Instruction No. 8/2023

Instruction No. 8/2023 BO No. 3/2023 Supplement • 2023/03/17 .................................................................................................................................................................................................. Topics Payment Systems :: Clearing Mod. 99999940/T – 01/14 Index Text of the Instruction «Annex II - SICOI Monitoring Committee Text of the Instruction Subject: Amending Instruction No. 8/2018 The TARGET-PT Regulation, the national component of TARGET – Instruction No. 16/2022, reflecting ECB Guideline ECB/2022/8 and repealing the TARGET2-PT Regulation (cf. Instruction No. 54/2012, of January 15, 2013), was recently published in the Official Bulletin of the Bank of Portugal No. 10/2022, of October 17, in the context of the launch of the new TARGET services on March 20, 2023. In this context, it is also necessary to revise the regulation of the Interbank Clearing System (SICOI), contained in Instruction No. 8/2018, of March 22, since SICOI is, in light of the TARGET-PT Regulation, a peripheral system, the rules of which must therefore be adapted in the context of the consolidation of TARGET services. Complementarily, the text of the Instruction was updated, namely with the aim of: i) introducing a new model for the approval and distribution of the operating manuals of the SICOI subsystems; ii) promoting specific changes to the conditions for direct and indirect participation in the System, with a view to its flexibility; and iii) reviewing the SICOI fee schedule. Thus, under the competence attributed to it by Article 14 of its Organic Law and by Article 92 of the General Regime of Credit Institutions and Financial Companies (RGICSF) regarding the regulation, supervision and promotion of the proper functioning of payment systems, the Bank of Portugal amends the provisions of Instruction No. 8/2018 – Regulation of the Interbank Clearing System (SICOI) –, determining the following: Instruction No. 8/2018, of March 22, is amended as follows:

1. The expression “TARGET2” is replaced by the expression “TARGET”.
2. The expression “TARGET2-PT” is replaced by the expression “TARGET-PT”.
3. The expressions “peripheral system settlement procedure No. 5 (“simultaneous multilateral settlement”) described in the TARGET2-PT Regulation” and “peripheral system settlement procedure No. 5 of TARGET2 (“simultaneous multilateral settlement”)” are replaced by “peripheral system settlement procedure ‘A’ described in the TARGET2-PT Regulation”.
4. The expression “peripheral system settlement procedure No. 3 (“bilateral settlement”) described in the TARGET2-PT Regulation” is replaced by “peripheral system settlement procedure ‘E’ described in the TARGET2-PT Regulation”.
5. References to “account held with the Bank of Portugal” are replaced by references to “opening of a Main Cash Account (CNP) in TARGET-PT, used exclusively for the establishment of a value reserve”.
6. References to “own settlement account in any of the national systems that are components of TARGET2”, “settlement account” and “settlement account in TARGET2” are replaced by references to “Dedicated Cash Account for Real-Time Gross Settlement (CND LBTR)” or “CND LBTR”.
7. References to “account in TARGET Instant Payment Settlement (TIPS)” are replaced by references to “peripheral system technical account of the TARGET Instant Payment Settlement Service (TIPS) (technical account SP TIPS) in TARGET-PT for the settlement of instant transfers”.
8. References to “TIPS dedicated cash account” are replaced by references to “Dedicated Cash Account of the TARGET Instant Payment Settlement Service (CND TIPS) for the settlement of instant transfers”.
9. The expression “TIPS dedicated cash account” is replaced by the expression “CND TIPS”.
10. The expression “the rules of TIPS” is replaced by the expression “the TARGET-PT Regulation.”
11. Paragraph 1 of Instruction 8/2018, of March 22, shall read as follows: «The addressees of this Instruction are the participants in the Interbank Clearing System (SICOI) and the processing entity.»
12. Paragraph 2.1 of Instruction No. 8/2018, of March 22, shall read as follows: «2.1. The Bank of Portugal carries out, through SICOI, the clearing and financial settlement of operations processed in the clearing subsystems of: a) Cheques; b) Commercial bills; c) Direct debits; d) Credit transfers; e) Card-based payment operations; f) Instant transfers.»
13. Paragraph 2.9 of Instruction No. 8/2018, of March 22, shall read as follows: «2.9. In the instant transfer clearing subsystem, payment orders expressed in euros, payable by any payment service provider participating in the subsystem, are presented, with immediate availability of funds to the beneficiary.»
14. Paragraph 5.1 of Instruction No. 8/2018, of March 22, shall read as follows: «5.1. For direct participation in any of the clearing subsystems, it is necessary for the participant to indicate a Dedicated Cash Account for Real-Time Gross Settlement (CND LBTR) in any of the national systems that are components of TARGET.»
15. Paragraph 5.2 of Instruction No. 8/2018, of March 22, shall read as follows: «5.2. Direct participation in any of the clearing and deferred settlement subsystems of SICOI requires: a) The opening of a Main Cash Account (CNP) in TARGET-PT, used exclusively for the establishment of a value reserve, in accordance with the terms and conditions set out in paragraphs 30 to 33 of this Regulation; b) The establishment of a value reserve, which may be provided by depositing cash in the account referred to in the previous subparagraph, and/or through liquidity granted by the Bank of Portugal secured by assets eligible for Eurosystem credit operations, in accordance with the terms and conditions set out in paragraphs 30 to 33 of this Regulation.»
16. Paragraph 5.4 of Instruction No. 8/2018, of March 22, shall read as follows: «5.4. The Bank of Portugal may, in duly justified exceptional circumstances, to ensure the regular functioning of the retail payment market and the SICOI subsystems and to safeguard possible prudential or systemic risks, exempt direct participants from the obligation referred to in paragraph 5.2.»
17. Paragraph 6 of Instruction No. 8/2018, of March 22, shall read as follows: «6. Conditions for indirect participation 6.1. For indirect participation in any of the clearing subsystems, it is necessary that the representation of the applicant is ensured by a direct participant in SICOI. 6.2. The introduction of payment operations in the various subsystems of SICOI is, under the terms of paragraph 5 of Article 2-B of Decree-Law No. 221/2000, of September 9, the sole responsibility of the direct participants.»
18. A new paragraph 7.1.4 is added to Instruction No. 8/2018, of March 22, with the following wording, renumbering the subsequent points and updating the references contained in paragraph 7: «7.1.4. The approval by the Bank of Portugal of the participation request submitted under the terms of paragraph 7.1.1. is also dependent on the applicant obtaining a Business Identifier Code (BIC) and an institution code to be provided by the Bank of Portugal;»
19. Paragraph 11.1 is added to Instruction No. 8/2018, of March 22, with the following wording, renumbering the subsequent points: «11.1. SICOI is a peripheral system for the purposes of the definition contained in point 3) of Annex III of the TARGET-PT Regulation and fully complies with what is set out in Annex I, ‘Part VI - Special Terms and Conditions for Peripheral Systems using Real-Time Gross Settlement Procedures for Peripheral Systems’ and ‘Part VII - Special Terms and Conditions for Peripheral Systems using the TARGET Instant Payment Settlement Service (TIPS) procedure’ of the TARGET-PT Regulation (TIPS).»
20. Paragraph 22.1 of Instruction No. 8/2018, of March 22, shall read as follows: «22.1. The processing entity shall ensure the receipt and processing of the SICOI operations indicated in paragraph 21.1 of this Regulation, under the terms defined in the contract concluded with the Bank of Portugal within the framework of the functioning of SICOI and in compliance with the obligations applicable to SICOI as a peripheral system of TARGET-PT.»
21. Paragraph 25.1 of Instruction No. 8/2018, of March 22, shall read as follows: «25.1. The processing entity must comply with the minimum operational service levels defined for the processing of payment operations in each subsystem, agreed between the Bank of Portugal and the processing entity.»
22. Subparagraph d) of paragraph 28 of Instruction No. 8/2018, of March 22, shall read as follows: «d) Periodically (at least annually) with the Bank of Portugal, carry out exercises that allow testing (i) the settlement of clearing balances and operations settled directly in TARGET on an individual basis, in case of failure of the connection to TARGET, (ii) the recalculation of clearing balances in all subsystems and (iii) the activation of the SICOI guarantee mechanism.»
23. Paragraph 31.3 of Instruction No. 8/2018, of March 22, shall read as follows: «31.3. The Bank of Portugal reviews monthly, with reference to the last TARGET day of the previous month, the amount of the value reserve to be established by each direct participant under the terms of paragraph 31.1., according to the following procedures:

a) By the first TARGET day of the month, the Bank of Portugal informs each direct participant, via email sent to the previously indicated contacts, of the new amount of the value reserve to be established; b) In the event that it is necessary to increase the amount of the value reserve to be established, this increase must be made by the direct participant by the end of the second TARGET day of the month.» 24. Paragraph 32.1 of Instruction No. 8/2018, of March 22, shall read as follows: «32.1. The value reserve established by the direct participant in cash is registered in the Main Cash Account (CNP) in TARGET-PT, used exclusively for the establishment of a value reserve.» 25. Paragraph 41.1 of Instruction No. 8/2018, of March 22, shall read as follows: «41.1. The deadline for making funds available to the beneficiary is 10 seconds, counted from the exact moment when the ordering participant introduces the operation into the system, and in no case may it exceed the maximum time of 20 seconds.» 26. Paragraph 42.1 of Instruction No. 8/2018, of March 22, shall read as follows: «42.1. The fee schedule to be applied by the Bank of Portugal to participants in SICOI is based on the recovery of costs incurred with the management of SICOI and the settlement of operations in TARGET-PT.» 27. Paragraph 43 of Instruction No. 8/2018, of March 22, shall read as follows: «43. Sanctions for non-compliance with the SICOI Regulation The penalties contained in points 2 and 3 of Annex IX do not prejudice the application of fines under the terms provided for in Title XI of the General Regime of Credit Institutions and Financial Companies.» 28. Paragraph 46 of Instruction No. 8/2018, of March 22, shall read as follows: «46. Operating Manuals and Annexes 46.1. The operating manuals of the various subsystems of SICOI form an integral part of this Regulation and contain the general, functional and technical specifications relating to the processing of operations in these subsystems. 46.2. The operating manuals of the SICOI subsystems are made available to participants by the Bank of Portugal, in the Payment Systems Thematic Area of the BPnet portal (www.bportugal.net), up to two months before the date of entry into production of the changes, with notification sent by email to the contacts designated for this purpose by each participant. 46.3. Changes to the operating manuals are classified as: i) Minor changes (revisions), when they result in specific changes with little significant impact on the subsystem in question, resulting, inter alia, from small adaptations, clarifications, explanations, correction of omissions or errors, or non-substantial changes to existing functionalities; ii) Major changes (versions), when they result in changes with significant impact on the subsystem in question, resulting, inter alia, from the inclusion of new functionalities, substantial changes to existing functionalities or changes to tariffs. 46.4. In addition to the operating manuals of the SICOI subsystems, the following annexes are an integral part of this Regulation: a) Annex I - SICOI Governance Model; b) Annex II - SICOI Monitoring Committee; c) Annex III - Calendar of clearing closures and financial settlement in deferred mode and schedules; d) Annex IV - Procedures relating to cheque clearing; e) Annex V - Reasons for cheque return; f) Annex VI - Determination of the amount of the value reserve to be established by the direct participant to guarantee its clearing balances in the subsystems with clearing and deferred settlement; g) Annex VII – Framework contract for the opening of credit with guarantee of financial instruments and credit rights in the form of bank loans within the framework of the guarantee fund account mechanism of the Interbank Clearing System in TARGET-PT; h) Annex VIII – Framework contract for financial guarantee for operations in the instant transfer subsystem; i) Annex IX – Fee schedule and penalties.» 29. Annex I “SICOI Governance Model” of Instruction No. 8/2018, of March 22, shall read as follows:

«Annex I - SICOI Governance Model Level 1 Board of Directors of the Bank of Portugal Level 2 Payment Systems Department of the Bank of Portugal Level 3 Processing entity of SICOI operations Level 1 represents the final decision-making body for all issues related to SICOI and is responsible for safeguarding its public function. Level 2 exercises all competencies that have been delegated to it by Level 1 within the framework of the functioning of SICOI, namely those relating to the current management of SICOI. Level 3 ensures the receipt and processing of operations submitted by participants and draws up proposals for changes to the functioning of SICOI, in coordination with Level 2 and with the Interbank Working Groups of the Interbank Commission for Payment Systems (CISP).

1. Cost calculation policy and price determination Decides on the structure and value of: − SICOI Fee Schedules; − Interbank Tariffs; − SICOI Fee Schedules charged by the processing entity. Evaluates and submits for approval to Level 1, proposals for changes to: − SICOI Fee Schedules; − Interbank Tariffs; − SICOI Fee Schedules charged by the processing entity. Draws up proposals for changes to: − Interbank Tariffs; − SICOI Fee Schedules charged by the processing entity. Decides on the measures to be implemented to ensure the correct application of interbank tariffs and SICOI and processing entity fee schedules. Controls and evaluates the correct application of interbank tariffs and SICOI and processing entity fee schedules and, whenever necessary, proposes action measures that ensure their adequacy. Makes available the information necessary for the analysis of the application of interbank tariffs and SICOI fee schedules charged by the processing entity.
2. Service Level Decides on the minimum service levels to be offered by SICOI. Evaluates and submits for approval to Level 1, proposals for changes to the minimum service levels to be offered by SICOI. Draws up proposals for changes to the minimum service levels to be offered by SICOI. Decides on the measures to be implemented to ensure compliance with the minimum service levels. Controls and evaluates the degree of compliance with the minimum service levels stipulated by Level 1 and, whenever necessary, proposes action measures that ensure their observance. Makes available the information necessary for the analysis of compliance with the minimum service levels of SICOI, including incident reports

Instruction No. 8/2023 BO No. 3/2023 Supplement • 2023/03/17 Topics Payment Systems :: Clearing .................................................................................................................................................................................................. Mod. 99999940/T – 01/14 that affect the operational performance of SICOI. 3. Risk Management Decides on the global risk mitigation mechanisms of SICOI. Evaluates and submits for approval to Level 1, proposals for changes to the global risk mitigation mechanisms of SICOI. Maintains adequate internal risk mitigation mechanisms (from the perspective of the processing entity). Decides on the measures to be implemented to ensure adequate risk management of SICOI. Controls and evaluates the risks associated with SICOI and the adequacy of the respective mitigation mechanisms implemented and, whenever necessary, proposes action measures that ensure their adequacy. Makes available the information necessary for the analysis of SICOI risks, including information that allows monitoring the evolution of the risk mitigation mechanisms implemented by the processing entity. Be informed of the activation of the SICOI guarantee mechanism. Decides on the activation of the SICOI guarantee mechanism and communicates the activation of the SICOI guarantee mechanism to the processing entity. Ensures the operationalization of the activation of the SICOI guarantee mechanism. Decides on the activation of the clearing balance recalculation mechanism. Evaluates and submits for approval to Level 1, proposals for activation of the clearing balance recalculation mechanism. After the aforementioned approval, communicates the activation of the recalculation mechanism to the participants of the respective subsystem and to the processing entity. Ensures the operationalization of the recalculation of clearing balances. 4. Development Decides on the evolutionary changes to SICOI. Evaluates and submits for approval to Level 1, proposals for evolutionary change to SICOI. Draws up proposals for evolutionary change to SICOI, in coordination with the Interbank Working Groups of the Interbank Commission for Payment Systems (CISP). Decides, by itself or by delegation, on new versions of the operating manuals of the SICOI subsystems (major changes). Submits for approval to Level 1 new versions of the operating manuals of the SICOI subsystems (major changes). After the aforementioned approval, disseminates the manuals to the participants of the SICOI subsystems. Evaluates and decides on revisions to the operating manuals of the SICOI subsystems (minor changes). Decides on the operating calendar and on the closing and settlement times of the SICOI subsystems. Evaluates and submits for approval to Level 1, proposals for changes to the calendar and closing and settlement times of the subsystems. After the aforementioned approval, disseminates the changes to the participants of the SICOI subsystems. Draws up proposals for changes to the calendar and closing and settlement times of the SICOI subsystems. 5. Operation Decides on participation requests, changes to the type of participation and cessation of participation. Evaluates and submits for approval to Level 1, participation requests, changes to the type of participation and cessation of participation and proceeds to their communication to participants. Ensures the operationalization of participation requests, changes to the type of participation and cessation of participation. Decides on the suspension or exclusion of participants. Evaluates and submits for approval to Level 1, proposals for suspension or exclusion of participants in any subsystem. After the aforementioned approval, communicates the suspension or exclusion to the participants of the respective subsystem. Ensures the operationalization of the suspension or exclusion of participants. Decides on the measures to be implemented to ensure the proper functioning of SICOI. Controls and evaluates the functioning of the system in accordance with the operating manuals in force and, whenever necessary, proposes action measures that ensure their adequacy. Ensures technical and operational support to participants, including in particular the test activities developed by participants. »

Instruction No. 8/2023 BO No. 3/2023 Supplement • 2023/03/17 Topics Payment Systems