Payment System Clearing

1.	Q: Not long ago, there were widespread reports in the media of a massive clearing deficit at a national bank. What is actually meant by a clearing deficit?
	A: A clearing deficit is a position in which a clearing member bank sustains a debit balance, with payment liabilities greater at the end of a clearing cycle in excess of claims.
2.	Q: If I am not mistaken, BI is introducing what is called the National Clearing System. Could you explain what the system is, and what goal is to be achieved?
	A: The Bank Indonesia National Clearing System (SKNBI) is a clearing system encompassing debit clearing and credit clearing with settlement conducted for all banks nationwide. The goal is to improve the efficiency of the payment system in Indonesia. It also aims to achieve compliance with risk management principles in clearing operations.
3.	Q: With the introduction of the SKNBI, can funds transfers take place in real time?
	A: The answer is no. True, the SKNBI has integrated the operation of funds transfers (debit clearing) into a nationwide, online system. However, settlement cannot take place in real time. The integration will improve efficiency as a result of shorter processing time due to the use of paperless credit transfers (paper instruments no longer used). Furthermore, because most banks are connected online to the clearing operator, it follows automatically that transaction data can be sent and clearing results downloaded online. This will save time in comparison to the earlier system. At this time, Indonesia has a total of 105 local clearing operators comprising units managed directly by BI and third parties appointed by BI.
4.	Q: What then is the difference between the clearing system and BI-Real Time Gross Settlement (RTGS) in which settlement takes place in real time?
	A: In the clearing system, settlement of funds transfers must await the outcome of the netting process conducted by the operator, in this case BI. With the SKNBI in operation, netting can be conducted per cycle, for example at midday (end of first cycle) and then in late afternoon (end of second cycle). In contrast, the BI-RTGS system enables settlement in real time, because settlement takes place on a gross or per transaction basis during the RTGS operating hours. With netting twice daily, funds transfers processed in clearing can be completed on the same day as long as book entry is performed immediately at the bank after BI, the operator, has completed the processing of clearing results. Of course, the transaction data must be free of technical errors that would prevent processing by the operator. As a matter of information, the SKN design supports faster settlement of funds transfers. In the rules established by BI as operator, the beneficiary bank is required to credit funds immediately to the customer account on the same date as clearing settlement, or no later than 09:00 hours local time in Jakarta on the following day. Delay by the beneficiary bank is liable to payment of compensation in the amount of interest calculated from the settlement date. Funds transfers through the SKN will therefore take no more than one day after the transaction date, provided that the office of the beneficiary bank is also linked to the SKN. BI’s target is to achieve nationwide integration of the SKN in 2007.