21 August 2013

EBF publishes TWG comments on the draft "Regulation of the ECB on oversight requirements for systemically important payment systems"

Applicability of the CPSS-IOSCO Principles to central banks

Whilst this point arises in a number of specific places in the draft regulation, EBF believes that it is also an underlying and important generic issue. Section 1.23 of the CPSS-IOSCO Principles states that in general the Principles are applicable to FMIs operated by central banks except in certain cases due to requirements in relevant law, regulation or policy with further information being provided in principles 2-4-5-15-18. EBF has interpreted this to mean that adherence to the CPSS-IOSCO Principles is the default position for central bank operated FMIs but there will be a limited number of exceptions. However, in a number of cases highlighted in our detailed comment below, it is not clear to us what reason is being used to justify some exclusion for Eurosystem SIPS. Consequently, in the interests of transparency, EBF requests that where exclusion is incorporated, the justification for this should be made publicly available. Also, EBF believes that such an approach accords with the CPSS-IOSCO Principles Responsibility D: Application of the principles for FMIs which states that central banks market regulators and other relevant authorities should clearly define and disclose their regulatory, supervisory and oversight policies with respect to FMIs.

To summarise, EBF believes that the clear message conveyed by the CPSS-IOSCO Principles is that there should be a level playing field between public (CB ) and privately operated SIPS. Consequently, EBF believe that exclusions for Eurosystem SIPS should only relate to central bank specific features and not features which apply equally to non-Eurosystem SIPS.

Application of the Regulation

EBF understands that although currently for IMF purposes TARGET 2 is being assessed against the underlying CPSS-IOSCO Principles, the intention is that in future it is to be assessed against the proposed Regulation. The following remarks are based on this premise.

EBF has given careful consideration to how to balance the need for a level playing field against the requirement for certain exemptions for Eurosystem SIPS, particularly where monetary policy operations are settled through TARGET 2. In addressing this, EBF believes it is important to take account of the fact that TARGET 2 is a multi-purpose system as described in Article 3(2) of the Harmonised Conditions. Having said this, EBF believes that irrespective of the reason for the payment, robust operational processes are required with the difference arising at the level of high level strategic decision making. Consequently, EBF would suggest that the cleanest way to address this issue is to redefine “the Board“ and “the Management“ in order to exempt Eurosystem SIPS from certain requirements relating to “the Board.“ It seems to EBF that doing this has two major advantages. Firstly, it avoids placing restrictions on the decision making power of the Governing Council. Secondly, it avoids the difficulty inherent in determining how the existing definition of “the Board “applies to Eurosystem SIPS. However, in making this recommendation, EBF has not researched whether any Eurosystem SIPS may be subject to additional requirements as a result of national law. If so, such national law will presumably need to be accommodated by the Regulation.

Finally, where EBF suggests drafting changes, this has been done without taking legal advice. Nevertheless, EBF hopes the Eurosystem will find such suggestions helpful in illustrating the points EBF is making.

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