Payment systems in Tanzania - Bank for International Settlements

- 208 - Tanzania
The mode of payment is agreed as stated in the contract and indicated in the deal
confirmation slip. Either a Bank of Tanzania transfer, cheque or bankers payment (which are cleared
and settled like any other cheque in the clearing houses) effects payment.
In the case where transfer is through current accounts maintained at the central bank,
entries are passed on due date by debiting or crediting the respective bank’s local currency accounts.
Where payment also involves US dollars, the dollar accounts are debited or credited accordingly.
Bureaux de change and banks cater for the retail market in which individuals and
businesses satisfy their foreign exchange requirements.
5. THE ROLE OF THE CENTRAL BANK IN INTERBANK SETTLEMENT
SYSTEMS
5.1 General responsibilities
5.1.1 Statutory responsibilities
There is no specific legislative framework governing the operations of the Tanzania
payment clearing systems, nor does the Bank of Tanzania have any statutory responsibilities in
connection with them. The Bank’s interest in the quality of these systems stems from its various core
responsibilities as a central bank.
Firstly, the primary objective of the Bank is to establish monetary conditions conducive
for price stability over time. As the ultimate provider of liquidity in the financial sector it presupposes
efficient and reliable payment, clearing and settlement systems that serve the financial markets
effectively.
Secondly, the Banking and Financial Institutions Act of 1991 gives the Bank other
responsibilities. These include: ensuring implementation of prudential controls concerning capital
adequacy, liquidity, concentration of credit, risk diversification and modification/monitoring of the
minimum reserve requirements and foreign exchange exposure. Hence the Bank has particular interest
in credit and liquidity risks that may result in systemic crises - incurred by the banking industry,
financial institutions and their customers participating in the clearing and settlement systems.
Thirdly, being the bankers’ bank, it accepts deposits of prudential reserves for the
commercial banks, discounts commercial and government paper, has the commitment to act as a
lender of last resort to the banks and, most significant in this context, is the settlement agent to these
banks. It is therefore very much exposed to the banks via the clearing system.
Fourthly, the Bank has a responsibility of establishing an effective financial system so
that financial transactions necessary for the smooth functioning of the economy can be carried out
with minimum costs, risks and the amount of time involved. In this connection, the Bank facilitates
the development of advanced clearing, transfer and settlement systems.
Fifthly, the Bank provides and supervises central clearance facilities for interbank
transactions through its three branches.
5.1.2 Establishment of common rules
The Bank in collaboration with Tanzania Bankers Association established and regularly
reviews the rules and regulations governing clearing houses and money markets. Except for the
accounting standards set by the National Board of Accountants and Auditors, no other rules, standards
or procedures have been set on payment systems by other organisations.