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Bahrain Central Bank takes up new settlement systems

The Central Bank of Bahrain (CBB) is to implement a new national payment network as part of its efforts to boost the Kingdom's banking sector and meet international standards.

It will deploy a real time gross settlement system (RTGS), which allows large value inter-bank payment and settlement to take place online and in real time. The RTGS will also take care of retail fund transfers on behalf of bank customers. The CBB also announced that it would implement the Securities Settlement System (SSS) to enable real time, online settlement of all government securities transactions, including sale/purchase, auction and repurchase transactions. Both systems are expected to go live in the second half of 2007, and will replace Bahrain's existing deferred net settlement systems.

Dr Abdul Rahman Saif, executive director, banking operations, at CBB, told ACN: "In line with BIS (Bank of International Settlements) core principles of systemically important payment systems (SIPS), and with a view to reducing/eliminating systemic settlement risk, most developed countries/emerging economies have been trying to migrate from instrument-based to electronic message-based systems, debit-pull to credit-push systems, and net settlement to gross settlement systems.

"In addition to the new systems being safe, secure, sound and efficient systems, the immediate benefit to accrue to ordinary customers is much faster realisation of funds - ie. intra-day funds availability." The RTGS-SSS systems will be implemented through the country's SWIFT network, which is already in place for banking transfers, and will make use of the security features provided by its message transmission.

Dr Saif added: "The RTGS-SSS project is a combination of business development, treasury management and IT. The introduction of RTGS is likely to facilitate the offering of new banking products."

All full commercial banks (FCDs) currently involved in domestic interbank fund transfer will participate in the RTGS and SSS systems, while other banks will be able to use the systems as customers of FCDs. The systems are capable of handling multiple currencies.

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