Development of an Inter-Regional Payment System Integration Framework Workshop- Overview of EAC Current Regional Payment System Integration Initiatives Outline Introduction EAC Institutional Framework Pillars of EAC Integration The East
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Development of an Inter-Regional Payment System Integration Framework Workshop- Overview of EAC Current Regional Payment System Integration Initiatives<br>
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Outline Introduction
EAC Institutional Framework
Pillars of EAC Integration
The East African Monetary Union (EAMU)
Payment and Settlement system
Status of EAC Payment System
EAC initiatives for PSS
Financial Market Infrastructure
Harmonization of financial laws & regulations
Capacity building
Way forward<br>
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Introduction The East African Community (EAC) is a regional organization mandated by the Governments of the Republics of Burundi, Kenya, Rwanda, Uganda, South Sudan and the United Republic of Tanzania to spearhead the East African economic, social and political integration. Under Article 5(2) EAC Partner States undertake to establish among themselves a Customs Union, a Common Market and subsequently a Monetary Union and ultimately a Political Federation<br>
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EAC Institutional Framework The EAC has its own; legislature (which can promulgate laws that override national law), judiciary, and the EAC Secretariat.
The integration agenda is managed by the “Council of Ministers” and the “Sectoral Councils” on (i) Trade, (ii) Industry, (iii) Finance, and (iv) Investment. There are three executive committees:
Monetary Affairs Committee (MAC) composed of the Central Bank Governors<br>
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EAC Institutional Framework Fiscal Affairs Committee (FAC), composed of senior officials from the Ministries of Finance, and
Capital Markets Insurance and Pensions Committee (CMIPC), composed of securities, insurance and pension regulators.<br>
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Pillars of EAC Regional Integration Customs Union; signed in 2004 and ratification in 2005
Through the Customs Union Protocol, trade within the EAC region has been enhanced significantly making the region an attractive foreign direct investment hub
Common Market; signed in 2009 and ratified in 2010
Provides for free movement of goods, people, labour, services and capital from one Partner State to another as well as the rights of establishment and residence without restrictions.<br>
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Pillars of EAC Regional Integration Monetary Union; Signed in 2013 and ratified in 2015
The East African Monetary Union Protocol provides for the attainment of a single currency for daily transactions within the Common Market
Political Federation
The EAC Partner States envisages coming together to form a super-state under a single political authority / government<br>
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The East African Monetary Union (EAMU) Monetary Union is expected to be in place in 2024 with single currency and a regional central bank
Preconditions to the above include
Establishment of institutions to support the Monetary Union
Attainment of macroeconomic convergence criteria, and
Harmonization of policies and regulatory frameworks<br>
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Payment and settlement system ARTICLE: 15 of the Protocol envisages the following;
Development and implementation of secure, efficient, reliable and integrated payment and settlement system that is;
Adopt an integrated trading and securities depository system and
Harmonize and integrate the payment and Settlement system financial market infrastructure with other system<br>
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Payment and settlement system The objective of the payment and settlement system shall be to ensure the efficient flow of financial transactions within the Monetary Union; by
Developing a robust environment for both, wholesale and retail Payment & Settlement System to facilitate market integration
Support effective application of monetary policy and financial markets<br>
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Payment and settlement system Enhance safety and efficiency in the overall payment and settlement systems.
Support, through integrated payment & settlement system, the broadening and deepening of the financial sector.<br>
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Status of EAC Payment System Varied payment system development
Inconsistent legislation and regulatory framework
Developed and under developed Communication infrastructure
Large Value and Retail systems are limited in all member states
The region has small financial systems that are dominated by the banking sector
Low Levels of access to formal financial services<br>
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EAC Initiatives for PSS- Financial Market Infrastructure Supporting the implementation and upgrade of Real Time Gross Settlement (RTGS) systems
Support Retail Payment System Automation and clearing systems- ACHs
Support SWIFT messaging platforms<br>
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EAC Initiatives- Financial Market Infrastructure Support Business Continuity arrangements and Disaster Recovery Sites
Support Network upgrade and IT operating environment
Support implementation of Central Securities Depositories
Support for modalities on setting up National switches<br>
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EAC Initiatives- Financial Market Infrastructure Development of a centralized database for regional payment flows
Implementation of the trading and settlement systems through a Capital Market Infrastructure (CMI) project; A technology platform seeking to link all the Stock Exchanges and Central Depositories of the EAC Capital Markets. The objective is to enable seamless transaction of financial securities across the Community.<br>
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EAC Initiatives- Financial Market Infrastructure Connectivity to East African Payment System (EAPS); The systems operates on a real time gross settlement basis by utilizing the linkage between the various Partner States’ Real Time Gross Settlement (RTGS) systems using SWIFT messaging network using the local currencies of the East African countries.<br>
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Harmonization of financial laws & regulations Drafting of legislation and policy to ensure that payments & settlement systems are adequately supported in the region by;
Developing a harmonized legal and regulatory Regional Framework
Cross Border Regional Regulatory Framework
EAC Regional Oversight Policy Framework
EAC Regional Failure to Settle Policy<br>
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Harmonization of financial laws & regulations Support for the development of rules, regulations and procedures to operationalise the NPS Act
Supporting development and drafting of Central Securities Depository (CDS) law
Drafting of regulations for payment and settlement system
Provided recommendations for technical, legal and regulatory framework for interoperability of card switches in the EAC.<br>
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Capacity building Training and skills support to strengthen the capacity of National Central Banks officers and other stakeholders in the area of Payment and Settlement Systems by; through
Facilitating study tours and exchange programs to institutions with developed PS
Organising Courses and training in PSS<br>
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Capacity building Sensitizing the population on retail payment systems and use of electronic means of payment (EAPS),
Support to the formation of a Regional Association of Bankers.
Facilitation of Financial literacy/education and establishment of regional/national strategies for banking and Payments<br>
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Way Forward The EAC is supporting the preparation for an integrated Single Payment System for the region (EAPS 2)
Establishing real time clearing for low value retail payments in the region
Establishment of a regional switch that will connect to the national switch in each EAC country<br>
