Document ID: chunk:federal_register_of_legislation:F2019N00027:body:0:p13
Version: federal_register_of_legislation:F2019N00027
Segment Type: other
Provision Reference: 
Character Range: 31771–34692

scheme to provide benefits directly to a downstream issuer, they considered this unlikely to occur in practice given the relatively small size of those entities' card issuing businesses.
The Bank notes that requiring small downstream issuers to comply, and certify compliance, on an annual basis would materially increase the overall regulatory burden on the industry. In addition, as their card issuing arrangements are not large, and generally not of a nature where they will receive significant incentive payments from schemes, there may not be a strong public interest case to include these issuers in the scope of the net compensation requirement.
Accordingly, the Bank proposes to modify the operation of the standards, such that the obligation to comply with the net compensation requirement falls on the entity that has the status within a scheme to issue cards itself and/or sponsor another entity into the scheme.[23] The draft variations to the standards implement this by introducing new definitions of 'Direct Issuer Participant' and 'Indirect Issuer Participant'.[24] The Bank would look to reinstate net compensation obligations on downstream issuers if arrangements emerged that sought to take advantage of this change in compliance requirements.

Proposal 7:
The Bank's Standards No. 1 and No. 2 of 2016 would be modified, such that for scheme-issuer arrangements where one entity sponsors another for a card-issuing arrangement, it is only the sponsoring issuer that is required to comply with the net compensation provisions.

2.4                 Historical Transitional Arrangements
The provisions of section 7 of each standard dealing with the timeframe for commencement of, and initial implementation of, the standards are now historical and so most of the relevant provisions can be removed.

2.5                 New Transitional Arrangements
The Bank anticipates that, if the Payments System Board determines that changes are in the public interest, variations to the standards would be implemented before the end of the current financial year, and the varied standards would be able to commence from 1 July 2019. However, a period of transition from the previous regime to the new arrangements will be needed.
The Bank's proposed approach to transition is to provide issuers with flexibility in terms of the approach to compliance and certification for the financial year 2018/19.[25] An issuer may elect to comply for 2018/19 based on the revised standards (which stakeholder feedback has indicated is more in line with how financial accounts are prepared), or it may comply for 2018/19 with the current standards and make the transition to the new regime for the 2019/20 financial year.
More specifically, the Bank proposes that the varied standards would be effective from 1 July 2019. Issuers would, by that date, make an election as to whether their compliance for 2018/19 would be based