for the namibian payment and clearing arrangements. commercial banks are driving the payment and clearing process in line with standards laid down by the bank of namibia. both projects are closely co - ordinated between the bank and commercial banks and for each a steering committee has been created. namibia has implemented a settlement system through perago who was the system and service provider and also project manager. this system is called niss - the acronym for namibia inter - bank settlement system that went live on the 10th june 2002. the system is based on real - time gross settlement principles and has enabled namibian banks to exchange payments electronically, in real - time, amongst each other and between themselves and the bank of namibia. in accordance with international practices, these funds transfers are final and irrevocable, and in this way the namibian system is brought in line with generally accepted principles for safe and efficient national payment system. all commercial banks in namibia are connected to niss via swift, the international de facto financial message carrier. they are entering the system through the niss entry user interface also provided by perago. on the 16th april 2004 the bank of namibia and two commercial banks have switched to trustlink a bureau service for swift. this link - up will improve efficiency in that all services related to swift will be provided by the bureau, while there is also a substantial cost savings to this arrangement. namibia ’ s rtgs system is not simply the installation of computer hardware and software - it involved the reengineering of the financial system in namibia. a number of existing policies, procedures and rules have been modified and fine - tuned to support the overall financial system of the country and to enhance the effectiveness of central bank policies. some legal statutes have been created such as the payment system management act and some amended such as the bills of exchange act in order to make the system legally enforceable and to properly align it to the namibian legal environment. as such, it required a willingness to change from existing policies, practices and processes that existed then. the advantages of niss to commercial banks are the improved visibility and management of risk and exposures, optimal usage of own liquidity and possible new services to customers. for the bank of namibia, the system led to enhanced mechanism supporting monetary policy execution, containment of systemic risk and a platform for financial market deepening. overall, the system has improved the international risk profile of namibia. payment instruments take many forms, such as cash, money orders, cheques, de

##ity management. accordingly, it provides liquidity to banking institutions when they do not have sufficient securities for additional credit at the intraday facility in the niss. for this reason, a banking institution may apply to obtain credit to either repurchase its securities and / or obtain sufficient credit for anticipated settlement needs. liquidity is provided under this facility through a seven - day repurchase agreement. this facility operates under standing conditions and it is obtained through prior application to the bank. it is, however, managed outside the niss. marginal lending facility this facility has been introduced to offer special assistance to banking institutions that could not obtain sufficient liquidity at the first two facilities. the use of this facility is highly discouraged and would only be used under special circumstances. thus, lending through this facility would be considered on a merit of each case presented to the bank. this facility serves as an important indicator for example : • it gives clear indication as to when a banking institution should be suspended from the niss. • it gives indication as to when banking supervision department should be notified. • it provides a smooth path to action under the lender of last resort policy. 5. conclusion mr. chairman, in my address today i have given you a generic overview of the importance of payment systems in monetary policy implementation. to understand the namibian situation, i have also given you a brief impression of our payment system reform process and the strategic and policy considerations that went into the design and operation of the systems. yet the reform process is not over yet. there are always areas where one can modify or fine - tune certain procedures, operations and policies to improve the effectiveness of the system and to reduce or contain risks. i trust that the audience has obtained a better understanding of the role of payment system in monetary policy implementation and the way namibia has addressed certain vital policy issues. in hindsight, i think the capital we have invested in our rtgs system has proven to be worthwhile. with the implementation of an electronic settlement system, a number related policy issues became evident and were reconsidered and reformed. the system, accompanied with our accommodating policies, has enabled namibia to come closer to meeting the bis core principles for systemically important payment systems. what remains to be achieved is to complete the namibianised clearing systems for the three payment streams, to establish a clearing house and payment system management body and to effectively oversee the payment systems to ensure that sufficient attention is given to risk reduction and management of