16 September 2008

ECB concerned about UK plans to transfer oversight of retail payment systems

It can be questioned whether giving oversight responsibilities to a non-central bank entity is compliant with European legislation, ECB states and calls it appropriate that the oversight of payment systems is undertaken by central banks.

As regards the proposal to transfer the responsibility for oversight of retail payment systems to the FSA, leaving the Bank of England with responsibility for oversight of large-value payment systems, there are several areas of concern for the ECB.

 

The national central banks have to date been the only regulatory authorities actively involved in the promotion and development of best practices in the payment systems industry in Europe, the ECB argues. “It can be questioned whether giving oversight responsibilities to a non-central bank entity is compliant with European legislation”, ECB states. “It seems appropriate that the oversight of payment systems is undertaken by central banks and includes both large-value and retail payment systems and instruments.”

 

Furthermore, ECB is of the opinion that only central banks should be entrusted with payment systems oversight responsibilities. “Moving the oversight of retail payment systems, including payment instruments, away from the central bank could have repercussions on the oversight framework applicable to retail payment systems”, the Central Bank warns. The Eurosystem is clearly concerned with the future shape of the oversight framework for retail payment systems in the United Kingdom in the context of SEPA and calls to ensure a level playing-field between infrastructures in the conduct of oversight activities.

 

Finally, the ECB states that possible change in the oversight competencies in the United Kingdom also raises issues regarding the communication and cooperation between the authority entrusted with the oversight of these systems and the national central bank and other central banks, if the systems process transactions that are denominated in a currency other than the local one.

 

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