CERTIS – the interbank payment system – description

The only interbank payment system in the Czech Republic, which handles interbank payments in Czech koruna, is the CERTIS system (Czech Express Real Time Interbank Gross Settlement System). CERTIS began operation within the Clearing and Settlement Centre at the State Bank of Czechoslovakia in the former Czechoslovakia on 8 March 1992. After the division of Czechoslovakia at the beginning of 1993, a new clearing centre was founded in Slovakia, while the former federal Clearing and Settlement Centre remained within the Czech National Bank.

Each participant in CERTIS is identified by a payment system code (also called a bank code), which is an obligatory part of any payment transaction. Additional numerical codes (so-called payment symbols) are used to provide more detailed information about the payments.

The establishment and operation of CERTIS as well as the rights and obligations of the participants are set out in the Act on payment system. The accounts used to settle interbank transactions are held at the Czech National Bank on the basis of the account agreements signed with participants. These agreements lay down uniform standards for all participants, as well as legal and technical conditions for keeping accounts and for the exchange and processing of interbank payment systems data.

Interbank payments in foreign currency are not provided by CERTIS. These payments are provided by foreign payment settlement systems or by correspondent banking.

The CERTIS system is based on the following principles:

• settlement of interbank payments in Czech koruna irrespective of their values;
• settlement in central bank money on accounts held at the Czech National Bank (which also serve as the accounts on which minimum reserves are held);
• direct participation by banks holding a banking licence for operation within the territory of the Czech Republic, by savings and credit co-operatives and by foreign bank branches; the CERTIS does not allow the participation of indirect participants;
• the irrevocability of all transactions accepted by the system – pursuant to Directive on settlement finality in payment and securities settlement systems;
• the processing of different types of transactions;
• Real Time Gross Settlement (RTGS), i.e. without netting;
• no overdrafts are permitted;
• uncovered transactions are neither settled nor rejected but held in a queue and they are settled at the moment of sufficient funds on the account;
• Czech National Bank provides banks with an interest-free fully collateralized intraday credit. The loan is secured by securities registered in The Short-Term Bond System (“SKD”) or the Central Securities Depository Prague (“CDCP”). The aim of providing intraday credit is to ensure sufficient liquidity for the smooth functioning of the payment system;
• if intraday credit is not repaid by the banks until the closing of the CERTIS accounting day, securities serving as collateral for intraday credit are transferred to the Czech National Bank's account and then serve as collateral for overnight credit.

Direct participants

Banks holding a banking licence for operation within the territory of the Czech Republic can be direct participants in the interbank payment system. The direct participants of CERTIS are savings and credit cooperatives, as well as foreign bank branches. The CERTIS system communicates only with the head offices of the participants. The Czech National Bank maintains only one interbank payment account for each participant. Payments between clients of the same participant are a matter for this participant, and they are processed within its accounting system without any involvement of CERTIS.

Ancillary systems (so called "third parties")

Under bilateral agreements with the Czech National Bank, certain financial institutions are allowed to participate in the system with a special status. These so-called "third parties" are non-bank financial institutions, for example card payment clearing houses and the securities clearing and settlement institutions, which play an important role in the market. They have no interbank payment account with the Czech National Bank, but they can submit payment orders to the CERTIS system (with the consent of the relevant direct participant) to transfer funds between direct participants (e.g. to settle the summarised positions arising from the card payment clearing or payments relating to stock exchange transactions).

The following types of transactions are handled in the CERTIS system:

• credit transfers;
• direct debits;
• corrective settlement transfers (credit transfer cancellations);
• ancillary system transactions;
• information and technical transactions.

Credit transfers can be low priority transactions and two types of high priority transactions (bank‑to‑bank priority transfers, client's priority transfers). Priority transfers are settled preferentially.

Within the CERTIS system, it is also operated

• the Instant Payments system with its own rules for processing instant payments (see Instant payments – description). These payments are settled in the 24/7/365 mode.
• Register for contact payments (see Description of register for contact payments).

For the operation of the interbank payment system, the Czech National Bank maintains accounts (interbank payment accounts) in Czech koruna for direct participants to settle their interbank payments. The Czech National Bank executes fund transfers from interbank payment accounts on the basis of instructions from the participants.

Balances on interbank payment accounts are also used to fulfil the reserve requirements. The maintenance of minimum reserves is mandatory in the Czech Republic. Minimum reserves are set at 2.0 % percentage points of deposits and can be used for interbank payments.

An accounting day begins on the previous working day (D-1) at 5 p.m. and ends at 4 p.m. of the following working day (D). The settlement in the CERTIS system takes place from 12 a.m. to 4 p.m. on day D. The settlement of instant payments in the CERTIS system takes place 24 hours a day (for more information, see the CERTIS schedule – Annex no. 3 to the Rules of the CERTIS Payment System). During the accounting day, participants send data to CERTIS in electronic form in accordance with fixed rules and procedures set out by the Czech National Bank. Participants deliver data by using the telecommunications network. SWIFT is not used. When the control programs validate that all data are of the required quality, a payment order is accepted by the CERTIS system and the settlement process begins. During that process the account of the sending bank is checked to see if it contains sufficient funds to cover the transactions submitted. If the result of the check is positive, the transfers are immediately settled by debiting the sending bank's account and crediting the receiving bank's account. The throughput of the system is about 1,500,000 transactions per hour. The processed transactions are transmitted to the respective participant in electronic form via the telecommunications network.

CERTIS executes payments only if the sending bank's account has sufficient cover (no overdrafts are allowed on the accounts). If funds are insufficient to cover a transaction, the transaction is placed in the so-called "hold queue". Information about queued payments is accessible for the respective bank through web portal AMOS, which provides participants with interactive access to data from the CERTIS system.

Sufficient cover for the execution of queued payments may be obtained:

• through incoming funds transfers;
• through borrowing in the money market;
• from the Czech National Bank in the form of a fully collateralised intraday credit;
• from the Czech National Bank by means of a fully collateralised overnight credit line.

If for any reason the bank is not able to obtain the required funds by the end of the accounting day, the transfer instructions in the hold queue will be rejected by the system and returned to the sending bank.

The pricing policy is determined by the Czech National Bank to ensure cost recovery for CERTIS. Schedule of the accounting day and related service prices have been changed several times over the life of the system. The aim has been not only to extend the operating hours, but also to support the Czech National Bank's efforts to finish the end-of-day procedure on time.

The current fee for participants is CZK 0.10. For banks with higher volume of transactions, the discount of CZK 0.04 (for monthly volume over 250,000 transactions), CZK 0.06 (over 2.5 mil. transactions), and CZK 0.08 (over 5 mil. transactions) is provided.

The list of charges is provided in Part V of the CNB's Schedule of Charges for Financial and Business Services (pdf, 218 kB).

Based on Act No. 240/2000 Coll. on Crisis Management and on the Amendment of Certain Acts, as amended, the CNB establishes, among other things, contingency plans for information systems, which also applies to the CERTIS system. The contingency plan for the CERTIS system stipulates procedures for dealing with particular contingencies in this information system. The contingency plan is tested periodically in the test environment. The plan is revised where necessary based on the experience gained during the testing.

The CNB, as a participant of the European System of Central Banks considers the business continuity in payment and securities settlement systems to be very important. It cooperates with the other central banks in sharing information in this area.

The CNB realized an evaluation of operational reliability of the CERTIS on the base of the Business Continuity Oversight Expectations for Systemically Important Payment Systems (SIPS). The system CERTIS is in compliance with this standard.