Automated FC clearing from Sep 4: BB

Bangladesh Bank has decided to introduce foreign currency (FC) clearing and settlement through the RTGS system from September 4, a development that reduces transaction costs and time.

The BB said this in a circular issued on Sunday. Along with the circular, the central bank also issued guidelines of FC clearing through the RTGS system.

Bangladesh Bank has been providing clearing and settlement services for local currency as well as approved foreign currencies within the country for a long time. The Forex Reserve and Treasury Management Department of BB executes clearing and settlement through maintaining FC accounts in approved currencies of scheduled banks. However, the whole FC Clearing and settlement process is still manual and paper instrument-based, which requires physical movement of instruments and officials resulting in higher transaction cost and inconvenience.

“To overcome this problem, Bangladesh Bank has decided to introduce FC clearing and settlement through the RTGS system,” said the BB.

Bangladesh Bank launched the Real Time Gross Settlement (RTGS) system on October 29, 2015 to facilitate safe, secure and efficient interbank payment systems. The RTGS system is capable of operating both in local currency and foreign currency.

Now Bangladesh Bank is introducing clearing and settlement in five foreign currencies — US Dollar, Great Britain Pound, Euro, Canadian Dollar and Japanese Yen — inside the country. The BB said the clearing & settlement of Chinese Yuan will be incorporated in the RTGS system soon.

The new guidelines on FC clearing said RTGS is a credit transfer system and operation of the FC in RTGS system is similar to that of local currency (BDT) settlement system. At the beginning of each business day, banks’ specific FC account will be debited and the related RTGS settlement account will be credited as per standing instruction of the participants. Then, as per instruction of participants, transactions will be settled instantly and funds will be transferred to the beneficiary’s account.

The transaction will be settled only when the RTGS settlement Account of a specific currency has sufficient balance. At the end of the business day, the balance of the settlement account of the RTGS system will be transferred to banks’ specific FC account. Thus FC clearing through RTGS system will eliminate settlement risk as well as credit risk for the participants, said the BB.