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National Clearance And Settlement Systems - Preliminary (Ss 1-2)

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3.       Recognition of clearance and settlement systems

 

            (1) Subject to this section, the Central Bank may recognise a clearance and settlement system that has any of the following objects-

     (a)     the clearing of payment instructions between financial institutions that are participants in the system;

     (b)     the settling of obligations arising from the clearing of transfer instructions referred to in paragraph (a), whether by-

           (i)       netting;

          (ii)       set-offs; and

          (iii)       gross settlement;

     (c)     the final discharge of any indebtedness between participants in a clearance and settlement system which arises from the clearance or settlement of obligations referred to in paragraphs (a) and (b) through a system established by the Central Bank in terms of section 7; or

     (d)     any of the following objects, to the extent that they are incidental to or connected with an object specified in paragraph (a), (b) or (c)-

           (i)       establishing a clearance system for the clearing of transfer instructions between all or any of the participants in the system and for the provision of services that are incidental to such clearing;

          (ii)       providing a forum for the consideration of matters of mutual interest concerning participants in the system;

          (iii)       acting as a medium of communication, on behalf of its participants, with the Government, the Central Bank, and other persons and authorities;

         (iv)       dealing with other matters of interest to its participants and fostering co-operation between them.

            (2) The Central Bank may, in terms of subsection (1), recognise different clearance and settlement systems-

     (a)     in respect of different classes of financial institutions;

     (b)     in respect of different areas of Botswana; or

     (c)     for the clearance and settlement of different classes of obligations.

            (3) The Central Bank shall not recognise a clearance and settlement system in terms of subsection (1) unless it is satisfied that-

     (a)     only financial institutions and the Central Bank are permitted to become participants in the system;

     (b)     the system fairly represents the interests of all financial institutions that are or will become participants in the system;

     (c)     the Central Bank will be able adequately to monitor and regulate the system and the activities of its participants in order to ensure compliance with this Act and the  Banking Act;

     (d)     the constitution and any rules governing the system are fair, equitable and transparent and make adequate provision for-

           (i)       admitting financial institutions into the system as participants, and regulating and terminating their participation;

          (ii)       controlling its participants' use of clearance and settlement systems or operations;

          (iii)       appointing a management body or committee, representative of the participants, to organise and manage the system and the participants' participation in it;

         (iv)       appointing any person as a system operator within the system in order to provide clearing processing services to or on behalf of participants; and

          (v)       criteria according to which a participant may be authorised to introduce any person to provide payment services; and

     (e)     the management body has ensured the provision of a contingency plan in support of the operational clearance and settlement system.

 

4.       Approval of amendments to constitution and rules of recognised systems

 

            No amendment to the constitution of any recognised system, or to the rules governing the system, shall have effect until they have been approved by the Central Bank.

 

5.       Constitution and rules of recognised system to be open for inspection

 

            The constitution of every recognised system and any rules governing the system, together with any amendments to that constitution and those rules, shall be kept at-

     (a)     the offices of the Central Bank; and

     (b)     the head office in Botswana of every recognised system,

and shall be open for inspection there by members of the public at all times during normal office hours.

 

6.       Withdrawal of recognition from clearance and settlement system

 

            (1) Subject to subsections (2) and (3), the Central Bank may by notice in writing to the management body of the system concerned, withdraw its recognition of a recognised system if the Bank has reasonable grounds for believing that-

     (a)     the system no longer fairly represents the interests of all financial institutions that are or should become participants in the system;

     (b)     the management body has contravened any provision of this Act or of the system's constitution; or

     (c)     the manner in which the system is being conducted does not adequately protect the system against systemic risk,

and that it is in the public interest to withdraw its recognition from the system concerned.

            (2) Before withdrawing its recognition from a system in terms of subsection (1), the Central Bank shall notify the system's management body, in writing, that it is considering doing so and of its reasons for considering such a step, and shall give the management body an opportunity to make representations in the matter.

            (3) The Central Bank shall not withdraw its recognition from a system in terms of subsection (1) without paying due regard to any representations made by the system's management body.

 

7.       Establishment and operation of clearance and settlement system by the Central Bank

 

            (1) The Central Bank shall establish and operate its own system for the settlement of obligations among banks and recognized systems.

            (2) The Central Bank may specify rules, procedures and participant requirements for the Central Bank system established in terms of subsection (1), provided that no such rule, procedure or participant requirement shall be made without adequate consultation with the participants of the system.

 

8.       Provision of information to Central Bank

 

            (1) In addition to any information that is required to be provided to the Central Bank in terms of the Banking Act, the management body of every recognised system, and every participant in the system, shall provide the Central Bank with such reports, returns and other information as the Central Bank may reasonably require regarding-

     (a)     the volumes and values of transfer instructions cleared in the system;

     (b)     the volumes or values of the participants' payment obligations and settlement obligations; and

     (c)     any other information regarding the operation of the system.

            (2) The Central Bank shall-

     (a)     obtain reports from any person or institution which is involved in the business of payment intermediation, whether under this Act or any other law; and

     (b)     require any such institutions concerned to adopt or conform to specified operating requirements.

 

9.       Control of undesirable conduct in regard to recognised system

 

            (1) If the Central Bank has reasonable grounds to believe that a management body or a participant in a recognised system or a settlement system is engaging in or is about to engage in any act, omission or course of conduct which results or is likely to result in systemic risk, or prejudices or will prejudice the integrity, effectiveness or security of the system concerned the Central Bank may issue a written directive requiring that management body or participant, as the case may be, to do any one or more of the following-

     (a)     to cease engaging in the act, omission or course of conduct concerned;

     (b)     to do such things as the Central Bank may specify to remedy the situation;

     (c)     to provide the Central Bank with such information relating to the matter as is specified in the direction.

            (2) Any person who contravenes or fails to comply with any provision of a directive in terms of subsection (1) shall be guilty of an offence and liable to a fine not exceeding P150 000.00.

            (3) If any person contravenes or fails to comply with any provision of a directive in terms of subsection (1), whether or not criminal proceedings have been or may be instituted against him for an offence in terms of subsection (2), the Central Bank may apply to the High Court for an order directing him to comply with the provision concerned.

            (4) On an application in terms of subsection (3), the High Court may make such order as, in its opinion, will ensure proper compliance with the directive concerned.

            (5) This section shall be construed as additional to, and not in substitution for, any provision of the Banking Act that permits the Central Bank to issue directions to financial institutions.