Payment systems replacement

In April 2016, the Reserve Bank started the Payment Systems Replacement Programme, focussing on implementing a change programme that ensures the on-going provision of payment and settlement infrastructure and systems.

 Last updated: 24 July 2017

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Background

The Reserve Bank conducted a strategic review of ESAS and NZClear in 2013/14.  As a result of the strategic review and industry feedback, the Bank decided that it must continue to own and operate ESAS, given that ESAS is central to New Zealand’s financial systems and the Reserve Bank’s statutory functions. The Reserve Bank has chosen to retain the NZ Clear business after a divestment process attracted no sufficiently compelling commercial bids.

Software Update

The Reserve Bank has contracted SIA Perago to provide a Real Time Gross Settlement System (RTGS).  The RTGS will replace the current software that underpins ESAS. The Bank has also signed a contract with SIA Perago for a Central Securities Depository (CSD), to replace NZ Clear’s existing system. In line with the findings of the 2013/14 strategic review, the replacement CSD will be implemented separately and interfaced via SWIFT messaging.

SIA Perago is implementing required changes to the standard RTGS to meet our industry requirements. SIA Perago is enhancing the RTGS implementation to include Settlement Before Interchange (SBI) and liquidity provisioning from the NZClear system.

Development of the CSD is under way after the Reserve Bank and SIA Perago clarified requirements through a series of workshops. The replacement will focus on core CSD services, based on current and likely future requirements, practices and interests of the industry and conforming to international processes and standards.

Infrastructure Update

A key part of the Payment Systems Replacement Project is the replacement of the infrastructure that hosts the current ESAS and NZ Clear systems. The current infrastructure is nearing the end of its support life.

The Reserve Bank has signed a contract with Datacom for the replacement and ongoing support of the ESAS & NZClear infrastructure. The detailed infrastructure design was completed in 2016. A third-party review of the technical architecture and costs found that they are appropriate for the high levels of resilience, reliability and redundancy that the Reserve Bank requires. The build is underway, with physical setup well advanced and a test programme running through to the end of 2017.   

Industry Engagement

The Reserve Bank has appointed Nathan Lewer to the role of Stakeholder Liaison and Sector Readiness Manager to the Payment Systems Replacement programme.

The Reserve Bank facilitated detailed RTGS workshops throughout the second half of 2016 and a summary of key findings has been communicated to ESAS account holders. Further workshops in early 2017 have reviewed key industry requirements for the implementation.   

The Reserve Bank has sought submissions from NZClear members about the on-going provision of some key areas of functionality in the replacement CSD system. We have published the outcome of these submissions and the decisions on the future of these services (PDF 752 KB).

The budget for the capital cost of the new systems is $28 million, including a provision for contingency, applied to ESAS and NZClear in approximately equal amounts. This includes the new applications, infrastructure and security. The Reserve Bank has discussed with ESAS account holders the impact of the replacement programme on likely future transaction fees.

Key Updates

  • Implementation of required changes to standard RTGS system for ESAS is in progress.
  • The Reserve Bank has signed contracts for a replacement Central Securities Depository (CSD) and for replacement infrastructure.
  • The CSD requirements are nearing finalisation with Perago. Development is now underway.
  • Liaison and engagement with the payments industry has increased.
  • A $28 million budget has been established, split between to ESAS and NZClear in approximately equal amounts.