BANK OF BOTSWANA PAYMENT SYSTEMS OVERSIGNT IN BOTSWANA

Overview Ø Legal and Regulatory Framework Ø Infrastructure Development Ø Institutional Arrangements Ø Coordination with other Regulators Ø Challenges, Lessons and Opportunities

Legal and Regulatory Framework Ø The National Clearance and Settlement Systems (NCSS) Act, 2003 and its Regulations, (2005) Ø Other Acts to facilitate e. Commerce such as Electronic Records (Evidence) Act & Electronic Communications and Transactions Act, Ø Financial Intelligence Act, Non-Bank Financial Institutions Regulatory Authority (NBFIRA) Act and Banking Act

Legal and Regulatory Framework cont. Ø Policies: Oversight Policy and Guidelines for Payments Systems Providers and Services. Ø System Rules: BACH, RTGS, CSD Ø General Reference to the Principles for Financial Market Infrastructures (PFMI), (reviewing oversight policies to align to PFMIs)

INFRASTRUCTURE DEVELOPMENT Ø Botswana Interbank Settlement System (BISS) – 2006, upgraded in 2016 Ø Botswana Automated Clearing House (BACH) 2015 Ø Central Securities Depository -2008: (Ongoing development to link CSD to BISS/RTGS) Ø 3 Mobile Network Operators (MNOs), all providing mobile money services.

INFRASTRUCTURE DEVELOPMENT Cont. Ø BISS Ø Bank of Botswana’s Real Time Gross Settlement System (RTGS) Ø Large value payment system and time critical payments Ø Direct linkages to Botswana Unified Revenue Service (BURS), BACH Ministry of Finance and Economic Development and (OAG), and CSD is planned

INFRASTRUCTURE DEVELOPMENT Cont. Ø BACH Ø Retail payment system Ø Inter-bank cheque and EFT clearing system Ø First introduced in 2002 as an Electronic Clearing House, BACH after the implementation of CITS to increase efficiency and security of the payments systems. Ø BACH went live in February 2015, achieve T+2 settlement

INFRASTRUCTURE DEVELOPMENT Cont. Ø Ø CSD Securities Settlement System that facilitates the holding of securities in electronic form (dematerialised) Ø Introduced in 2008 to facilitate trading at the Botswana Stock Exchange Ø Proposed business case for single CSD, for Government and private securities. Ø Gov’t securities are currently not traded through the BSE but through Bank of Botswana and held in the books of the Bank (book entry system). Ø Currently settlement of funds is through a commercial bank, proposals to settle through central bank.

INSTITUTIONAL ARRANGEMENTS Ø Ø National Payments Council (NPC) Chaired by Governor Membership comprise Chief Executives of Financial Institutions and Non-bank financial institutions Responsible for leading the payment systems reform and modernisation process, promoting collaboration and co-operation among stakeholders, as well as making binding decisions on NPS project matters.

INSTITUTIONAL ARRANGEMENTS Ø Ø National Payments Task Force (NPTF ) Chaired by Deputy Governor Comprises Bank representatives, Executive Officers and appointed representatives of commercial banks, non-bank financial institutions and other stakeholders in the payment systems such as other regulatory authorities and Government representatives. The personnel involved are senior and knowledgeable people capable of determining the NPS vision, strategy and development.

Institutional Arrangements Banker’s Association of Botswana (BAB) Ø Serves the useful role of sounding board for testing the suitability and market implications of any policy decision concerning the payments system. Ø Ø It is a forum at which bankers project opinions and take positions on issues, providing feedback to the Bank on policy changes

OVERSIGHT APPROACH Ø The Banks Oversight Policy adopts a functional approach (as opposed to institutional approach), i. e, entities offering payments/payment-related services would be subjected to the same oversight criteria, irrespective of their institutional nature. Ø The oversight process is risk based.

Coordination and Cooperation Ø Memorandum of Understanding (Mo. U) with NBFIRA, Competition Authority, Financial Intelligence Agency and Botswana Communications Regulatory Authority(BOCRA) to cooperate on issues of mutual interest. All stakeholder Regulators are members of the National Payments Task Force Ø The Bank is a member of the SIRESS Payment System Oversight Committee Ø

CHALLENGES Ø Cyber Crime, No cyber resilience strategy for critical infrastructures Ø Amendment of Payments System Act to cater for new developments Ø Increase of retail participants and new entrants in the market. Ø No appropriate legislation to Regulation payment services (EPS Regulations proposed). Ø Low levels of financial inclusion

LESSON LEARNED Ø Stakeholder consultation is key Ø Benchmarking from other countries in the region, no need to re-invent the wheel Ø Need for mobilisation of NPS projects and strategies Ø National Payments System Strategy driven from Senior Management level to achieve intended goals

OPPORTUNITIES An all inclusive National Financial Inclusion Strategy being drawn, Lead managed by the MFED Ø Issuing and Adoption of the Electronic Payment Services (EPS) Regulations to cover payments services Ø Consideration for a National Switch, for further development of the Retail Payment System Ø

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