Operator of the large-value payment system

The National Bank plays this role by handling and managing the real-time gross settlement system - MIPS. Namely, the NBRM is the owner and operator of MIPS. The NBRM ensures smooth daily operating of the system and conduct of all operations initiated by participants. The participants perform all operations in the system as required by the predefined Operating rules of MIPS

Oversight ROLE

The NBRM's payment systems oversight is a legally defined task. Pursuant to the Law on Payment Operations, overseeing the payment systems is aimed at achieving objectives related to the safety and efficiency of payment systems by monitoring the existing and planned arrangements, evaluating them against goals and policies. NBRM’s payment systems oversight is an integral part of its wider responsibilities for the implementation of monetary policy and maintaining financial stability.

The oversight function includes analysis of the payment system framework for managing legal, credit, liquidity, operational and other risks. If payment systems do not manage risks efficiently and effectively, their operation may pose a significant risk to the financial system, be a potential source of instability, and cause major systemic disruptions. The intensity, scope and type of the NBRM’s payment systems oversight depends on the assessment of risks to the payment system.

The primary responsibility for reliable functioning of the payment system rests with the system operators. Therefore, operators are expected to ensure stability of their systems. In reducing operational risk, the NBRM insists on technical security, taking modern security measures, internal controls, ensuring business continuity in terms of resources and data and further full compliance at least with the key considerations of the payment system operations standards, according to the payment system classification. Hence, oversight promotes awareness of payment system operators to recognize any critical point.

The NBRM may induce changes or propose amendments to the rules, the design or operability of payment systems or their operating environment, for the purposes of risk elimination, reduction or improved risk management.

Role of the NBRM in Payment Systems

According to the legal mandates, the NBRM shall establish, register and oversee the safety, soundness and efficiency of payment, settlement and clearing systems.

 

At the same time, the NBRM is the beneficiary of the payment systems in the country for the purposes of conducting monetary policy, maintaining financial stability and performing other important central bank operations.

 

In addition, the NBRM is the beneficiary of the international payment systems for the purposes of managing foreign reserves and executing payment operations of government authorities.

 

In this regard, the NBRM performs the following roles in the payment systems:

  • operational role;
  • oversight role;
  • development and catalyst role.

 

Operational role

The operational role of the NBRM covers the following aspects:

Operator of the large value payment system - MIPS
The National Bank plays this role through handling and managing real-time gross settlement system - MIPS.

Back-office operations
Back-office operations are internal operations of the NBRM associated with settlement of transactions concluded on the financial markets, and involve: processing, confirmation and settlement of transactions, accounting and reconciliation of the cash and custody accounts.

Performing international payment operations for the government
Cross-border payment operations are performed through foreign currency accounts of the NBRM opened in foreign central and commercial banks, with which it has established correspondent relations and by indirect participation in the payment system TARGET2 through central banks of the Eurosystem.
 

 

 

 

 

Oversight role

The NBRM's payment systems oversight is a legally defined task. Pursuant to the Law on Payment Operations, overseeing the payment systems is aimed at achieving objectives related to the safety and efficiency of payment systems by monitoring the existing and planned arrangements, evaluating them against goals and policies. NBRM’s payment systems oversight is an integral part of its wider responsibilities for the implementation of monetary policy and maintaining financial stability.

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Development and catalyst role
 

 

The NBRM performs its development role by improving financial institutions regulations, participating in the harmonization of the national with the European legislation, introducing new standards in the payment system operations in line with the internationally accepted standards, following the development trends and creating an environment for their implementation in the Republic of Macedonia so as to get ready for the integrative flows of SEPA within the EU.

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payment systems oversIGHT Methodology

The assessment of compliance of the payment system operations with the payment system operations standards in the Republic of Macedonia is conducted as defined by the Decision on the manner and methodology for payment systems oversight applying the Disclosure Framework and the Assessment Methodology of the Committee on Payment and Settlement Systems at the Bank for International Settlements and the Technical Committee of the International Organization of Securities Commissions.

Payment systems oversight is based on the identification, assessment and finding ways to eliminate or reduce the following types of risks:

  • systemic risk - payment systems can each be a source of risk in case of termination of operations of any of them or because of wrongdoing, which could lead to unexpected financial exposure of the participants,
  • legal risk - risk where improper interpretation and setup of legislation can make payment systems or participants face large financial exposures and possible losses,
  • credit risk - when one or more payment system participants are not able to settle the total liability either at the time of maturity or later,
  • liquidity risk - when one or more payment system participants cannot settle the total liability at the time of maturity, but in the future,
  • general business risk - risk that occurs during the payment system operations and assets and liabilities management, 
  • custody and investment risk - risk to the payment systems when safeguarding and investing assets at their disposal, and holding on behalf of their participants, and
  • operational risk - risk that occurs due to hardware or software failure, human error or hacker attack, which increases the possibility of malfunction of the system or its mismanagement or financial exposure and possible losses.

payment systems OPERATIONS Standards

The NBRM adopted the Principles for Financial Market Infrastructures issued by the Committee on Payment and Settlement Systems at the Bank for International Settlements and the Technical Committee of the International Organization of Securities Commissions as internationally accepted standards for payment system operations.

The NBRM classifies the payment systems in accordance with the Decision on criteria and standards for payment systems operations, relying upon the following criteria:

  • financial impact presented by the average daily value of payment transactions executed via the given payment systems during the  previous calendar year;
  • market share presented by the number of payment transactions of the given payment system relative to the total number of payment transactions executed by all payment systems of the same type during the preceding calendar year, expressed as a percentage; and
  • settlement of other payment systems or securities settlement systems in the given payment system.

The payment systems can be classified as:

  • systemically important payment systems,
  • important payment systems, and
  • other payment systems.

CROSS-BORDER payment operations on behalf and for the account of the government

The NBRM performs cross-border payment operations for the needs of the government and government authorities in accordance with the powers arising from the provisions of the Law on the National Bank of the Republic of Macedonia and the Law on Foreign Exchange Operations. Under the Law on Foreign Exchange Operations, the NBRM lays down regulations on the manner of performing cross-border payment operations.

Cross-border payment operations are performed through foreign currency accounts of the NBRM opened in foreign central and commercial banks, with which it has established correspondent relations and by indirect participation in the payment system TARGET2 through central banks of the Eurosystem.

In the field of documentary operations, the NBRM, playing the role of a bank of the government and government authorities, uses the following instruments for payment and protection against risks arising from contractual relationship of clients with their foreign partners:

1. Documentary letter of credit: is an instrument for international payments where the bank assumes an irrevocable obligation to pay the beneficiary upon receipt of the documents that comply with the prescribed terms and conditions in the letter of credit.

2. Bank guarantee: is an instrument of security against risks in international trade where the guaranteeing bank undertakes irrevocable obligation to pay the beneficiary any amount up to the maximum amount of the guarantee in case of default under the concluded contractual relationship between the principal and the beneficiary.

3. Cheque: is an instrument for payment in favor of the bearer on order and for the account of the issuer of the cheque.

NBRM carries out the following types of services related to documentary operations:

  • Opening letters of credit at the request of the government and government authorities in favor of foreign legal entities, subject to the Uniform Customs and Practice for Documentary Credits, UCP 600 published by the International Chamber of Commerce in Paris,
  • Notification of guarantees received by SWIFT in favor of the government and government authorities, i.e. authentication of signatures  for guarantees received in original, as well as processing and sending documents of beneficiary’s claim for payment based on claims for payment under guarantees,
  • Forwarding cheques issued by a foreign bank for collection at request of clients
  • Advisory services to its clients as principals (instructing party) for opening letters of credit in favor of foreign legal entities and as beneficiaries of bank guarantees issued by a foreign guaranteeing bank.

Bank Guarantees Manual (pdf document) (available only in Macedonian language)
Presentation (pdf document) (available only in Macedonian language)

Development and catalyst role

The NBRM performs its development role by improving financial institutions regulations, participating in the harmonization of the national legislation with the European legislation, introducing new standards in the payment system operations in line with the internationally accepted standards, following the development trends and creating an environment for their implementation in the Republic of Macedonia so as to get ready for the integrative flows of SEPA within the EU.

The NBRM performs its catalyst role by initiating, coordinating, researching and consulting operators and participants of the payment systems in relation to changes in the structure, functionality and policies in the area of payment systems.  The NBRM's development and catalyst role is mostly achieved through the National Payment Systems Council of the Republic of Macedonia.

Back-office operations

Back-office operations are internal operations of the NBRM associated with settlement of transactions concluded on the financial markets, and involve: processing, confirmation and settlement of transactions, accounting and reconciliation of the cash and custody accounts.

Back-office operations contribute significantly to the implementation of the monetary policy and to the foreign reserves management. In terms of monetary policy, back-office operations support the following instruments: open market operations, reserve requirement, deposit facilities, overnight credit and intraday credit. At the same time, in foreign reserves management, the NBRM is trading with the following financial instruments: spot, forward and swap transactions in foreign currency and gold, outright and repo transactions in securities, lending of securities and derivatives. For the settlement of transactions related to these instruments, the NBRM uses the established correspondent relations with foreign central and commercial banks and foreign depositories. 

The NBRM's back-office operations are carried out in accordance with the internal procedures that reflect international best practices contained in the codes of conduct for the financial market operations.

SEPA

SEPA - Single Euro Payments Area is a project for advanced integration of the EU internal market which enables equalization of the euro payments requirements for all participants, regardless of their location, i.e. equalization of the national and cross-border euro payments. This project is a joint initiative of the European Commission, the European Central Bank and the European Payment Council, whereby the Eurosystem has played an active role in its implementation as a catalyst, promoter, regulator and source of knowledge.

The implementation of the SEPA project is expected to achieve the following objectives:

  • to create a single market for electronic payments in euros, which makes no difference between domestic and cross-border transactions,
  • to increase payment systems efficiency in the SEPA  countries in terms of cost of services, simplicity, functionality, safety and reliability of payment systems,
  • to accept single payment instruments for credit transfer and direct debit within the entire payment area,
  • to establish technical interoperability between payment systems in the country and among all SEPA countries, and
  • to establish technical standards.

The Strategy for Development of the Payment System of the Republic of Macedonia in the period 2013 - 2017 defines activities aimed at the gradual introduction of SEPA standards in the Republic of Macedonia. The activities are part of the Action Plan for the implementation of the Strategy for Development of the Payment System of the Republic of Macedonia in the period 2013 - 2017. These activities are conducted within the working groups of the National Council for the payment systems of the Republic of Macedonia.

For more information on the SEPA please visit the following link on the ECB website.