The role of the Central Bank of Cyprus
The role of the Central Bank of Cyprus is determined by the provisions of the Central Bank of Cyprus Laws of 2002-2007, whereby Section 6(2)(g) states that one of the main tasks of the Bank is the promotion, regulation and oversight of the smooth operation of the payment, clearing and/or settlement systems. Section 48 further expands on the role of the Bank, by providing that the Bank may manage, participate in, or become a member of any payment, clearing and/or settlement system, place under its oversight such systems operating in the Republic of Cyprus, issue directives regulating the functions and the operating procedure of the systems under its oversight, impose administrative fines and take judicial measures for non-compliance.
The Bank, in exercising the aforementioned powers, has placed under its oversight the following systems:
In addition, acting as the competent authority in accordance with the provisions of the Settlement Finality in Payment Systems and Securities Settlement Systems Law of 2003 - 2011, the Bank has designated as systemically important, and has notified accordingly the European Commission, the TARGET2-CY system of the Central Bank of Cyprus and the Central Depository and Central Registry of Securities, of the Cyprus Stock Exchange.
Oversight of Payment, Clearing and Settlement Systems
The oversight process of the aforementioned systems involves the following steps:
The standards adopted by the CBC are primarily those adopted by the Eurosystem. In areas where these have not been determined yet, the Bank adopts its own standards until such policy is formulated at European level. The general framework is included in the document "Eurosystem Oversight Policy Framework", February 2009.
The Governing Council of the European Central Bank (ECB) has adopted the principles described in the “Core Principles for Systemically Important Payment Systems” report of the Bank for International Settlements (BIS) as the appropriate standards for such systems. The BIS report expands on ten core principles as well as four central bank responsibilities in relation to systemically important payment systems. The ECB has also formulated policy relating to retail payment systems based on the Core Principles, whereby the classification of systems and the oversight effort is commensurate to the systemic importance of each system.
More recently the Eurosystem has adopted common standards for the assessment of schemes offering payment intruments. Based on these Standards, an assessment methodology for Card Payment Schemes was adopted aiming towards reliable and comprehensive assessments. Similarly, oversight frameworks have been developed and adopted for credit transfer and direct debit schemes.
In relation to securities settlement systems the European System of Central Banks (ESCB) is, in co-operation with the Committee of European Securities Regulators (CESR), developing standards and assessment methodology based on the equivalent BIS Recommendations for such systems and for central counterparties. These standards are applicable to central securities depositories and central counterparties, and are addressed to the relevant supervisory authorities.
Based on the above mentioned standards, the payment, clearing and settlement systems of each member-state, as well as the cross-border ones, are assessed to ensure the mitigation of various forms of risk (legal, operational, credit, liquidity and systemic) and the achievement of safe and efficient systems.
The oversight process is dynamic as both standards and systems may change with the implementation of new technologies and the introduction of new payment instruments. Assessments are repeated at regular intervals, with the frequency depending on the systemic importance of each system. As the oversight function is one of the main tasks of the Central Bank, this is carried out by qualified staff and to high professional standards.
The attached report determines the Central Bank’s policy and methodology regarding the oversight of payment, clearing and settlement systems. This is performed in a transparent manner, as the Bank’s policy is accessible by all through its website, and is applied consistently to both systems operated by the Bank and systems operated by third parties.