ECB identifies ‘systematically important payments systems’

The systems, named on 21 August as Target2, Euro1, Step2-T and Core(Fr), will be subject to the regulation that came into force earlier in the month.

The ECB said the new regulation covers large-value and retail payment systems in the euro area operated by both central banks and private entities. The regulation is designed to promote the “smooth operation of safe and efficient payment systems in the euro area” and aims to ensure the “efficient management of legal, credit, liquidity, operational, general business, custody, investment and other risks as well as sound governance arrangements”.

In identifying Sips, the ECB said it looked at the value of payments settled, market share, cross-border relevance and provision of services to other infrastructures.

According to the ECB, if a system is deemed to meet at least two of these four criteria it makes the list. Those identified are Target2, operated by the Eurosystem (the monetary authority of the eurozone), Euro1 and Step2-T, both run by EBA Clearing, and Core(Fr), operated by Stet, which is a joint initiative of six major French banks. The list will be reviewed annually based on updated data, the ECB said.

The ECB said this is the first time it has made use of its regulatory powers in the field of payment systems oversight. “The SIPS regulation is stricter than previous oversight standards and provides for sanctions and corrective measures for system operators in case of non-adherence,” the ECB said.

According to the ECB, its decision “implements and is consistent with the ‘Principles for Financial Market Infrastructures’ (188-page / 1.09 MB PDF), introduced in April 2012 by the Committee on Payment and Settlement Systems (CPSS) of the Bank for International Settlements and the International Organization of Securities Commissions.

ECB executive board member and CPSS chairman Benoit Cœure said: “With this regulation, Europe is consolidating international practice for the oversight of Sips into EU law, as with past efforts for other financial market infrastructures, such as the European Market Infrastructure Regulation for the supervision of central counterparties and trade repositories, and the ongoing regulatory initiative for central securities depositories.”

Eurosystem central banks that have primary oversight responsibilities for one or more payment systems are expected to regularly assess compliance of these systems with the Sips regulation, the ECB said.

For consistency with international practice and “to take account of the increased integration of retail payment systems in the Single Euro Payments Area (SEPA)”, the ECB said the Eurosystem has also undertaken a “comprehensive review” of the oversight standards for euro retail payment systems, that are not Sips, initially adopted in June 2003. SEPA, in geographical terms, refers to all 28 EU member states, Iceland, Liechtenstein, Norway, Switzerland and Monaco.

The ECB said as a result of the review of oversight standards, it has also published the ‘Revised Oversight Framework for Retail Payment Systems’ (19-page / 160 KB PDF).