JBA Suspends Discussions on Implementation of Check Truncation

At the Board of Directors Meeting in March 2002, JBA decided on a basic policy for implementing "check truncation" in inter-bank bill and check clearing systems. This step was intended to renovate the clearing procedure by transmitting data such as the amount and account number of the drawers of checks, from collecting banks to paying banks via data telecommunications, instead of presenting the actual checks.

However, deliberations on details of the policy conducted since then by the Working Group have revealed difficulties in pursuing this project. As a result, the Board of Directors Meeting held on December 24, 2002 agreed to freeze further deliberations on this matter.

Bills and checks are not the only items handled for inter-bank clearing at clearing houses. Bonds and interest coupons are also handled. It is presently difficult to include these securities in the same manner as bills and checks. This means the clearing operations of banks would become two fold if truncation were implemented, and thus nagate its benefits. Also, wiring financial institutions who are entrusting other banks with clearing operations into new clearing networks will complicate the system and increase costs. Moreover, the number of bills and checks cleared at clearing houses has been decreasing owing to diversification of settlement means. This has created a need for even closer attentiveness. On the other hand, electronic processing of government revenues and the issuance of new banknotes are imminent. This has required banks to reassign priorities for investments out of their limited resources.

The decision to halt discussions on check truncation at this time was made for above reasons. This does not, however, affect JBA's intent to tackle the further streamlining of clearing operations and offer better services to customers.