement instruction input for non-Russian banks, organize STP for these settlements and offer customers real time on-line account monitoring capabilities
This development is combined with an initiative for co-operation between MICEX and ICAP

12. MICEX Settlement House as settlement services provider
To date the number of MICEX Settlement House’s customers achieved 722 organizations including the biggest Russian financial institutions and foreign banks’ subsidiaries

13. MICEX Settlement House as settlement services provider
Settlements Safety and Reliability is achieved by the following:
The MICEX SH is a financial institution specializing in settlements
The MICEX SH maintains obligatory liquidity ratio at the minimum level of 100%, does not effect any investment activity thus does not carry any credit or other market risks
Back-up procedures are in place for all data
E-documents exchange is protected by certified encryption mechanism
Alternative communications channels are provided
Settlement procedures are fully automated

14. MICEX Settlement House as settlement services provider
Main financial figures as of 01 October 2008
(in millions):
Total balance – RUB (USD 4 452)
Equity – RUB (USD 77)
Funds in the Bank of Russia and correspondent accounts with prime foreign banks - RUB (USD 4 419)
Daily average turnover of correspondent account with the Bank of Russia – RUB (USD 8 098)
Daily average turnover of customers’ accounts – RUB (USD )

15. Contact details of the MICEX Settlement House
1/13 Sredny Kislovsky Pereulok, building 8, Moscow , Russia
tel: , fax:
SWIFT: MICURUMM
Теlex: , MICU RU

16. Thank you
for your attention!