Payments System Board Annual Report – 2007 Functions and Objectives of the Payments System Board

The Payments System Board's responsibilities stem from the Financial System Inquiry, whose findings and recommendations were released in 1997.^[1] The Inquiry found that, while earlier deregulation had improved competition and efficiency in Australia's payments system, further gains were possible. To that end, it recommended the establishment of the Payments System Board at the Reserve Bank with the responsibility and powers to promote greater competition, efficiency and stability in the payments system. The Government accepted those recommendations and established the Payments System Board in 1998.

The Board's responsibilities for oversight of the Australian payments system are formally set out in the Reserve Bank Act 1959. The Act requires the Board to determine the Bank's payments system policy so as to best contribute to:

• controlling risk in the financial system;
• promoting the efficiency of the payments system; and
• promoting competition in the market for payment services, consistent with the overall stability of the financial system.

In establishing the Board, the Government provided the Bank with additional powers that are set out in two Acts: the Payment Systems (Regulation) Act 1998 and the Payment Systems and Netting Act 1998.

Under the Payment Systems (Regulation) Act the Bank has the power to designate payment systems and to set standards and access regimes in designated systems. The Act also sets out the matters that the Bank must take into account when using these powers. The Payment Systems and Netting Act provides the Bank with the power to give legal certainty to certain settlement arrangements so as to ensure that risks of systemic disruptions from payment systems are minimised.

In addition, the Reserve Bank Act gives the Board responsibility for ensuring that clearing and settlement facilities contribute to the stability of the financial system. The relevant powers are set out in the Corporations Act 2001, which gives the Bank the power to determine financial stability standards for licensed securities clearing and settlement facilities.

This Annual Report covers the activities of the Board over 2006/07.

Footnote

Financial System Inquiry, Final Report, March 1997. [1]