Financial Services (Banking Reform) Bill

House of Lords

Session 2013 - 14
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Other Bills before Parliament

Financial Services (Banking Reform) Bill

Financial Services (Banking Reform) Bill
Part 5 — Regulation of payment systems
43

(5)
Schedule 4 (which contains further provision about the Payment Systems
Regulator) has effect.
“Payment system” etc
32
Meaning of “payment system”
(1)
In this Part “payment system” means a system which is operated by one or
5
more persons in the course of business for the purpose of enabling persons to
make transfers of funds, and includes a system which is designed to facilitate
the transfer of funds using another payment system.
(2)
But “payment system” does not include—
(a)
any arrangements for the physical movement of cash;
10
(b)
a system which does not make any provision for the transfer of funds
by payers, or to recipients, in the United Kingdom;
(c)
a securities settlement system operated by a person approved under
regulations under section 785 of the Companies Act 2006 (provision
enabling procedures for evidencing and transferring title);
15
(d)
a system operated by a recognised clearing house;
(e)
any other system whose primary purpose is not that of enabling
persons to transfer funds.
(3)
In this section—
“recognised clearing house” has the meaning given by section 285(1) of
20
FSMA 2000;
“securities settlement system” means a computer-based system, and
procedures, which enable title to units of a security to be evidenced and
transferred without a written instrument, and which facilitate
supplementary and incidental matters.
25
(4)
The Treasury may by order amend this section so as to—
(a)
add descriptions of systems or arrangements that are not to be regarded
as payment systems, or
(b)
vary or remove any such description.
33
Participants in payment systems etc
30
(1)
This section applies for the purposes of this Part.
(2)
The following persons are “participants” in a payment system—
(a)
the operator of the payment system (see subsection (3));
(b)
any infrastructure provider (see subsection (4));
(c)
any payment service provider (see subsection (5)).
35

(But see also subsection (8).)
(3)
“Operator”, in relation to a payment system, means any person with
responsibility under the system for managing or operating it; and any
reference to the operation of a payment system includes a reference to its
management.
40
(4)
“Infrastructure provider”, in relation to a payment system, means any person
who provides or controls any part of the infrastructure used for the purposes
of operating the payment system.

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(5)
“Payment service provider”, in relation to a payment system, means any
person who provides services to persons who are not participants in the system
for the purposes of enabling the transfer of funds using the payment system.
(6)
A payment service provider has “direct access” to a payment system if the
payment service provider is able to provide services for the purposes of
5
enabling the transfer of funds using the payment system as a result of
arrangements made between the payment service provider and the operator of
the payment system.
(7)
Any reference to participation in a payment system is to be read in accordance
with this section, and in particular—
10
(a)
in the case of an operator of a payment system, includes a reference to
developing the system, and
(b)
in the case of a payment service provider with direct access to a
payment system, includes a reference to entering into an agreement
with a person to enable the person to become a payment service
15
provider in relation to the system.
(8)
The Bank of England is not to be regarded as a participant of any kind in any
payment system.
Designation as a regulated payment system
34
Designation orders
20
(1)
The Treasury may by order (a “designation order”) designate a payment
system as a regulated payment system for the purposes of this Part.
(2)
A designation order must specify in as much detail as is reasonably practicable
the arrangements that constitute the payment system.
35
Designation criteria
25
(1)
The Treasury may make a designation order in respect of a payment system
only if they are satisfied that any deficiencies in the design of the system, or any
disruption of its operation, would be likely to have serious consequences for
those who use, or are likely to use, the services provided by the system.
(2)
In considering whether to make a designation order in respect of a payment
30
system, the Treasury must have regard to—
(a)
the number and value of the transactions that the system presently
processes or is likely to process in the future,
(b)
the nature of the transactions that the system presently processes or is
likely to process in the future,
35
(c)
whether those transactions or their equivalent could be handled by
other payment systems, and
(d)
the relationship between the system and other payment systems.
36
Procedure
(1)
Before making a designation order in respect of a payment system the Treasury
40
must—
(a)
consult the Payment Systems Regulator and, if the system is a
recognised inter-bank payment system, the Bank of England,

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(b)
notify the operator of the system, and
(c)
consider any representations made.
(2)
In considering whether to make a designation order in respect of a payment
system, the Treasury may rely on information provided by—
(a)
the Bank of England,
5
(b)
the FCA,
(c)
the PRA, or
(d)
the Payment Systems Regulator.
37
Amendment of designation order
(1)
The Treasury may amend a designation order.
10
(2)
Before amending a designation order made in respect of a payment system, the
Treasury must—
(a)
consult the Payment Systems Regulator and, if the payment system is a
recognised inter-bank payment system, the Bank of England,
(b)
notify the operator of the payment system, and
15
(c)
consider any representations made.
(3)
The Treasury must consider any request by the operator of a regulated
payment system for the amendment of its designation order.
38
Revocation of designation orders
(1)
The Treasury may revoke a designation order.
20
(2)
The Treasury must revoke a designation order if they are not satisfied that the
criteria in section 35 are met in respect of the payment system to which the
order relates.
(3)
Before revoking a designation order made in respect of a payment system, the
Treasury must—
25
(a)
consult the Payment Systems Regulator and, if the payment system is a
recognised inter-bank payment system, the Bank of England,
(b)
notify the operator of the payment system, and
(c)
consider any representations made.
(4)
The Treasury must consider any request by the operator of a regulated
30
payment system for the revocation of its designation order.
General duties of Regulator
39
Regulator’s general duties in relation to payment systems
(1)
In discharging its general functions relating to payment systems the Payment
Systems Regulator must, so far as is reasonably possible, act in a way which
35
advances one or more of its payment systems objectives.
(2)
The payment systems objectives of the Payment Systems Regulator are—
(a)
the competition objective (see section 40),
(b)
the innovation objective (see section 41), and
(c)
the service-user objective (see section 42).
40

Financial Services (Banking Reform) Bill
Part 5 — Regulation of payment systems
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(3)
In discharging its general functions relating to payment systems the Payment
Systems Regulator must have regard to—
(a)
the importance of maintaining the stability of, and confidence in, the
UK financial system,
(b)
the importance of payment systems in relation to the performance of
5
functions by the Bank of England in its capacity as a monetary
authority, and
(c)
the regulatory principles in section 43.
(4)
The general functions of the Payment Systems Regulator relating to payment
systems are—
10
(a)
its function of giving general directions under section 44 (considered as
a whole),
(b)
its functions in relation to the giving of general guidance under section
81 (considered as a whole), and
(c)
its function of determining the general policy and principles by
15
reference to which it performs particular functions.
40
The competition objective
(1)
The competition objective is to promote effective competition in—
(a)
the market for payment systems, and
(b)
the markets for services provided by payment systems,
20

in the interests of those who use, or are likely to use, services provided by
payment systems.
(2)
The reference in subsection (1) to promoting effective competition includes, in
particular, promoting effective competition—
(a)
between different operators of payment systems,
25
(b)
between different payment service providers, and
(c)
between different infrastructure providers.
(3)
The matters to which the Payment Systems Regulator may have regard in
considering the effectiveness of competition in a market mentioned in
subsection (1) include—
30
(a)
the needs of different persons who use, or may use, services provided
by payment systems;
(b)
the ease with which persons who may wish to use those services can do
so;
(c)
the ease with which persons who obtain those services can change the
35
person from whom they obtain them;
(d)
the needs of different payment service providers or persons who wish
to become payment service providers;
(e)
the ease with which payment service providers, or persons who wish
to become payment service providers, can provide services using
40
payment systems;
(f)
the ease with which payment service providers can change the
payment system they use to provide their services;
(g)
the needs of different infrastructure providers or persons who wish to
become infrastructure providers;
45
(h)
the ease with which infrastructure providers, or persons who wish to
become infrastructure providers, can provide infrastructure for the
purposes of operating payment systems;

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(i)
the needs of different operators of payment systems;
(j)
the ease with which operators of payment systems can change the
infrastructure used to operate the payment systems;
(k)
the level and structure of fees, charges or other costs associated with
participation in payment systems;
5
(l)
the ease with which new entrants can enter the market;
(m)
how far competition is contributing to the development of efficient and
effective infrastructure for the purposes of operating payment systems;
(n)
how far competition is encouraging innovation.
41
The innovation objective
10
(1)
The innovation objective is to promote the development of, and innovation in,
payment systems in the interests of those who use, or are likely to use, services
provided by payment systems, with a view to improving the quality, efficiency
and economy of payment systems.
(2)
The reference in subsection (1) to promoting the development of, and
15
innovation in, payment systems includes, in particular, a reference to
promoting the development of, and innovation in, infrastructure to be used for
the purposes of operating payment systems.
42
The service-user objective
The service-user objective is to ensure that payment systems are operated and
20
developed in a way that takes account of, and promotes, the interests of those
who use, or are likely to use, services provided by payment systems.
43
Regulatory principles
The regulatory principles referred to in section 39(3)(c) are as follows—
(a)
the need to use the resources of the Payment Systems Regulator in the
25
most efficient and economic way;
(b)
the principle that a burden or restriction which is imposed on a person,
or on the carrying on of an activity, should be proportionate to the
benefits, considered in general terms, which are expected to result from
the imposition of that burden or restriction;
30
(c)
the desirability of sustainable growth in the economy of the United
Kingdom in the medium or long term;
(d)
the general principle that those who use services provided by payment
systems should take responsibility for their decisions;
(e)
the responsibilities of the senior management of persons subject to
35
requirements imposed by or under this Part, including those affecting
persons who use services provided by payment systems, in relation to
compliance with those requirements;
(f)
the desirability where appropriate of the Payment Systems Regulator
exercising its functions in a way that recognises differences in the
40
nature of, and objectives of, businesses carried on by different persons
subject to requirements imposed by or under this Part;
(g)
the desirability in appropriate cases of the Payment Systems Regulator
publishing information relating to persons on whom requirements are
imposed by or under this Part, or requiring such persons to publish
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Financial Services (Banking Reform) Bill
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information, as a means of contributing to the advancement by the
Payment Systems Regulator of its payment systems objectives;
(h)
the principle that the Payment Systems Regulator should exercise its
functions as transparently as possible.
Regulatory and competition functions
5
44
Directions
(1)
The Payment Systems Regulator may give directions in writing to participants
in regulated payment systems.
(2)
A direction given to a participant in a regulated payment system may—
(a)
require or prohibit the taking of specified action in relation to the
10
system;
(b)
set standards to be met in relation to the system.
(3)
A direction under this section may apply—
(a)
generally,
(b)
in relation to all operators, all infrastructure providers or all payment
15
service providers, or
(c)
in relation to specified persons or persons of a specified description.
(4)
The Payment Systems Regulator must publish any direction given under this
section that applies as mentioned in subsection (3)(a) or (b).
(5)
A direction under this section that applies as mentioned in subsection (3)(a) is
20
referred to in this Part as a “general direction”.
45
System rules
(1)
The Payment Systems Regulator may require the operator of a regulated
payment system—
(a)
to establish rules for the operation of the system;
25
(b)
to change the rules in a specified way or so as to achieve a specified
purpose;
(c)
to notify the Payment Systems Regulator of any proposed change to the
rules;
(d)
not to change the rules without the approval of the Payment Systems
30
Regulator.
(2)
A requirement under subsection (1)(c) or (d) may be general or specific.
46
Power to require granting of access to payment systems
(1)
This section applies where a person (“the applicant”) applies for an order
under this section.
35
(2)
The Payment Systems Regulator may by order require the operator of a
regulated payment system to enable the applicant to become a payment service
provider in relation to the system.
(3)
The Payment Systems Regulator may by order require any payment service
provider with direct access to a regulated payment system to enter into an
40

Financial Services (Banking Reform) Bill
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agreement with the applicant to enable the applicant to become a payment
service provider in relation to the system.
(4)
An order under this section may provide for the applicant to become a
payment service provider in relation to a payment system—
(a)
for a period specified in the order;
5
(b)
on terms and conditions specified in the order.
47
Variation of agreements relating to payment systems
(1)
This section applies to the following agreements—
(a)
any agreement made between the operator of a regulated payment
system and a payment service provider;
10
(b)
any agreement made between a payment service provider with direct
access to a regulated payment system and another person for the
purpose of enabling that other person to become a payment service
provider in relation to the system;
(c)
any agreement concerning fees or charges payable in connection
15
with—
(i)
participation in a regulated payment system, or
(ii)
the use of services provided by a regulated payment system.
(2)
The Payment Systems Regulator may, on the application of a party to an
agreement to which this section applies, vary the agreement by—
20
(a)
varying any of the fees or charges payable under the agreement, or
(b)
in the case of an agreement within subsection (1)(a) or (b), varying any
other terms and conditions relating to the payment service provider’s
participation in the payment system.
(3)
In the case of an agreement within subsection (1)(b), the reference in subsection
25
(2)(b) to the payment service provider is to the payment service provider which
does not have direct access to the payment system.
(4)
The power under this section to vary any fee or charge includes power to
specify a maximum fee or charge.
(5)
If the Payment Systems Regulator varies an agreement under this section, the
30
agreement has effect subject to the variation.
48
Power to require disposal of interest in payment system
(1)
The Payment Systems Regulator may require a person who has an interest in
the operator of a regulated payment system to dispose of all or part of that
interest.
35
(2)
The power conferred by subsection (1) may be exercised only if the Payment
Systems Regulator is satisfied that, if the power is not exercised, there is likely
to be a restriction or distortion of competition in—
(a)
the market for payment systems, or
(b)
a market for services provided by payment systems.
40
(3)
The Payment Systems Regulator may not exercise the power conferred by
subsection (1) without the consent of the Treasury.