Address by Mr T.T. Mboweni, Governor of the South African Reserve Bank, at the 10th Anniversary function of the Payment Association of South Africa, Pretoria, 15 November 2006 Honoured guests,ladies and gentlemen. 1. Introduction It is with great pleasure that I join you in celebrating the tenth anniversary of the Payment Association of South Africa (PASA). As financial systems have become increasingly complex, stricter regulation, overview and co-ordination of payment systems has been required. South Africa has been no exception, and PASA was born as an integral part of this process. As with most young children, there have been many growing pains, but it is a tribute to all those involved with the organisation that with the passage of time, PASA is developing into a mature adult. For the benefit of those unacquainted with the system, the NPS is a broad concept which not only entails systems to clear payments (cheques, electronic payment and card payments) between banks, but encompasses the total payment process. This includes all the systems, mechanisms, institutions, agreements, procedures, rules, laws etc that come into play from the moment an end-user issues an instruction to pay another person or a business, through to the final settlement between banks at the South African Reserve Bank. The NPS thus enables transacting parties to exchange to do business efficiently. 2. Background to the creation of PASA In the late 1980s, the risks emanating from the settlement of payment-related activities increasingly became of particular concern to central banks. The Bank for International Settlements (BIS) gave this issue further prominence when it started publishing reports highlighting the risks associated with the payment system. These reports highlighted the discomfort of central banks with the level of credit and liquidity risks to which participants in the payment system were exposed. Furthermore, concern was also raised about the regulatory and supervisory responsibilities of central banks in the payment system. In response, central bank Governors agreed to establish an ad hoc committee to investigate the findings of the various reports. Consequently, the Committee on Payment and Settlement Systems (CPSS) at the BIS was established. The Committee is currently convened by Mr Timothy Geithner, President of the Federal Reserve Bank of New York. It has become a trend, especially among the central bank fraternity, for regular attention to be paid to payment systems. This is part of the contribution that central banks make to overall financial system stability. With the reintegration of South Africa into the world economy in the early 1990s, it was clearly evident that this would bring increased obligations in order to ensure that the domestic clearing and settlement systems and risk management procedures conformed to international best practice. In February 1994, the banking industry requested the South African Reserve Bank to take the lead in the modernisation process of the domestic payment system. The NPS project, which was initiated by the Bank in April 1994, was launched as a collaborative effort between the Bank and the banking industry and the initial focus was to formulate a long-term strategy for the modernisation and development of the domestic payment system. This initial work resulted in the development of the South African National Payment System Framework and Strategy document (the so-called Blue Book) which was published by the Bank in 1995. The Blue Book contained the vision and strategy for the NPS up to 2004. An important component of the implementation strategy entailed the establishment of an umbrella body – the Payment Association of South Africa (PASA). It was envisaged that PASA would play a central role in establishing and controlling Payment Stream Associations representing the banks participating in each particular payment stream. It was the view at the time that although the Bank would remain responsible for the overall safety and soundness of the NPS, the clearing environment should be managed by a