Regulation of the Banque centrale du Luxembourg 2010/No.6 of 8 September 2010 on the oversight of payment systems, securities settlement systems, payment instruments, central counterparties and trade repositories in Luxembourg

BANQUE CENTRALE DU LUXEMBOURG

Regulation of the Banque centrale du Luxembourg 2010/No.6 of 8 September 2010 on the oversight of payment systems, securities settlement systems, payment instruments, central counterparties and trade repositories in Luxembourg

The Management of the Banque centrale du Luxembourg,

Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 127(2) and (5) thereof;

Having regard to Articles 3.1 and 22 of the Statutes of the European System of Central Banks (ESCB) and of the European Central Bank;

Having regard to Article 108bis of the Constitution;

Having regard to the Law of 23 December 1998 (hereinafter referred to as the "Law") on the monetary status and the Banque centrale du Luxembourg (hereinafter referred to as the "Central Bank"), as amended, in particular Articles 2(5), 27-3 and 34(1);

Considering that, pursuant to Article 2(5) of the Law, "In view of its mission regarding the promotion of the proper functioning of payment systems, the Central Bank ensures the efficiency and safety of payment systems and securities settlement systems, as well as the safety of payment instruments. The modalities for coordination and cooperation for the exercise of this mission are subject to agreements between the Central Bank and the Commission de Surveillance du Secteur Financier, respecting the legal competences of the parties";

Considering Article 27-3 of the Law providing that "For the purpose of carrying out the mission defined in Article 2 paragraph 5, the Central Bank may request information from payment systems and securities settlement systems regarding the operation of these systems which it needs to assess their efficiency and safety, and it may request information from issuers of payment instruments regarding the payment instruments which it needs to assess their safety. The Central Bank is authorized to carry out on-site visits to collect the information referred to in paragraph 1. To this end, it coordinates with the Commission de Surveillance du Secteur Financier.";

Considering Article 34(1) of the Law providing that "Within the limits of its competences and missions, the Central Bank has the power to adopt regulations. The regulations of the Central Bank are published in the Mémorial.";

Having regard to the Law of 10 November 2009 on payment services, the electronic money institution business and finality in payment systems and securities settlement systems;

Having regard to the Law of 20 May 2011 (on the business of electronic money institutions);

Considering, pursuant to the Opinion of the European Central Bank of 13 January 2011 (CON/2011/1) (2011/C 57/01), that the central banks of the Eurosystem have the mission to maintain financial stability as well as the safety and efficiency of financial infrastructures, "this role is undertaken both by the central banks responsible for the oversight of central counterparties and trade repositories and by the central banks issuing the currencies used for transactions cleared by central counterparties or recorded by trade repositories".

Art 1. Definitions

"System": a system enabling the transfer of funds and/or securities and which is governed by standardized formal procedures and common rules for the processing, clearing or settlement of payment operations and/or securities transactions.

"System Operator": the entity or entities legally responsible for the operation of a system. A system operator may also act as a settlement agent, central counterparty or clearing house.

"Payment Instrument": a personalized device and/or a set of procedures enabling a natural or legal person to deposit, transfer or withdraw funds.

"Issuer of Payment Instruments": a legal person which, within the framework of its commercial activity, makes a payment instrument available to the public.

"Governance Authority": a central organization responsible for the proper functioning of the payment instrument and compliance with the rules by the actors involved. It is the main contact point for authorities.

"Technical Agent": a service provider with whom a system operator, an issuer of payment instruments, a governance authority, a central counterparty or a trade repository has placed or centralized a significant part of its operational and/or technical infrastructure.

"Central Counterparty": a legal entity that interposes itself between the counterparties to financial transactions on one or more markets, thereby becoming the buyer vis-à-vis each seller and the seller vis-à-vis each buyer.

"Trade Repository": an electronic register centralizing the collection, storage and dissemination of information relating to transactions on derivative products.

Art 2. Scope of Application

1. The Central Bank exercises oversight of the systems it designates and operating in Luxembourg under Article 2(5) of the Law.
2. The Central Bank exercises oversight of payment instruments, which include in particular credit transfers, direct debits, payment cards and electronic money schemes. The Central Bank is authorized to ensure the oversight of payment instruments in other forms made available to the public in Luxembourg.
3. The Central Bank exercises oversight of central counterparties and trade repositories established in Luxembourg.

Art 3. General Oversight Framework

1. To exercise its oversight, the Central Bank applies in particular decisions adopted by the Governing Council of the European Central Bank relating to recommendations, principles and standards, including evaluation methodologies. The Central Bank ensures in particular the application of the recommendations included in the annex to this regulation.
2. The oversight by the Central Bank covers the safety and efficiency of systems, central counterparties and trade repositories; it also covers the safety of payment instruments.
3. The Central Bank exercises its oversight regarding the operating rules and contracts of the system. Its oversight also extends to the system itself, including operators, services (in particular operational and IT services) provided by technical agents or third-party entities, and participants depending on the risk situation resulting from their participation in the system.
4. The Central Bank's oversight regarding payment instruments applies in particular to issuers and governance authorities, services (in particular operational and IT services) provided by technical agents or third-party entities, operating rules and contracts.
5. The Central Bank exercises its oversight regarding central counterparties and entities operating trade repositories, as well as operating rules and contracts. Its oversight also extends to services (in particular operational and IT services) provided by technical agents or third-party entities.

Art 4. Implementation Modalities

1. The Central Bank oversees systems, payment instruments, central counterparties and trade repositories by collecting all useful information available to it under its various missions and through cooperation with other central banks and prudential supervisory authorities. The Central Bank indicates in particular to the entities concerned the qualitative and quantitative information that must be provided to it, as well as the frequency of such information. The Central Bank determines the communication and transmission modalities for the purposes of this regulation.
2. The Central Bank may require system operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories concerned to carry out regular self-assessments of their level of compliance with the applicable recommendations, principles and standards referred to in Article 3.
3. The Central Bank carries out the controls it deems appropriate. It is in particular authorized to carry out on-site inspections at system operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories concerned.
4. The Central Bank may, within the framework of its oversight, address specific recommendations or instructions to system operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories concerned.

Art 5. Obligations of System Operators, Issuers of Payment Instruments, Governance Authorities, Central Counterparties and Trade Repositories

1. System operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories put in place a risk management framework for the system, payment instrument, central counterparty and/or trade repository adapted to the volume and complexity of their activity. The framework relies on an organization, internal procedures and rules allowing effective governance, monitoring and control of the safety and/or efficiency of the system, payment instrument, central counterparty and/or trade repository, associated risks, and applicable legal and operational environments. System operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories follow the oversight recommendations, principles and standards referred to in Article 3.1.
2. System operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories are required to provide the Central Bank with all information it deems useful for the accomplishment of its oversight mission.
   These information include among others:

• general information relating to systems, instruments, central counterparties or trade repositories,
• data relating to activity, incidents, fraud,
• financial data,
• information relating to the risks to which systems, instruments, central counterparties or trade repositories are exposed, as well as to internal risk mitigation tools,
• information relating to changes affecting systems, instruments, central counterparties or trade repositories,
• information relating to governance and internal rules and procedures.

3. System operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories designate one or more duly mandated contact persons to deal with the Central Bank within the framework of its oversight mission.

Art 6. International Cooperation

The Central Bank cooperates within the framework of its oversight mission with other central banks, in particular within the Eurosystem and the European System of Central Banks (ESCB), as well as with prudential supervisory authorities.

Art 7. Publication

This regulation is published on the website of the Central Bank (www.bcl.lu) and in the Mémorial. The annexes of the regulation as updated are published on the website of the Central Bank (www.bcl.lu).

The Central Bank also makes available to the public the official list of systems, central counterparties and trade repositories that it oversees via its website (www.bcl.lu).

Art 8. Sanctions

1. Without prejudice to financial sanctions, the Central Bank may take administrative sanctions up to the implementation of the procedure for revocation of the designation of the system in case of non-compliance with the provisions of this regulation.
2. The Central Bank may report any breach of the provisions of this regulation to other financial sector supervisory authorities or to the Minister having the financial market within his responsibilities. It may make public the recommendations or instructions it is led to take.

Art 9. Miscellaneous Provisions

1. The Central Bank adapts its oversight of systems, payment instruments, central counterparties and trade repositories in application of the principle of proportionality.
2. This regulation is supplemented by annexes.
3. BCL Circulars 2001/163 and 2001/168 are repealed.

Art. 10. Entry into Force

This regulation enters into force on the day of its publication.

BANQUE CENTRALE DU LUXEMBOURG
The Management

Annexes:

1. Recommendations of the European System of Central Banks and the Committee of European Securities Regulators relating to securities settlement systems (ESCB-CESR recommendations for securities settlement systems, May 2009, www.bcl.lu)
2. Core Principles of the Committee on Payment and Settlement Systems relating to systemically important payment systems (CPSS Core principles for systemically important payment systems, January 2001, www.bcl.lu)
3. Oversight standards for retail payment systems (Oversight standards for euro retail payment systems, June 2003, www.bcl.lu)
4. Harmonised oversight approach and oversight standards for payment instruments (Harmonised oversight approach and oversight standards for payment instruments, February 2009, www.bcl.lu)
5. Oversight framework for card payment schemes (Oversight framework for card payment schemes – standards, January 2008, www.bcl.lu)
6. Security objectives for electronic money systems (Electronic money systems security objectives, ECB, May 2003, www.bcl.lu)
7. Report on electronic money (Report on electronic money, ECB, August 1998, www.bcl.lu)
8. Oversight framework for direct debit schemes (Oversight framework for direct debit schemes, October 2010, www.bcl.lu)
9. Oversight framework for credit transfer schemes (Oversight framework for credit transfer schemes, October 2010, www.bcl.lu)
10. Eurosystem oversight policy framework (Eurosystem oversight policy framework, July 2011, www.bcl.lu)
11. CPSS-IOSCO Principles for Financial Market Infrastructures, Bank for International Settlements (April 2012, www.bcl.lu)