Mark Friend 10 November 2015 Introduction to the legal framework for the regulation of payment systems in the UK
Agenda The legal basis for payment systems regulation What are payment systems? The PSR s regulatory jurisdiction The PSR s remit Concurrency Penalties and appeals Allen & Overy 2015 *
The legal basis for payment systems regulation
The regulatory architecture of the PSR differs from other utility models Interbank payment systems PSR Card payment systems Bacs Cheque & Credit CHAPS Faster Payments Scheme LINK Northern Ireland Cheque Clearing economic regulator (with concurrent competition law powers) of HMT-designated regulated payment systems MasterCard Visa Europe HMT designates when deficiencies in the design of the system, or disruption in its operation, would be likely to have serious consequences for users of services provided by the system
What are payment systems?
What do we mean by a payment system? Arrangements for physical movement of cash A system operated by one or more persons in the course of business Systems that don t allow transfers of funds in the UK For the purpose of enabling persons to make transfers of funds Securities settlement systems Includes a system designed to facilitate transfer of funds using another payment system Systems operated by a recognised clearing house Systems that don t have as their primary purpose enabling transfers of funds
The PSR's regulatory jurisdiction
The PSR has a very broad range of powers Rules Require establishment of rules or change them Notify PSR of changes Prior PSR approval Directions Access Operator direct access Payment services provider indirect access Divestments Person with interest in operator All or part of interest Requires HMT consent Participants operator, infrastructure provider, payment service provider Positive or negative General, specific description, specified Varying agreements Between operator and payment service provider Providing for indirect access Concerning fees or charges
The PSR has issued a series of general directions and one specific direction GD1 Participants in regulated payment systems GD2 Bacs, CHAPS, C&C, Faster Payments GD3 LINK, MasterCard, VISA GD4 GB inter-bank systems GD5 GB inter-bank systems GD6 GB inter-bank systems Deal with the PSR in an open and cooperative way Disclosure obligation Access requirements: objective, risk-based, public disclosure Access requirements: public disclosure Appropriate representation of service user interests in governing body s decision-making Prohibition on directors also being director of a central infrastructure provider Publish minutes of governing body Barclays, HSBC, Lloyds, RBS Publish information on sponsor bank access services
The PSR's remit
The PSR must exercise its general functions in a way which advances one of its payment systems objectives Competition Financial stability Regulatory principles Serviceuser Innovation Objectives extend beyond designated payment systems No hierarchy
Concurrency
Concurrency: the PSR has a choice of routes 1. CA98 toolkit 2. Regulatory powers Market studies Strict time limit (6 months for notice of proposed decision; 12 months for final report) Broad powers of intervention including FSBRA powers 1 2 Market reviews No statutory time limit Broad powers of intervention under FSBRA
Penalties and appeals
Penalties and appeals Penalties no upper limit on level of penalties The appeals regime is complex CAT merits review CAT judicial review CMA hybrid review Third party appeals payment system will have very limited rights in proceedings
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