Self-assessment Report on the ZETSS/RTGS System’s Observance of the Bank for International Settlement Principles for Financial Market Infrastructures

FINANCIAL MARKETS

NATIONAL PAYMENT SYSTEMS

SELF ASSESSMENT REPORT ON THE

ZETSS/RTGS SYSTEM'S

OBSERVANCE OF THE

BANK FOR INTERNATIONAL SETTLEMENT

(BIS)

PRINCIPLES FOR

FINANCIAL MARKET INFRASTRUCTURES

(PFMIS)

DECEMBER 2021

Table of Contents
EXECUTIVE SUMMARY.....................................................................	3
1.	INTRODUCTION .............................................................................	4
2.	OVERVIEW OF THE PAYMENT LANDSCAPE........................	5
3.	OBJECTIVE OF THE ASSESSMENT: .........................................	7
4.	SUMMARY OF PRINCIPLES ASSESSMENT ............................	7
5.	SUMMARY ASSESSMENT CHALLENGES AND
ACHIEVEMENTS ..................................................................................	8
6.	RATING GUIDELINES AND RELATED ASSESSMENTS:....13
7.	DETAILED ASSESSMENT ...........................................................	19
8.	CONCLUSION ..............................................................................	103
Table of Tables
Table 1:Summary of Principles Assessed .............................................	7
Table 2: Ratings Summary on Observance Status ..............................	8
Table 3: Summary of Highlights and Challenges Per Principle.........	8
Table 4:Prioritized list of recommendations ......................................	12
Table 5 : Rating Guideline....................................................................	14
Table 6:Summary of Principles Ratings and Comments ..................	14
Table 7: Principles Key Considerations Questions, comments and
Assessments ............................................................................................	19
Table of Figures
Figure 1: RTGS Annual Transactions 2009-2020................................	6
Figure 2: RTGS Annual Digital Transactions Proportions 2009-2020
...................................................................................................................	6

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EXECUTIVE SUMMARY

Reserve Bank of Zimbabwe (RBZ) hereby publishes its self-assessment for 2020 settlement system against the Principles for Financial Market Infrastructures (PFMIs) formulated by CPMI/IOSCO and published in April 2012. The self-assessment was performed by the Operations Unit. An internal self-assessment against the principles has been performed previously, but this is the first self-assessment to be published. The principles are designed to broadly apply to all systemically important financial infrastructures.

Ten of the 24 principles are not applicable to RTGS (nos. 4-7, 10, 11, 12, 14, 16 and 24), while the remaining 14 are considered relevant of which, thirteen principles were observed and one was broadly observed. RBZ's conclusion is that there are principles that need long term solutions, that is gaps in the current legal framework, technological integration, stress testing and capacitating resources.

The principle on access criteria and operating rules will be publicly shared on an ongoing basis. It is important that all broadly observed should be monitored as the economy is under constant evolution.

Fourteen principles were said to be applicable and observed. Overall, the assessment demonstrates that the ZETSS FMI operates in line with best international standards as required by the 24 Principles.

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1. INTRODUCTION

The self-assessment for the Zimbabwe Electronic Transfer Settlement System (ZETSS) known as Real Time Gross Settlement System (RTGS) was done by the Reserve Bank of Zimbabwe Financial Markets, National Payment Systems, Operations Unit and reviewed by the Oversight function of the Bank

ZETSS operations are primarily governed by the Reserve Bank Act and the National Payment Systems (NPS) Act and other guidelines issued by the Bank. The system is owned and operated by the Central Bank and administered by Financial Markets Division, National Payment Systems Department- Settlement and Operations Section. The Oversight Section of the NPS Department oversees the operations of the FMI as guided by international best practices in particular the 24 Principles for Financial Market Infrastructures (PFMIs). Supporting statutes to the operations of The RTGS include among others the Exchange Control, Banking and Anti Money Laundering and Counter Financing of Terrorism (AML/CFT) Laws. This is the first publication of the ZETSS self- assessment against the Bank for International Settlements' (BIS) Principles for Financial Market Infrastructures(PFMIs) as at the end of 2020. It is also the second self-assessment the Bank has completed for

ZETSS.

ZETSS facilitates safe, secure and real-time transmission of high value funds between accounts in different financial institutions. It was implemented in November 2002 and has undergone several upgrades to meet the ever changing payments systems requirements.

The ZETSS participation is open to Banks, Building Societies, Post Office Savings Bank, the Development Bank and Microfinance Banks. Currently there are twenty-two (25) registered ZETSS participants. The settlement of domestic high value transactions and retail transaction batches is in central bank money. Each settlement participant has an account with the RBZ from which interbank settlement obligations are

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settled. Participants must provide enough funds to ensure that the settlement system functions smoothly. Settlement in ZETSS is considered final and irrevocable and is based on a pre-funded (credit push) principle.

The system has improved efficiency in payment systems by mitigating settlement risk and eradicating time lag for settling high value and time critical payments. They include; clearing house positions, interbank transfers, government securities and money market transactions. Turnaround time for a transaction is instantaneous.

2. OVERVIEW OF THE PAYMENT LANDSCAPE

ZETSS is the settlement system established and operated by the Reserve Bank of Zimbabwe (RBZ) for real time gross settlement of large value and time critical transactions. In addition, it has the capacity to settle batched retail transactions using the multi-lateral netting systems. Its primary objective is to provide a settlement mechanism in which both processing and final settlement of participant payment instructions in real time. The transactions are checked for funds availability and settled on a gross basis. The system is credit push based to manage credit and systemic risks.

The Real Time Gross Settlement System (RTGS) as the most critical systemically important payment system for large value, time critical payments between system participants, settled transactions valued at ZWL1.6 Trillion constituting 62% of the local digital transactions in the year 2020. This was an increase 592% from prior year transactions. In terms of volumes ZETSS system handled 10.7 million transactions constituting 0.56% of the local digital transactions in the economy or an increase of 31% from prior year transactions.

The growing RTGS annual transactional values and volumes are shown in the figure 1 below.

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