Circular BCL 2001/168 of 5 December 2001 — Policy and Procedures for the Supervision of Payment Systems and Securities Settlement Systems in Luxembourg

Luxembourg, 5 December 2001

To all operators and technical agents of payment systems and securities settlement systems

CIRCULAR BCL 2001/168

Policy and Procedures for the Supervision of Payment Systems and Securities Settlement Systems in Luxembourg

Ladies and Gentlemen,

1. We refer to Circular BCL 2001/163 of 23 February 2001 regarding the supervision by the Central Bank of payment systems and securities settlement systems in Luxembourg.

2. The Central Bank has established a supervision framework for payment systems and securities settlement systems. It has developed a General Policy and Procedures document defining the framework for supervisory activities, the standards applied, and the obligations of the systems in this regard.

3. The general policy and procedures for supervision, based on legal provisions, take into account the norms, recommendations, and rules issued by official bodies at the international level. They also take into account market practices and the latest developments in this field.

4. Payment systems and securities settlement systems comprise five distinct components, namely: the operator, the participants, the technical agents, the internal rules and contracts of the systems, and their specific legal and regulatory environment.

5. The operator is considered the central organization offering products and services related to a payment system or securities settlement system. The technical agent is a service provider to whom an operator has outsourced or centralized a significant part of its operational and/or IT infrastructure.

6. Systems in which the Central Bank participates and for which it has issued an official notification to the European Commission are subject to the supervision of the Central Bank. Other systems that present particular importance with regard to stability may also be subject to the supervision of the Central Bank.

7. To date, the following operators and technical agents are subject to the supervision of the Central Bank:

Operators of systems notified by the Central Bank to the European Commission on 12 February 2001:

• RTGS-L Gie (LIPS Gross),
• Sypal-Gie (LIPS Net),
• Clearstream Banking Luxembourg (CBL)

Technical agents:

• BCL for RTGS-L Gie and LIPS-Gross,
• CETREL for Sypal-Gie and LIPS-Net,
• CETREL for other operational and IT services of systemic importance,
• Clearstream Services for operational and IT services

8. The Central Bank’s supervision framework places particular importance on self-assessment by operators/technical agents regarding the standards and market best practices to be observed. The general policy and procedures extend to corporate governance practices to be applied to the various entities ensuring responsibilities regarding the systems, as well as to methods for preventing and reducing risks.

9. The Central Bank requires operators/technical agents to provide information on how they comply with the aforementioned standards. It mandates the submission of reports and information on a regular and/or ad-hoc basis. The Central Bank organizes direct follow-up with the managers of the supervised entities. It may conduct on-site inspections to verify compliance with the supervision policy and procedures.

10. In addition to the General Policy and Procedures document, the Central Bank has developed a draft Instruction Manual containing practical elements related to the exercise of supervision, including specific requirements for the regular and ad-hoc information to be provided to the Bank. This draft is currently subject to consultation with the concerned operators/technical agents.

11. The Central Bank has organized an internal distinction within its organization between its control missions and its operational missions in the field of payment systems.

12. Point 4 of Circular BCL 2001/163 regarding the establishment of the supervision framework is repealed and replaced by the provisions of this circular.

13. The Central Bank designates as the contact person for the application of this circular the Head of the Financial System Stability and Supervisory Authorities Relations Section.

14. Attached to this circular, you will find in English the General Policy and Procedures document for the supervision of payment systems and securities settlement systems, as well as a summary. The documents may be adjusted if necessary and will be published on the Central Bank’s website (www.bcl.lu).

Serge KOLB
Director

Andrée BILLON
Director

Yves MERSCH
General Director