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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.

 
 

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

44

 

(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,

 
 

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

45

 

(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

46

 

(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;

 
 

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

45

 
 

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

48

 

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
Part 5 — Regulation of payment systems

49

 

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.

 
 

 
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