29 November 2012

ECB: Oversight expectations for links between retail payment systems

These oversight expectations lay down Eurosystem oversight requirements with regard to links established by retail payment systems operating in the euro area. They focus on ensuring the safety and efficiency of the operation of links.

In March 2012 the ECB launched a public consultation on the draft oversight expectations for links between retail payment systems. The aim of the public consultation was to invite all interested parties to express their views on the evolution of retail clearing infrastructures in Europe and the role of links between retail payment systems, as well as to comment on the draft requirements by 18 May, 2012.

Oversight of payment systems, which aims to ensure the smooth functioning of payment systems and to contribute to financial stability, is an essential function of central banks. As part of its oversight function, the Eurosystem established the “Oversight standards for euro retail payment systems” in 2003. These standards are based on the “Core principles for systemically important payment systems” set by the Committee on Payment and Settlement Systems in 2001.

The Eurosystem has since recognised that these standards have not been designed to cover adequately the additional risks associated with links between retail payment systems (RPSs). Meanwhile, it has also noted that such links have consistently grown over the last few years, largely owing to the payment and banking industry initiative aimed at the creation of a single euro payments area (the “SEPA” project), which was launched in 2002.

The Eurosystem considers that links should be properly overseen. It has therefore established a harmonised single set of expectations for RPSs to comply with, specifically for risks that may arise when one RPS establishes a link with another. The national central banks (NCBs) responsible will, as part of their respective oversight functions, assess the compliance of an RPS for any links it may have. The goal is to ensure that the risks stemming from the establishment of links between RPSs are properly managed. The expectations cover risks related to legal, financial and operational arrangements, as well as issues related to governance, access and efficiency. With a view towards ensuring consistency in the implementation of expectations, the Eurosystem will draw up a single methodology to be applied by the NCBs.

This note elaborates on these aspects in three sections. The first section introduces the key notions related to links and different types of links. The second section explains the general approach taken by the Eurosystem as regards the application of the expectations. Finally, the third section reflects on the different risks associated with the establishment and operation of links, as well as looking at the oversight expectations that have been designed to mitigate them.

Press release

Full publication

Public consultation – summary

© ECB - European Central Bank