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Exploring Frontiers in Payments Systems Development Washington DC, May 29 - June 1, 2007

Johan PISSENSHead of Oversight Unit

Oversight of Non-traditional Payment Providers

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OversightObjectives

safety and efficiency of payment systemsComponents

monitoring / analysingassessing inducing change

RationaleFinancial stabilitysome central banks: confidence in the currency /

payment systems

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Components of oversight: detail (1/2)

Monitoring / analysing importance of analytical framework importance of risk based analysis

Assessing importance of internationally accepted

standards (CP, CPSS-IOSCO...) Inducing change

typically use of moral suasion, sometimes complemented with additional regulatory tools

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Components of oversight: detail (2/2)

Traditionally: focus on payment systems

Evolving focus:Securities Clearing and Settlement Systems (SCS)service providerscard payment schemes

Rationale: relevance for smooth functioning of payment

systems (= safety and efficiency)

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Oversight of SCS (1/2)

Key role of securities markets, and securities clearing and settlement (SCS), in the integration of financial markets;

Size of SCS - SCS is systemically important fot maintaining/promoting financial stability;

SCS have links with national and international securities markets, FX markets, money markets,...

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Oversight of SCS (2/2)

In many case cooperation between central bank

and securities regulator

CPSS / IOSCO Standards for SSS and CCPs

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Oversight of service providers Well known example of SWIFT SWIFT is not a payment system Oversight on SWIFT motivated by its importance for the good

functioning of correspondent banking payments and payment and settlement systems

The objective of the oversight of SWIFT is to obtain comfort that SWIFT has put in place appropriate governance arrangements, structures, processes, risk management procedures and controls that enable it to effectively manage the risks it may pose to financial stabiltiy and to the soundness of financial infrastructures

Standards for the oversight of SWIFT have been developed - High Level Expectations for the Oversight of SWIFT

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High level Expectations for the Oversight of SWIFTStandards for the oversight of SWIFT developed by the central banks Risk Identification and Management Information Security Reliability and Resilience Technology Planning Communication with Users

detailed presentation to be published in the NBB's forthcoming FSR (June 2007)

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Oversight of card payment schemesNot all central banks oversee retail

paymentsExplicit Eurosystem policyStandards for oversight of card payment

schemes have been issued for market consultation by Eurosystem

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Selected issues conflict of interest with other roles of central bank:

commercial relationship (customer, competition) of central bank with SSS / service provider / card payment scheme separation of activities / confidentiality arrangements

disclosure: distinction between, on the one hand, disclosure on overseer's responsibilities and policies, organisation, processes, methodologies for oversight, and on the other hand disclosure of results of oversight assessments

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Disclosure of results of assessmentsconfidentiality level of detail liabilitywhat with bad results? level playing fieldsself assessments

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Future trends : towards a risk based oversight ?

Evolve from standard based approach towards risk based approach

example (next slide):

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13 RISK TO PLANNING MATRIXMulti-Year Rolling Plan

(Probability * Impact) Risk Scoringand

Management Quality Scoring

Business activities

Business components

Types of Risk (based on standards CCP, CPSS-IOSCO,

...)Legal, OperationalCredit, Liquidity,...

(Inherent) Risk Matrix

Business activities

Business components

Management Quality Matrix

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International cooperative oversight Multicurrency of cross-border systems including

non traditional payment providers: several (or even many) central banks have an interest in smooth functioning of systems

International cooperation in order to: coordinate central bank actions avoid gaps increase effectiveness avoid unnecessary duplication

Lamfalussy principles as updated in the CPSS oversight report

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