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Clearing house transactions reduced to $1m

Published:Friday | May 20, 2016 | 5:00 AMMcPherse Thompson

The Bank of Jamaica reduced the value of transactions processed through the Automated Clearing House (ACH) from $2 million to a maximum of $1 million, marking the final phase of the reductions.

The revised ceiling is meant to reduce or eliminate settlement risk posed by large transactions processed through the ACH, which are settled on a deferred basis, the central bank said.

Transaction above $1 million must now be settled through the JamClear Real Time Gross Settlement platform operated by the central bank. Before the phased reductions began, transactions as high as $5 million were cleared through ACH.

BOJ said that a review of transactions processed through the ACH indicated that transactions greater than or equal to $1 million represented approximately 80 per cent or $2.29 trillion of the transaction values processed through the ACH and 2.7 per cent of volumes as at December 31, 2008, the benchmark year.

In consultation with commercial banks and the National Payments Council in 2010, it was agreed that reducing ACH transactions to a maximum of $1 million would reduce the settlement risk exposure to normal and acceptable levels, the BOJ said in a statement on its website.

The central bank said that under phase one of the programme, there was a 53 per cent reduction in the aggregate value of transactions equal to or greater than $1 million processed through the ACH when compared to the aggregate values in 2008.

Under phase two, there was a further 47 per cent reduction in aggregate values relative to 2011. Phase three saw a further nine per cent reduction.

Safer, more efficient

BOJ says JamClear provides a safer and more efficient means of making payments as settlement of transactions are immediate, final and irrevocable.

Commercial banks will be required to target 100 per cent of all payments and transfers that are above the threshold of $1 million for migration to JamClear-RTGS.

The BOJ said commercial banks that are fully compliant with the targeted threshold of $1 million for those payments and transfers that are processed through the ACH will incur no charge, while the non-compliant will incur a charge of $5,000 for each transaction over and above the threshold.

National Commercial Bank Jamaica (NCB) has advised customers that with the reduction in the threshold, it will levy the penalty of $5,000 imposed by the BOJ on each transaction that exceeds the threshold and apply the charge, plus GCT, to customers' accounts.

In a notice to customers, NCB encouraged them to route transactions over the value threshold through JamClear-RTGS as it provides a safer and more efficient method of payment.

The bank advised that transactions processed via ACH are settled in batches. This means that under the ACH, settlement of transactions are done at a designated cut off time, and the amount exchanged between banks is based on calculating the net amount due, that is, the difference between the total debits and credits.

Any transaction initiated after a designated settlement time would have to wait until the next settlement, NCB said.

In contrast, the RTGS system processes transactions continuously throughout the day.

NCB said any payment valued at more than $1 million will be affected by the changes, including statutory payments to the collector of customs, collector of taxes and stamp duty loan on disbursements from NCB to other banks or institutions, car purchases, real estate purchases, and deposits to financial institutions for investment or other purposes.

The bank is encouraging customers to use its online platform to make payments above the limit to avoid the penalty charges.

For business customers using the online RTGS, transfers, once initiated before 2:30 p.m., are submitted to the recipient bank within two hours of confirmation and cost $173 plus GCT, it said.

Retail customers making payments above $1 million are required to visit the branch for assistance in completing those transactions.

Where manager's cheques in excess of $1 million are required, the cost of the cheques and threshold limit fee, plus GCT, will be levied on the customers' accounts.

mcpherse.thompson@gleanerjm.com