Opinion of the European Central Bank of 15 May 2014 on oversight of payment and securities settlement systems (CON/2014/33)
Date: 2014-05-15
Institutions: European Central Bank
Subjects: Lithuania, central bank, financial supervision, national law, payment system

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 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 resolution 

1.1  The  draft  resolution  recasts  the  framework  for  the  conduct  of  payment  and  securities  settlement 

systems  oversight  by  Lietuvos  bankas,  which  was  approved  by  the  Board  of  Lietuvos  bankas  in 

2003.  

1.2  The  draft  resolution  aims  to  implement  the  Principles  for  financial  market  infrastructures2 

(hereinafter the ‘CPSS-IOSCO principles’) and provide the basis for effective oversight of payment 

and securities settlement systems conducted by Lietuvos 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  important  payment  and  securities  settlement  systems, 
performed  on  the  basis  of  CPSS-IOSCO  principles3;  and  (3)  monitoring  of  systems.  The  draft 

resolution  also  contains  provisions  as  regards  cross-border  cooperation  in  the  field  of  systems 

oversight.  

1  

2  

3  

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). 
The Principles for financial market infrastructures issued jointly by the Committee on Payment and Settlement Systems 
(CPSS) of the Bank for International Settlements (BIS) and the Technical Committee of the International Organization of 
Securities Commissions (IOSCO) (http://www.bis.org/publ/cpss101a.pdf). 
The Principles for financial market infrastructures: disclosure framework and assessment methodology. 

 
 
 
 
 
                                                 
ECB-PUBLIC 

2. 

General observations  

2.1  The ECB understands that the draft resolution aims 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 systems4 (hereinafter the ‘SIPS Regulation’). The SIPS Regulation 

aims  to  implement  the  CPSS-IOSCO  principles  in the  euro  area  in  a  legally binding  way.  It  will 

define inter alia the criteria for qualifying a payment system as systemically important and will set 

requirements aimed at ensuring efficient management of legal, credit, liquidity, 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  integrated  member  of  the  Eurosystem,  the  SIPS 

Regulation  will  also  apply  to  Lietuvos  bankas  and  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  obligations,  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 obligations 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 Regulation 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  

5  
6  

7  

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. 
Paragraph 2.3 of the draft resolution. 
Systemic  risk  is  defined  in  Annex  H  of  the  CPSS-IOSCO  principles  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’. 
Paragraph 7 of the draft resolution. 

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ECB-PUBLIC 

settlement  systems  themselves,  and  not  only  systems  operation,  should  be  assessed  against  the 

CPSS-IOSCO principles, and recommends amending the draft resolution accordingly.  

4.2  The  ECB  understands  that  Lietuvos  bankas  is  also  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 assessment to be performed every three years or when 
substantial changes to a system are made8. 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’ and the frequency of such reporting10. The ECB suggests that the 

draft resolution is amended to ensure that the data collected may be used for 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 information ‘necessary for the conduct 

of systems oversight’ and the sharing of such information 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  with  supervisory  and  oversight  authorities  of 

Member  States  and  the  Union,  to  the  extent  that  this  is  necessary  for  the  performance  of  their 

public tasks. 

8  
9  
10  
11  
12  

Paragraph 10 of the draft resolution. 
Every one to two years.  
See paragraphs 14, 15 and 16.3 of the draft resolution. 
Paragraph 24 of the draft resolution. 
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). 

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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. 

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