Hong Kong - Guideline On Oversight Of Designated Retail Payment Systems (“Guideline”).

Legal News & Analysis - Asia Pacific - Hong Kong - Banking & Finance - Regulatory & Compliance

27 November 2020

 

In September 2020, the Hong Kong Monetary Authority (“HKMA”) issued the Guideline explaining the HKMA’s interpretation of some of his oversight requirements under the Payment Systems and Stored Value Facilities Ordinance (“PSSVFO”) relating to designated Retail Payment Systems (“Designated RPS”) so as to assist system operators (“SO”) or settlement institutions (“SI”) of Designated RPS to understand and comply with such requirements. Notable high-level principles in the Guideline to promote compliance with section 7(1) of the PSSVFO (safety, efficiency and general rules of operations of Designated RPSs) are as follows.
 

(1) 

Safety requirements
 

Requirements for a legal basis for the Designated RPS’s activities; governance arrangements; a risk management framework; control mechanisms to ensure proper functioning of the system; detecting and addressing potential violations of statutory and/or regulatory requirements and ensuring that the infrastructure associated with the system provides adequate and continued services; a financial risk management framework; an operational risk system; an incident management framework; business continuity management programmes; a security framework; and rules and procedures as regards how transfer orders effected through the system are to be regarded as settled.
 

(2) 

Efficiency requirements
 

Requirements for the SO and SI of a designated RPS to ensure speed of transfer, clearance and/or settlement of payment orders; ensure flexible technical arrangements of their systems; monitor changes in transaction volume or patterns; and, where appropriate, implement liquidity arrangements for efficient settlement of payment obligations. The criteria for admission as a participant in a designated RPS should be objective, transparent, justified.
 

(3) 

Requirements on operation rules
 

The operating rules should be clear, unambiguous, enforceable, up-to-date and consistent with the applicable laws and regulations, and available to all participants. Among other things, the SO and SI of a designated RPS should have effective control mechanisms to ensure that the system is operated in accordance with the established operating rules and to monitor participants’ compliance with relevant rules.

 

The Guideline is accessible here: link.

 

For further information, please contact:

 

Simon Deane, Partner, Deacons

[email protected]