Payment System Oversight: Outcomes of the WB Global Payment Systems Survey 2008

Global Payments Week 2008

Jose Antonio GarciaThe 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: www.worldbank.org/paymentsystems

Oversight topics covered in the Global Payment Systems Survey 2008

• Legal Powers

• Organizational Issues

• Objectives

• Scope

• Instruments

• CooperationWith 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

8%

50%47%

0%

10%

20%

30%

40%

50%

60%

No FormalPowers

PowersIMPLICIT

PowersEXPLICIT

• 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

72%78%

66%

0%

30%

60%

90%

Oversight FunctionEstablished in

Practice

Specific Unit forOversight

Oversight Functionseparated from

Operations

• 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

70%

63%

32%

0%

30%

60%

90%

Objectives set down inregulation/policy

document

Objectives include only"safety" and "efficiency"

Objectives also includecompetition, consumer

protection, others

• 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

55%

39%

16%

57%

0%

25%

50%

75%

SIPS: onlyRTGS orsimilar

All SIPS,including

SSS and FX

All paymentsystems if

operated bybanks

All paymentsystems

regardless ofoperator

• 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”)

83

55

4843

26

0

20

40

60

80

100

Monitoring Dialogue andMoral Suasion

Publication ofStatistics andOther Reports

Regulationsand Sanctions

On-siteInspections

• 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

9%

40%

45%

0%

10%

20%

30%

40%

50%

No significant cooperation Ad-hoc and informalCooperation

Cooperation through MOUor similar

6. Cooperation with other Stakeholders: World Figures

41%

55%

21%

25%

0%

15%

30%

45%

60%

A formal NationalPayments Council

is in place

Strategicconsultations with

senior levels,encompassing allrelevant players

Bilateralconsultations,

mostly on specificoperational issues

Consultations onlywith Bankers'Association or

similar

• 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 GarciaPayment Systems Development Group

The World Bank

jgarciagarcialun@worldbank.org+1 (202) 473-2383

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