Page 47 - ITU-T Focus Group Digital Financial Services – Interoperability

ITU-T Focus Group Digital Financial Services
Interoperability

B. Interoperability and oversight policy

35. An interoperable payment system and the effective management of risks associated with interoperability
should be a key objective of payment system oversight. It is important to have a clear understanding of how
and to what extent current international oversight standards provide for effective means to promote safe and
efficient interoperability. It will then be possible to consider ways to strengthen the oversight policy framework,
including identifying expectations specifically tailored for interoperability, against which payment system
operators and PSPs should be held accountable.

Interoperability and international standards
36. Interoperability is addressed by the Principles of financial market infrastructures (PFMIs). As one of
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the different forms of interdependencies among financial market infrastructures (FMIs), interoperability is
addressed in the PFMIs report under various principles. Principle 20 explicitly addresses FMIs links and their risk
management by requiring that a FMI that establishes a link with one or more FMIs should identify, monitor, and
manage link-related risks. In addition, interdependencies are covered in: (a) Principle 2 on governance, which
states that FMIs should consider the interests of the broader markets; (b) Principle 3 on the framework for the
comprehensive management of risks, which states that FMIs should consider the relevant risks that they bear
from and pose to other entities; (c) Principle 17 on operational risk, which states that a FMI should identify,
monitor, and manage the risks that other FMIs pose to its operations and the risks its operations pose to other
FMIs; (d) Principle 18 on access and participation requirements, which states that FMIs should provide fair and
open access, including to other FMIs; (e) Principle 21 on efficiency and effectiveness, which states that FMIs
should be designed to meet the needs of their participants; and (f) Principle 22 on communication procedures
and standards, which states that FMIs should use, or at a minimum accommodate, relevant internationally
accepted communication procedures and standards. The combination of these principles should achieve a
strong and balanced approach to interoperability.
Establishing RPS-specific principles for interoperability

37. While the PFMIs address interoperability in several contexts, it should be recognized that they have
not been designed specifically to cover the risks associated with interoperability in RPS. In Europe, policy
guidelines have been produced for interoperability between EU central counterparties, while the European
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Central Bank (ECB) has formulated oversight expectations for overseeing links that connect retail payment
systems – an area that only broadly relates with interoperability. In fact, no institution or jurisdiction has so
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far considered setting up oversight criteria especially conceived for interoperability in RPSs.

38. It is therefore advisable to define a consistent set of oversight principles for managing the risks that may
arise in connection with interoperability in RPS. The principles elaborated below cover risks associated with
the legal, financial, and operational aspects of interoperability, as well as issues relating to their governance,
access, efficiency, and effectiveness. The principles build on international best practices. They are based on the
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principle that the responsibility for managing the risks associated with interoperability lies first and foremost
with the RPSs and each retail payment entity (RPE) operating and/or participating in interoperable systems.
The oversight authorities should be responsible for making sure that such recommendations are fulfilled.

39. Importantly, any sound oversight framework for managing risks relating to interoperability in RPSs will
require strong cooperation between relevant authorities. As interoperability of RPS involves several related
dimensions (including legal, financial, operational, technical, procedural, and business aspects), different
institutions bearing oversight, supervisory, and regulatory responsibilities – not just in the financial area – may

10 See Reference in Footnote 6.
11 See the “Guidelines and Recommendations for establishing consistent, efficient and effective assessments of interoperability
arrangements: final report”, 10 June, 2013, issued by the European Securities and Markets Authority (ESMA), under Article 54(4)
of the European Market Infrastructures Regulation.
12 See the “Oversight expectations for links between retail payment systems”, European Central Bank, Frankfurt, November 2012.
13 In particular, the proposed principles build on the ECB’s oversight expectations for links between retail payment systems (see
previous footnote) and on the EACHA Instant Payments Interoperability Guidelines V1.1, European Automated Clearing House
Association, 19 November 2015.

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