There is little information regarding Peru's compliance with the Core Principles for Systemically Important Payment Systems, either in terms of clear adherence or descriptive information. In 2000, the Center for Latin American Monetary Studies (CEMLA) and the World Bank published a study of Peruvian payment system mechanisms, and found that Peru had implemented a real time gross settlement system (RTGS) for large value transactions. The CEMLA/World Bank report notes that the RTGS system has clearly defined participation rules and the Central Reserve Bank of Peru (BCRP) is in charge of administering and regulating the RTGS system. According to a 2006 BCRP report, the two systemically important payment systems in the country are the RTGS and, for low-value transactions, the Electronic Clearing House system operated by the Cámara de Compensación Electrónica.

General Overview

The Central Bank of Peru (Banco Central de Reserva del Peru, or BCRP), in its 2006 Annual Report, indicates that there are two systemically important payment systems in Peru: the real time gross settlement (RTGS) system and the Electronic Clearing House system operated by the Cámara de Compensación Electrónica (CCE). Information provided on the BCRP website notes that the high-value system in Peru is administered by the BCRP. The BCRP regulates the RTGS system, and the Superintendence of Banks, Insurance and Pension (SBS) authorizes the organization and functioning of clearing firms. The BCRP website notes that low-value payments are processed by clearing houses and settled through high-value systems.

The 2006 Annual Report by the BCRP notes that, in 2006, 84.8 percent of the value of payment transactions in Peru was settled through the RTGS system, and the rest was cleared through the Electronic Clearing House system. In its 2005 Annual Report, the BCRP noted that the RTGS system settles large value payments and the CCE administers low-value payment systems. The 2005 report adds that the RTGS and CCE systems where created as part of the 2000 modernization program, along with the securities settlement system, Sistema de Liquidación Multibancaria de Valores, also called the Institución de Compensación y Liquidación de Valores CAVALI ICLV S.A. (generally known as CAVALI) which began operations in 2005.

According to the 2000 report issued by the Center for Latin American Monetary Studies and the World Bank (CEMLA/WB), the primary objectives of the BCRP in introducing the RTGS system are to provide finality in settlement as soon as the transaction is accepted and also to eliminate settlement risk. The report also notes that the Credit and Financial Regulation Department, the Foreign-Currency Operations, and the Treasury and Accounting Departments will be directly linked to the RTGS system, and the Credit and Financial Regulation Management of the BCRP "will perform a number of activities which includes supervising and controlling the current account system maintained for financial institutions at the BCRP, particularly those linked to the large value transfer mechanism through the Real Time Growth Settlement system and those related to the check exchange mechanism at the Clearinghouse which is also a Central Bank responsibility" (pp. 68-69).

The Principles

I. The system should have a well-founded legal basis under all relevant jurisdictions.

II

There is insufficient information publicly available as to Peru's compliance with this principle. Per the CEMLA/WB 2000 report, the legal framework for payments in Peru is based on a number of laws and regulations. The main law governing payment systems in Peru is the General Law of the Financial and Insurance Systems Organic Law of the Superintendence of Banks, Insurance and Pension.

II. The system's rules and procedures should enable participants to have a clear understanding of the system’s impact on each of the financial risks they incur through participation in it.

II

According to the 2000 CEMLA/WB joint report, "in December 1999, the BCRP approved the Operating Rules of the Real-Time Gross Settlement, which include the directives regulating the operation of the system as to the participants, operative cycle, characteristics of the transfer orders, intraday credit and allowed guarantees" (p. 29). However, there is insufficient information publicly available as to Peru's compliance with this principle.

III. The system should have clearly defined procedures for the management of credit risks and liquidity risks, which specify the respective responsibilities of the system operator and the participants and which provide appropriate incentives to manage and contain those risks.

II

The 2000 CEMLA/WB report lists among the objectives of the Central Bank's RTGS system the elimination of the settlement risk currently assumed by the BCRP, and thus reducing moral hazard. The RTGS will also allow all RTGS operating areas to work in an integrated way. However, there is insufficient information publicly available as to Peru's compliance with this principle.

IV. The system should provide prompt final settlement on the day of value, preferably during the day and at a minimum at the end of the day. (Systems should seek to exceed the minima included in this Core Principle.)

II

By introducing the RTGS system, the BCRP intended to provide finality at time of acceptance, according to the 2000 CEMLA/WB report. However, there is insufficient information publicly available as to Peru's compliance with this principle.

V. A system in which multilateral netting takes place should, at a minimum, be capable of ensuring the timely completion of daily settlements in the event of an inability to settle by the participant with the largest single settlement obligation. (Systems should seek to exceed the minima included in this Core Principle.)

II

There is insufficient information publicly available as to Peru's compliance with this principle.

VI. Assets used for settlement should preferably be a claim on the central bank; where other assets are used, they should carry little or no credit risk and little or no liquidity risk.

ID

Among the objectives of the Central Bank's RTGS system is to eliminate the settlement risk currently assumed by the BCRP and thus reduce moral hazard, according to the 2000 CEMLA/WB report. However, there is insufficient information publicly available as to Peru's compliance with this principle.

VII. The system should ensure a high degree of security and operational reliability and should have contingency arrangements for timely completion of daily processing.

II

There is insufficient information publicly available as to Peru's compliance with this principle. According to the 2000 CEMLA/WB report "the communication structure for the RTGS chosen has been type 'V,' offering greater simplicity to the message flow, eliminating the need for an additional agent and requiring a lower number of messages and exchange of communications among participants, as it informs the beneficiary only when the order has been processed and is already final. Other security aspects of the system are contingency procedures for order communications" (pp. 28-29).

VIII. The system should provide a means of making payments which is practical for its users and efficient for the economy.

II

There is insufficient information publicly available as to Peru's compliance with this principle.

IX. The system should have objective and publicly disclosed criteria for participation, which permit fair and open access.

II

When establishing the RTGS system, the authorities laid out participation rules and criteria such as rules describing eligible collateral and the method for valuing each asset category, according to the 2000 CEMLA/WB report. Participants are also required to sign a 'Participant Agreement' by which all the conditions for the use of the system are clearly set out.

X. The system's governance arrangements should be effective, accountable and transparent.

II

There is insufficient information publicly available as to Peru's compliance with this principle.

A. The central bank should define clearly its payment system objectives and should disclose publicly its role and major policies with respect to systemically important payment systems.

II

There is insufficient information publicly available as to Peru's compliance with this principle. However according to information provided in the 2000 CEMLA/WB report, among the primary objectives of the BCRP in introducing the RTGS system are to provide finality in settlement as soon as the transaction is accepted and also to eliminate settlement risk. The report also notes that the Credit and Financial Regulation Department, the Foreign-Currency Operations, and the Treasury and Accounting Departments will be directly linked to the RTGS and the Credit and Financial Regulation Management of the BCRP "will perform a number of activities which includes supervising and controlling the current account system maintained for financial institutions at the BCRP, particularly those linked to the large value transfer mechanism through the Real Time Growth Settlement system and those related to the check exchange mechanism at the Clearinghouse which is also a Central Bank responsibility" (pp. 68-69).

B. The central bank should ensure that the systems it operates comply with the Core Principles.

II

There is insufficient information publicly available as to Peru's compliance with this principle.

C. The central bank should oversee compliance with the Core Principles by systems it does not operate and it should have the ability to carry out this oversight.

II

There is insufficient information publicly available as to Peru's compliance with this principle.

D. The central bank, in promoting payment system safety and efficiency through the Core Principles, should cooperate with other central banks and with any other relevant domestic or foreign authorities.

II

The 2000 CEMLA/WB report states that "the Payment System Inter-banking Commission (CISPA) was created by the BCRP as a forum for "the discussion and co-ordination of all matters related to the payment system within the framework of the payment system reform. The CISPA is composed of seven commercial bank representatives and one from the National Bank" (pp. 19-20). Nonetheless, there is insufficient information publicly available as to Peru's compliance with this principle.