Opinion of the European Central Bank of 10 July 2014 on approval of payment systems (CON/2014/53)
Date: 2014-07-10
Institutions: European Central Bank
Subjects: Malta, administrative sanction, central bank, financial supervision, national law, payment system

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 10 July 2014 

on the approval of payment systems 

(CON/2014/53) 

Introduction and legal basis 

On 5 June 2014, the European Central Bank (ECB) received a request from the Central Bank of Malta 

(CBM) for an opinion on draft Directive No 13 on the approval of payment systems (hereinafter the ‘draft 

CBM 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  European  Union  and  the  third  and  fifth  indents  of  Article 2(1)  of  Council 
Decision 98/415/EC1,  as  the  draft  CBM  Directive  concerns  the  CBM  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 CBM Directive 

1.1  Following legislation enacted in 20132 amending the Central Bank of Malta Act3 (hereinafter the 

‘CBM  Act’),  the  CBM  has  the  power  to  issue  directives  regulating  the  approval  of  payment 
systems4,  as  well  as  to  order  the  closure,  suspension  or  revocation  of  approval  of  non-compliant 
payment systems5.  

1.2  The draft CBM Directive sets out both the parameters and the applicable terms and conditions for 

approving  payment  systems  before  they  commence  operations.  It  also  sets  out  the  procedure  to 

close or suspend the operation of a non-compliant payment system pursuant to Article 34(2) of the 

CBM Act. 

1.3  The draft CBM Directive will constitute a legally binding instrument and will be published shortly 

after the ECB issues its opinion. It is envisaged that the draft CBM Directive will enter into force 

upon publication. 

1  

2  
3  
4  
5  

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).  
Act XIII of 2013. 
Chapter 204 of the Laws of Malta. 
Article 34(5) of the CBM Act. 
Article 34(2)(a) and (b) of the CBM Act. 

 
 
 
 
 
                                                 
 
ECB-PUBLIC 

2. 

General observations 

2.1  The  draft  CBM  Directive  has  already  been  subject  to  a  public  consultation  procedure  with 

prospective operators who may be interested in setting up a payment system in Malta. 

2.2  The  ECB  has  prepared  [and  adopted]  a  regulation  on  oversight  requirements  for  systemically 
important payment systems (hereinafter the ‘SIPS Regulation’)6. The SIPS Regulation implements 

the CPSS-IOSCO principles in the euro area in a legally binding manner. It defines the criteria for a 

payment  system  to  qualify  as  being  systemically  important  and  lays  down  requirements  aimed  at 

ensuring the efficient management of legal, credit, liquidity, operational, general business, custody, 

investment and other risks. It also sets requirements for sound governance arrangements, objective 

and  open  access  and  the  efficiency  and  effectiveness  of  systemically  important  payment  systems 

(SIPS). 

2.3  The  SIPS  Regulation  will  be  directly  applicable  in  Malta  and  the  rest  of  the  euro  area  and  enjoy 

supremacy over national law in the field of oversight of SIPS. The draft CBM Directive will require 

further  review  by  the  consulting  authority  in  order  to  ensure  full  consistency  with  the  SIPS 

Regulation in so far as the relevant definitions and the provisions on sanctions are concerned. 

3. 

Temporal scope of the draft CBM Directive and definitions 

3.1  There is some ambiguity concerning the temporal scope of the draft CBM Directive. Article 1(2) 

and  Article  3(1)  make  it  clear  that  payment  systems  are  to  be  approved  by  the  CBM  prior  to 

becoming operational. In addition, Article 3(3) states that the draft CBM Directive will apply to the 

approval of a ‘new payment system’, thus implying that pre-existing payment systems do not fall 

within  its  scope.  Article  3(4)  requires  additional  safeguards  to  be  put  in  place  when  the  CBM 

determines that a ‘proposed payment system’ can be classified as a SIPS. However, the definition 

of a SIPS in Article 2 refers to ‘... the only payment system in Malta, or ... the principal payment 

system  in  terms  of  aggregate  value  of  payments’,  or  one  which  has  been  so  designated  under 

paragraph 5 and Annex I of CBM Directive No 2. It seems that these criteria can only be satisfied 

by payment systems already in operation prior to the entry into force of the draft CBM Directive. 

3.2  

If the intention is that the draft CBM Directive should only apply to the approval of a ‘new payment 

system’, the ECB recommends amending the definition of a SIPS and inserting a grandfather clause 

which makes it clear that payment systems that were in operation prior to the entry into force of the 

6  

Regulation (EU) No YYY/2014 of [20 June 2014] on oversight requirements for systemically important payment systems 
(ECB/2014/28). Not yet published in the Official Journal. 

2 

 
 
                                                 
ECB-PUBLIC 

draft CBM Directive7 will continue to be subject to the conditions and legal provisions applicable at 
the time8. 

3.3 

In addition, the definition of a SIPS in the draft CBM Directive is narrower than that of Article 1(3) 

of the SIPS Regulation, which lists specific criteria for a payment system to be identified as a SIPS. 

In  order  to  ensure  consistency  with  the  SIPS  Regulation  and  the  CPSS-IOSCO  principles,  and 

indeed  a  harmonised  concept  of  what  a  SIPS  is  throughout  the  euro  area,  the  ECB  therefore 

recommends that the draft CBM Directive is amended accordingly. 

3.4   The ECB notes that the draft CBM Directive does not define the term ‘systemic risk’. Since this is a 

key  concept  for  the  proper  functioning  of  the  draft  CBM  Directive,  the  ECB  recommends  that  a 

definition  of  this  term  is  inserted  and  that  it  fully  reflects  the  definition  in  the  aforementioned 

CPSS-IOSCO principles. 

4. 

The CBM’s tasks under the draft CBM Directive 

4.1  Under Article 34 of the CBM Act, the CBM is the competent authority to oversee and regulate the 

operation of, and participation in, payment systems. No person is authorised to set up and operate a 

payment system unless the payment system and its rules are approved by the CBM in accordance 

with the application procedure provided for in the draft CBM Directive.  

4.2 

In  view  of  the  resources  required  for  the  performance  of  these  tasks,  the  ECB  has  consistently 

expressed  its  concern  that,  when  allocating  additional  tasks  to  national  central  banks,  it  must  be 

ensured  that  they  have  sufficient  human  and  financial  resources,  both  in  terms  of  quantity  and 

quality, for all of their tasks, and in particular that their capacity to fulfil their European System of 

Central Banks or Eurosystem-related tasks is not affected. 

5. 

Sanctions 

Under  paragraph  7(3)  of  the  draft  CBM  Directive,  the  CBM  will  have  the  right  to  impose  sanctions  in 

accordance  with  Article  56  of  the  CBM  Act  and  the  provisions  of  CBM  Directive  No  12  on 
Administrative Measures and Penalties for Infringements under the Central Bank of Malta Act9. The draft 

CBM Directive lays down a set of measures that the CBM may take in certain circumstances, including 

when  a  payment  system  or  a  SIPS  ‘is  failing  or  has  failed  to  comply  with  any  condition  and/or 
requirement set out by the Bank’10. As the SIPS Regulation lays down specific corrective measures and 

sanctions,  the  CBM  will  have  to  apply  the  draft  CBM  Directive  to  SIPS  in  accordance  with  the 

7 

8 
9  

10  

Namely TARGET2-Malta and MaltaClear, as designated in Annex I of CBM Directive No 2 on Payment and Securities 
Settlement Systems. 
Namely the aforementioned CBM Directive No 2. 
The ECB expressed its views on CBM Directive No 12 in Opinion CON/2011/105. All ECB opinions are published on 
the ECB’s website at www.ecb.europa.eu. 
Article 6(1) and the following paragraphs of the draft CBM Directive. 

3 

 
 
                                                 
ECB-PUBLIC 

requirements of the SIPS Regulation, to ensure the availability of effective, proportionate and dissuasive 

sanctions, and to revoke any provisions of the draft CBM Directive which are not in conformity with the 

SIPS Regulation. 

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 10 July 2014. 

[signed] 

The President of the ECB 

Mario DRAGHI 

4