Payment System Oversight: Outcomes of the WB Global Payment Systems Survey 2008 Global Payments Week 2008 Jose Antonio Garcia The World Bank

The World Bank’s Global Payment Systems Survey 2008 Covered 128 central banks and 142 countries Topics covered: –i) Legal Framework –ii) Large Value Payment Systems –iii) Retail Payment Systems –iv) Foreign Exchange Settlement Systems –v) Securities Settlement Systems –vi) Remittances –vii) Payment System Oversight –viii) Current Reforms

The World Bank’s Global Payment Systems Survey 2008 WB Publication: –“Payment Systems Worldwide: A Snapshot. Outcomes of the Global Payment Systems Survey 2008”. Available at:

Oversight topics covered in the Global Payment Systems Survey 2008 Legal Powers Organizational Issues Objectives Scope Instruments Cooperation With other authorities With other stakeholders

Accronyms used for World regions AFR = Sub-Saharan Africa EAP = East Asia and Pacific ECA = Europe and Central Asia* LAC = Latin America and the Caribbean MNA = Middle East and North Africa SA = South Asia EU-15 = European Union 15 “older” members EU-NM = European Union “new” members ODC = Other Developed Countries * In the WB classification, ECA actually comprises the EU-NM

Legal Powers for Oversight

1. Legal Powers for Oversight: World Figures

Figures do not add up to 100% as some central banks checked both the “no formal powers” and “implicit empowerment” options No Formal Powers –Of 12 central banks with no formal powers, 8 are in the LAC region Implicit or Explicit Empowerment –Implicit mainly in LAC (80%) –Explicit above average in EAP, ECA, EU and ODC –Difficulties for consistent interpretation: some central banks may regard some legal text as “explicit empowerment”, while others consider the same text as “implicit empowerment”

Organizational Arrangements

2. Organizational Arrangements: World Figures

Oversight Function Established in Practice –Below the average: LAC (43%), MNA (50%), SA (50%) –Above the average: EAP (80%), EU-15 (100%), ODC (86%) Specific Unit perform the Oversight Function –Trends by region similar as above. –Noteworthy is that 17 central banks already established a unit despite oversight not yet established formally in practice Segregation Oversight vs. Operations –Below the average: EAP (50%), LAC (43%), SA (42%), EU- NM (42%) –Above the average: EU-15 (100%)

Objectives

3. Objectives of Oversight: World Figures

Objectives set down in Regulation/Policy Document –Below average: ECA (56%), LAC (43%), MNA (58%), EU-NM (58%) –Above average: EU-15 (100%), ODC (79%) Objectives: Safety and Efficiency only –Mainly in ECA (81%), and ODC (71%) Broader Objectives –Mainly in EAP (50%), AFR (50%), EU-NM (42%) In general, the lower a country’s income, the broader the objectives of Oversight: 48% for low-income, while 20% for high-income

Scope

4. Scope of Oversight: World Figures

With regard to SIPS (RTGS or similar), all world regions are close to the world average SIPS including SSS and FX settlement systems –Above the average: EAP (50%), AFR (55%), EU-15 (47%), ODC (64%) Oversight of all payment systems as long as these are operated by banks is more common in low- income countries Objectives vs. Scope –While many low-income countries have embraced broader objectives, their scope is generally more limited than that for higher income countries

Instruments

5. Instruments of Oversight: World Figures (frequency for each instrument rated “highly relevant”)

Monitoring and dialogue & moral suasion are “highly relevant” oversight instruments in all world regions; slighltly more so in high-income countries. Publication of statistics and other relevant information was ranked higher among EU countries (67%), and lower in EAP (20%) and MNA (8%) Regulations and sanctions were ranked highest in EAP (70%) and SA (50%), and lowest in EU-15 (13%) and ECA (19%) On-site inspections as part of the Oversight function are regarded as relevant instruments in lower-income countries

Cooperation

6. Cooperation with other Authorities: World Figures

6. Cooperation with other Stakeholders: World Figures

LAC is the region with the highest number of countries that indicated “no significant cooperation” is in place Formalized cooperation with other authorities is more common in higher income countries (EU-15), and also in SA –EAP, LAC and MNA are all well below the average A formal NPC is especially common in AFR (70%) and EU-15 (60%), and much less so in EU-NM (8%), EAP (10%) and ODC (14%).

Concluding Remakrs

Overall, central banks are increasingly devoting efforts to put into place their Oversight function –Only a 3-5 years ago this was not the case, at least in emerging economies Inadequate legal empowerment has not stopped some (few) central banks from carrying out certain oversight activities – At the same time, even with “adequate” legal empowerment some central banks have not yet established in practice their Oversight function

Formally adopting broad objectives and/or a comprehensive scope does not necessarily reflect on how Oversight is carried out in practice –Still many central banks that have adopted “broader” oversight objectives or a comprehensive scope still limit their oversight activities to ensuring the safety and efficiency of the central bank-operated RTGS or similar –Lack of capacity? Learning curve? Overall, answers to the WB’s Global Survey are consistent with WB’s operational experience –There are, however, some exceptions, basically some countries overstating what they have in place at the moment –Probably related to insufficient understanding/awareness of existing literature and the international debate?

Thank you Jose Antonio Garcia Payment Systems Development Group The World Bank +1 (202) PPP Goals