Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Instructions No. (3) of 2014

Regarding Membership in the Baraq Real-Time Gross Settlement System

Based on the provisions of Law Decree No. (17) of 2012 regarding the National Payments Settlement, particularly Article (9) thereof, and based on what the Board of Directors approved in its meeting No. (126) dated 2014/02/13 and in pursuit of the public interest, we have issued the following Instructions:

Chapter One: General Provisions

Article (1)

Definitions

The words and expressions used in these Instructions shall have the meanings assigned to them below, unless the context indicates otherwise:

System	The Real-Time Gross Settlement System (Baraq).
Member	A participant in the System.
Direct Member	A bank licensed to operate in Palestine that holds a settlement account with the Palestine Monetary Authority and has the authorization to use the System.
Indirect Member	Clearing agents licensed by the Palestine Monetary Authority and any other entities approved by the Authority for using the System.
Clearing Agent	A legal entity that calculates the net financial positions resulting from the clearing operations of its members.
Settlement Account	The account held by the Member with the Palestine Monetary Authority and opened in the System in the circulating currencies (Jordanian Dinar, US Dollar, Israeli Shekel, Euro, and any other currency) for the purpose of executing monetary settlement transactions through it.
Final Settlement	The completion of the execution of financial transfers deducted from the paying Member's account in favor of the receiving Member's account at a specific time, definitively and irrevocably.
Business Continuity Procedures	Alternative procedures adopted by the Palestine Monetary Authority to ensure the continued operation of the System under emergency circumstances, and these procedures are considered an integral part of the System's operating procedures.

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Article (2)

Objective

These Instructions aim to regulate membership in the System and determine the rules governing the execution of Members' transactions through it.

Article (3)

Scope of Application

These Instructions apply to all Members in the System.

Article (4)

System Ownership

The ownership of the System and all data available therein shall belong to the Palestine Monetary Authority, which shall exclusively hold the powers to operate, manage, and supervise the System and its operations, determine and update its rules and procedures, and supervise their implementation.

Article (5)

System Membership

All Members in the National Clearing Rooms must participate in the System's membership, except in cases where the Palestine Monetary Authority decides otherwise.

Article (6)

Circulating Currencies in the System

In addition to the Palestinian currency upon its issuance, the Jordanian Dinar, US Dollar, Israeli Shekel, Euro, or any other currency that the Palestine Monetary Authority may permit in the future for executing payments shall be the approved currencies for circulation through the System.

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Chapter Two: Membership and Authorization Conditions

Article (8)

Types of Membership in the System

The membership categories in the System shall be as follows:

1. Direct membership.
2. Indirect membership.

Article (9)

Conditions for Direct Membership in the System

Except for the Palestine Monetary Authority, the following conditions must be met by a Direct Member:

1. Must be a bank licensed by the Palestine Monetary Authority.

2. Must provide the necessary banking guarantees to mitigate risks arising from its transactions in the System, as determined by the Authority.

3. Must comply with the System's operating procedures manual, usage mechanisms, and policies and instructions issued by the Authority.

4. Must comply with technical and operational inspection plans and procedures requested by the Authority.

5. Must commit to reducing operational risks resulting from its membership in the System and take all necessary measures and safeguards to protect data and information security.

6. Must commit to participating in the banking network managed by the Authority.

7. Must be a subscriber to the SWIFT system and possess a unique identifier enabling it to execute financially impactful transfers.

8. Must be a subscriber to the closed group system designated by the Authority.

9. Must hold a settlement account in all circulating currencies in the System.

10. Must comply with the General Terms and Conditions Agreement for opening bank accounts with the Authority.

11. Must commit to opening one or more sub-intermediary accounts for each settlement account in the System for the purpose of executing payment orders, as determined by the Authority.

Article (10)

Conditions for Indirect Membership in the System

The following conditions must be met by an Indirect Member:

1. Must hold a license from competent authorities.
2. Must provide the necessary banking guarantees to mitigate risks arising from its transactions in the System, as determined by the Authority.
3. Must comply with the System's operating procedures manual, usage mechanisms, and policies and instructions issued by the Authority.
4. Must comply with technical and operational inspection plans and procedures requested by the Authority.
5. Must commit to reducing operational risks resulting from its membership in the System and take all necessary measures and safeguards to protect data and information security.
6. Must be a direct or indirect subscriber to the SWIFT system and possess a unique identifier enabling it to execute its transactions.
7. Must participate in the clearing results settlement system operated by direct members in the System.

Article (11)

Obligations of a Direct Member in the System

Except for the Palestine Monetary Authority, a Direct Member in the System shall be obligated to:

1. Execute transactions in the System in compliance with instructions and procedures issued by the Authority.

2. Accept and execute all transfer transactions received and settled through the System in accordance with the Authority's instructions.

3. Monitor and manage its accounts in the System and mitigate risks arising from its transactions.

4. Ensure the reconciliation of its final accounts before the System closes and notify the Authority of any discrepancies.

5. Monitor the approved communication network, networking services, and information security systems provided by the Authority, and provide all necessary systems, software, operating procedures manuals, internal instructions, business continuity plans, and qualified personnel.

6. Notify the Authority of any technical issues or emergency circumstances requiring the temporary suspension of its transactions in the System within a maximum period of half an hour from the detection of the technical fault or occurrence of any emergency circumstances.

7. Bear any losses, damages, costs, expenses, liabilities, or claims arising from the suspension of its membership or resulting therefrom towards any Member.

Article (12)

Obligations of an Indirect Member in the System

An Indirect Member in the System shall be obligated to:

1. Execute transactions in the System in compliance with instructions and procedures issued by the Authority.
2. Monitor and manage its transactions in the System and mitigate risks arising therefrom.
3. Ensure the reconciliation of its final accounts before the expiration of the specified period for its transactions and notify the Authority of any discrepancies.
4. Monitor the approved communication network, networking services, and information security systems provided by the Authority, and provide all necessary systems, software, operating procedures manuals, internal instructions, business continuity plans, and qualified personnel.
5. Notify the Authority of any technical issues or emergency circumstances requiring the temporary suspension of its transactions in the System within a maximum period of half an hour from the detection of the technical fault or occurrence of any emergency circumstances.
6. Bear any losses, damages, costs, expenses, liabilities, or claims arising from the suspension of its membership or resulting therefrom towards any Member.

Article (13)

Authorizations of Direct Members in the System

A Direct Member in the System may:

1. Execute internal transfer transactions with other Members, fund and manage account injections, and execute settlement transactions for debit positions.
2. Monitor and manage its accounts and extract financial, technical, and statistical reports regarding them individually.
3. Prepare a list of System users and their access levels.

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Article (14)

Authorizations of Indirect Members in the System

An Indirect Member in the System may:

1. Register the net financial positions resulting from its internal clearing transactions, monitor the settlement of these positions, and prepare related reports in accordance with procedures approved by the Authority.
2. Use an intermediary account in the System for the monetary settlement of its transactions.
3. Calculate the results of transactions for each of its members within a specified period and transmit them to the System.
4. Re-submit the clearing file to the System if it is rejected.
5. Execute clearing transactions for debit and credit payment orders of its members.
6. Prepare a list of System users and their access levels.

Article (15)

Powers of the Palestine Monetary Authority

1. The Palestine Monetary Authority shall grant access authorizations to the System to any Member in accordance with the membership category granted to them.
2. The Palestine Monetary Authority shall be a Direct Member in the System and the Settlement Agent therein, as well as the Operator and Service Provider, as follows:
   • a. Manage and operate the System, configure its settings, manage its membership, approve authorizations for its users, provide an operational usage manual and detailed procedures for all Members, and determine alternative operating procedures in emergency situations.
   • b. Execute System transactions as the Monetary Settlement Agent on behalf of Members in cases where any Member is unable to access the System, settle clearing agent results in Members' accounts, execute Authority transactions by deducting from Members' accounts, and reverse, cancel, or execute transactions contrary to instructions and procedures issued by any Member without needing to refer back to them, and transfer balances of Direct Members from intermediary accounts to their main accounts and vice versa.
   • c. Execute the Authority's banking and financial transactions.
   • d. Provide services to Members and ensure the availability of secure and appropriate basic infrastructure enabling all Members to access the System and carry out maintenance and updates.
3. The Palestine Monetary Authority may determine or suspend access authorizations to the System for any Member as follows:
   • a. Temporarily suspend access authorization to the System upon the Member's request.
   • b. Temporarily suspend access authorization to the System at the Authority's discretion in any of the following cases:
     1. If the Authority deems such action necessary to protect the banking sector.
     2. If the Member fails to pay required fees or fines for a period exceeding three months.
     3. If the Member fails to comply with any membership conditions or System operating procedures within a maximum period of one month from the date of notification.
     4. If a decision is issued to liquidate the Member under prevailing laws.
   • c. Permanently revoke membership in the System in the following cases:
     1. If the Member fails to comply with the provisions of paragraph (3) letter (b) of this Article within a maximum period of six months from the date of temporary suspension of access authorization.
     2. If a decision is issued to revoke the Member's license.
     3. If the Authority deems such action necessary to protect the banking sector.
   • d. The Authority must notify all Members in the event of suspending, restricting, or revoking membership.
   • e. The Authority may freeze available credit balances in the settlement accounts of a Member whose membership has been suspended.
   • f. The Authority may utilize available credit balances in the accounts of a Member whose membership has been suspended for the purpose of settling its obligations with other Members.

Chapter Three: Settlement Rules through the System

Article (16)

Settlement Messages (SWIFT)

1. A Direct Member must execute payment transactions as follows:

   • a. Internal banking transactions using only the following messages: MT102, MT103, MT202.
   • b. Withdrawal and external transfer (Extraction) from the Member's settlement account using message MT202.
   • c. Funding of Members' settlement accounts (Injection) using System interfaces only (Web Client).

2. A Direct Member must execute transfer transactions in the System using (FIN Y-Copy) mechanisms in accordance with SWIFT message standards and specifications.

3. A Clearing Agent may register clearing files in the System for the purpose of executing final settlement using the SWIFT system in accordance with technical conditions determined by the Authority.

4. Members must comply with the conditions set forth in the user manual issued by SWIFT Inc.

5. The Authority may mandate Members to use System interfaces to execute payment and settlement transactions, in which case the Member shall be solely responsible for fulfilling all obligations arising from the use of System interfaces, despite the Authority appearing as the originator of the original message.

6. A Direct Member must specify the closed group code in the message.

7. Members must state the type of transfer; otherwise, the transfer order shall be cancelled, and the Member shall be responsible for any losses, damages, costs, expenses, liabilities, or claims arising therefrom.

8. A Direct Member, when using a SWIFT message issued to multiple recipients (MT102), must ensure that the entity issuing transfer orders is a single entity only.

9. A Direct Member must fund its settlement accounts on the same business day, provided that the value date is the same as the business day.

Article (17)

Settlement Management in the System

1. Members must comply with operating procedures and settlement mechanisms issued by the Authority.
2. A Member may cancel any transfer order issued by them if it has not been finally settled through the System.
3. Transfer orders in the System are settled on the same value date regardless of the date the transfer order was submitted to the System.
4. Credit transfer orders issued by a Member are settled if sufficient balances are available in their settlement accounts.
5. In the event of using the Real-Time Settlement window (RTM), all transfer orders issued by a Member shall be cancelled if insufficient balances are available in their settlement accounts.