Decision on Requirements for Payment Card Schemes and Processing Entities

Pursuant to Article 47 paragraph 1 item 6 of the Law on the National Bank of the Republic of North Macedonia (Official Gazette of the Republic of Macedonia No. 158/10, 123/12, 43/14, 153/15, 6/16 and 83/18 and Official Gazette of the Republic of North Macedonia No. 110/21) and Article 116 paragraph 3 of the Law on Payment Services and Payment Systems (Official Gazette of the Republic of North Macedonia No. 90/22), the National Bank of the Republic of North Macedonia Council has adopted the following DECISION on the requirements that need to be met by the payment card scheme and the processing entity
I. GENERAL PROVISIONS

1. This Decision shall prescribe the requirements that need to be met by the payment card
   scheme and the processing entity in order to ensure their separation and independence in terms of accounting, internal organization and internal decision-making processes.
2. For the purposes of this Decision, the following definitions shall be applied:
   2.1. “Governing body” shall be the body of the payment card scheme or the processing
   entity, which is assigned in accordance with the law and which is authorized to set the strategy, the goals and the overall guidelines of the entity, which monitors the decision-making and includes the persons who effectively operate the payment card scheme or the processing entity;
   2.2. “Senior management” shall denote the natural persons within the payment card
   scheme or the processing entity who perform executive functions and are responsible to the governing body for the day-to-day operations of the payment card scheme or the processing entity;
   2.3. “Remuneration” shall denote all forms of fixed and variable remuneration,
   including payments made or privileges, cash or non-cash, which are directly or indirectly awarded by the payment card scheme or the processing entity to their employees;
   2.4. “Joint services” shall denote any activity, function or service performed by some
   internal organizational unit within the payment card scheme or the processing entity or by a separate legal entity, and is performed in favor of the payment card scheme and the processing entity;
   II. ACCOUNTING
3. The payment card schemes and the processing entities shall be obliged to establish
   accounting processes which in a systematized way will provide preparation of the financial information in certain financial performance reports, as well as explanatory notes to this financial information. The financial information referred to in paragraph 1 of this item shall be in accordance with the applicable accounting regulations for the preparation of the financial statements.
4. The financial information referred to in item 3 of this Decision shall be based on the
   distribution of revenues and expenditures between the payment card scheme and the processing entity in accordance with the following rules:

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(a) the revenues and the expenditures that are directly related to the provision of processing services shall be distributed to the processing entity; (b) the revenues and the expenditures that are directly related to the payment card scheme shall be distributed to the payment card scheme; (c) the revenues and the expenditures that are not directly related to the provision of processing services or the payment card scheme shall be distributed according to the method “expenditures based on activities”, which implies distribution of indirect revenues and expenditures according to the real consumption of the processing entity or the payment card scheme; (d) the revenues and the expenditures that cannot be directly attributed and cannot be distributed according to the method “expenditures based on activities”, shall be distributed according to the accounting policies, adopted by the governing body and disclosed in an additional note. The additional note referred to in paragraph 1 sub-item (d) of this item for each revenue and expenditure shall include:
(a) information on the distribution methodology; and (b) explanation for the application of the distribution methodology.
5. The payment card schemes and the processing entities shall be obliged to prepare separate
explanatory notes for each mutual transfer of financial assets for the purposes of the provision of services or the use of joint services, in accordance with item 12 of this Decision. These explanatory notes shall include the prices and the fees for those services, regardless of the organizational setup between them, and shall be an integral part of the financial information referred to in item 3 of this Decision. If the payment card schemes and the processing entities belong to the same legal entity or group, the explanatory notes referred to in paragraph 1 of this item shall state the evidence that the prices and the fees for the mutual services or for the use of joint services do not differ from the prices and the fees for the same services or in their absence, on them comparative services paid between the payment card schemes and the processing entities which do not belong to the same legal entity or group.
6. The financial information referred to in items 3, 4 and 5 of this Decision shall be revised on
an annual basis by an audit company, which prepares an audit report, in accordance with the audit regulations. The audit report referred to in paragraph 1 of this item shall provide:
(a) an opinion on the trustworthiness and impartiality of the financial information prepared by the payment card schemes and the processing entities and their compliance with the applicable accounting regulations; (b) compliance of the financial information with the distribution policies from the previous years or, in case of non-compliance, an explanation why the distribution policy has been amended, and recalculation of the value for last year.
III. INTERNAL ORGANIZATION
7. The payment card schemes and the processing entities that are not established as two
separate legal entities shall be organized in two separate internal organizational units.

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8. The payment card schemes and the processing entities located in the same commercial
property shall be organized in separate premises equipped with limited and controlled access.
9. The senior management of the payment card scheme or the organizational unit of the
payment card scheme shall differ from the senior management of the processing entity or the senior management of the organizational unit of the processing entity and they shall act autonomously. The senior management of the payment card scheme or the organizational unit of the payment card scheme shall not work for a processing entity or an organizational unit of the processing entity, and vice versa, for at least one year once their employment relationship in the entity for which they worked before, terminates.
10. The employees of the payment card schemes shall differ from the employees of the
processing entity.
The employees of the payment card scheme and the employees of the processing entity can carry out work tasks related to the provision of joint services, as stated in item 12 of this Decision. The employees of the processing entity can carry out work tasks related to the preparation of the single sum of rules, practices, standards and / or instructions for application, and in relation to the execution of card-based payment transactions, if:
(a) the work tasks related to the designing of the single set of rules can be carried out by other processing entities on a non-discriminatory basis; (b) the design of those rules shall include a representative sample of all processing entities which participate in the payment card scheme.
11. The processing entities shall be obliged to adopt remuneration policies that shall not
encourage the employees to act toward certain payment card schemes in a privileged way nor shall they provide them with privileged information of a sensitive nature, which is not available to the other competitors. The remuneration of the employees shall reflect the performance of the processing entity and it shall not be allowed directly or indirectly to be associated with the performance of the payment card scheme, to which the processing entity provides services. The payment card schemes shall be obliged to adopt remuneration policies that shall not encourage the employees to act toward certain processing entity in a privileged way nor shall they provide them with privileged information of a sensitive nature, which is not available to the other competitors. The remuneration of the employees shall reflect the performance of the payment card schemes and it shall not be allowed directly or indirectly to be associated with the performance of the processing entity.
12. The payment card schemes and the processing entity which use joint services, shall
describe the joint services and the conditions, including the financial conditions under which the services are provided, in a single document.
13. The information management system jointly used by the payment card scheme and the
processing entity shall ensure that:
(a) the employees of the payment card scheme and the processing entity shall be identified separately through the authentication procedure, thus granting access to the information management system; (b) the users shall have access only to the information for which they have the right in accordance with this Decision. The employees in the payment card scheme shall have no access to the sensitive information referred to in item 14 of this Decision, and

4 which refer to the processing entity, and vice versa, the employees in the processing entity shall have no access to the sensitive information of the payment card scheme.
14. The payment card schemes and the processing entity must not exchange information of
a sensitive nature with which they get a competitive advantage, if such information is not shared with the other competitors.
15. The payment card schemes and the processing entities, which belong to the same legal
entity or group, shall be obliged to prepare a Code of Conduct which lays down the procedures of their employees and shall publish it on their web site in order to provide compliance with this Decision. The Code of Conduct shall also provide for the effective mechanisms for its implementation. The Code of Conduct shall define the rules in order to prevent the sharing of sensitive information between the payment card schemes and the processing entity in accordance with item 14 of this Decision.
IV. INTERNAL DECISION-MAKING PROCESSES
16. The payment card schemes and the processing entities shall ensure that in the structure
of the governing body there will not be a conflict of interests in the decision-making process between the payment card scheme and the processing entity, so that they will lay down clear and objective criteria according to which the same person at the same time can have a function of a manager in the governing body of the payment card scheme and in the governing body of the processing entity. These criteria should be publicly available. The governing bodies of the payment card scheme and the processing entity which belong to the same legal entity or group shall approve and shall periodically check the policies of a conflict of interests in order to manage and monitor the compliance with this Decision. For the purposes of paragraph 2 of this item and when the function of a manager can be carried out by the same person who is a member of the governing body of the payment card scheme and the governing body of the processing entity, the payment card schemes and the processing entities shall establish:
(a) a separate governing body responsible for the decisions related to the activities of the payment card scheme, with the exception of the joint services referred to in item 12 of this Decision, and which is composed of the members of the governing body who do not carry out any executive function in relation to the processing activities. These members shall advise the governing body about the strategy of the payment card scheme in accordance with this Decision and shall help it in the supervision of the implementation of that strategy by the senior management; (b) a separate governing body responsible for the decisions related to the processing activities, with the exception of the joint services referred to in item 12 of this Decision, and which is composed of the members of the governing body who do not carry out any executive function in relation to the activities of the payment card scheme. These members shall advise the governing body about the strategy of the processing entity in accordance with this Decision and shall help it in the supervision of the implementation of that strategy by the senior management; (c) independent lines of reporting between the senior management of the organizational unit of the payment card scheme or the processing entity, depending on the case, and toward the governing body.

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The governing body shall be fully responsible for ensuring compliance with this Decision.
17. The payment card schemes and the processing entities shall be obliged to prepare
independent annual operational plans which determine the budget and the capital and operational expenditures, as well as information on the possible authorizations for monitoring those expenditures. The independent annual operational plans referred to in paragraph 1 of this item shall be submitted to the governing bodies of the payment card schemes and the processing entities or, if necessary, to the governing body referred to in item 16 of this Decision.
V. CLOSING PROVISIONS
18. This Decision shall enter into force on the eighth day from the day of its publication in the
Official Gazette of the Republic of North Macedonia, and shall apply from 1 January 2023.
19. This Decision shall cease to be valid on the day of the accession of the Republic of North
Macedonia to the European Union.
D No. 02-15/XX-12/2022
25 November 2022
Skopje
Anita Angelovska Bezhoska
Governor and Chairperson of the National Bank of the Republic of North Macedonia Council