TABLE OF CONTENTS BANK OF UGANDA P.O.BOX 7120 KAMPALA

Transcription

1 THE UGANDA LOCAL FOREIGN CURRENCY CHEQUE CLEARING GUIDELINES TABLE OF CONTENTS P.O.BOX 7120 KAMPALA

2 LOCAL FOREIGN CURRENCY CHEQUE CLEARING GUIDELINES 1. Local Foreign Currency Clearing House 1.1. Business of the Clearing House The Clearing House shall be a medium of exchange, presentation and settlement of noncash payment instruments (cheques, drafts, credit clearance, Electronic Funds Transfers and similar payment orders and their electronic records) drawn on and payable to member banks, at par Membership to the clearinghouse Membership of the Clearing House will be open to all Commercial Banks licensed by Bank of Uganda, to carry out the business of banking in Uganda on application after satisfying specific requirements. A bank seeking admission to the Clearing House shall apply to the Chairman, Uganda Bankers Association (UBA). The application shall then be reviewed and approved by the Uganda Bankers Association on the recommendation of the Clearing House Committee Conduct and Supervision The supervision arrangement of the Uganda shillings clearinghouse will be maintained Accounts for LFCCC Commercial banks will have to open accounts for each of the foreign currencies with the central bank before 1st July, Accounts held with BOU will be non- interest bearing and purely settlement purposes. The onus will be on the Commercial Banks to maintain balances sufficient for clearing Procedures for the opening of foreign denominated accounts: 1. The Commercial Bank submits a letter to Director Commercial Banking, requesting to open forex account. The letter must indicate the proposed title of account, the signatories and also indicate that it is a forex account. 2. Director Commercial Banking verifies the application and submits the request to Governor (where required), for approval. 3. Director Commercial Banking instructs the Chief Accountant s office to open a forex account in the general ledger. 4. The Chief Accountant authorizes the opening and instructs the Officer in-charge of General ledger to allocate an account number. 5. After allocating an account number, the Chief Accountant writes a letter to the Commercial Bank, copied to Director Commercial Banking and Director Banking informing them of the new account title and account number. 2

3 1.5. Currencies to be cleared The currencies to be cleared are United States Dollars (USD), Euro (EUR), Great Britain Pound (GBP) and Kenyan Shillings (KES) and any other currencies that may be agreed upon in the future Transaction and Voucher Type Codes Currency Clearing Codes The clearinghouse committee assigned the following transaction codes to the various currencies under the LFCCC scheme: Current account cheques: 22= USD, 23= EUR, 24 = GBP, 25 = KES Savings account cheques: 63=USD, 64=EUR, 65=GBP, 66=KES Drafts / Bankers cheques: 38=USD, 39=EUR, 67=GBP, 68=KES Voucher Types The voucher types will be similar to those used for local currency. The key voucher types are; 10 = Savings account cheque 11 = Current account cheque 12 = Bank draft 16 = Banker s cheque 1.7. Clearing Files File Format The file format will be the same as that currently used for local currency. The currency code field on the header record will change to correspond to currency codes set by the clearing house committee. The currency codes will be: 0 = UGX, 1 = USD, 2=EUR, 3=GBP and 4= KES Electronic Clearing Files Commercial bank representatives should present electronic clearing files for each currency which should contain an Electronic journal (EJ), Settlement, Electronic funds transfer file (EFT) and a Discrepancy file for each currency cleared File Naming Convention The file naming convention remains the same as that being used for the local currency, that is, RRDDMMxx.Jcc where RR = clearing service branch code to receive the file DDMM is the date of presentation, DD = day, MM = month xx = Sequence no in range 00-99, reset daily J= file type code for Electronic Journal 3

4 cc = collecting clearing service branch File Boundaries There will be separate files for the different currencies. The currency for the file should be selected in the header File Presentation The files will be presented and delivered according to currency with each currency having its own zip file. Although there will be one clearing session per day, the clearing will be split into mini sessions for each currency to be cleared MICR code line Currently there is no currency code on the MICR code line. The code line consists of the following: Voucher Type, Sort Code (i.e. Bank, Branch, and Country), Check Digit, Account number and Serial number. To facilitate MICR processing for LFCC instruments, we will be required to use voucher types code ranges reserved for Other Future Debit Instruments in the table 2 below to include the different local foreign currency instruments. Table 1: Transaction and Voucher Type Codes Transaction And Voucher Type Code Non-MICR Cheques 03 Savings Account Cheque 10 Current Account Cheque 11 Bank Draft 12 Travellers Cheque 13 Treasury Bill Cheque 14 Government Cheque 15 Bankers Cheque 16 Gift Cheque 17 Interest/Dividend Warrant 18 Certificate of Deposit 19 Money Order 20 Promissory Note 21 Other Future Debit Instruments Software Upgrade Commercial banks should engage their software vendors / developers to upgrade their Electronic Clearing Systems (ECS) to handle Local Foreign Currency Clearing. 4

5 2. Clearing Cycle Day 1: Day 2: Day 3: 1. Banks present cheques and their associated electronic records and EFT credits and debits for exchange and derivation of settlement obligations in the clearing house. 2. Settlement balances are posted to commercial bank accounts held at Bank of Uganda. 3. Banks process cheques and their associated electronic records and EFT credits and debits either collected from the Clearing House or sent along telecommunication line. 4. Beneficiaries of EFT credits get value. 1. Unpaid cheques and their associated records, discrepancy records and unapplied/unpaid EFT credits and debit records are exchanged in the Clearing House. 1. Last day for exchange of unpaid cheques, their associated electronic records and unpaid direct debit records in the Clearing House. 2. Cheque and Direct debit payee s get value. A process flow chart is shown in Appendix I 2.1. The Clearing Process in Detail 1. Representatives of the participating banks should assemble by 10:00 am daily when the clearing house opens for banks to deposit their data files which will be in a pre-determined standard format. 2. Each bank will submit four zipped files (on a portable storage device); one for each currency to be cleared each containing an electronic journal (EJ), a settlement electronic funds transfer file and a discrepancy file. 3. LFCCC will run concurrently with the Uganda shilling cheque clearing. Files will be received at the same time but processed on a currency basis with each currency being processed in a separate session. 4. While data files are being read and processed, representatives of the participating banks will exchange physical instruments. 5. The Electronic Clearing System (ECS) shall receive the settlement files from all the banks and derive bilateral gross positions, which will constitute the 5

6 3. Other Issues obligations for each bank. At the end of every clearing session, the gross bilateral position shall be derived. 6. The Electronic Clearing System (ECS) shall receive the settlement files from all the banks and process them, from which gross bilateral obligations for each bank will be derived. 7. The obligations derived from the clearing process will then be posted and onto the respective commercial bank settlement accounts. Settlement will only be possible if there is sufficient balance in the bank s settlement account. If a bank is has an insufficient balance, the bank will be notified and given two hours to fund their account. 8. If the bank fails to raise funds within the allotted time, the failure to settle rules will be invoked and the shortfall will be settled through sale of the collateral at best quote. 9. The Clearing House Manager resubmits the concurrent batch for settlement after liquidity has been released from the collateral Cheque Cap Values Cheques exceeding the following amounts shall not be exchanged in the Clearinghouse: UGX =20,000,000= (Twenty Million UGX), USD =10,000= (Ten Thousand USD), EUR =8,000= (Eight Thousand EUR), GBP =6,000= (Six Thousand GBP), and KES =800,000= (Eight Hundred Thousand KES). These limits may be reviewed from time to time Cheques cleared on Agency basis A financial institution may wish to apply for sub-membership of the Clearing House if it is licensed by Bank of Uganda, to carry on the business of banking in Uganda under the Financial Institutions Act, These institutions include Credit Institutions and Microfinance Deposit-Taking Institutions Every applicant for sub-membership shall be proposed by a member that shall also act as a sponsor for that financial institution i.e. clearing items on its behalf. The application for sub-membership and termination thereof shall go through the prescribed stages for accepting a new member.all the liabilities and risks of a sub-member participating in the Clearing House are borne by the sponsoring bank. 6

7 3.3. Failure to Settle Rules Survivors Pay Rules Survivor s Pay Rules will be used as the failure to settle mechanism for both Uganda Shilling and Foreign currency denominated cheque clearing. Each participating bank, other than the Bank of Uganda shall contribute equally to the collateral pool. The collateral pool will be calculated basing on the highest net debit position in the clearing house over the past 3-months plus 50%. The 50% is to take care of fluctuations over the future period since the calculations are based on past records. The minimum contributions shall be advised once every three months, using data for the last 3 months and held constant for three months. For LFCCC clearing, the minimum contribution shall be advised in August 2009 using the data for the previous month. Upon maturity of the treasury bills held in the collateral pool, the banks will be credited with the principal and the interest. On the same day, Bank of Uganda will debit the accounts of the commercial banks with the cost for the new collateral amount for the next 3 months. In the event that a member bank is unable to clear and part of the collateral is used for settlement: The collateral used shall be sold at the ruling market rate. The used-up collateral shall be allocated to the participant that was unable to settle up to 100% of its contribution; and The rest of the outstanding balance shall be allocated to the other participants on an equal basis Collateral Management The collateral pool shall be kept at the Bank of Uganda Central Depository System (CDS) and Bank of Uganda shall be responsible for the management of the CDS. The collateral value shall be 75% of the amount that can be realized on the security on rediscounting it (i.e. the margin of safety shall be 25% of the face value of the security). 4. LFCC Implementation Timeline File format testing was scheduled to take place between 4th and 15th May 2009 but continues from 18th May 2009 up to 30th May 2009 in order to validate the LFCCC test file format for correctness. Pilot testing for exchange of LFCCC test files started on 1st June 2009 and will run up to end of Month. Local Foreign Currency Clearing - Go Live Date is scheduled for 1st July

8 5. Contact Details For Technical Issues contact details: 1. Daniel Ocakacon, Ext Modesto Aula, Ext. 2496, For Procedures, Rules and Regulation issues contact details: 1. Julie Piloya Okiror, Ext Charity Mugumya, Ext The LFCCC committee was composed of the following: 1. Mr John Chemonges Banking Department 2. Dr Charles Abuka Research Department 3. Mr. Modesto Aula Payments and Settlements Department 4. Ms. Caroline Akishule Ntumwa Research Department 5. Ms. Julie Piloya Okiror Banking Department 6. Mr. Ronald Ngobya Financial Markets Department 7. Mr. Isaac Bonny Teko Legal Counsel 8. Mr. Julius Sengendo MIS 9. Ms. Pauline Nyapendi Commercial Banking Department 10. Ms. Anita Mpagi Research Department 11. Ms. Hadijah Nampijja Internal Audit Department Technical input on accounting issues was given by the Accounts Department. 8

9 Appendix I EFT Debits and Credits Presenting Bank Payment Instruction Received Prepare Clearing data Pass provisional accounting Entries Reverse provisional accounting entries Unapplied instruction received Payee realise value Day 3 Clearing house Bank of Uganda Receiving Bank EFT File s Exchange instructions Day 1 EFT and Instructions received Settlement Determine Settlement Values Balance data & Verify instructions Unapplied EFT/Discrepancy file Exchange of Unapplied Instructions/ EFT debit EFT/Discrepancy file/ Unapplied instruction prepared for return Accounting Entries (Cr payee for EFT Cr -Day 1/ Debit payer for EFT Debit Day 1-3) Applied 9

10 Cheque Clearing Collecting/ Presenting Bank Cheque Received Sort cheques, prepare data & deliver to CH Accounting entries passed (provisional Cr to payee) Returned to payee cheque Unpaid Cheque/data received EJ/Discrepancy file Reverse provisional Cr to payee Payee realise value Clearing house Bank of Uganda EJ file Exchange of cheques & Data Day 1 Cheque EJ file Settlement Settlement values determined EJ/ Discrepancy file Unpaid cheque Exchange of unpaid Cheque/ data Discrepancy file Day 3 Paying/ Receiving Bank Receipt of instruments and data Balance data & verify Instruments Unpaid Unpaid Cheque and data prepared Debit Payer Account Paid 10