BAHTNET System

BAHTNET (Bank of Thailand Automated High-value Transfer Network) is a financial infrastructure serving for Real-Time Gross Settlement (RTGS) of large value funds transfer between financial institutions or other organizations maintaining deposit accounts at the Bank of Thailand (BOT).

The BOT developed BAHTNET and launched on 24 May 1995. It is designed to mitigate settlement risk amongst financial institutions that maintain deposit accounts at the BOT as well as to facilitate efficient, quick and secure transfers for third-parties.

Prior to the introduction of BAHTNET, payments among financial institutions were mainly executed by cheque where the payees could not receive their funds immediately due to collection and settlement process between paying and receiving banks. Consequently, payees were exposed to considerable risk because the payment finality had not immediatelyachieved, and this would possibly lead to a greater risk in payment systems as a whole.

BAHTNET (Bang of Thailand Automated High-value Transfer Network) is a financial infrastructure serving for Real-Time Gross Settlement (RTGS) of large value funds transfer between financial institutions or other organizations maintaining deposit accounts at the Bank of Thailand (BOT).

The BOT Developed BAHTNET and launched on 24 May 1995. It is designed to mitigate settlement risk amongs financial insstitutions that maintain deposit accounts at the BOT as well as to facilitate efficient, quuick and secure transfers for third-parties.

Prior to the introduction of BAHTNET, payments among financial institutions were mainly executted by cheque where the payees could not receive their funds immediately due to collection and settlement process between paying and receiving banks. Consequently, payees were exposed to considerable risk because the payment finality had not immediately achieved, and this would possibly lead to a greater risk in payment systems as a whole.

1. Background

As a result of rapid economic and trade expansion of the country, daily payment transactions grew in terms of both volume and value. Therefore, to facilitate high-value transactions, reduce transaction costs and systemic risks, the Bank of Thailand (BOT) thus developed an electronic large-value funds transfer system, known as Bank of Thailand Automated High-value Transfer Network (BAHTNET).

BAHTNET is an electronic network linking the BOT and BAHTNET members to facilitate high-value fund transfers on Real Time Gross Settlement (RTGS) basis. BAHTNET members include financial institutions and other organizations that are authorized to open deposit accounts with the BOT. BAHTNET is aimed to mitigate risk in payment system which will contribute to a more effective, secure and timely payment system. Launched on 24 May 1995, BAHTNET is a financial infrastructure for interbank and third-party fund transfers.

Prior to the BAHTNET implementation, payments among financial institutions were mainly executed by cheque in which the payees could not receive their funds immediately due to collection and settlement process between paying bank and receiving bank. Consequently, considerable risk incurred to payee because the payment finality had not immediately achieved, possibly lead to the greater risk in payment systems as a whole.

2. Regulations, Guidelines, and Policies

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.

3. Members of BAHTNET

BAHTNET members must maintain deposit accounts with the BOT, and currently consist of commercial banks, specialized financial institutions, finance companies, securities companies, government agencies, Thailand Securities Depository Co., Ltd (TSD) 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 June 2013, there are total 64 BAHTNET members, consisting of 58 direct members and 6 associate members.

4. Channel of Access

BAHTNET members can link to the BAHTNET System via two channels as follows:

4.1 S.W.I.F.T. network which is an international financial telecommunication network, given that members will have to send message in accordance with S.W.I.F.T. (Society for Worldwide Interbank Financial Telecommunication) message standard. Members are able to develop internal systems to link with the BOT in Straight-through Processing (STP).

4.2 BOT WEB PORTAL through Bank of Thailand Electronic Financial Services (BOT- EFS) provided by the BOT. Members will send and receive messages through BAHTNET Web service, provided that the BOT has developed the message format in accordance with S.W.I.F.T. message standard. However, all BAHTNET members, both S.W.I.F.T. or non-S.W.I.F.T. 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.

5. BAHTNET Services

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 the BOT.

(2) Third Party Funds Transfer

Third-party funds transfer is a funds transfer on a client’s order, from the client’s 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 the 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 the BOT, this feature also allows a member to broadcast messages to all members upon request to the BOT.

(6) Multilateral Funds Transfer (MFT)

This function allows a number of simultaneous debit/credit funds transfers for making daily settlements. These settlements are net positions of settlement agents i.e. NITMX, TSD, and ECH.

6. Major BAHTNET Development Steps

The BOT has continuously improved BAHTNET system to offer service responding to changing business needs as follows;

6.1 Delivery Versus Payment (DVP) for government securities settlement

The BOT realized the importance of developing the government's domestic securities market, promoting transactions in secondary market, and serving as infrastructure for further development of a more efficient and internationally-accepted money and capital market. The 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, i.e. transfer of ownership 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 launched on December 11, 2001.

Transfer of Delivery Versus Payment Service for Government Securities to Thailand Securities Depository Co., Ltd. (TSD)

The Second Thai Bond Market Development Plan (2005-2014) issued by the Ministry of Finance (MOF) aims to develop and promote the government debt securities market as another source of financing besides equity and money market. Under this plan, the Central Securities Depository for the country was established in order to increase efficiency in the securities clearing and settlement process. Therefore, the BOT transferred the depository and securities settlement services to TSD. The BOT and TSD helped develop a system that links BAHTNET and TSD systems 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 whereas the securities settlement is settled in TSD’s system. The system was launched on 15 May 2006.

6.2 Linkage between BAHTNET and GFMIS system to serve for government payment and budget allocation

The BOT has cooperated with government sector in promoting and modernizing an efficient government's management system under the Government Fiscal Management Information System (GFMIS). One of major goals is to increase the speed and effectiveness of financial transactions of Government's Treasury Reserve Account at the BOT. BAHTNET was enhanced to establish linkage with the GFMIS to facilitate government agencies’ revenue submission and budget disbursement by transmitting data from GFMIS to be processed in BAHTNET. The service was launched on 2 December 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.

7. Security Measures

Since BAHTNET system is designed for high-value funds transfer, thus BOT maintains high security standard, given that members transmitting messages to BAHTNET via S.W.I.F.T. channel must apply S.W.I.F.T. security standard which is an internationally-accepted standard. For members transmitting messages via BOT-EFS WEB channel, digital signature is employed where members sending messages are required to have Private Key in their tokens to create digital signature for verifying electronically their activities 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.

8. Settlement Procedures

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.

9. Liquidity Management

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.

10. Fee Charged to customers

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.

11. BAHTNET Fee

Monthly Fee are as follows:
(1) 3,500 Baht for each direct member
(2) 500 Baht for each associate member
Transaction Fee varies across message channels and message categories. 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.

12. Risk Management

13. Backup Solutions

The BOT also set up replicated backup site around 50 kilometers away from the main site, provided that similar hardware and software have been installed to ensure continuous operation in case of natural disaster or system failure. Besides, the BOT has already prepared contingency plan to tackle failure scenarios, both from the BOT and member sides. With all these security measures, BAHTNET members can be guaranteed with high security and effective service.

BAHTNET System​

BAHTNET System