Rewiring the Region’s Financial Architecture

1. Rewiring the Region’s Financial Architecture Delivering a Payment System for the 21st Century in the Caribbean Prepared for CAIB’s 37th Annual General Meeting and Conference – November 2010

2. Disclaimer The views expressed by me in this presentation are not necessarily the official views of the Eastern Caribbean Central Bank (ECCB) and should not be construed as inferring such.

3. Outline • Background/Landscape • Concepts • Functionalities • Enabling Environment • Scope

4. Background • The Caribbean • Wikipedia defines The Caribbean as a region consisting of the Caribbean Sea, its islands (most of which enclose the sea), and the surrounding coasts. The region is located southeast of the Gulf of Mexico and North America, east of Central America, and to the north of South America. • The word "Caribbean" has multiple uses. Its principal ones are geographical and political. The Caribbean can also be expanded to include territories with strong cultural and historical connections to slavery, European colonisation and the plantation system.

5. Background

6. Background • 18 countries • Physically and politically separated • Economically and culturally separated, • 36 banks with varying services and clienteles • 13 other financial institutions. • Payment system at varying stages of development, with varying degrees of efficiency, reliability • Governed by different and in some cases an incompatible legislative framework.

7. Concepts/Definition • http://www.bis.org/publ/cpss00b.htm • Payment System: • a payment system consists of a set of instruments, banking procedures and, typically, interbank funds transfer systems that ensure the circulation of money.

8. Concepts/Definition • http://www.bis.org/publ/cpss00b.htm • Systemically Important Payment System: • A payment system is systemically important where, if the system were insufficiently protected against risk, disruption within it could trigger or transmit further disruptions amongst participants or systemic disruptions in the financial area more widely.

9. Concepts -Customer Environment • Computers became affordable • Computers in every home • The rise of the internet • Social Networking – The battle for supremacy of Facebook, MySpace, Twitter, Hi5, Skype, OOVOO. It is believed that in the developed world almost 1 in 5 persons meet their significant other online. • The evolution of the Cell Phone

10. Functionalities • Payment Models • Business to Business • Business to Consumer • Consumer to Business • Consumer to Consumer

11. Functionalities • Differentiated • Time sensitive transactions • Bulk less time sensitive • Relatively Inexpensive

12. Enabling Environment • Settlement for all payment models • Large Value Payment System (expedited settlement, liquidity management) • Retail Payment System Settlement (Bulk payments, least expensive, allows open product development)

13. Enabling Environment • Core Principles of Systemically Important Payment System: • http://www.bis.org/publ/cpss43.pdf

14. Enabling Environment • Risk Management • Liquidity • Credit Risk • Rules • Standards • Foundation; enables consistent evolution and revolution; enables compatibility and relevance • Legislation • Support for new technology • Defines finality and irrevocability • Management of Data: Processing, storage …

15. Scope • Same principles required for Caribbean Payment System • Settlement is fundamental to Pan Caribbean Payment System • Cross Border Linkages via RTGS (Central Banks relationships) • Cross Border Linkages via ACHs (e.g. Fed/Canada; Fed/Mexico; Initiative for Central America and Santo Domingo, Fed/SEPA) • Build a Pan Caribbean Centrally Managed

16. Questions, Comments, Emotional Outbursts??? Thank You