Regulation No. 2013-03 on the Clearing Guarantee Fund

REGULATION ON THE CLEARING GUARANTEE FUND
Year 2013 / Number 03
(Text in force as of 30/09/2017 – Update II)

Central Bank of the Republic of San Marino
Regulation No. 2013-03 on the Clearing Guarantee Fund – Update II

PART I
PROVISIONS ON THE CLEARING GUARANTEE FUND

Art. 1 – Definitions

1. For the purposes of this Regulation, the following terms are understood as:

• “Central Bank” or “BCSM”: the Central Bank of the Republic of San Marino;
• “clearing banks”: foreign banks, contracted with the Central Bank, which provide payment services on a contractual basis in favor of cleared banks and their customers;
• “cleared banks”: San Marino banks that, in providing payment services to their customers, rely on Italian and European payment systems;
• “Fund”: the clearing guarantee fund;
• “Law”: Law No. 200 of 22 December 2011.

2. In the subsequent articles, words referring to these definitions are printed in bold.

Art. 2 – Purpose

1. This Regulation, issued pursuant to Article 66 of the LAW, aims to regulate the methods of establishment, funding, and operation of the FUND, to which banks contributing – on a contractual basis – to the clearing services offered by foreign intermediaries, members of Italian and European payment systems, contribute.

Art. 3 – Initial Amount and Subsequent Adjustments

1. The FUND has the nature of independent assets and is managed by the CENTRAL BANK under the mandate of the legislator.
2. The initial amount of the FUND is set at 650,000 euros. In accordance with what is provided for in Article 66 of the LAW, BCSM may, by its own decision, adjust its amount, also taking into account the conditions set by foreign intermediaries for the continuation of contractual clearing relationships.

Art. 4 – Contribution Methods

1. All CLEARED BANKS are required to participate in the FUND. The amount of individual contribution is established by the CENTRAL BANK in proportion to the savings collection of each CLEARED BANK, with a minimum share of 25,000 euros remaining fixed. For the determination of savings collection, as derived from the accounting situations sent by the CLEARED BANKS to the CENTRAL BANK based on the signposting models in force from time to time, reference is made to Art. I.I.2, paragraph 1, point 62, of BCSM Regulation No. 2007-07.
2. If the assets of the FUND are used pursuant to this Regulation, within the month following its use, the amount is replenished by the CLEARED BANKS in proportion to the amount of savings collection referred to at the end of the solar quarter preceding that of use. The CENTRAL BANK communicates to the participating banks the amount due based on the data resulting from the last accounting situation.
3. The contribution share is returned to banks that cease to be cleared due to the transformation of the corporate object, dissolution and consequent voluntary liquidation, or compulsory administrative liquidation. Shares paid by banks that have undergone concentration processes (merger, merger by incorporation, transfer of the entire banking business branch, etc.) are not subject to refund and are therefore attributed to the bank resulting from the concentration operation.
4. Banks established after the entry into force of this Regulation are required to adjust the minimum contribution share of 25,000 euros after a semester from the start of clearing relationships. The BCSM communicates the amount due in proportion to the savings collection resulting from the monthly supervisory report of the newly established bank, referred to the sixth month following the start of the clearing relationship.
5. The liquid assets paid to fulfill contribution obligations are deposited in an account opened with the CENTRAL BANK, remunerated at the rate provided for for the deposit locked for mandatory reserve purposes. The individual contribution share, given its mutualistic purpose in support of the orderly functioning of the payment system, is recognized as a deduction from the mandatory reserve of each CLEARED BANK.
6. The CENTRAL BANK, once the amount of the FUND is determined, communicates to the participating banks the amount due proportionally by each and proceeds to debit, ex officio, the aforementioned sums on accounts opened with it, in accordance with what is provided for in the subsequent Article 7.

Art. 5 – Fund Management Methods

1. The intervention of the FUND in favor of the CLEARING BANK will occur upon the occurrence of the following conditions:
   a) formal notice of default of the CLEARED BANK by the CLEARING BANK, to be carried out within a maximum term of 5 working days in the presence of a debit balance on the reciprocal account. The communication of notice of default is transmitted for knowledge to the CENTRAL BANK and to the FUND, domiciled at the same CENTRAL BANK; b) suspension of clearing of the non-compliant CLEARED BANK; c) lapse of 85 days from the establishment of the debt position of the non-compliant CLEARED BANK without the same having provided for the repayment of the debt position exceeding the individual guarantees provided by each CLEARED BANK to the CLEARING BANK in accordance with the clearing agreements concluded.
2. In the presence of non-compliance in the settlement of debit balances by the CLEARED BANK in favor of the CLEARING BANK regarding payment operations intermediated by the latter, the CENTRAL BANK orders interventions of a documentary and/or inspection nature against the non-compliant CLEARED BANK deemed necessary to ascertain any situation of illiquidity.
3. In order to limit patrimonial risks for the CLEARING BANKS and the FUND in the presence of non-compliance by CLEARED BANKS, provided this is in conformity with the contractual agreements concluded by the CLEARING BANKS and the CLEARED BANKS, the CENTRAL BANK may request – in the name and on behalf of the non-compliant CLEARED BANK – the suspension of clearing services. Such request may be advanced by the CENTRAL BANK where the exposure of the CLEARED BANK towards the CLEARING BANK is higher, in total, than the entire amount of the individual guarantee provided to the CLEARING BANK and to 75 percent of the share of the non-compliant bank in the FUND.
4. The powers of ordinary and extraordinary administration of the FUND as well as the powers concerning decisions regarding FUND interventions belong to the Supervisory Coordination. In this context, the Supervisory Coordination deliberates on:
   a) the overall amount of the fund, initially set at 650,000 euros, and the criteria for its possible adjustment; b) the interventions of a documentary and/or inspection nature to be adopted against cleared banks pursuant to the previous paragraph 2; c) the request for suspension of clearing services referred to in the previous paragraph 3; d) actions aimed at recovering sums due to the FUND for an amount equal to the difference, if positive, between the amount of the intervention carried out by the FUND in favor of the CLEARING BANK and the individual contribution share of the non-compliant bank.
5. The sums recovered by any title by the CENTRAL BANK on behalf of the FUND against previous interventions against non-compliant banks pursuant to the aforementioned paragraphs 2 and 3 of this article, are attributed:

• first, for a total amount equal to the difference, if positive, between the amount of the intervention carried out by the FUND in favor of the CLEARING BANK and the individual contribution share of the non-compliant bank, to the other banks adhering to the FUND in proportion to the contribution shares of each at the time the intervention was carried out. These sums are credited pro rata to the centralized account held with BCSM by the individual CLEARED BANKS adhering to the FUND within five working days from the date of payment;
• second, to the replenishment of the individual contribution share of the non-compliant bank provided it intends to continue clearing services, in conformity with the contractual agreements with the CLEARING BANK.

6. In case of necessity and urgency, the President of the Supervisory Coordination may assume decisions within the competence of the Supervisory Coordination, subject to the subsequent ratification by the same collegial body convened for this purpose.
7. The CENTRAL BANK reports within the Annual Report to the Great and General Council on the activity of the Fund and, following the implementation of interventions, to the Committee for Credit and Savings through the Supervisory Coordination. Similar information is also provided to the banks adhering to the FUND.

PART II
AMENDMENTS TO BCSM REGULATION NO. 2009-03

Art. 6 – Amendments to BCSM Regulation No. 2009-03

1. Article 4, paragraph 4 of BCSM Regulation No. 2009-03 is replaced by the following:
   “4. The Internal Auditing structure, referred to in Art. VII.IX.6 of Regulation No. 2007-07, is required to ascertain the overall reliability of the internal procedures used for the execution of the activities referred to in the second paragraph, the adequacy of the information systems used, and the completeness of first and second-level controls. The results of the controls carried out are communicated, on a quarterly basis, to the CENTRAL BANK, by the end of the month following each solar quarter. The quarterly report must detail:
   a) the methodology used for audit checks on the process of feeding and transmitting data relevant for the Registry Archive pursuant to D.L. 14.5.2009 n. 65, specifying the evaluation metric (structured on at least three levels of judgment) and any attention indicators adopted (1); b) brief references on the methods of selection of the sample of operations/processes subject to quarterly verification; c) the man-hours dedicated to such checks in the quarter; d) the operations actually analyzed; e) the results of the controls, with a brief judgment for each of the analyzed profiles (2); f) any initiatives proposed for the removal of deficiencies found; g) follow-ups regarding previous audit interventions that concluded with a judgment of not full adequacy.
2. The modification referred to in the previous paragraph applies from the quarterly report referred to the third quarter of 2013, to be sent by 31 October 2013.

1 In the description of the analysis methodology, the indication of the methods for carrying out the audit activity carried out pursuant to BCSM Regulation No. 2009-03 is required, specifying the organizational units involved, the operational processes examined, and the types of risk considered. In this context, it is necessary to describe the criteria adopted to evaluate the efficiency and compliance of operational processes with what is required both by the reference legislation on the Registry Archive (cf. Decree-Law n. 65 of 14 May 2009 and BCSM Regulation No. 2009-03) and by contractual agreements. Regarding the results of the analysis, a breakdown of judgments into three or more levels using qualitative-quantitative ratings (e.g., evaluations such as “adequate”, “sufficient”, “deficient”) is required. Given the massive nature of the extraction, reprocessing, and feeding of information flows, it is necessary to define a set of indicators aimed at detecting, on the one hand, the anomalies recorded (e.g., rejected flows, requests for correction by BCSM or the CLEARING BANK) and, on the other hand, potentially “critical” situations (e.g., high-value operations or operations carried out on behalf of trusts, fiduciaries, or foreign anonymous companies) on which to focus attention. 2 As a mere exemplary, non-exhaustive list, the following profiles are considered:

• completeness of the registry data present in the flows to be forwarded and their correspondence with what is present in company archives;
• congruity of the data with what is provided for by Regulation No. 2009-03;
• methods of feeding asymmetric and registry flows;
• first and second-level controls on the correctness of the data present in the asymmetric and registry flows forwarded to the CENTRAL BANK and the CLEARING BANK;
• management of pending flows;
• management of errors and consequent archiving procedures;
• presence of manual areas in the feeding of flows;
• respect for contractual obligations towards the CLEARING BANK;
• verification of the correct attribution, updating, and accounting of guarantees provided to the CLEARING BANK;
• verification of the completeness and updating of data on customers and beneficial owners, especially in the presence of subjects – even foreign – of the type of fiduciary companies, trustees, anonymous companies;
• respect for forwarding deadlines;
• non-use of the CLEARING BANK for carrying out payment operations in euros to and from Italy.

PART III
FINAL PROVISIONS

Art. 7 – Initial Contribution Share and Subsequent Adjustments

1. For the year 2013, the contribution shares referred to in the previous Article 4, paragraph 1 are calculated based on the savings collection of the CLEARED BANKS as of 31.03.2013 and communicated by the CENTRAL BANK by 31 July 2013, with debit on 30 August 2013.
2. The adjustment of the individual contribution share based on the dynamics of savings collection is communicated by the CENTRAL BANK by 31 March of each year based on the data resulting from the accounting situation referred to at the end of the previous year, with credit/debit on the last working day of the subsequent month of April of the differences resulting compared to the individual share already paid, ensuring, in any case, the minimum overall amount of the FUND of 650,000 euros.
3. Any modifications to the amount of the FUND, determined pursuant to Article 3, paragraph 2 of this Regulation, are communicated by the CENTRAL BANK to the CLEARED BANKS by registered mail with return receipt, with effect from the end of the solar month following that of sending the communication. The communication indicates the reasons underlying the decision and specifies the criteria adopted for the determination of the new amount, deliberated by the Supervisory Coordination pursuant to the previous Article 5, paragraph 4, letter a).