As a result of the rapid economic and trade expansion experienced by the country, daily payment transactions grew in terms of both volume and value. Therefore, in order to facilitate high-value transactions, reduce costs and systemic risks, BOT thus developed an electronic large-value funds transfer, known as BAHTNET (Bank of Thailand Automated High value Transfer Network).
BAHTNET is an electronic network served for transmitting and receiving message between Bank of Thailand (BOT) and financial institutions or other organizations maintaining deposit accounts at BOT for settling large value funds transfer on Real Time Gross Settlement basis (Online RTGS). It is designed to mitigate risk in payment systems so as to facilitate settlement in effective, secured and timely manner since 24 May 1995 to serve as a financial infrastructure for interbank funds and third-party funds transfer.
Prior to the BAHTNET implementation, the payment among financial institutions were mainly executed by cheque in which the payees could not receive their funds instantly due to collecting and payment process between Paying Bank and Receiving bank. So, there was a risk for payee because the payment has no instant finality which may cause risk to payment systems as a whole.
Members of BAHTNET system have to maintain deposit account at BOT and abide by the Bank of Thailand Regulation on BAHTNET Services B.E. 2549. The regulation specifies the authority, roles and responsibilities of BOT, in its capacity as the service provider, and the members. The regulation also specifies the types of services and the guidelines for using the services.
In the event of a dispute, each party will appoint one arbitrator, and the two arbitrators will together appoint an outsider as a neutral arbitrator.
As for a third-party transfer, in which a commercial bank provides a service to its client in transferring funds via the BAHTNET system into a receiver’s account at another bank, the service must comply with the BAHTNET Funds Transfer Guideline for Commercial Bank’s Customer Service. This is to ensure fairness to the customers who use the services.
BAHTNET members, who must maintain deposit accounts with BOT, are consisting of commercial banks, specialized financial institutions, finance companies, securities companies, government agency, Thailand Securities Depository Co., Ltd and BOT internal departments.
Regarding the Bank of Thailand Regulation on BAHTNET Services B.E. 2549, members can be classified into 2 types, namely:
(1) Direct Member
A direct member is a member who received the BOT’s permission to send funds transfer transactions, receive funds transfer, and perform other functions through BAHTNET system.
(2) Associate Member
An associate member is a member who received the BOT’s permission for BAHTNET services’ usage via other direct members’ BAHTNET Workstation Subsystem.
As of February 2008, there are total 67 BAHTNET members, consisting of 62 direct members and 5 associated members.
BAHTNET members can link to the BAHTNET System via two channels as following;
4.1 Linkage and transmit message via S.W.I.F.T. network which is an international financial telecommunication network, given that members will have to send message in align with SWIFT message standard. Members are able to develop internal systems to link with BOT in Straight-through Processing (STP).
4.2 Linkage and transmit message via BOT WEB PORTAL through Electronic Financial Services (EFS) provided by BOT. Members will send and receive message through BAHTNET Web service, provided that BOT has developed the message format in accordance with SWIFT message standard. However, all BAHTNET members, both SWIFT or non-SWIFT members, are required to install BAHTNET Web service for the purpose of inquiry for account balance and movement of deposit accounts, including queue management and reports
The system operates daily from 8:30 a.m. to 5:30 p.m., except on bank holidays. It offers the following services:
(1) Funds Transfer
A member can transfer funds from its account to another member’s account or between its own accounts at BOT.
(2) Third Party Funds Transfer
Third-party funds transfer is a funds transfer on a client's order, from the client account to a beneficiary account at another bank. This service will make funds available for beneficiary on the same day basis.
(3) Inquiry
A member can access to the information pertaining to its own current account at BOT,
e.g. the account balance and its movements, and inquire the status of items in a queue and those already processed.
(4) Bilateral Communication
A member can communicate with another member via the BAHTNET system at anytime during the operating hours.
(5) Message Broadcast
Normally used to broadcast messages from BOT, this feature also allows a member to broadcast messages to all members upon request to BOT.
(6) Multilateral Funds Transfer (MFT)
This is a BAHTNET function that allows a number of simultaneous debit/credit funds transfers. It is used by BOT for making daily settlements resulting from net position settlement system such as ECS or SMART.
BOT has been continuously improved BAHTNET system to offer service responding to changing business needs as following;
6.1 Delivery Versus Payment (DVP) for government securities settlement
BOT realized the importance of strengthening the government's domestic securities market in order to promote transactions in secondary market and to serve as one of major sources of financing besides money and capital markets. BOT thus enhanced the system to provide settlement function for government securities, in which the BOT is a registrar, on a real time and Delivery Versus Payment (DVP) basis, provided that ownership transfer of government securities and payment are taken place simultaneously. The transaction is then deemed final and irrevocable. This service changes the traditional way of using cheques as payment for payee. It was first launched on December 11, 2001.
Transfer of Delivery Versus Payment Service for government securities to TSD
Due to the second Thai bond market development plan (2005-2014) issued by the Ministry of Finance (MOF) which aimed to develop and promote the government debt securities market as another source of financing besides equity and money market. Regarding the aboved-mentioned plan, there was a task to establish only one Central Securities Depository for the country in order to increase efficiency in the securities clearing and settlement process. Therefore, BOT transferred the depository and securities settlement services to TSD since May 15, 2006. With cooperation between BOT and TSD, the linkage is established to link BAHTNET and TSD's system to facilitate Delivery Versus Payment for government securities on RTGS basis, given that only funds settlement resulting from securities transaction is sent to be settled in BAHTNET in order to effect the securities settlement in TSD’s system.
6.2 Linkage between BAHTNET and GFMIS system to serve for government payment and budget allocation
BOT worked in cooperation with government sector to promote and to modernize government's management system under the Government Fiscal Management Information System (GFMIS) project. One of major goal is to achieve fast and efficient process of receive and payment across Government's Treasury Reserve Account at BOT. BAHTNET was enhanced to establishing linkage with GFMIS system to facilitate earning submitting and requesting for budget allocation to pay for their debtors by transmitting data from GFMIS to be processed in BAHTNET. The service was launched on December 2, 2004.
6.3 Central Settlement System (CSS) served for net position settlement of various payment transactions' among BAHTNET members
Net position settlement of various payment transactions among BAHTNET members is undertaken through MFT function by debiting a number of sending institutions' accounts and simultaneously crediting a number of receiving institutions' accounts such as settlement of inter-bank cheque clearing. This method is aimed to improve system's efficiency and to ensure its compliance with the international standard, including mitigating settlement risk among financial institutions. BOT then developed Central Settlement System to offer service for government agency and private organizations such as TSD to transmit multilateral funds transfer order for settlement of other types of transactions such as equity settlement, credit card settlement etc. The service has been in operation since June 28, 2004. In 2008, BOT has enhanced this system to allow members to view their bilateral position against other members.
6.4 Settlement for equity and corporate bonds on RTGS basis
BOT has established the linkage with Thailand Securities Depository Co., Ltd. (TSD)'s system in order to serve as financial infrastructure for RTGS-Delivery Versus Payment of equity and corporate bonds which are under TSD's custody. The service has been offered for big lot transaction (trade order which is equal or more than 1 million units or amount exceeds 3 million baths) so as to alleviate settlement risk. It has been in operation since July 15, 2005.
Since BAHTNET system is designed for high-value funds transfer, BOT thus implement high security standard, given that members transmitting messages to BAHTNET via SWIFT channel must apply SWIFT security standard which is an acceptable international standard. For members transmitting messages via EFS, digital signature is employed. Members sending messages have to maintain Private key in personal Smart Card to create digital signature signed in electronic paper sent to BAHTNET system. By adopting this technology, BAHTNET is capable of assuring members with integrity, confidentiality, authentication, non-repudiation including continuous audit trail for all transactions to be kept as evidence.
BAHTNET is an irrevocable funds transfer system, which operates on a Real Time Gross Settlement (RTGS) basis. It requires greater level of liquidity than the traditional net settlement system. Therefore, the transferor has to have an adequate amount of funds in its current account at BOT in order to be able to successfully execute the funds transfer order. However, the transferor may momentarily face liquidity shortage, which would halt the transfer order. The BAHTNET utilizes the following mechanisms for handling such a situation.
- A Queuing Mechanism is used to help prioritize an executable funds transfer orders, which are placed in a queue until such time as the account balance has enough funds to cover the funds transfer orders.
- A Gridlock Resolution system is an optimization process to help resolve a gridlock situation due to liquidity shortage. The system searches the queue for a combination of funds transfer orders that have a manageable net clearing position, in which case these funds transfer orders are executed simultaneously.
Due to the high degree of liquidity required to operate the BAHTNET system, BOT enables more efficient liquidity management for members by providing Intraday Liquidity Facility (ILF) to BAHTNET members, which are financial institutions under BOT supervision, on an intraday and fully collateralized basis.
To apply for ILF usage, BAHTNET members are subject to submit letter of agreement to sell their securities to BOT at the beginning of business day and buy-back those securities at end of day. ILF granted for each member depends on his collateralized securities with no charge for usage during the business day. Members are entitled to activate ILF when they have no sufficient balance in their current accounts. However, ILF is restricted to use for transaction settlement in BAHTNET system only. In case of overnight loan, BOT will charge compensation to default members by applying policy rate plus 0.5 per annum.
BOT has developed BAHTNET as a financial infrastructure to increase the efficiency while reducing systemic risks within the payment system. There is no profit motive. In fact, the BAHTNET fee structure is meant to entice potential electronic funds transfers away from paper-based system.
At the beginning, with regards to the setting of service fees charged by member banks to their clients, BOT lets the market mechanism work freely, but initially set the ceilings in order to cap the fees to within a reasonable level. However, BOT has presently lifted such requirements to promote competition according to Bank of Thailand notification BOT. PSG (03) C. 3414/2543 The Removal of Third Party Funds Transfer Ceiling Fee 7 December B.E. 2543. Therefore, members are subject to set their own fees.
Third party funds transfer fee within Bangkok and metropolitan area consisting of Nontaburi, Pathumthani, Nakornprathom, Samutprakarn, Samutsakorn is subject to the same rate. In case of transfer across provincial area, customers will be charged in addition. Interested customers can contact all commercial banks and specialized banks for more information.
- Monthly Fee is as following:
(1) 3,500 Baht for each direct member
(2) 500 Baht for each associated member
- Transaction Fee varies across message channel and message category. Additionally, it is determined in according to settlement time, which is classified into 3 time zones in order to encourage BAHTNET members to settle their transactions in the early hours of the day and to avoid congested traffic of the transactions during closing hour.
BAHTNET funds transfer is based on RTGS and is irrevocable. As such, it is a system with already a high degree of risk control. Items that cannot be settled immediately would be placed in a queue, and the transfer orders would only proceed when funds become sufficient. Unexecuted orders remaining in the queue at the end of the day would be cancelled. Altogether this implies that BAHTNET is a relatively safe payment system. In addition, BOT has also successfully encouraged the members to move high-value transactions, i.e. interbank loan, and foreign exchanges, from using cheque to be settled on RTGS basis via BAHTNET.
BOT also sets up replicated backup site around 50 kilometers away from the production site, provided that same set of hardware and software have been installed to ensure continuous operation under the circumstance that production center fails down. Besides, BOT has already prepared contingency plan to tackle failure scenarios. With all these security measures, BAHTNET members can be guaranteed of high security and effectiveness service.