Four SIPS is enough

On 21 August 2014, the Governing Council of the ECB announced that it has identified four systemically important payment systems (SIPS):

• TARGET2 (operated by the Eurosytem),
• EURO1 and STEP2-T (both operated by EBA CLEARING) and
• CORE(FR) (operated by STET)

The SIPS are given one year to comply with the Regulation on oversight requirements for SIPS which entered into force on 12 August 2014. This Regulation is part of the international effort of harmonisation covering financial market infrastructures, as embodied by the Principles for Financial Market Infrastructures (PFMIs) released by the CPSS and the Technical Committee of the IOSCO in April 2012.

Ultimately, the PFMIs are meant to apply to at least five key types of FMIs:  systemically important payment systems (SIPS), central securities depositories (CSDs) and securities settlement systems (SSSs) (previously discussed here), central counterparties (CCPs) and trade repositories (TRs).

The SIPS are payment systems that meet at least two of the following criteria for a calendar year:

• the total daily average value of euro-denominated payments processed exceeds EUR 10 billion;
• its market share is at least one of the following:

15 % of total volume of euro-denominated payments

5 % of total volume of euro-denominated cross-border payments

75 % of total volume of euro-denominated payments at the level of a Member State whose currency is the euro

• its cross-border activity (i.e. participants established in a country other than that of the SIPS operator and/or cross border links with other payment systems) involves five or more countries and generates a minimum of 33 % of the total volume of euro-denominated payments processed by that SIPS
• it is used for the settlement of other FMIs

SIPS will have to meet a full spectrum of requirements aimed at ensuring legal soundness, credit, liquidity, operational, general business risk and other risks.

In a rare burst of regulatory foresight, the ECB recognised early in the regulatory process that making all retail payment systems subject to the full set of requirements of the regulation would not be proportionate from a risk perspective. The payment systems that do not meet the criteria mentioned above will be exempt from the regulation. Instead, the PFMIs, or a limited sub-set thereof, will apply

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