2009 Self-assessment of the Reserve Bank Information and Transfer System Central Bank Responsibilities

A. Disclosure

The central bank should define clearly its payment system objectives and should disclose publicly its role and major policies with respect to systemically important payment systems.

A.1 Assessment of compliance

The Reserve Bank complies with this disclosure responsibility.

As explained in the Regulatory Framework section above, the Reserve Bank has both a regulatory and an operational role in Australia's payments system. The Reserve Bank's regulatory responsibilities reside with its Payments System Board. A practical description of the Payments System Board's role and responsibilities, including how it is supported by the work of the Payments Policy Department of the Reserve Bank, is available on the Reserve Bank website and in Payments System Board Annual Reports.

Payments System Board policy decisions are communicated through media releases, which are published on the Reserve Bank website. Where a policy decision is of direct relevance to a payment system, or its participants, this may also be directly communicated. Regulatory decisions made by the Payments System Board, and implemented by the Reserve Bank using powers granted to it by legislation, are published in the Commonwealth of Australia Gazette. The provisions of some Acts require tabling of approvals before Parliament and can be subject to disallowance periods. The Reserve Bank maintains on its website lists of approvals granted, standards and access regimes imposed, and a range of other supporting documentation.

The Reserve Bank's role and policies as owner and operator of Australia's only systemically important payment system, RITS, are clearly defined in the RITS Regulations. The regulations are consistent with the Reserve Bank's legislative responsibilities with regard to payment systems, and are publicly available on the Reserve Bank's website. A practical description of the Reserve Bank's role and policies relating to RITS is also provided on the Reserve Bank website.

B. Compliance of Central Bank Operated Systems

The central bank should ensure that the systems it operates comply with the Core Principles.

B.1 Assessment of compliance

The Reserve Bank has established procedures to ensure that RITS complies with the Core Principles.

The Payments System Board is responsible for the oversight of the payments system under provisions in the Reserve Bank Act. As a part of this role, the Payments System Board, via the Payments Policy Department, oversees the operations of RITS. A formal self-assessment of RITS against the Core Principles is undertaken periodically by the Reserve Bank and published on the Reserve Bank's website. To date, assessments have been undertaken in 2000, 2005 and 2009.^[1]

To avoid any conflicts of interest, the Payments Settlements Department of the Reserve Bank (which is responsible for developing and operating RITS) is separate from the Payments Policy Department (which is responsible for the oversight of RITS) in the Reserve Bank's organisational structure. There are separate reporting lines up to and including the level of Assistant Governor, and Payments Policy Department also reports to the separate Payments System Board (see Figure 5).

Payments Policy Department conducts its oversight of RITS by monitoring RITS on an ongoing basis, including associated risks, market behaviour, costs, and rules and regulations. Payments Policy Department is also informed of any operational problems and, where appropriate, discusses with Payments Settlements Department the measures that are necessary to mitigate systemic risk. Any application for an ESA and thus RITS membership (see section 9.2 above) must be approved by both the Payments Policy and Payments Settlements Departments.

C. Compliance of Privately Operated Systems

The central bank should oversee compliance with the Core Principles by systems it does not operate and it should have the ability to carry out this oversight.

C.1 Assessment of compliance

The Reserve Bank has legislative power to obtain the necessary information to oversee compliance with the Core Principles by payment systems it does not operate. As described in the Regulatory Framework section above, the Reserve Bank's powers under the Payment Systems (Regulation) Act include the power to obtain information from payments system participants, and to set access regimes and determine standards for designated payment systems.

Australia's RTGS system, RITS, is owned and operated by the Reserve Bank and is currently Australia's sole systemically important payment system. Since RITS settles payments instructions from feeder systems, the Reserve Bank takes appropriate steps to ensure that the operation of those feeder systems does not have implications for the compliance of RITS with the Core Principles. The Reserve Bank can influence actions taken by relevant feeder systems via its operational role in respect of RITS, or via policy actions under powers afforded by the Payment Systems (Regulation) Act and the Corporations Act.

D. Co-operation with Other Authorities

The central bank, in promoting payment system safety and efficiency through the Core Principles, should co-operate with other central banks and with any other relevant domestic or foreign authorities.

D.1 Assessment of compliance

To achieve its goals of stability, efficiency and competition in the payments system, the Reserve Bank co-operates with other relevant domestic and international regulatory authorities.

Domestic Co-operation

The Australian financial supervisory authorities consist of the Reserve Bank, APRA and ASIC. The Reserve Bank has separate MOUs with APRA and ASIC. The MOU with APRA sets out the roles of each party in ensuring the stability of the financial system and detailing the framework for co-operation, including provisions for information sharing, consultation and regular meetings between senior management from both institutions. The Reserve Bank's MOU with ASIC sets out a similar framework for co-operation in respect of regulatory responsibilities for clearing and settlement facilities. Some of these facilities act as feeder systems to RITS and may be RITS members.

High-level co-ordination between these agencies and the Treasury – all of which have interests in various aspects of the payment system and its participants – is conducted through the Council of Financial Regulators. In response to the recent financial turmoil the Council has issued a joint MOU between its members detailing the management of and response to financial distress.

There are also overlapping responsibilities between the Reserve Bank and the ACCC around access and competition issues in payment systems. This overlap is dealt with in an MOU between the two agencies, which sets out each agency's responsibilities, covers the issue of regulatory consistency, the goal of information sharing and the co-ordination process.

The Reserve Bank has also established procedures for liaison with APCA, a self-regulatory industry body. Regular liaison with ASX in respect of its clearing and settlement facilities is conducted within the framework of the Reserve Bank's oversight of clearing and settlement facilities.

International Co-operation

International co-operation on payment system issues occurs formally through the CPSS,^[2] the EMEAP Working Group on Payment and Settlement Systems and the CLS Oversight Committee. The Reserve Bank is also represented on the Basel Committee on Banking Supervision. When an issue is of concern to other groupings of international institutions, communication is done on an ad hoc basis. This is facilitated by the Reserve Bank's maintenance of close relations with other central banks and other relevant international institutions.

Footnotes

The 2000 self-assessment was published as part of the Payments System Board's Annual Report. The 2005 and this 2009 self-assessment have been published in more detail in stand-alone form. [1]

The membership of the CPSS was expanded in July 2009 to include an additional nine countries, including Australia. [2]