Transcript GENERAL FRAMEWORK DNB-CEF WORKSHOP ON PAYMENT …

Oversight on Systemically Important
Payment Systems
De Nederlandsche Bank
Paul Osse
Conference Financial Sector of Macedonia
on Payments and Securities Settlement
Systems
Ohrid
24 June 2008
De Nederlandsche Bank
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Agenda
Oversight general
Oversight and Supervision
Oversight in NL (general)
Oversight standards
Trends / developments
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Oversight general
Oversight is a task of a central bank aiming:
to contribute to the reduction of systemic risks
by performing oversight on clearing and
settlement systems

to promote the adequate functioning of the
payment system by performing oversight on
the payment chain/infrastructure

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Systemic risk (general)
Systemic risk
 Systemic risk is the risk that propagation of a
serious failure in a sector of the society will
imperil other sectors (a ‘domino’ effect). The
infection is propagated via the interfaces
between the sectors
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Systemic risk
In case propagation leads to a
effect
a systemic risk has
occurred
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Oversight and Supervision

The objective of Supervision is to assess the
(financial) health of an individual financial institution

Oversight has its focus on the chain/infrastructure,
with specific attention for the security and continuity of
the payment infrastructure (payment systems,
payment products etc.)

Oversight assesses against (national or international
accepted) oversight standards

Oversight can be legally or not legally (moral suasion)
based
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Oversight in NL (general)
Objects of oversight


Payment clearing and settlement systems

Whole sale (DNB: TOP / TARGET, CLS)

Retail (Equens: CSS) (UPSS: UPSS system)
Securities settlement systems


Clearing and settlement systems of Euroclear and LCH.Clearnet
(systems used by Euronext)
Retail Payment chain

Payment products

Other roles (excl. clearing and settlement)
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Oversight in NL (general)
Organization at DNB


Oversight and operations organisational
located within the same division
Multidisciplinary staff (11, including head of
department): lawyers, risk management
experts, (IT) auditors, economists
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Oversight in NL (general)
Approach / tools (1)

Determination of objects

Prioritisation / risk analyses

Assessments

Monitoring / continuous oversight

Oversight standards / frameworks
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Oversight in NL (general)
Approach / tools (2)
 Authority to set up minimum standards for the
objects of oversight (oversight framework)
 Assessment of a system, product or a role
 prior approval for system or product to
ensure adherence to the Oversight
Framework
 periodical reports on key elements for
regular examination
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Oversight in NL (general)
Approach / tools (3)
Payments become more and more international.
Securities are international
consequences:
 International co-operation with other NCB's, ECB,
BIS, CPSS/IOSCO, ESCB CESR
 Oversight on Target arranged within ESCB
 For other systems a common oversight approach is
still missing so case by case MoU’s are
drafted/amended

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Oversight standards
 By
using standards the level of playing field
is guaranteed
Wholesale

Core principles for systemically important payments
systems (SIPS) (BIS, January 2001)

Terms of Reference (ToR) for the assessment of
Large Value Payment Systems (LVPS) (ECB)

standards and best practices (ROC of DNB, agreements in
context of NVB and ESCB)

technical standards (ISO, ECBS, NVB,...)
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Oversight on securities
Trade (Authority Financial Markets (AFM))
 Euronext
 Clearing (DNB/AFM)
 LCH.Clearnet
 Settlement (DNB/AFM)
 Euroclear
 DNB / TOP (DVP-settlement)

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Oversight standards
Securities
 SSSs
CPSS/IOSCO Recommendations
 CCPs
CPSS/IOSCO Recommendations
 Oversight Framework CSE (Dutch)
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Trends / developments
Consolidation / concentration

European consolidation underway
TARGET2
 Single European Payment Area (SEPA)
 EuroNext (mergers)
 Euroclear (CSD acquisitions)
 EC legal initiatives:
 Payment Service Directive
 Code of Conduct

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Trends / developments
Specialisation


multiple operators/owners: card schemes, transaction
networks, imaging and clearing
new providers of payment products/ payments services
telecom providers
 network providers
 public transport
 non bank ATM’s
 acceptant payment service providers

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Trends / developments
Implications

Few critical systems (operators) will remain

Retail area with local, fragmented functions

Increasing (need for) cooperation between providers
(scaling-up, new markets)

Cross-border oversight will become standard
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Trends / developments
Consequences

Standardisation increasingly important

Increasing (need for) co-operation between overseers
(criteria, standards, approach)

Legal and oversight frameworks need to be harmonised
(MoU’s)

Increasing (need for) co-operation with other regulators
(e.g. supervisors, securities regulators, etc.)
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Trends / developments
Overseer needs to find balance

Security – efficiency

National – international

Supplier – consumer

Regulation – market
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QUESTIONS?
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Time’s up………
Thank you for your
attention
P.W. Osse RE RA CISA
De Nederlandsche Bank N.V.
+31 20 - 524 3292
[email protected]
De Nederlandsche Bank
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