EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 15 May 2014  
on oversight of payment and securities settlement systems 
(CON/2014/33) 
 
Introduction and legal basis 
On 7 April 2014, the European Central Bank (ECB ) received a request from Lietuvos bankas for an 
opinion on a draft resolution on the framework for the conduct of payment and securities settlement 
systems oversight (hereinafter  the ‘draft resolution’). 
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 European Union and the third and fifth indents of Article 2(1) of Council 
Decision 98/415/EC1, as the draft resolution relates to Lietuvos bankas and payment and settlement 
systems. In accordance with the firs t 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 resolution 
1.1 The draft resolution recasts the framework fo r the conduct of payment and securities settlement 
systems oversight by Lietuvos bankas, which w as approved by the Board of Lietuvos bankas in 
2003.  
1.2 The draft resolution aims to implement the Principles for financial market infrastructures
2 
(hereinafter the ‘CPSS-IOSCO principles’) and provide  the basis for effective oversight of payment 
and securities settlement systems conducted by Liet uvos bankas. The draft resolution sets out the 
tasks that Lietuvos bankas carries out in performing systems oversight, namely: (1) registration of systems; (2) assessment of systemically impor tant payment and securities settlement systems, 
performed on the basis of CPSS-IOSCO principles
3; and (3) monitoring of systems. The draft 
resolution also contains provisions as regards cr oss-border cooperation in the field of systems 
oversight.  
 
                                                 
1  Council Decision 98/415/EC of 29 June 1998 on the consulta tion of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
2  The Principles for financial market infrastructures issued jointly by the Committee on Payment and Settlement Systems 
(CPSS) of the Bank for International Settl ements (BIS) and the Tec hnical Committee of the Inte rnational Organization of 
Securities Commissions (IOSCO) ( http://www.bis.or g/publ/cpss101a.pdf ). 
3  The Principles for financial market infrastructur es: disclosure framework and assessment methodology. 
ECB-PUBLIC  
2 2. General observations  
2.1 The ECB understands that the draft resolution ai ms to mirror the core principles for systemically 
important payment systems included within the CPSS-IOSCO principles. Currently, the 
Eurosystem is in the process of drafting an ECB regulation on oversight requirements for systemically important payment systems
4 (hereinafter the ‘SIPS Regulation’). The SIPS Regulation 
aims to implement the CPSS-IOSCO principles in th e euro area in a legally binding way. It will 
define inter alia the criteria for qualifying a paym ent system as systemically important and will set 
requirements aimed at ensuring efficient management of legal, credit, liquidi ty, operational, general 
business, custody, investment and other risks. It  will also set requirements for sound governance 
arrangements, objective and open access and the efficiency and effectiveness of systemically important payment systems. 
2.2 Once adopted, the SIPS Regulation will be directly applicable in the euro area. Lithuania is a 
Member State with a derogation pursuant to Article  139 of the Treaty. Once Lithuania adopts the 
euro and Lietuvos bankas becomes a fully inte grated member of the Eurosystem, the SIPS 
Regulation will also apply to Lietuvos bankas an d amendments to the draft resolution will be 
required. 
 3.  Definition of systemic risk 
The draft resolution defines systemic risk as ‘the probability that a failure of one or more system 
participants to meet its obligations and/or a disruption in the system itself will cause the inability of other system participants to meet their obliga tions, affect other systems and/or the financial 
market’
5. This definition is constructed cumulatively and therefore is narrower than that included in 
the CPSS-IOSCO principles6, since, under the draft resolution, for a risk to be considered systemic, 
the failure of a system participant to meet its ob ligations should not only cause other participants to 
be unable to meet their obligations, but also ‘affect  other systems and/or the financial market’. In 
order to ensure consistency with the SIPS Regulation and the CPSS-IOSCO principles and a 
harmonised concept of systemic risk throughout the euro area, the draft resolution will need to be 
amended in this regard once the SIPS Regulati on becomes applicable to Lietuvos bankas. 
 4. Assessment of systems 4.1 The draft resolution provides that the assessment of systems should be the assessment of ‘systems 
operation for its compliance with the CPSS-IOSCO principles’
7. The ECB notes that payment and 
                                                 
4  Press release of the ECB of 7 June  2013, announcing public consultation on a draft SIPS Regulation, available on the 
ECB’s website at www.ecb.europa.eu. 
5  Paragraph 2.3 of the draft resolution. 
6  Systemic risk is defined in Annex H of the CPSS-IOSCO pr inciples as ‘the risk that the inability of one or more 
participants to perform as expected will cause other participants to be unable to meet their obligations when due’. 
7  Paragraph 7 of the draft resolution. 
ECB-PUBLIC  
3 settlement systems themselves, and not only sy stems operation, should be assessed against the 
CPSS-IOSCO principles, and recommends ame nding the draft resolution accordingly.  
4.2 The ECB understands that Lietuvos bankas is al so the competent authority to oversee central 
counterparties and systems operated by the central counterparties and recommends clarifying the draft resolution accordingly.  
4.3 The draft resolution provides for the systems asse ssment to be performed every three years or when 
substantial changes to a system are made
8. The ECB notes that the SIPS Regulation will provide 
for a higher frequency of assessment9. The draft resolution will need to be amended in this regard 
once the SIPS Regulation becomes applicable to Lietuvos bankas. 
 5. Collection and sharing of information  5.1 The draft resolution entitles Lietuvos bankas to determine the information ‘necessary for the 
conduct of systems monitoring’ a nd the frequency of such reporting
10. The ECB suggests that the 
draft resolution is amended to ensure that the data  collected may be used fo r tasks of the European 
System of Central Banks (ESCB) other than systems monitoring.  
5.2 In the same vein, as regards ensuring confidentiality of the in formation ‘necessary for the conduct 
of systems oversight’ and the sharing of such in formation with the ECB and/or foreign competent 
authorities11, the draft resolution should be amended, by analogy with the harmonised conditions 
provided for in Guideline ECB/2012/2712, to ensure that the information may also be shared with 
other central banks of the ESCB, to the extent that  this is necessary for the efficient functioning of 
payment and securities settlement systems, or wi th supervisory and ove rsight authorities of 
Member States and the Union, to the extent that  this is necessary for the performance of their 
public tasks. 
 
                                                 
8  Paragraph 10 of the draft resolution. 
9  Every one to two years.  
10  See paragraphs 14, 15 and 16.3 of the draft resolution. 
11  Paragraph 24 of the draft resolution. 
12  Article 38(2) of Annex II to Guideline ECB/2012/27 of 5 December 2012 on a Trans-European Automated Real-time 
Gross settlement Express Transfer system (TARGET2) (OJ L 30, 30.1.2013, p. 1). 
ECB-PUBLIC  
4 6. Organisational separation of operator and oversight functions  
The ECB welcomes the fact that the draft resolution13 provides for organisational separation 
between the functions of Lietuvos bankas as payment systems operator and in the oversight of systems. 
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 15 May 2014. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI 
  
                                                 
13  Paragraph 23 of the draft resolution.