SICOI - Interbank clearing system

Banco de Portugal is responsible for the organisation of the domestic interbank clearing services (Decree-Law No 381/77 of 9 September). The use of several payment instruments (cheques, credit and debit transfers, bills of exchange and bank cards), made available by banks to the different economic agents implies the collection of charges through a payment system. In the case of retail instruments, this collection is made by clearing (calculation of the net debtor or creditor positions of the banks involved).
 
The present Interbank Clearing System (Portuguese acronym: SICOI) was restructured in 1986 and has been subject to some changes, chiefly as a result of the implementation of the euro and, more recently, of the creation of SEPA. SICOI is classified as a prominently important retail payment system (PIRPS) in the classification of retail systems made in 2003 by the Eurosystem, in compliance with the applicable Core Principles.
 
The SICOI Regulation (Instruction of Banco de Portugal No 3/2009 – see SIBAP) lays down the system guidelines. The operating rules are established in manuals of procedures, distributed to participants only. The main rules laid down in Instruction 3/2009 are summarised below.

1 – Operating rules

The operating rules of the Interbank Clearing System are based on the respective Regulation issued by Banco de Portugal, and on the technical specifications manuals agreed among banks, SIBS (as operator of SICOI) and Banco de Portugal, and distributed to participants by the latter.

The SICOI Regulation establishes the baselines of the system and the relationships and responsibilities of the participants. The technical specifications manuals are also important, since they define the detailed procedures to be met by the participants in data transmission, intended for the operation of the system.

2 – Participation in system

Banks and other equivalent entities may participate in the system, either directly or indirectly, after prior authorisation by Banco de Portugal. The request for participation shall be submitted together with an opinion of the entity supplying the service (in this case SIBS), confirming that the applicant fulfils the necessary technical and operational conditions. Participation in each sub-system is conditional on the successful conclusion of a range of tests defined by the service supplier.
 
Participation in one of more SICOI sub-systems does not necessarily imply participation in the other sub-systems. Institutions that are not authorised to participate directly may be represented by another institution, where the latter shall assume towards the other institutions the rights and obligations of the represented institutions (indirect participation).

Banco de Portugal may, for technical reasons, cancel authorisations already granted, when there are, for instance, frequent communication difficulties from one participant. Continued failure in the settlement of outstanding balances of clearing systems and non-compliance with the rules defined in the SICOI Regulations may also be reasons for cancelling authorisations.

3 – Types of transactions

The system covers the following types of teleclearing: ATMs, Cheques, Interbank Electronic Transfers (Portuguese acronym: TEI), Direct debits and Bills of exchange.

4 – Operation of the system

The system is operational on every bank working day on a 24-hour basis. It includes the 5 sub-systems indicated below, with different data formats and processing procedures, defined in the respective technical specifications manuals. Settlements in the “Cheques”, “Interbank Electronic Transfers”, “Direct debits” and “Bills of exchange” sub-systems are made on a net basis, provided that the amounts do not exceed €100.000. Above that ceiling, settlements must be channelled to TARGET2, where they are processed on a gross basis (on a case-by-case basis) TARGET2 settlement accounts.

4.1. Cheque sub-system

In this sub-system, all cheques are cleared, with truncation at the drawer bank. However, there is a ceiling for cheques exchanged between participants. Since October 2003, the electronic exchange of images of non-truncated cheques has replaced the previous physical exchange that used to occur in four specific centres located in the mainland and autonomous regions.
 
All cheques shall comply with a common technical rule, which includes Optical Character Recognition, in order to allow for the automated processing and transmission of data between participants.

4.2. TEI sub-system – Interbank Electronic Transfers

Data transmission and clearing take place twice a day within the schedule mentioned in the table in Section 5. The first closing time applies to domestic and international credit transfers ordered by private customers and companies. The second closing time applies to domestic and international interbank transfers.

Since April 2005, the SICOI’s TEI sub-system has made available an interlinking function for international transactions processed through the Pan-European Automated Clearing House (PE-ACH).

4.3. Direct Debit sub-system

This sub-system became operational in the last quarter of 2000 and covers pre-authorised debits in the bank account of the debtor, but ordered by the creditor.  The debtor must issue a mandate, in compliance with the specific rules defined by Banco de Portugal, allowing the payment of different services. Banco de Portugal’s regulations also establish the rights and obligations of participating creditors, debtors and credit institutions.

The debit authorisation is made electronically by the debtor. It may also be sent via the ATM network. As a consumer protection measure, the debtor may revoke debits within 8 weeks.
 
The direct debit sub-system was created with a view to gradually replacing the previous system in force since 1983, which was based on bilateral agreements between credit entities and each bank of the debtor. It is expected that both systems co-exist for some time.

4.4. Bills of exchange sub-system

This sub-system is based on the truncation of the bills of exchange in the drawer bank, which communicated it electronically to the drawee bank, seven days prior to maturity. The information is stored for seven days on an electronic portfolio with SIBS. Bank customers may pay the effect by debiting their accounts (in the case of domiciled effects), or in any bank branch of their choice or via ATM in the case of non-domiciled effects. In addition, this sub-system also accepts effects denominated in foreign currency, which are settled in the respective currency through correspondent accounts via S.W.I.F.T.

4.5. ATMS sub-system

This sub-system covers transactions made via ATMs and EFT-POSs. It operates in real-time on a 7-days per week basis. Bank customers may conduct a wide range of operations through ATMs: withdrawals, deposits, transfers (between customers of the same bank or different banks), balance enquiries, payment of services (water, electricity, telephone, gas, etc.), requesting cheque books, changing the PIN (Personal identification number), charging mobile phones, payment of bills of exchange, payment of school fees, booking and payment of concert and theatre tickets and train tickets, etc. At first, ATM terminals were only located in bank agencies, but recently their location was widened to public spaces, supermarkets, large retailers and public services.

The authorisations required by the direct debit system and VIA VERDE (electronic toll payment system) may also be made via ATM terminals. Also, the ATM sub-system also makes it possible to settle VIA VERDE payments.

5 – Schedule  

The table below shows the closing times of SIBS sessions and of financial settlement at Banco de Portugal.

CHRONOGRAM OF THE CLEARING SYSTEM

SUB-SYSTEM	SIBS CLOSING TIME	TIME OF FINANCIAL SETTLEMENT AT BANCO DE PORTUGAL
TEI
1st closing time	9:00 p.m.	9:30 a.m.	a)
2nd closing time	1:45 p.m.	3:00 p.m.	b)
SEPA
1st closing time	11:30 p.m.	10:00 a.m.	a)
2nd closing time	11:30 a.m.	3:30 p.m.	b)
ATMs	8:00 p.m.	9:00 a.m.	c)
BILLS OF EXCHANGE	9:30 p.m.	9:00 a.m.	d)
DIRECT DEBITS	10:00 p.m.	9:30 a.m.	d)
CHEQUES	3:30 a.m.	9:30 a.m.	e)

a) Day following SIBS closing time, except if it coincides with TARGET2 closing days;
b) Same day as SIBS closing time;
c) Working day following SIBS closing time;
d) Working day following SIBS closing time, except on TARGET2 closing days not coinciding with the holidays mentioned in the collective labour agreement for the Banking Sector; with reference to that day, SIBS conducts the clearing of cheques, bills of exchange, direct debits and the first closing of TEIs, (excluding SEPA-related), although financial settlement only occurs separately on the following working day;
e) Same day as SIBS closing time, except in the case indicated in d).

6 – Processing of transactions  

SICOI participants use SIBS’ interbank communication network to transmit their batch transfer orders, except in the ATM sub-system, where transfers are processed in real time.

7 – Settlement procedures

The balances obtained by SIBS at closing time in a multilateral netting system are reported via file transfer to TARGET2, which conducts the respective operations to the debit or credit in the accounts of the different participants, according to the schedule mentioned in 5 above, thereby concluding the financial settlement of the transactions.

8 – Credit and liquidity risk

Participants may use eligible securities in monetary policy operations as a guarantee to obtain intraday credit, and may also use other TARGET2 operational facilities (for instance, the queuing mechanism). These mechanisms make it possible to control credit and liquidity risks in real time and to optimise cash management by the participants.

Operations processed through any SICOI sub-system are final and irrevocable after settlement in Banco de Portugal. Non-compliance with the obligations due to lack of funds in the settlement account of the participant determines the application of penalties and even the possible exclusion from participation.

9 – Price policy

The key principle underlying price policy is based on the system self-financing, wherefore it reflects the concerns of the participants as regards compensating each other for the operation charges. Banco de Portugal charges participants for the balances settled in each sub-system. Prices charged for services provided by SIBS to participants are broken down by transaction and instrument. There are no common regulations on the prices to be charged by banks to their customers, apart from the obligation to display the price list in a visible location at the counter.

10 – Statistical data  

The statistical data on SICOI can be viewed in the Report on Payment Systems and Interbank Settlement, and in the publication of the Eurosystem “Blue Book”, that contains a detailed description of Payment Systems in the European Union.