EN ECB -PUBLIC  
 
 OPINION OF THE EUROPEAN CENTRAL BANK  
of 19 March 2020  
on the oversight of payment systems  and payment system operator s 
(CON/20 20/9) 
 
Introduction and legal basis  
On 10 January 2020, the European Central Bank (ECB) received a request from the Governor of the 
Central Bank of Cyprus (CBC) for an opinion on a draft directive of the CBC on the o peration of p ayment 
systems  under its oversight , on the role and governance of payment system operator s and on the 
obligations  of payment system participants  (hereinafter the ‘draft directive’).  
The ECB’s competence to deliver an opinion is based on Articles  127(4) and 282(5) of the Treaty on the 
Functioning of the E uropean Union and the third and fifth indents of Article 2(1) of Council Decision 
98/415/EC1, as the draft directive contains provisions concerning the CBC  and payment and settlement 
systems. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European 
Central Bank, the Governing Council has adopted this opinion.  
 
1. Purpose of the draft directive  
1.1 The main purpose of the draft directive is to enact a set of rules governing the functioning and 
operating methods of payment  and clearing and settlement systems and of the operators of those 
systems that are subject to the provisions of the draft directive pursuant to a decision of the CBC2. 
According to the explanatory note , the draft directive will set out details regarding the CB C’s 
existing role as overseer of retail payment systems. As stated in the explanatory note, i n drafting 
the draft directive, the CBC had regard to the provisions of the Eurosystem’s revised oversight 
framework for payment systems3. 
1.2 The draft directive governs participation in, and suspension or exclusion from , a payment system . 
More specifically, the draft directive makes  participation in a payment system  conditional  upon the 
satisfaction of eligibility and continuing participation c riteria approved by the CBC for every 
payment system, and sets the procedure governing the admission of participants to a payment 
system, including the procedure to challenge the decision i f the candidate participant is rejected4.  
                                                 
1  Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative provisions ( OJ L 189, 3.7.1998, p. 42).  
2  See paragraph 3(1) of the draft directive.  
3   See Eurosystem oversight policy framework, Revised version (July 2016) available on the ECB’s website at 
https://www.ecb.europa.eu/paym/pol/html/index.en.html . 
4  See paragraphs 21 and 22 of the draft directive.  
ECB -PUBLIC  
2 1.3 The draft directive governs the departure and discipline  of payment system participant s, including  
the conditions for voluntary departure, escalation and disciplinary procedures  in case of 
infringement of the draft directive or system documents, the operator’s powers after force majeure  
events , the exclusion of a participant by the operator from the system in relation to exclusion 
events approved by the CBC  or in case of infringement of the continuing participation c riteria  or if 
the participant has materially or repeatedly infringed any provision of the draft directive or the 
system documents5. 
1.4 The draft directive requires  participants to deposit sums of money with a collateral administr ator as 
trustee for the participants  so that they can be used in the event that one or more participants are 
unable to honour their obligations within the payment system6. 
1.5 The draft directive also addresses settlement finality , providing that the system operator ensures  
that the system r ules and other documents  are in line with Directive 98/26/ΕC7 and the Settlement 
Finality in Payment and Securities Settlement Systems Laws 2003. The draft directive also requires 
the operator to ensure that the system r ules define: (a) the time of entry of a transfer order in the 
payment s ystem; and (b) the time after which a transfer order cannot be withdrawn8. 
1.6 The draft directive sets out the powers and role of the CBC  over payment systems and their 
operators . According to the draft directive, the CBC may adopt a decision placing a payment 
system under its oversight and designating it as a payment system to which the provisions of the 
draft directive will apply . The CBC may permit gradual compliance with the draft directive based on 
a compliance plan to be implemented within a period of no more than two years9.  
1.7 The CBC may adopt decisions to  recogni se operators of payment systems meeting specified 
requirements , and may also impose further terms and conditions for the purpose of recognising an 
operator . The CBC may appoint one executive and one non- executive member of the operator’s 
board of directors and may object to the appointment or request the removal of any bo ard member  
who does not meet the requirements set out in the draft directive.  The CBC approves the 
operator’s memorandum and articles of association. The CBC may appoint one person to each of 
the operator’s technical, business, legal , risk management, internal audit, disciplinary, objections, 
business continuity and dispute resolution committees. The operator’s risk management committee 
is required to submit annual reports to the CBC , and the internal audit committee is required to 
submit quarterly report s to the CBC  regarding compliance with the provisions of the draft directive.  
The CBC may make recommendations, provide guidance and require the operator to take any 
action to s afeguard the attainment of the operator’s governance objec tives. The operator’s 
organisational structure and reporting lines must be approved by the CBC. The CBC also approves 
the operator’s transparency, conflict of interest, internal audit and compliance monitoring, 
redaction, risk management, physical security , data security, business continuity and recovery and 
                                                 
5  See paragraph 23 to 28 of the draft directive.  
6  See paragraph 34 of the draft directive.  
7  Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment 
and securities settlement systems (OJ L 166 of 11.06.1998, p. 45).  
8  See paragraph 35 of the draft directive.  
9  See paragraph 4 of the draft directive.  
ECB -PUBLIC  
3 incident management policies10. 
1.8 Under the draft directive the CBC has a prominent role in relation to the operator’s delegation of 
functions  to third parties . The third party service provider must  cooperate with the CBC in 
connection with the services provided by it. The operator is obliged to make available to the CBC, 
upon the CBC’s request, all relevant data  that may be required so as to enable the CBC  to verify 
whether  the service operator perf orms its functions in accordance with the draft directive.  The CBC 
must be notified in advance of any delegation of function. The CBC’s prior consent is required for 
the delegation of critical or important functions to a third party11. 
1.9 Under the draft directive the operator must cooperate closel y with the CBC in per forming its duties 
and notify the CBC of any information pertaining to a participant of which it has reason to believe  
might adversely affect the operation of the payment system.  The CBC must  develop and apply an 
audit programme to monitor the operation of the payment system, the performance of the 
operator’s duties and system participant’s compliance with their obligations. The CBC has the 
power to replace the operator unilaterally in the eve nt of serious or repeated inability or failure ; 
imminent serious inability on the part of the operator to perform its functions  or comply with the 
draft directive;  if necessary to safeguard the stability of the payment system or the wider financial 
system ; or to ensure the continuity and proper operation of the payment system12. 
1.10 The draft directive provides that the method of calculation of operator fees is specified in 
procedural rules adopted by the operator and approved by the CBC. Each participant must also 
pay the CBC an annual regulatory fee set by the CBC on a cost basis . The CBC  may also set 
additional fees for specific payment systems. All fees are required to be published on the websites 
of the operator and the CBC13. 
1.11 The draft  directive provides that, as a participant in a payment itself, the CBC must  ensure that it 
complies  with all of a participant’s obligations , and must pay fees and extraordinary charges on the 
same terms as other participants14. 
1.12 Finally, the draft directive provides that  the CBC may require a payment system’s r ules to be 
amended for the purpose of ensuring the stability, security  and reliability of the system15. 
 
2. General observations  
2.1 The ECB welcomes the draft directive , which will provide a more robust legal basis for  the CBC’s  
existing tasks relating to the oversight of payment systems. The draft directive  should thereby help 
to promote the sound governance, security and stability  of retail payment system s and their  
operators .  
2.2 Pursuant to the fourth indent of Article 127(2) of the Treaty , as mirrored in the  fourth indent of 
                                                 
10  See paragraphs 5 to 12 of the draft directive.  
11  See paragraph 14 of the draft directive.  
12  See paragraphs 15, 16 and 20 of the draft directive.  
13  See paragraphs 37 and 39 to 41 of the draft directive.  
14  See paragraph 42 of the draft directive.  
15  See paragraph 43 of the draft directive.  
ECB -PUBLIC  
4 Article 3.1 of the  Statute of the European System of Central Banks and of the European Central 
Bank  (hereinafter the ‘Statute of the ESCB’) , the Eurosystem has the task of promoting the smooth 
operation of payment systems . Article 22 of the Statute of the ESCB furthers the performance of 
this task.  Based on the foregoing the ECB and the national central banks should use the powers 
available to them to promote the smooth operation of clearing and  payment systems . Oversight 
responsibilities  are inter alia key to this general task16.  
2.3 The Eurosystem oversight policy framework states  that for the purpose of overseeing indi vidual  
financial market infrastructures , the Eurosystem  assigns primary oversight responsibility  to the 
central bank that is best placed to fulfil this function,  either by virtue of its proximity to the overseen 
entity (e.g. where the system is legally incorporated in its jurisdiction) or by virtue of national laws 
that attribute specific oversight responsibilities to the central bank concerned, subject to any 
Treaty -based requirements . This is typically the case for systems with a clear national anchor, i.e. 
being legally incorporated in a jurisdiction or serving that particular national market17, such as the 
retail payment systems intended to be covered by the draft directive.  
2.4 The explanatory note accompanying the draft directive does not make  reference to the Eurosystem 
revised oversight framework for retail payment systems, which establishes variable oversight 
requirements depending on whether a retail system is classified as a ‘prominently important retail 
payment system ’ (PIRPS) or an  ‘other retail payment system ’ (ORPS)18. In this respect , the ECB 
understands that the scope of the draft directive is to cover solely PIRPS and ORPS within the 
meaning of the Eurosystem Revised Oversight Framework for Retail Payment Systems 
(paragraph 3.1 below).  
2.5 The oversight of payment systems has been recognis ed as one of the CBCs’ main tasks  under 
existing provisions of Cypriot law19. The draft directive does not confer new tasks on the CBC , but 
rather specifies the CBC’s existing tasks by establishing a set of detailed rules governing the 
CBC’s oversight  of payment systems  and payment system operators . Therefore, the issue of 
assessing whether the conferral of new tasks on a national central bank complies with the 
prohibition of monetary financing does not arise in the case at hand.  
 
3. Specific observations  
3.1 The ECB suggests  amending the definition of ‘payment system’ in paragraph 2(1) of the draft 
directive, so as to clarify that the scope of application of the draft directive, as set out in paragraph 
4 thereof , only covers  PIRPS and ORPS within the meaning of the Eurosystem revised oversight 
framework for retail payment  systems . This clarification would remove any residual  uncertainty  
regarding the scope of application of the draft directive, and its interplay with Regulation (EU) 
                                                 
16  See Section 3.1 of the Eurosystem oversight policy framework, Revised version (July 2016), available on the ECB ’s 
website at www.ecb.europa.eu . 
17  See Section 5.2 of the Eurosystem oversight policy framework, Revised version (July 2016) . 
18  See the revised oversight framework for retail payment systems, available on the ECB’s website at 
www.ecb.europa.eu . 
19  See Article 6(2)(g) of the Central Bank of Cyprus Law of 2002.  
ECB -PUBLIC  
5 No 795/2014 of the European Central Bank (ECB/2014/28)20, which applies  to payment system s 
defined as ‘ systemically import ant payment systems ’ (SIPS)  on the basis of certain quantitative and 
qualitative criteria21. Regulation (EU) No 795/2014 covers all SIPS, be they large- value or retail 
payment systems . Accordingly, s uch clarification would ensure that the draft directive is not  in 
conflict with the Regulation. Furthermore, such clarification would be more in line with the CBC’s 
intention as set out in the ex planatory note which states that the draft directive will  only apply with 
regard to retail payment systems . 
3.2 Under  the Eurosystem revised oversight framework for retail payment systems , the participation 
requirements of PIRPS and the relevant rules and key procedures of both PIRPS and ORPS 
should be publicly disclosed. PIRPS and ORPS should disclose clear descriptions of the system’s 
design and operations, as well as the system’s and par ticipants ’ rights and obligations, so that 
participants can assess the risks they would incur by participating in the system22. The consulting 
authority may wish to consider whether these elements sh ould be reflected in the draft directive.  
3.3 The Central Bank  of Cyprus Law of 2002 is silent on the issue of the CBC’s liability with regard to 
the oversight of payment systems. The Central Bank of Cyprus Law of 2002 does not contain any 
provision excluding or limiting the liability of the CBC as the authority resp onsible for the oversight 
of payment systems. In line with previous ECB opinions , the Cypriot authorities should consider 
aligning the CBC’s liability in relation to its oversight of payment systems  with its liability concerning 
its supervision of credit  institutions, given that potential liability issues could represent substantial 
financial risks for the CBC23. 
3.4 For the sake of legal certainty, the ECB  suggest s that the scope of the operator’s legal 
responsibility under paragraph 5(2) of the draft directive could be further clarified. As currently 
phrased, it is unclear whether this provision creates  a new statutory duty for the operator, or 
whether liability arises only if the operator is in breach of the provisions of the arrangement 
establishing the payment system.  
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 19 March 2020.  
 
[signed] 
 
The President of the ECB  
Christine LAGARDE  
                                                 
20  Regulation (EU) No 795/2014 of the European Central B ank of 3 July 2014 on oversight requirements for 
systemically important payment systems (ECB/2014/28) (OJ L 217, 23.7.2014, p. 16).  
21  See Article 1(3) of Regulation (EU) No 795/2014 (ECB/2014/28).  
22  See Principles 18(2) and 23(1) and(2) of the Eurosystem  revised oversight framework for retail payment systems.  
23  See, for example, paragraph 3.1 of Opinion CON/2017/44, paragraphs 2.3.6 and 2.3.8 of Opinion CON/2017/3, 
paragraph 3.1.7 of Opinion CON/2015/45 and paragraph 3.1.7 of Opinion CON/2015/37.