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 CBC directive on the operation of payment systems under its oversight, on the role and governance of payment system operators and on the obligations of payment system participants (hereinafter the ‘draft directive’).
The main purpose of the draft directive is to enact a set of rules governing the functioning and operating methods of payment systems and of the operators of those systems. The draft directive governs participation in, and suspension or exclusion from, a payment system. More specifically, the participation in a payment system is made conditional upon the satisfaction of eligibility and continuing participation criteria approved by the CBC for every payment system, and the procedure governing the admission of participants to a payment system, including the procedure to challenge the decision if the candidate participant is rejected, is set.
By way of a general observation, the ECB welcomed 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 will help to promote the sound governance, security and stability of retail payment systems and their operators.
The ECB made the following comments on the draft directive:
- A suggestion was made to amend the definition of ‘payment system’ in paragraph 2(1) of the draft directive, so as to clarify that the draft directive’s scope of application only covers prominently important retail payment system (PIRPS) and other retail payment system (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) No 795/2014 of the European Central Bank (ECB/2014/28)20, which applies to payment systems defined as ‘systemically important payment systems’ (SIPS) on the basis of certain quantitative and qualitative criteria.
- It is advisable for the draft directive to reflect the fact that PIRPS and ORPS should disclose clear descriptions of the system’s design and operations, as well as the system’s and participants’ rights and obligations, so that participants can assess the risks they would incur by participating in the system.
- 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 responsible for the oversight of payment systems and hence 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.
- For the sake of legal certainty, the ECB suggests 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 is a summary of the opinion of the ECB, which was published on its website on 19 March 2020.