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Article (8): Ongoing Requirements of Designated Large-Value Payment Systems

C 9/2020 Effective from 10/2/2021

Principal Requirements

  1. The SO and/or SI of a designated LVPS, are required to ensure compliance with the following:
     
    1. 1.1. LVPS must comply with any instructions issued by the Central Bank and any relevant international standards (e.g. PFMI), and ensure proper and continued functioning of the designated LVPS; and
       
    2. 1.2. LVPS must provide the information required by the Central Bank and where it deems appropriate for achievement of its objectives.
       
  2. The Central Bank may exempt the SO, SI or a Participant Person of a designated LVPS in a general or specific manner, from the provisions of this Regulation, instructions, rules, directives, rules, and controls issued by it.
     
  3. The Central Bank may appoint experts and advisors specialised in Financial Infrastructure Systems to assist the Central Bank in performing its duties and functions in accordance with this Regulation.

Detailed requirements

  1. Upon designation, an LVPS must comply with the oversight requirements imposed under this Regulation and the relevant provisions of PFMI (see Article (9) for detail). Failure to comply with any of those requirements may expose the concerned party to possible sanctions as provided for under the Central Bank Law. The principal requirements, in addition to the relevant provisions of the PFMI, include: -
     
    1. 4.1. Submission of particulars – the Central Bank requires any SO and/or SI of a newly designated LVPS to inform the Central Bank in writing of the designation particulars within fourteen (14) working days after the notification of designation, including the name, place of business, postal address and electronic mail address, as well as the aspects of the management or operations of the system. For any SO and/or SI which are a corporation, the names and personal particulars of the directors, chief executive (if any) and shareholders of the corporation are similarly required to be submitted to the Central Bank. Details of any subsequent change in any of those particulars are to be notified to the Central Bank in writing within fourteen (14) days of the change taking effect.
       
    2. 4.2. Compliance with safety and efficiency requirements – the general requirements include safe and efficient operation of the LVPS, the establishment of appropriate Operating Rules, the existence of adequate compliance arrangements, and the availability of appropriate financial resources. Any major change to a designated LVPS’s Operating Rules requires prior approval of the Central Bank.
       
    3. 4.3. Submission of information or documents - the Central Bank may request information or documents relating to a designated LVPS from the SO and/or SI of, or the Participant Person in, the LVPS when performing the oversight functions under this Regulation. The SO and/or SI of, or the Participant Person in, the designated LVPS to whom a request is made is required to submit the information or documents within the period specified in the request.
       
    4. 4.4. The Central Bank may, at any time, with a short prior notice to the concerned SO and/or SI, examine any books, accounts or transactions of the SO and/or SI of a designated LVPS when performing its functions.
       
    5. 4.5. The Central Bank may require the SO and/or SI of, or the Participant Person in, a designated LVPS to submit to the Central Bank a report prepared by one or more auditors on matters that the Central Bank requires for discharging or exercising its duties and powers under this Regulation. The SO and/or SI of, or the Participant Person in, a designated LVPS may only appoint an auditor approved by the Central Bank or an auditor amongst auditors approved by the Central Bank for preparing a report required by the Central Bank.
       
    6. 4.6. The Central Bank may direct the SO and/or SI of a designated LVPS to take any action necessary to bring the LVPS into compliance with any of the requirements of this Regulation. Such a direction will specify the Central Bank’s concerns and the action(s) to be taken, include a statement of the respect in which the Central Bank considers the designated LVPS not to be in compliance with a requirement of this Regulation and specify the period within which the direction is to be complied with.
       
    7. 4.7. The SO and/or SI of the designated LVPS must have proper Operating Rules to enable its Participant Persons to obtain sufficient information regarding their respective rights and obligations associated with their participation in the LVPS, especially the Default Arrangements and the related procedures. Such rights and obligations must be clearly defined and disclosed to the Participant Persons.
       
    8. 4.8. The SI must establish rules and procedures as part of the Operating Rules to enable final settlement to take place no later than the end of the intended settlement time and date. The related rules and procedures must also ensure certainty in terms of circumstances under which Transfer Orders effected through the LVPS are to be regarded as final as well as settled for the purposes of the LVPS.
       
    9. 4.9. Where action has been taken under Default Arrangements of a designated LVPS by the SO and/or SI in respect of a Participant Person in the LVPS, the Central Bank may direct the SO and/or SI of a designated LVPS to give information relating to the default to any official nominated by the Central Bank. The nominated official is responsible for assessing and examining any matter arising out of or connected with the default of the Participant Person in that LVPS. The liabilities of Participant Persons for any loss arising from the default of the Participant Person and the arrangements to handle any disputes over Participant Persons’ liability with respect to default transactions should be clearly set out in the rules and procedures.