Notice No. 4/GBM/2019 of 29 January - Regulation of the Real-Time Gross Settlement Transfer Subsystem (MTR)

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--- Bank of Mozambique --- Governor

NOTICE No. 04/GBM/2019 Maputo, 29 January 2019

SUBJECT: Regulation of the Real-Time Gross Settlement Transfer Subsystem (MTR)

Given the need to regulate the Real-Time Gross Settlement Transfer Subsystem, the Bank of Mozambique, exercising the powers conferred upon it by paragraph c) of paragraph 2 of Article 6 of Law No. 2/2008 of 27 February – National Payments System Law, determines:

1. The Regulation of the Real-Time Gross Settlement Transfer Subsystem (MTR), attached hereto, is hereby approved, forming an integral part of this Notice.

2. This Notice enters into force on the date of its publication and revokes Notice No. 8/GBM/09 of 23 December.

3. Any doubts arising from the interpretation and application of this Notice shall be submitted to the Payments Systems Department of the Bank of Mozambique.

[Signature] Rogério Lucas Zandamela Governor

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--- Bank of Mozambique --- Governor

REGULATION OF THE REAL-TIME GROSS SETTLEMENT TRANSFER SUBSYSTEM (MTR)

CHAPTER I General Provisions

Article 1 (Subject Matter)

This Regulation establishes the principles and provisions governing the establishment and operation of the Real-Time Gross Settlement Transfer Subsystem, hereinafter referred to as Metical in Real Time (MTR).

Article 2 (Scope of Application)

This Regulation applies to all MTR participants set forth in Article 4.

Article 3 (Definitions)

For the purposes of this Regulation, the following terms shall be understood as:

a) Final Beneficiary – the identified client in the payment instruction who receives funds through a credit to their bank account;

b) Multiple Blockage – the inability to execute settlement of payment instructions in two or more waiting queues in the MTR due to insufficient liquidity in the participants' settlement accounts;

c) Settlement Account – a demand deposit account in national currency maintained by a participant at the Bank of Mozambique for financial settlement purposes, including operations under the MTR;

d) Intraday Credit – a loan granted by the Bank of Mozambique to a credit institution participating in the National Payments System, against collateral, with repayment occurring on the same business day, up to the settlement deadline for obligations in the payment subsystems;

e) FIFO (First in-First out) – the payment instruction settlement rule observing chronological criteria, as established under Article 10 of this Regulation;

f) Waiting Queue – the ordering mechanism by which payment instructions are held pending acceptance by the MTR for settlement, due to insufficient funds in the ordering participant's settlement account;

g) Settlement – the successful execution of debit and credit entries in the settlement accounts of the participants indicated in the payment instructions;

h) MTR Operations Manual – the document providing participants with detailed and practical procedures to ensure the proper functioning of the MTR, constituting an annex and integral part of this Regulation;

i) MTR – the payment subsystem operated and managed by the Bank of Mozambique to enable a participant, as the ordering party, to transfer funds in favor of another participant, as the recipient, in real time, transaction by transaction, through settlement accounts maintained at the Bank of Mozambique, for their own benefit or for a third party, the final beneficiary;

j) Recipient Participant – the participant who receives the payment instruction via the MTR and credits the final beneficiary's account, in accordance with the information provided in the instruction;

k) Ordering Participant – the participant who initiates the payment instruction for debit in their settlement account and credit in the recipient participant's account, via the MTR;

l) Multiple Blockage Resolution – the mechanism to unblock funds related to payment instructions in the waiting queue;

m) Real Time – processing of instructions on an individual basis at the moment they are received, and not at a later time.

CHAPTER II PARTICIPATION, AUTHORIZATION AND OPERATION OF THE MTR

Article 4 (Participants)

The following may be participants in the MTR:

a) The ministry overseeing the finance sector;

b) The Bank of Mozambique; c) Banks; d) Other entities authorized by the Bank of Mozambique.

Article 5 (Participation Requirements)

1. For the entities referred to in paragraphs c) and d) of the preceding article, the cumulative participation requirements in the MTR are:

a) Being an institution authorized to operate in Mozambique, in accordance with applicable legislation; b) Holding a settlement account with the Bank of Mozambique; c) Possessing technological infrastructure for carrying out operations, in accordance with established procedures; d) Meeting adequate solvency and liquidity requirements.

2. The Bank of Mozambique may request supplementary information from entities and conduct investigations it deems necessary for the purposes of the authorization provided for in the following article.

Article 6 (Authorization to Participate)

1. It is the responsibility of the Bank of Mozambique to grant authorization for participation in the MTR.

2. The Bank of Mozambique must communicate, via the means it deems appropriate, the admission of new participants and their respective operational start dates to the other MTR participants.

Article 7 (Operating Days)

1. The MTR operates every day, except Saturdays, Sundays, national holidays, and all-day point tolerances in the jurisdiction hosting the MTR processing, that cover the entire day.

2. The MTR operates in accordance with the rules defined in the MTR Operations Manual.

CHAPTER III PAYMENT INSTRUCTIONS AND INTRADAY CREDIT IN THE MTR

Article 8 (Eligible Payment Instructions)

All payment instructions initiated by participants, regardless of the amount involved, are eligible for processing and settlement through the MTR.

Article 9 (Fees)

The fees set out in the current table at the Bank of Mozambique are due for the services provided in the MTR.

Article 10 (Settlement of Payment Instructions and Waiting Queues)

1. Payment instructions in the MTR are executed by debiting and crediting the settlement accounts held at the Bank of Mozambique.

2. Payment instructions in the MTR are, in principle, settled in the order of entry into the MTR, following the FIFO rule, under which the first payment instruction to be validated is the first to be settled.

3. In the event of a lack or insufficiency of provision in the settlement account, and if an intraday credit request cannot be made, payment instructions are placed in a waiting queue.

Article 11 (Intraday Credit)

Intraday credit is granted to participants under the terms defined in the respective Regulation.

Article 12 (Definitive, Irrevocable and Unconditional Nature)

Payment instructions executed in the MTR become definitive, irrevocable, and unconditional at the moment settlement has been effected in the participants' settlement accounts.

Article 13 (Timeframe and Consequences of Failure to Make Funds Available)

1. Funds related to payments settled in the MTR must be made available in the final beneficiary's bank account in real time by the recipient participant.

2. The provisions of paragraph 3 of Article 26, without prejudice to the provisions of paragraph 1 of Article 27, both of Law No. 2/2008 of 27 February, shall apply to the failure to make funds available.

Article 14 (Settlement of Payment Instructions in Waiting Queues and Resolution of Multiple Blockages)

The MTR has mechanisms for the periodic detection and resolution of multiple blockage situations for payment instructions in the waiting queue, using the most appropriate solution established in the MTR Operations Manual.

Article 15 (Retention of Payment Instructions in Waiting Queues)

1. Payment instructions that enter the waiting queue may remain there until the settlement accounts are funded within the timeframe and conditions established in the MTR Operations Manual.

2. Payment instructions that are not settled due to a lack or insufficiency of provision in the settlement accounts, as established in Article 13, are automatically rejected.

Article 16 (Return of Payment Instructions)

1. Payment instructions processed in the MTR may be subject to return.

2. In the event of a return of payment instructions, the reasons determining the return, as provided in the MTR Operations Manual, shall be stated and communicated.

CHAPTER IV SUSPENSION AND EXCLUSION OF PARTICIPANTS FROM THE MTR

Article 17 (Suspension or Exclusion)

1. The Bank of Mozambique may determine the suspension or exclusion of any MTR participant whenever there is non-compliance, inter alia, with the norms established in Law No. 2/2008 of 27 February and this Regulation, as well as the commission of acts that affect the normal functioning of the MTR.

2. The occurrence of any of the following facts also constitutes grounds for the exclusion of an MTR participant:

a) A declaration of their technical and financial incapacity to continue participating in the MTR; b) The freezing or closure of their settlement account; c) Submission to exceptional operating regimes, notably financial rehabilitation; d) Revocation of the authorization for their operation.

Article 18 (Communication, Effects of Suspension, Exclusion and Readmission)

1. The Bank of Mozambique communicates the suspension, exclusion, and readmission of a participant in the MTR to the other participants.

2. The suspension of an MTR participant referred to in the preceding article may be determined for a maximum period of 90 days, counted from the date of notification of the decision to the participant in question.

3. A suspended or excluded participant may request readmission to the MTR at any time.

4. The readmission referred to in paragraph 3 is conditional upon submission of proof that the cause determining the suspension or exclusion has ceased.

CHAPTER V FINAL PROVISIONS

Article 19 (Contingency Mechanisms)

In the event of system unavailability or disruptions in the communications network, or for any other reason, if a participant or the Bank of Mozambique is unable to order or receive payment instructions or other MTR messages, the contingency mechanisms established in the MTR Operations Manual may be used.

Article 20 (Applicable Norms)

The sanction regime provided for in Law No. 2/2008 of 27 February, as well as in other applicable provisions, shall apply to violations of the provisions of this Regulation.

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ANNEX

MTR Operations Manual

1. Objectives

The MTR Operations Manual aims to:

a) Disseminate the main characteristics and functional procedures of the MTR;

b) Establish operational functioning rules for the MTR; c) Establish rules and procedures of mandatory compliance for all participants, with a view to providing predictability and transparency to the MTR's functioning and preventing occurrences that may interfere with its normal operation.

2. MTR Operation

The MTR operates every weekday, except Saturdays, Sundays, national holidays, and point tolerances in Maputo, according to the schedule established in the table below:

Time	Session/Operation
08:00 – 08:29	MTR Opening
	Execution of start-of-day routines and procedures in the MTR.

08:30 – 14:30	Operation
	a) Sending and receiving payment instructions;
	b) Requesting and granting intraday credit;
	c) Managing waiting queues.
14:31 – 14:50	Pre-Closing
	Conversion of intraday credit into repurchase agreement transactions with a one-day maturity.
14:51 – 15:00	Closing
	Execution of end-of-day routines and procedures, including printing of respective reports and archives.

Note: The Bank of Mozambique may, whenever objective reasons so dictate, alter the MTR operating schedule, and must notify participants.

3. Settlement Account

3.1. All payment instructions sent by participants must be settled by debiting and crediting the settlement account (SA) of the ordering and recipient participants, respectively.

3.2. However, if the settlement account lacks sufficient funds to settle the payment instructions, these automatically move to the waiting queue.

4. Waiting Queue Management

A payment instruction that enters the waiting queue may remain in that status until the pre-closing session, with all payment instructions not settled by pre-closing being automatically rejected.

The MTR has automatic mechanisms to identify and resolve multiple blockage situations for payment instructions in the waiting queue, namely:

a) FIFO - First In First Available;

b) Liquidity optimization mechanism, which allows reordering of existing orders, processing first the payments of lower value;

c) Netting, which allows the determination of bilateral/multilateral net value among existing payment instructions.

5. Correction of Errors After Settlement

To correct errors in payment instructions detected after their definitive, irrevocable, and unconditional settlement, in the event of impossibility to identify the final beneficiary of the payment instruction, the recipient participant must proceed to return the respective amount to the ordering participant before the system's pre-closing time, as provided in paragraph 2 of this Manual.

The return must be effected through a new payment instruction, using the same reference number as the original payment instruction in the message, and clearly stating the following information: “Payment Return”.

The cost or claim resulting from the failure to return the said payment is subject to negotiation between the involved participants, and in cases where the error originates from the ordering participant, its correction is made through negotiation between the participants.

6. Return Codes and Reasons

Payment instructions may be returned for the following reasons:

a) 12 – Account closed; b) 13 – Account frozen; c) 51 – Beneficiary is not a client; d) 83 – Duplicate record.

7. Contingency Mechanisms

In the event of complete system unavailability due to disruptions in the communications network, or for any other reason, the following contingency mechanisms may be used:

a) Telephone with call recording; b) Courier; c) Email.

If a participant is unable to order or receive payment instructions or other MTR messages, they must communicate the incident to the Bank of Mozambique and request the transfer of this subsystem's transfers at the Bank's premises, previously indicating the name of the institution's employee who will visit the Bank.

7.1. Use of Telephone in the MTR

All communications made using the telephone for MTR purposes must be recorded. Telephone calls must be made by users registered with the Bank of Mozambique.

Users are identified by their password or part of it. Thus, the ordering participant must send a fax to the Bank of Mozambique, through a registered number and with authorized signatures, containing the transaction amount, and another fax to the recipient participant, containing the payment instruction details.

Payment instructions are settled through manual postings in the participants' settlement accounts, and respective bordereaux must be issued to the involved participants.

7.2. Use of Courier in the MTR

The courier must be identified with the participating institution's badge and must present the payment instructions in original documents, duly signed by authorized persons.

The ordering participant must send a duplicate document to the Bank of Mozambique containing the instruction amount, and another to the recipient participant with the payment instruction details, with the recipient participant acknowledging receipt on the same document sent to the Bank of Mozambique, which must be forwarded by fax or courier on the same day.

Payment instructions are settled from manual postings in the settlement accounts of the involved participants.

7.3. Use of Email in the MTR

The Bank of Mozambique provides an email address for communication with MTR participants.