The system of interbank electronic payments in Ukraine. How it works



    The Interbank Electronic Payment System (SEP) of Ukraine is the main system of payments between banks and state treasury institutions in Ukraine. It is through it that the bulk of payments between individuals and legal entities in the country occurs. BOT is a closed RTGS-system in which money circulates in a closed financial space and is under emission control by the National Bank. So - how does it work ...




    It would seem, what does Luzhkov Yushchenko have to do with it? It was Yushchenko who stood at the origins of the formation of the banking system of Ukraine during his work as chairman of the National Bank (NBU)in 1993-1999 At that time, quite a lot of internal banking instruments and systems were developed and implemented, and a broad regulatory framework was developed. Then the BOT was developed and launched.

    As of 01.01.2014, there were 423 institutions participating in the SEP, of which:
    • 180 - banks (as of 01.01.2014 in Ukraine there were 183 banks)
    • 178 - branches of banks
    • 28 - bodies of the State Treasury Service
    • 37 - institutions of the National Bank

    In 2013:
    • 347.6 million payments were made
    • in the amount of 12.7 trillion. UAH (1.5 trillion dollars)

    Daily Averages for 2013
    • 1.4 million payments
    • in the amount of 50.5 billion UAH. (6 billion dollars)
    • balance of funds in the accounts of the participants in the SEP: 27.8 billion UAH. ($ 3.5 billion)


    How the bank calculates




    Each bank has a correspondent account that is opened with the NBU. This is a general consolidated account. Subordinate institutions (branches, branches) do not have correspondent accounts. The exceptions are the so-called “Balance” branches, which have their own MFI code and are almost a full-fledged bank in miniature. However, over the past 10 years, most banks have pursued a policy of centralizing and reducing the number of subordinate balance sheet institutions. The bank’s own funds are deposited to the correspondent account, which are used as operating funds for interbank payments. Thus, it is guaranteed that the bank can use only the funds that it has for settlements.

    The participants in the SEP are mostly working on the so-called The “third model” of servicing a consolidated correspondent account, according to which the bank has a correspondent account and an interbank interbranch payment system, which provides money transfers between bank branches and interaction with the SEP for interbank money transfers by bank branches (there are seven models in total) .

    Payments in the BOT are irrevocable. Neither the initiator nor anyone else can recall the completed transaction. The initiator of the transaction is only the bank-holder of the account. Transaction processing priority is in a live queue. There are no other priorities.

    On practice




    When you pay money at a bank’s cash desk for services / goods to an enterprise from another city, then your money goes to the bank’s intrabank account. Further, the accountant confirms the payment and the amount goes to the internal correspondent account of this bank. BOT operator in the bank - confirms the sending of the payment and the payment goes to the clearing house of the territorial administration of the NBU, to which this bank is subordinate. Next - the payment goes to the NBU in Kiev to the Central Clearing House - after - to the NBU Territorial Administration in the region of the payee’s bank - then - to the payee’s bank and finally credited to the payee’s account of your funds. From the moment a payment is sent from Bank A to the moment it is credited to the payee's account with Bank B, an average of 1-4 hours pass(I do not take into account the time for processing your payment by the cashier and accountant, which may take up to a day, depending on the bank) . The entire payment process is quite automated, but there is also a significant role for manual control.

    The scheme is simplified if the payer and the recipient are in the same area, or even within the same bank (then the BOT is not used if these divisions of the bank are unbalanced) .

    An important note - SEP works in real time. Thus, every day from 8:00 to 18:00 there is a processing of payments. All payments sent must be processed and delivered to the recipients. There should be no “hung” payments. Therefore - if you are told that " I sent the payment”, But you didn’t receive it that day - that means the interlocutor is lying, or (very rarely) the bank is to blame and did not send his payment because of his problems. But the latter is extremely rare, because threatens with quite serious sanctions from the NBU.

    There are backup transit accounts to display transactions that were initiated but were not completed on that day. This makes it possible to work in exceptional cases in asynchronous mode.

    If the bank has any technical problems (for example, the internal bank payment system fails - which in itself will cause a capital flight)and the bank does not have time to meet the closing time of the BOT, the bank writes a request to the NBU with a request to extend the working time of the BOT by 1-2 hours. And then all of Ukraine sits and waits for these deer until they solve their problems. If they do not meet the deadline - then this is a big grief, but this is a separate issue - I will tell about this next time. EPP does not work on weekends.

    Equipment




    SEP was introduced a long time ago (since 1996) - at the dawn of the computer boom - and its requirements for hardware are very democratic. In practice, payments are transferred as files (batch mode) . A file with a special structure (the so-called “bundle”) contains 1-1000 payments. Having received the file, the recipient reports on this and processes the file. Each recipient (BOT participant) has its own alphanumeric encoding (4 characters of the Latin alphabet / numbers) . Files are specially named and numbered. Payments are prepared in the internal banking system (ODB - Bank Operating Day) . It is the ODB that should ensure the correct formation of settlement documents and service messages.
    Thus, it is possible to successfully participate in the EPA with only a 486 computer with a network on board.

    Globally:
    • At the highest level - in the Central Clearing House of the National Bank of Ukraine, the “ARM-1” software and hardware complex is operating. It is designed to manage the work of the clearing house nationwide. Checks the correct operation, synchronization of the EPA, speed control, protection against unauthorized access and the detection of such attempts.
    • At the second level - in the regional clearing houses of the NBU - the “ARM-2” complex operates. This is an exchange of information for banks in the region, exchange of settlement documents with “ARM-2” in other regions, synchronization of BOT for participants within the region, control over payments, protection against unauthorized access.
    • At the third level - at banks - the “ARM-3” complex. Information exchange and transfer of payments with “ARM-2”, interaction with the bank’s internal payment system.

    File exchange is carried out through a set of software and hardware called “ NBU Email ”. All banking institutions of Ukraine, as well as a number of governmental and commercial organizations, have access to it.

    Security


    In itself, the banking system of Ukraine is quite thought out and from a technological point of view is very reliable. I will touch upon two aspects of security - technical and organizational.

    The first is cryptography hardware. Each BOT participant receives encryption equipment and cryptography keys in the NBU Territorial Administration (closed symmetric keys) . Also used are hardware encryption systems in technological communication channels. I will not talk about them - I will only say that they are and they are quite serious, albeit compact. Periodically (although extremely rarely), the NBU makes changes to the protection technology.

    The second aspect is the already mentioned correspondent account. All funds of customers "in general" form the bank's wallet. Calculations are made from it, payments are received to it. Explanatory specialist in money circulation (“money changer”)the bank does not allow that there is a lot of money on the correspondent account - free cash resources are sold to the NBU or other banks for a certain period of time to close their gaps in the correspondent account, or vice versa - resources are bought on the interbank account to close their holes. This is beneficial - buying resources at the interbank market at 3% and issuing loans at 18% can make you feel good. On the contrary - when you have a lot of money on your correspondent account - this does not mean that the bank is rich - it means that the "money man" is stupid and does not earn income on free resources. But back to security. Practice shows that most of all banking crimes are committed by bank employees - and, as a rule, by very smart employees of IT departments, who are also boots in accounting and banking, in particular - that’s why they “burn” on elementary ignorance. Not,



    So - an attacker who decided that he was a connoisseur of banks is making physical adjustments to the base of the intra-bank payment system. To get to the base in the NBU - the hands are short, so - the maximum is inside your bank. We take the company under control and in the field "balance" add zero to the side. As a result, instead of 100 thousand, we have 1 million on the balance. Now - we are satisfied - we are making a payment in order to take this money to the side and we are preparing to give Dёru to meet the dawn on a beautiful island. Only these krivoruky do not understand that because of their changes - no money was added to the correspondent account of the bank. And their payment hung at the exit, or the “yellow balance” in the NBU - more money is needed than they are now available and they are all put on ears and will not be removed from the ears until the cause of this event is established. In general, everything what can be "tricked" will be revealed a maximum - the next morning, because the banking day inside the bank will be closed / opened and a discrepancy will be revealed on this particular account, as you can’t just change the balance. When closing the day, balances from past days, daily turnovers, total balances by account groups, etc. are checked. etc. In general - you need to be a very big specialist to crank out a scam of similar complexity. There are much simpler fraud methods that are not related to the technical component. to crank out a scam of similar complexity. There are much simpler fraud methods that are not related to the technical component. to crank out a scam of similar complexity. There are much simpler fraud methods that are not related to the technical component.

    Domestic kitchen


    There are no restrictions on transaction amounts. Technologically, the transaction amount is limited by the balance on the correspondent account of the bank - the initiator of the transaction.

    Settlements are made in real time, and thanks to this, BOT participants are able to quickly receive information for liquidity planning.

    Overdraft according to the accounts is impossible. And this is additional protection against a systemic crisis in banks.

    SEP is the property of the National Bank of Ukraine. For each operation in the SEP, the bank pays a fee to the NBU. The total amount depends on the number of transactions per month and the time when payments were made - until 16:00, from 16 to 18 (one and a half tariff) and after 18:00 (double). The cost is extremely low, because the goal of the NBU is not to get to arrive, but to get the economic effect of the work of the EPAs throughout the country.

    For each currency, the BOT participant opens a separate correspondent account (and only one for such currency) . There are practically no differences in the payment technology, except that the correspondent accounts are opened for commercial banks only in one place - at the NBU Interstate Settlement Center and thus there are no interregional settlements. Conversion is not provided. Settlements in different currencies are carried out separately.

    BOT is not isolated. It has gateways and connects to payment systems of ex-USSR and SWIFT countries. The

    situation of the “ red balance ” may occur."When, bypassing the standard SEP tools, some fines are imposed on the bank, and there is not enough money on the correspondent account. Then all outgoing payments will be impossible until the receipt of payments and the closure of the negative balance. This situation is more theoretical - I personally have not heard about this.

    Conclusion


    In conclusion, I would like to note that incl. due to the fact that Ukraine - lives in the same time zone - it was possible to build a very reliable and flexible banking system that opens / closes a banking day daily and brings balances together, which gives high technological reliability.

    A separate topic - when things go awry - communication channels, financial servers (and backups as usual) fail , programmers deliberately / unconsciously lay down banking systems and then an exciting period begins called “The functioning of the banking system in emergency situations”. But that's another story.


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