Copyright © Japanese Banks' Payment Clearing Network All Rights Reserved.

ZENGIN SYSTEM AND
THE ROLE OF ZENGIN-NETFebruary 2018
Japanese Banks’ Payment Clearing Network(Zengin-Net)
https://www.zengin-net.jp/en/
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Agenda• Fund transfer in Japan• Payment systems in Japan• The Zengin System - Overview• History• Member Banks• Zengin-Net as a Central Counterparty (CCP)• Transactions• System Configuration• Operating Hours• Zengin EDI System (ZEDI)2

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Fund transfer in Japan• In Japan, a credit transfer is commonly used for remittance and/or payments for transactions between

physically separated parties. Credit transfers enable fast and safe settlement.
• General payments for various transactions• Salary payments• Pension payments• Dividend payments• Tax refund payments, etc.
• Channels• Bank counter• ATM• Internet banking（PC / mobile devices）• Phone banking• The Zengin System is a fundamental financial market infrastructure, takes its role as a payment

system that enables close-to-real-time domestic fund transfer.
• Japanese Banks’ Payment Clearing Network (Zengin-Net) manages the Zengin System, and also has
set a mechanism for domestic fund transfers and related rules applied to banks (“Domestic Funds
Transfer System”).
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Payment systems in Japan
Zengin System

BOJ-NET

FXYCS

Bills and Checks
Clearing

Domestic Retailpayments

Domestic
Wholesalepayments

Cross-border
Retail &Wholesale
payments

Commercial Bills
and Checks

Zengin-Net

Bank of Japan

Japanese
BankersAssociation

Local Clearing
HousesSettlement

RTGS /
Designated-time
Net settlement

RTGSRTGS

Designated-time
Net settlement

Daily Volume / Value(average in 2016)

6,432 thousandtransactions /11.9 trillion yen

67 thousandtransactions /137.3 trillion yen

28 thousandtransactions /16.1 trillion yen

242 thousandtransactions /1.7 trillion yen

Payment System NameMain Coverage

Governing Body

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The Zengin System - Overview• Official name is “The Zengin Data Telecommunication System”• Developed and provided by NTT DATA Corporation and operated by Zengin-Net.
• A central online system that processes inter-bank domestic fund transfers in areal-time manner.
ATM,Internet
Banking, etc.

• Connected to domestic banks through the network• Credit transfer requests (transfer messages) from customers

received at bank all around the nation will be transmitted in a realtime manner through the online Zengin System.
• Transaction conforming Straight-Through-Processing, enabling realtime fund balance settlement from payers’ to payees’ accounts.
• Debts/credits balance of each bank calculated simultaneously• Small-value payments: Clearance of funds between banks
conducted by Bank of Japan (BOJ) after business hours in adesignated-time net settlement manner.
• Large-value payments (JPY 100 million and above) : Sorted out andsettled on an RTGS basis by BOJ-NET.
• The Zengin System covers only inter-bank credit transfer. Credit
transfers between accounts in a same bank are completed by eachbank.

ZENGIN SYSTEM

5

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History• Operation started in April 1973. (The Domestic Funds Transfer System was put into effect at the sametime.)• Following increasing transaction volume and security improvement, the Zengin System sequentiallyapplies performance improvement and function addition. Current working system is the 6th generation.
YearEventApr.1973• The Zengin System launched. (88 banks / about 7,400 branches)

Feb.1979• The 2nd Generation Zengin System started. (708 banks / about 18,000 branches)

Apr.1982• Foreign banks in Japan joined for the first time.

Aug.1984• Almost all banks in Japan joined. (5,479 banks / about 40,000 branches)

Nov.1987• The 3rd Generation Zengin System started. (5,304 banks / about 42,000 branches)• Dual Site (Tokyo and Osaka) Tokyo⇔Osaka : more than 500km distanceOct.1988• MT data file transmissions (bulk transfer) started.

Mar.1993• Same-day settlement started.

Nov.1995• The 4th Generation Zengin System started. (3,552 banks / about 44,800 branches)

Nov.2003• The 5th Generation Zengin System started. (1,679 banks / about 37,250 branches)

Nov.2011• The 6th Generation Zengin System started. (1,371 banks / about 32,515 branches)• ISO20022/XML introduction : Adoption of latest global standards for interoperability• Real-time gross settlements for fund transfers of 100 million yen and above started.

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Member Banks ①• Almost all depositary institutions in Japan join in the Zengin System.

• As of the end of December 2017, a total of 1,287 financial institutions (member banks), such asbanks, shinkin banks, credit cooperatives, labor banks, and agricultural cooperatives, constitutethe Zengin System.
• Credit transfer is available anywhere in Japan through the Zengin System.
Number ofBanks

Branches

City banks

5

2,200

Regional banks

64

7,527

Trust banks

9530

Member banks of the Second Association of Regional Banks

41

3,086

Foreign banks

821

Shinkin Central Bank and Shinkin banks

265

7,369

Shinkumi Federation Bank and Credit cooperatives

148

1,664

Rokinren Bank and Labor banks

14621

Norinchukin Bank, Credit federations of agricultural cooperatives, Credit federations of fisherycooperatives and Agricultural cooperatives

719

7,977

Others

14421

Type of Banks

Total number of member banks 1,287

Branches 31,416

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Member Banks ②• The Zengin System has a two-tiered participation structure.
• Small-size financial institutions (shinkin banks, credit cooperatives, labor banks,agricultural cooperatives, etc.) connect to the Zengin System via direct participants
appointed to settle their net position on their behalf.
Connection Diagram of the Zengin System andSystems of Member BanksZengin System

MemberBank

MemberBank

MemberBank

Norinchukin Center

Shinkin Central
Bank Center

Shinkumi
Federation
Bank Center

RokinrenBank Center【Individual connection style】
Member banks are individuallyconnected to the Zengin System.

Shingyoren

Shingyoren

ShinrenShinren

JAJA

Shinkin

Shinkin【Cooperative connection style】
Member banks connect to the Zengin System through the joint system.

Shinkumi

Shinkumi

RokinRokin8Copyright © Japanese Banks' Payment Clearing Network All Rights Reserved.

Zengin-Net as a Central Counterparty (CCP)
Settlement Risk ManagementBank• The Sender Net Debit Cap• Deposit of Collateral

103050BankCThe balance of each credit/debit
relationships is replaced by arelationship between individual banks
and the Zengin-Net as a CCP.

BAScheme
The Zengin Center monitors and manages
the member banks’ net debit amount toensure that it does not exceed the limit
declared by each bank.

Bank4060
20BankD

Each bank is required to submit collateral(JGB, cash, etc.) equivalent to sender netdebit cap.

BankBank• Liquidity Providing Banks
In the event of default, “liquidity providingbanks” contracted with the Zengin-Net
provides funds to cover the defaulted bankto provide final settlement by the end ofthe day. Subsequently, the Zengin-Net
repays the amount by disposing collateralprovided by the default bank.

A80

50

B60

BankZenginNet
CCPBank
C70

D9

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Transactions• Statistics in 2017
• Average daily volume: 6.7 million transactions• Average daily value: JPY 12.1 trillion• Annual total: 1.65 billion transactions/ JPY 3 quadrillion• Including “Large-value” transactions of 2.5 million transactions / JPY 2 quadrillion
3,500

Amout(Trillion JPY)

Transactions
16 (10 Billion)

A Change of Telegraphic Domestic Fund Transfer Messages
143,000
AmountTransactions

122,500
102,000

8
1,500
6
1,000
4500

020(Through the year)

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System Configuration• The Zengin System consists of the Zengin Center (Host computer), relay

computers installed in hosting centers of each member bank, and data
telecommunication lines connecting these systems.
• Duplicated facility (DUAL-LIVE) for operational resiliency.

• Two main Zengin centers operated separately in Tokyo and Osaka as mutualbackup facilities.
• The Zengin System has never disrupted its service since it began operation in1973.

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Operating Hours ①• Single Transfers: from 8:30AM to 3:30PM of weekdays.
• From 7:30AM to 4:30PM on month-end business day, due to large volume of transactions.
• Real-time credit transfer to recipients’ accounts.

• Bulk Transfers: from 8:30AM to 4:40PM of weekdays.

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Operating Hours ② - Realizing 24/365• Operating hours of the Zengin System is planned to be extended to24H-365Days.
• Targeting to begin operation in October 2018, testing phase is in process.

Time period

Weekdays

Saturdays, Sundays, and holidays
Extended operating hours“MORETIME”

0:00 to
8:30

Current operating hours“CORETIME”
8:30 to
15:30

15:30 to
24:00

•••

•

All member banks are required to beconnected.
•Real-time payments among ALLmember banks.
••

A new platform will be built separate
from the main system.
Connection time will be determineddiscretionally by each member bankbased on customer needs.
Real-timepayments
betweenCONNECTED member banks.
Participation timing is also at thediscretion of each member bank as it
becomes ready.
Envisioned mainly for credit transfers
using Internet banking.
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Zengin EDI System (ZEDI) ①• Zengin-Net has been developing the New Platform “Zengin EDI

System (ZEDI)” compatible with XML messages apart from the ZenginSystem.
• Targeting to begin operation in December 2018.
• 2 ways to access to the Zengin EDI System for companies (directly / via banks).

Direct access (FB*)
SenderFIAdd EDI
information

Messageconversion①Payer(FB)company

Messageconversion

Transfer
instruction
(XML)

③②

• Store EDI information +generate ‘key information’• XML data for bank transfer
information is converted to
Fixed-length*FB ・・・ Firm Banking

Receiver
FIZengin
SystemMessage
conversion④

Fixed-length message
and‘key information’Zengin EDI System（ZEDI）

Receive
EDI
information⑤Transferredpayment(XML)• EDI information obtainedusing ‘key information’• Fixed-length data for banktransfer information isconverted to XML⑥(FB)Receivercompany

Messageconversion

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Zengin EDI System (ZEDI) ②Access via banks (IB*)

Addition of
Add EDI
EDI
information
information

Sending
SenderfinancialFIinstitution①´(IB)

Messageconversion

Transfer
instruction
(XML)

Payer
company③②②’
Messageconversion*IB ・・・ Internet Banking• Storage of additional EDI• Store EDI information +information + ‘keygenerate ‘key information’information’ generation• XML data for bank transfer• XML data for bank transfer
information is converted toinformation is converted to
Fixed-length
Fixed-length

Receiving
ReceiverfinancialFI
institution ⑥´(IB)ZenginSystemReceiveEDI
EDI
information
information
receipt

Messageconversion④Transferredpayment(XML)

Fixed-length message
and‘key information’⑤Zengin EDI System（ZEDI）• Additional EDI information• EDI information obtained
set based on ‘keyusing ‘key information’information’• Fixed-length data for bank
• Fixed-length data for banktransfer information istransfer information isconverted to XML
converted to XML

Receivercompany⑤’
Messageconversion

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For further information, please visit us athttps://www.zengin-net.jp/en/16