Payment systems oversight
Electronic transfers of funds comprise all kinds of transactions, ranging from cashless purchases to large payments between banks or securities settlement transactions. The smooth functioning of payment systems is a fundamental prerequisite for financial stability. Therefore, the OeNB has the statutory mandate to conduct payment systems oversight in Austria.
An overview of the different types of payment systems and the arguments in favor of oversight by the central bank as well as the OeNB’s oversight activities are provided below.
The case for payment systems oversight by the central bank
Payment systems fulfill an important role in maintaining the stability of the financial system. Disruptions in the money cycle could have considerable repercussions, ranging from problems for individual stakeholders to the destabilization of the entire financial system, and, consequently, the undermining of confidence in the currency. Risks that are typically associated with payment systems include
- credit risk (obligations are not met),
- liquidity risk (obligations are not met in time),
- legal risk (contracts prove impossible to enforce),
- technical-operational risk (human error, IT problems, terrorist attacks, etc. cause a system breakdown), and
- systemic risk (one participant’s or one system’s problems set off a chain reaction, causing disruptions in other payment systems or in the entire financial system).
The security of payment systems is of fundamental macroeconomic importance; therefore payment systems oversight is one of the key tasks of a central bank.
Legal basis and subjects of oversight
The OeNB carries out its oversight function under the framework provided by the oversight policies set out by the Governing Council of the ECB, which are based on Article 127 (2) of the Treaty on the Functioning of the European Union as well as Articles 3 and 22 of the Statute of the ESCB and of the ECB. The main oversight objective is to prevent system failure and to safeguard the efficiency and security of market infrastructures. For further details on the legal framework for payment systems oversight at the European level, see the website of the ECB.
Article 44a of the Nationalbank Act assigns the task of payment systems oversight to the OeNB. In its capacity as the public authority responsible for payment systems oversight, the OeNB, under constitutional law, is not bound by any instructions. The OeNB fulfills its statutory task in particular by conducting in-depth assessments of the measures implemented to ensure the security of payment systems (system assessments). Furthermore, it compiles statistical data and is empowered to take sanctions if deemed necessary. All these rights and responsibilities are laid down in the Nationalbank Act.
Operators of payment systems are the main subjects of oversight, as they assume the primary responsibility for the design of the system, its structure and processes as well as its operational soundness and technical security. Furthermore, payment system participants are also subject to payment systems oversight (see Article 44a paragraph 6 Nationalbank Act). Essentially, this includes payment service providers which are authorized to initiate payments and transfers through existing payment systems under the Austrian Payment Services Act.
Payment system assessments
The OeNB carries out payment system assessments both on a regular and on an ad hoc basis. These assessments focus on system security from
- the legal perspective: the legal basis on which a system operates must be clearly defined and enforceable among all stakeholders;
- the financial perspective: all system stakeholders must be aware of and be able to keep in check the financial risks involved in operating, contributing to or using a system.
- the organizational and technical perspective: a system must ensure a high (i.e. state-of-the-art) level of confidentiality, integrity and availability.
If a system assessment identifies potential problems or shortcomings, the OeNB and the system operator agree on remedial measures, whose implementation will be reviewed in follow-up assessments. The evaluation of the organizational and technical security of a payment system is usually carried out in cooperation with external experts.
Payment systems statistics
The OeNB monitors the ongoing operational activities of payment system providers and stakeholders, who regularly report quantitative and qualitative information to the OeNB. If the OeNB identifies significant deviations or problems, it may launch an ad hoc system assessment. Findings derived from the analysis of payment systems statistics that are of macroeconomic relevance are published at six-monthly intervals in the OeNB’s Financial Stability Report.
Reporting requirements for payment system operators
To help us comply with our oversight responsibilities, we require payment system operators to report relevant changes in a timely manner to the OeNB. A new provision reflecting this obligation (paragraph 7a) has been added to Article 44a of the Nationalbank Act, which took effect on January 14, 2015. Thus, operators of payment systems are obligated to inform the OeNB in writing of the launch or discontinuation of a payment system within a period of two weeks. Furthermore, payment system operators are obligated to inform the OeNB of the participants which have registered for their payment system and of any changes thereof within a period of two weeks. This excludes the need to resubmit information on payment system operators and participants already included in the payment statistics.
- Please include the following information in your reports:
- In the event of the launch or discontinuation of a payment system: Name of the payment system, name and residence of the payment system operator, name and residence of payment system participants and reference to the type of participation (e.g. direct or indirect).
- In the event of changes to the range of participants: Name and residence of participants that have joined or left the payment system, including a reference to the type of participation (e.g. direct or indirect).
- Please e-mail the respective changes to the payment systems oversight.
- Please include the following information in your reports:
Recognition of payment systems under the Finality Act
The assurance that transactions will at some point be complete and will not be subject to reversal (finality of settlement) is of crucial importance to receivers of payments. The Austrian law on settlement finality in payment and securities settlement systems (Finality Act) provides for legal certainty in this context, mitigating the risks for participants in systems recognized under this law. Transactions processed and settled through recognized systems are legally binding, also for third parties. The OeNB is responsible for recognizing payment and securities settlement systems under the Finality Act.
(as at January 2015)