the payments system in trinidad and tobago - Central Bank of ...

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10THE PAYMENTS SYSTEMIN TRINIDAD AND TOBAGOinformation) while settlement refers to the transfer of funds to thepayee or beneficiary with finality. Clearance ought to be completedahead of settlement.At the end of each business day, banks sort the cheques theyreceive, list them and send the cheques and listing to the respectivepaying banks on which they are drawn. Upon receipt of the physicalcheques, the paying banks peruse the cheques (for cheque detailssuch as the payer’s signature) and verify the availability of funds inthe payers’ accounts. The total value to be paid to each bank asevidenced by the cheques is reconciled against the value on thelisting submitted by each bank.At 9.30 a.m. each morning, banks (including the Central Bank) meetat the clearinghouse at the Central Bank, to reach mutual agreementon the net amounts due to each other on the basis of the chequelistings received the previous day. The Central Bank is the operatorof the Clearinghouse and supervises this meeting. At the close ofthe meeting, the clearance process is complete and the Central Bankcarries out the settlement. The latter is achieved by making a creditor debit of the agreed amount to each bank’s account through theRTGS.By agreement, there is a limit of 4 days, starting from the day thecheque was received by the payer’s bank, for the return of chequeswhich have any kind of irregularity or for which there is a lack offunds in the payer’s account.
11THE PAYMENTS SYSTEMIN TRINIDAD AND TOBAGOAlthough modern technologies such as cheque sorting and countingmachines are now used to improve the cheque processing operations,there is still a large amount of manual processing in this means ofpayment.The following is a diagrammatic representation of the clearing andsettlement process for cheques.Figure 3Cheque Clearing and SettlementProcess1 2BeneficiaryBankPayerBankBeneficiary36(Credit)CentralChequeClearingHouse4Bank5(Debit)Message flowsTransfer of fundsReal TimeGross SettlementSystem(RTGS)
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