Instruction No. 01/GR/2014 on the Supervision of Payment Systems in the CEMAC

INSTRUCTION No. 01/GR/2014 ON THE SUPERVISION OF PAYMENT SYSTEMS IN THE CEMAC

Having regard to the Convention governing the Central African Monetary Union (UMAC);

Having regard to the Statutes of the Bank of Central African States (BEAC);

Having regard to the Convention of 16 October 1990 establishing the Central African Banking Commission (COBAC);

Having regard to the Convention of 17 January 1992 on the Harmonisation of Banking Regulation in the Central African States;

Having regard to Regulation No. 02/00/CEMAC/UMAC/CM of 29 April 2000 on the harmonisation of exchange regulation in the CEMAC States;

Having regard to Regulation No. 02/03/CEMAC/UMAC/CM of 04 April 2003 on Payment Systems, Means and Incidents;

Having regard to Regulation No. 02/10 of 02 October 2010 revising Regulation No. 01/03 CEMAC/UMAC/CM on the prevention and repression of money laundering and terrorist financing in Central Africa;

Having regard to the General Regulations of the Automated High-Value Payment System (SYGMA) annexed to the SYGMA membership convention;

Having regard to the General Regulations of the Central African Telecompensation System (SYSTAC) annexed to the SYSTAC membership convention;

Considering the importance of the harmonious functioning of payment systems to guarantee financial stability in the zone;

Considering the importance of the credibility of payment instruments to guarantee public confidence in book money;

Considering the statutory role of the BEAC, as guarantor of the efficiency and proper functioning of Payment Systems;

Considering the role of the BEAC, as guarantor of maintaining public confidence in the use of book money;

Considering the principles and recommendations of the Bank for International Settlements (BIS) regarding payment system supervision;

Considering the ISO 27001 standard relating to the information security management system;

Considering the ISO 27002 standard relating to the Code of practice for information security management;

ADOPTS THE INSTRUCTION WITH THE FOLLOWING CONTENT:

Chapter I - Definitions

Article 1

For the purposes of this Instruction, the expressions and acronyms shall be understood as follows:

a) APEC: Professional Association of Credit Institutions;

b) Adherent: entity that has signed the membership conventions for SYGMA and SYSTAC;

c) Obliged entities: the Central Bank and the participants in the payment systems managed by it;

d) "Central Bank", "BEAC" or "Issuing Institution": Bank of Central African States;

e) Commercial bank: a bank that collects public savings and creates book money through its credit distribution operations;

f) BIS: Bank for International Settlements;

g) National Clearing Centre (NCC): entity responsible for the telecompensation of domestic or national operations;

h) Regional Clearing Centre (RCC): entity responsible for the telecompensation of cross-border or regional operations;

i) Central African Banking Commission (COBAC): body responsible for banking regulation and supervision in the CEMAC;

j) Regional Payment System Supervision Committee (CRSP): Body responsible for defining, proposing, and controlling the standards and guidelines relating to the governance of payment systems;

k) Technical Supervision Committee for Payment Systems (Technical Committee): body responsible for implementing the supervision of payment systems;

l) "Community" or "CEMAC": Economic and Monetary Community of Central Africa;

m) Regional financial community: the set of actors operating in the CEMAC financial sector, particularly regarding book payment collection, savings collection, and credit distribution: this includes the BEAC, the Development Bank of Central African States (BDEAC), Public Treasuries, Postal Financial Services, and credit and microfinance institutions;

n) Payment Systems and Means Directorate (DSMP): BEAC entity responsible for payment systems and means;

o) Governor: the Governor of the Bank of Central African States;

p) Central money or monetary base: money that has been created directly by the Central Bank and consists of banknotes and coins in circulation, as well as monetary holdings held by commercial banks or assimilated institutions in the books of the Issuing Institute;

q) Commercial or book money: monetary holdings held by non-bank agents (households and businesses) in the books of credit institutions or assimilated institutions. This money circulates between economic agents through book payment means;

r) Systemic risk: risk capable of threatening the financial or monetary stability of the CEMAC through a "domino effect";

s) Financial stability: a situation in which all components of the CEMAC financial system, particularly intermediaries, markets, and their infrastructures, operate in a healthy and smooth manner, demonstrated by their ability to withstand shocks without causing adverse chain effects on savings allocation, investment, and payment processing in the CEMAC;

t) Monetary stability: a situation in which the external and internal value of the currency is guaranteed, on the one hand, based on the level of currency coverage by foreign exchange reserves, and on the other hand, based on the generally low level of prices;

u) Payment system supervision: the Central Bank function aimed at promoting the security and efficiency objectives of payment systems by ensuring ongoing monitoring of existing systems, evaluating them against these two objectives, and encouraging, if necessary, related changes;

v) Supervision of an endogenous payment system: a control mechanism enabling the Central Bank to ensure that payment systems for which it ensures operational management comply with the fundamental principles inherent to a Systemically Important Payment System (SIPS);

w) Supervision of an exogenous payment system: a control mechanism enabling the Central Bank to ensure that payment systems for which it does not ensure operational management also comply with the fundamental principles inherent to a Systemically Important Payment System;

x) SWIFT: message teletransmission service through which standardized payment orders transit, offered by the Belgian cooperative society "Society for Worldwide Interbank Financial Telecommunication", equipped with a secure international network between its adherents;

y) High-Value Payment System: a gross settlement system that processes, individually and in real time, systemically important transactions using exclusively central money as the underlying asset;

z) Automated High-Value Payment System (SYGMA): the CEMAC real-time gross settlement system that ensures the settlement of systemically important transactions in central money;

aa) Payment system: a system consisting of a set of instruments, banking procedures, and an interbank fund transfer infrastructure, intended to ensure the circulation of money;

bb) Systemically Important Payment System (SIPS): a payment system whose malfunction could result in the occurrence and propagation of systemic risk;

cc) Mass payment system: a net settlement system that processes non-systemically important operations using commercial money as the underlying asset;

dd) Endogenous payment system: a payment system for which operational management is ensured by the BEAC;

ee) Exogenous payment system: a payment system for which operational management is not ensured by the BEAC;

ff) Central African Telecompensation System (SYSTAC): a net settlement system that ensures the settlement of mass payments in book money.

Chapter II - Object and Scope of Payment System Supervision

Article 2

This Instruction defines the organization and sets the rules for the supervision of payment systems operated in the CEMAC, with a view to guaranteeing their proper functioning, security, and efficiency.

Supervision aims to ensure that obliged entities comply with the technical, legal, and functional standards defined in the Payment System Supervision Reference Framework. It covers both endogenous and exogenous systems.

Article 3

The provisions of this Instruction do not expressly apply to the following systems:

• Electronic money payment system, the supervision of which is regulated by Instruction No. 01/GR of 31 October 2011 on the supervision of electronic money payment systems;

• Electronic money transfer system, the supervision of which is subject to COBAC control;

• Private interbank monetary system, the supervision of which is ensured by the Central African Interbank Monetary Group (GIMAC);

• Securities Settlement/Delivery System of the Central African Securities Exchange (BVMAC) and Douala Stock Exchange (DSX), the supervision of which is ensured respectively by the Central African Financial Market Supervision Commission (COSUMAF) and the Financial Market Commission (CMF) of Cameroon;

• Free Subscription Public Securities Settlement/Delivery System, the supervision of which is ensured by the Settlement and Custody Cell (CRCT) of the BEAC.

However, the BEAC establishes a framework of permanent cooperation and consultation enabling it to ensure the general supervision of all payment systems in the CEMAC.

Article 4

The provisions relating to the supervision of payment systems apply to the following obliged entities:

• the BEAC in its capacity as manager of endogenous payment systems;

• participants in endogenous and exogenous payment systems as specified in Article 6 of this Instruction.

Article 5

The supervision of endogenous payment systems explicitly concerns:

• at the BEAC level, the operational management of SYGMA and SYSTAC;

• at the Participants level, the technical and functional operation of the SYGMA and SYSTAC platforms.

It also covers compliance with applicable regulatory and normative provisions.

Article 6

For the purposes of this Instruction, the supervision of exogenous payment systems exclusively concerns the management of fund transfers outside the CEMAC zone via the SWIFT network.

Chapter III - Supervisory Bodies for Payment Systems

Article 7

A Regional Payment System Supervision Committee, abbreviated CRSP, and a Technical Supervision Committee for Payment Systems, hereinafter referred to as the Technical Committee, are hereby established within the CEMAC and the BEAC, respectively.

Article 8

The CRSP defines the broad guidelines for payment system supervision.

It is competent to:

• issue a conforming opinion for the Governor's authorization of a new adherent's participation in the CEMAC endogenous payment System;

• set payment system supervision standards;

• establish an annual on-site control program for Obliged entities;

• ensure the implementation of recommendations arising from an Obliged entity's control;

• hear the director(s) of entities whose shortcomings are identified in supervision reports;

• rule on the fate of Obliged entities responsible for shortcomings identified in supervision reports and, where applicable, propose applicable sanctions to the Governor;

• determine the means to be implemented for the performance of supervision missions;

• validate the draft budget for payment system supervision;

• represent the regional financial community before international bodies responsible for payment system governance, particularly the Committee on Payment and Settlement Systems (CPSS) established by the BIS;

• adopt the quarterly and annual activity reports on payment system supervision.

The CRSP drafts and updates a code of conduct regarding the operation of payment systems.

The CRSP issues and updates, via circulars, the Payment System Supervision Reference Framework as well as the list and format of information necessary for its updating.

The CRSP may delegate certain of its powers to one or more of its members.

Article 9

The members of the CRSP are:

• the Vice-Governor of the BEAC: Chairman;

• the General Director of Operations of the BEAC: Vice-Chairman;

• the President of the Development Bank of Central African States (BDEAC);

• the President of the APEC Federation;

• the representative of the BEAC National Directors (rotating member);

• the Director of Payment Systems and Means of the BEAC;

• the Director of Studies and Financial Stability of the BEAC;

• the Director of IT and Telecommunications of the BEAC;

• the Head of the Legal Affairs and Contracts Department of the BEAC;

• the representative of Public Treasuries (rotating member);

• the representative of Postal Financial Services (rotating member);

• the representative of credit institutions (rotating member);

• the Coordinator of the Technical Supervision Committee for Payment Systems: rapporteur.

The Deputy Secretary General of the COBAC and the General Director of General Control of the BEAC participate in CRSP meetings as observers with advisory votes.

Rotating members are designated by their respective bodies and institutions for a term of one year.

The CRSP may create working groups, composed of its members and/or experts, to carry out work relating to payment system governance.

Article 10

The CRSP rules by means of opinions and circulars.

The opinion is issued for questions related notably to an Obliged entity's participation in payment systems (authorization to join, injunction, suspension, or exclusion).

The circular directly prescribes technical or regulatory provisions of a general or particular nature towards Obliged entities.

Article 11

The CRSP meets once per quarter in ordinary session upon convocation by its Chairman.

However, it may meet, if necessary, in extraordinary session.

The operating procedures of the CRSP are specified in its internal regulations.

Article 12

The Technical Committee permanently and operationally carries out the supervision activities of endogenous and exogenous payment systems in the CEMAC.

Its main missions are to:

• implement the guidelines defined by the CRSP;

• control Obliged entities;

• propose updates to the Payment System Supervision Reference Framework;

• process authorization-to-join files for submission to the CRSP for a conforming opinion;

• process disciplinary files for submission to the CRSP;

• draft the annual on-site control program for Obliged entities;

• draft the draft budget for payment system supervision;

• monitor the implementation of CRSP decisions;

• draft a quarterly payment system supervision activity report for submission to the CRSP;

• prepare the annual payment system supervision activity report for submission to the CRSP;

• propose reforms to improve the functioning of CEMAC payment systems;

• archive all documents relating to the supervision of CEMAC payment systems;

• ensure the permanent secretariat of the CRSP.

Article 13

The BEAC Technical Committee comprises the following structures:

• the Payment Systems and Means Directorate represented by:

  • the head of the supervision pole;
  • the service head in charge of supervision.

• the IT and Telecommunications Directorate represented by:

  • a network and security expert;
  • a SWIFT technical expert;
  • a SYSTAC technical expert;
  • a SYGMA technical expert.

• the Studies and Financial Stability Directorate represented by the service head in charge of financial stability.

• the Credit, Capital Markets and Banking Control Directorate represented by the service head in charge of the Money Market.

• the Legal Affairs and Contracts Department represented by a lawyer in charge of questions related to payment systems.

The Internal Control Department of the General Directorate of Operations, the General Secretariat of the COBAC, and the General Directorate of General Control of the BEAC are also represented, in an observer capacity.

The alphabetical list of Technical Committee members is established by Governor's Decision, upon proposal of the CRSP Chairman.

The Technical Committee may, if necessary, engage the services of other resource persons.

Article 14

The head of the supervision pole of the Payment Systems and Means Directorate is the coordinator of the Technical Committee.

Article 15

The secretariat of the Technical Committee is ensured by the service in charge of supervision at the Payment Systems and Means Directorate.

Chapter IV - Payment System Supervision Reference Framework

Article 16

The Payment System Supervision Reference Framework defines the entire set of legal, financial, operational, and technical principles governing the supervision of CEMAC payment systems to guarantee their efficiency, security, and effectiveness.

Article 17

The Supervision Reference Framework covers the following control domains:

• the legal environment: compliance with regulatory, normative, and conventional provisions;

• the technical environment: compliance with standards relating notably to business continuity as well as data integrity, availability, confidentiality, authenticity, and non-repudiation;

• the financial environment: compliance with standards relating notably to order coverage, monitoring the settlement of transactions in central and book money, as well as the prevention of liquidity and credit risk;

• the operational environment: compliance with administrative and control standards, relating notably to the monitoring of customer transaction processing, transaction reconciliations, situation matching, and procedure compliance.

Chapter V - Implementation Modalities of Payment System Supervision

Article 18

Payment system supervision is carried out through off-site and on-site controls. To this effect, the bodies in charge of payment system supervision have the broadest right of access to any information related to the management of payment systems and means in the CEMAC.

Obliged entities are required to respond to any information requests within the framework of payment system supervision.

The Technical Committee's controls are not exclusive of those incumbent upon the General Secretariat of the COBAC and the General Directorate of General Control (DGCG) of the BEAC.

Article 19

Off-site control is carried out based on documents and information collected periodically from Obliged entities by the supervision service of the DSMP. It enables continuous monitoring of the effective management, operation, and use conditions of payment systems in the CEMAC.

Article 20

Under off-site control, Obliged entities transmit to the supervision service of the DSMP, in a format and periodicity to be defined by a Circular Letter from the CRSP, notably the following information:

• technical and functional operation reports of the SYGMA platform;

• technical and functional operation reports of the SYSTAC platform;

• technical and functional operation reports of the SWIFT platform;

• technical operation reports of the telecommunications network dedicated to payment systems.

The quantitative and qualitative information to be provided in the various technical and functional operation reports of the platforms are, as needed, specified, modified, or supplemented by Circular Letter from the CRSP.

Article 21

On-site control is initiated in accordance with the annual program established by the CRSP and, if necessary, based on off-site control results or concerning information deemed worrying.

Article 22

On-site control is carried out through verification missions towards Obliged entities.

On-site control may take the form of a thematic control, when it aims to verify a specific point of system operation, or a general scope verification, when it aims to control compliance with the payment system supervision framework.

Article 23

Any on-site control mission results in the establishment of a report, the draft of which is previously submitted to the Obliged entity's observations. Observations made by the Obliged entity and not taken into account by the mission must be recorded in a document annexed to the verification report.

The verification report is sent to the CRSP. A copy of the final report is transmitted by the CRSP Chairman to the Governor, the concerned National Director, the controlled Obliged entity, and, where applicable, to the General Secretariat of the COBAC.

Article 24

If the control of an Obliged entity reveals shortcomings or failures, the report recommends the implementation of a series of regularization recommendations.

The controlled Obliged entity develops an implementation plan for the recommendations, which it addresses to the Technical Committee.

It regularly transmits to the Technical Committee a tracking table of said recommendations.

Article 25

When the recommendations referred to in Article 24 are not implemented, the Governor may, ex officio or upon referral by the CRSP, address to the concerned Obliged entity an injunction to take, within a specified deadline, appropriate measures to comply with the Supervision Reference Framework.

Article 26

In case of failure to comply with the prescriptions notified to the Obliged entity via the Governor's injunction, the offender is subject to disciplinary sanctions provided for by the participation conventions to the systems. They may result, upon request by the CRSP, in the suspension or exclusion of the offender from the payment systems, without prejudice to the application of sanctions provided for by banking regulation.

The sanctioned Obliged entity may submit a gracious appeal to the Governor, within a period of two (02) months from the notification of the sanction.

Chapter VI - Financing of Payment System Supervision

Article 27

The financing of payment system supervision falls to the BEAC.

Article 28

The CRSP Chairman is the budget authorizing officer.

Without prejudice to the control carried out by the General Directorate of General Control of the BEAC, the CRSP ensures the control of budget execution