JOINT MEDIA RELEASE Date: 26 March 2003 Embargo: For Immediate Release

MANAGEMENT OF EXCHANGE SETTLEMENT ACCOUNTS

When Real-Time Gross Settlement (RTGS) arrangements were introduced in Australia in June 1998, it was decided that all banks would settle their RTGS transactions directly through their own Exchange Settlement (ES) accounts at the Reserve Bank.

That policy has now been reviewed in the light of experience and the Payments System Board has agreed to changes. In future, banks (and other institutions eligible for an ES account) whose aggregate RTGS transactions are relatively small (defined as less than 0.25 per cent of all RTGS transactions) may make their RTGS transactions through an agent, rather than directly through their ES accounts.

Banks that elect to settle their RTGS transactions through an agent must still maintain an ES account, for use in a contingency.

For institutions settling transactions through their own ES account, responsibility for the account must rest with management located in Australia. This means that sufficient resources must be in place in Australia to ensure that the institution is always able to authorise, execute and settle RTGS transactions in an efficient and timely way.

Any authorised deposit-taking institution (ADI) intending to use an agent or act as an agent for RTGS payments will need to seek prior approval from APRA. APRA will assess the risk management systems in place prior to approving the arrangements. In particular, APRA will consider the potential impact of the arrangements on ADIs' operational risk and liquidity management. This will include assessing compliance with the ADI Prudential Standard on Outsourcing (APS 231 and Guidance Note AGN 231.1).