ISMT

The Interbank Money Transfer System is an electronic money transfer system whose users include the National Bank of the Republic of Kazakhstan, the Treasury of the Ministry of Finance, the National Agency for Government for Citizens, second-tier banks, the Kazakhstan Stock Exchange, the Central Securities Depository, and non-banking financial organizations.

ISMT Participants of ISMT FAQ Tariffs Standard Agreements Rules List of Error Message Codes

The work on creating a real-time operating system began in 1995 by the National Bank of Kazakhstan. Exactly a year later, the Large Value Payment System (LVPS) was implemented, operating based on the National Payment Corporation (NPC). The finality and irrevocability of real-time settlement were achieved by introducing electronic documents that did not require paper confirmation, developed regulatory framework, and effective liquidity management by the National Bank.

The introduction of the Interbank Money Transfer System (ISMT) in 2000 marked the next stage in the development of Kazakhstan’s payment system, leading to the enhancement of system monitoring mechanisms and liquidity risk management by banks.

ISMT was put into industrial operation in December 2000 by the National Bank and NPC.

ISMT is an electronic money transfer system whose users include the National Bank of the Republic of Kazakhstan, the Treasury of the Ministry of Finance, the National Agency for Government for Citizens, second-tier banks, the Kazakhstan Stock Exchange, the Central Securities Depository, and non-banking financial organizations. Each user of the system has an account with the National Bank. MISMTSPT operates every day of the week, except holidays and weekends.

ISMT has a V structure and operates according to the following scheme:

The Guarantor Bank (Bank A) sends MT100, MT102 messages to MSPT about the money transfer.

In the case of a money transfer, ISMT notifies the Guarantor Bank (Bank A) with the MT900 message and the Beneficiary Bank (Bank B) with the MT910 message about the completion of the money transfer.

ISMT sends messages MT100, MT102 to the Beneficiary Bank (Bank B) containing payment details.

The Guarantor Bank debits the money from the Sender’s account, and the Beneficiary Bank credits the money to the Receiver’s account.

ISMT performance is an average of 5-7 processed financial transactions per second.

Message exchange in ISMT is done only electronically, using SWIFT-like message formats developed, supplemented, and approved by NPC.

The operational day of ISMT

Before the start of the operational day of ISMT, at the scheduled time according to the timetable, the National Bank, based on the user’s payment order, transfers money from their correspondent account opened in the National Bank, within the balance amount, to a specially designated account of the National Bank (hereinafter the system account).

Based on executed payment orders from users, the National Bank compiles and sends an electronic statement to MSPD containing information about the amounts of money transferred by users from their correspondent accounts to the system account in the National Bank and their banking identification codes.

For risk management purposes, the National Bank also provides an electronic statement to ISMT about the maximum permissible amount of payment orders in the user’s debit queue. This statement includes the user’s banking identification code and the total amount of payment orders that can be registered in their queue. During the operational day, the user has the opportunity to change the current balance of the account in the system.

Information about the amounts of money users transferred from their correspondent accounts to the system account in the National Bank and the maximum total amount of payment orders that can be registered in the user’s queue allows the National Bank to manage user liquidity in real-time.

The operational day of ISMT begins at 9:00 AM.
Before the start of the operational day, based on the electronic statement received from the National Bank unit, the NPС reflects the amounts from the system account to user positions in the NPC. Also, a record is made of the maximum total amount of payment orders that can be registered in the user’s queue.

During the operational day, ISMT ensures irrevocable and final settlement in real-time.

Money transfer within the system is carried out within the user’s amount of money transferred to the system account in the National Bank and amounts received from other users. In case of insufficient funds, payment orders are placed in the queue.

Payment orders in the queue are processed according to priority codes. Within the priority codes, the execution of payment orders from the queue is carried out in the order of their arrival in the queue, according to the FIFO principle. Users have the right to set the execution order of payment orders.

If, upon receipt of the next payment order from the user, the maximum total amount of payment orders in the queue exceeds the permissible value, then this payment order is rejected.

Payment orders in the queue can be revoked by the payer user at any time.

After each credit entry on the user’s position, ISMT checks the possibility of executing payment orders in its queue. By using these tools, the user has the ability to manage their queue.

ISMT performs authentication of the received message by verifying the electronic-digital signature. During processing in ISMT, payment order control includes:

Compliance of the message structure with the accepted formats.
Correctness of the electronic digital signature.
Uniqueness of the reference.
Correctness of the sender’s and recipient’s BICs (Bank Identification Codes).
Control digit of the sender’s and recipient’s accounts.
Compliance with the value date.
Authorization for the sender to initiate payments and the recipient to receive payments.
Presence of filled-in EKNP codes.
Possibility of debiting the amount specified in the payment order from the user’s position.

If the control conditions are not met, the payment is rejected, and the sender receives an error message (MT905) indicating the error code and description.

When all control conditions are met, ISMT transfers the money. A debit confirmation (MT900) is created for the payment sender, a credit confirmation (MT910) for the payment recipient, and the payment order itself (MT100, MT102) is transmitted, serving as the basis for crediting the money to the account.

During the operational day, upon user requests, ISMT provides an electronic statement on the user’s position in ISMT:

For executed payment orders.
For payment orders registered in the user’s queue.
About the user’s remaining money in the system.

Money-receiving users, after receiving, verifying the payment order, and crediting the money to their correspondent accounts, perform the acceptance (crediting) of money to their clients’ accounts during ISMT operational day but no later than their next operational day.

ISMT transfers money based on payments generated by the Interbank Clearing System NPC and serves as a clearing agent for securities trading results, settling transactions on a Delivery versus Payment (DVP) basis. The settlement process follows this scheme:

The Central Securities Depository (CSD), after registering the transaction, blocks the necessary amount of securities from the selling bank.
The CSD debits the buyer bank’s account in the system for the entire transaction amount and credits its own account in the system.
After receiving confirmation of the debit of the buyer bank’s account, the CSD transfers the securities to the buyer bank.
The CSD generates an entry in ISMT to transfer the transaction amount from its account in the system to the selling bank’s account.

Money transfers in ISMT are made during the operational day before the closing time, which is at 8:00 PM. However, based on the National Bank’s directive, the operational day may be extended.

After the close of the operational day, ISMT generates a set of closing documents for each user:

Statement of executed payments.
Extended statement of executed payments.
List of unprocessed documents.
Report on the user’s message flow, categorized by message types and their processing times.

An electronic statement with user position balances is sent to the National Bank. The statement includes the user’s banking identification code, incoming position balance, total turnover amount in debit, total turnover amount in credit, and outgoing position balance.

The National Bank’s unit servicing users’ correspondent accounts, upon receiving the electronic statement, verifies it for equality of money amounts between the system’s position in NPC, the system’s account in the National Bank, and the total balance amount of user positions in ISMT. It also checks for equality of debit and credit turnover amounts for user positions and the presence and correctness of all required details, after which it informs NPC of the completed verification.

Subsequently, the National Bank transfers the money from the user’s position balance from the system’s account in the National Bank to the user’s correspondent account opened in the National Bank.

For credit risk and liquidity risk management of users in ISMT, the National Bank’s unit conducts system monitoring. Monitoring is done in real-time based on data on the current state of user positions, debit and credit turnovers, the number and volume of processed payments, and documents in the queue. If necessary, the National Bank’s unit has the ability to view all payments of any user in detail.