Ranee Jayamaha: The significance of payment reforms in financial system stability Opening address by Dr Ranee Jayamaha, Deputy Governor of the Central Bank of Sri Lanka, at the seminar on “Payment systems and cheque imaging” organised by the Royalist Bankers’ Club, Colombo, 25 May 2006. *  *  *  Let me thank the President and members of the Royal Bankers’ Club for inviting me to deliver the opening remarks at the seminar on ‘Payment Systems and Cheque Imaging’. I am honoured to be speaking to this distinguished group and it is encouraging to note that the subject is of interest to a good cross section of the financial community. In my opening remarks, I will give an overview of the significance and rationale of payment reforms in financial stability and then set out the impact of payment reforms on the financial system, institutional arrangements that are in place, and the need to change payment practices of banks and the public. It may also be important to note that the term “Payment Systems” covers payments, clearing and settlement systems. As you are aware, the Central Bank’s role in the payment system stems from its primary function of providing payment, clearing and settlement service. Economic policy reforms, the ever increasing complexities in the financial system and the changing role of central banks have resulted in central banks to be at the center of payment reforms which, from the Central banks’ point of view, is helpful in achieving the objective of financial system stability.
The RTGS was implemented in September 2003 and the system facilitates large value and time critical fund transfers and settlements electronically and on real time. In February 2004, the SSSS module was integrated to the RTGS System. To facilitate the operations of these systems, government securities are issued in scripless form and the system facilitates simultaneous transfer of government securities and settlement of funds through the RTGS on a Delivery versus Payment basis. The Central Bank continues to upgrade and enhance facilities to these two systems and in December 2005, the internet based facility called LankaSecureNet which enables the account holders of the Scripless Securities Depository System to obtain up to date details of their investments through the internet was introduced. While eliminating the systemic risks that was involved in the high value and time critical transactions, the Central Bank became the owner and operator of both the RTGS and SSS systems. The service provider of the retail payment system is LankaClear (Pvt) Ltd which is owned jointly by the Central Bank and the commercial banks. Two weeks ago, LankaClear (Pvt) Ltd introduced the Cheque Imaging and Truncation System to ensure that cheques deposited in any part of the country is cleared and settled within two days except in uncleared areas. The cheque imaging system eliminates regional disparities in cheque clearing and establishes a common clearing schedule. In addition to these two systemically important payment systems, there are other small scale payments and settlements arrangements.