19 February 2016

ECB: Revised oversight framework for retail payment systems

The oversight of payment systems aims to ensure the smooth functioning of payment systems, which is an important precondition for the central bank's ability to contribute to financial stability, to implement monetary policy and to maintain public confidence in the currency.

The oversight function of the Eurosystem is recognised in the Treaty on the Functioning of the European Union and the Statute of the European System of Central Banks (ESCB) and of the European Central Bank (ECB). Article 127(2) of the Treaty and Article 3.1 of the Statute state that “the basic tasks to be carried out through the ESCB shall be […] to promote the smooth operation of payment systems.”

The objectives and scope of the oversight function are defined in the Eurosystem oversight policy framework. With regard to the objectives, the Eurosystem’s task of promoting the smooth operation of payment systems consists in ensuring their safety and efficiency. With regard to the scope, the framework specifies the entities and instruments that form the payment and settlement landscape of the euro area; retail payment systems (RPSs) are an integral part of this landscape and thus fall within the scope of oversight.

So far, Eurosystem oversight of retail payment systems has been based on the Oversight standards for euro retail payment systems, which, in turn, were based on the Core Principles for Systemically Important Payment Systems. Given the increased integration of retail payment systems in the Single Euro Payments Area (SEPA), and the replacement of the Core Principles with the new CPSS-IOSCO Principles for financial market infrastructures (PFMIs), the Eurosystem decided to define a new comprehensive oversight framework for retail payment systems, replacing the one from 2003. In this revision, the Regulation of the ECB on oversight requirements for systemically important payment systems (hereinafter “the SIPS Regulation”), by means of which the Eurosystem has adopted the PFMIs, has also been taken into account. The Regulation covers all systemically important payment systems (SIPS), be they large-value or retail payment systems.

The present framework identifies RPS categories and clarifies the oversight standards applicable to each RPS category. In order to ensure effective coordination, it also provides guidance on the organisation of oversight activities for systems of relevance to more than one central bank.

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