Norges Bank supports the main points in the Draft Act relating to Payment Systems, etc.
The Banking Law Commission's draft act relating to payment systems is an important new element in financial legislation, says Norges Bank in a consultative statement. Norges Bank concurs with the main points in the Banking Law Commission's draft act, but points out that too detailed regulation of payment systems would be disadvantageous.
Regulation of payment systems generally serves the same purpose as other regulations concerning the financial sector. Ensuring the banking system's financial strength helps to safeguard the general public's access to a generally-accepted means of payment (account funds) with low risk. Norges Bank maintains that the degree to which society benefits from such a means of payment is entirely dependent on transfers being conducted in a secure and efficient manner so that the general public has confidence in payment systems. In the central bank's view, the draft act allows such interventions as may be deemed necessary in order to prevent any unfavourable trends in this area.
In terms of financial stability, it is important to limit the risk inherent in systems for the transfer of funds between financial institutions - interbank systems. However, Norges Bank points out that it would not be economically optimal to eliminate all risk from the interbank systems. The risk should, however, be known and understood by all participants. According to the central bank, the authorities' requirements should be linked to risk which is of significance to the general stability of payment systems. Risk limitation is particularly important in interbank systems where large amounts are settled, for example, substantial funds transfers between banks and securities settlements. Regulation must be oriented and implemented in such a way that the banks' own interest in drawing up common rules is not diminished. Norges Bank therefore emphasises that it must be made absolutely clear that the participants are responsible for the systems.
Norges Bank points out that the authorities can facilitate banks' and other industries' access to foreign markets by ensuring that international standards for risk limitation are observed. Internationally, it is common to attach greater importance to the self-regulating capacity of the markets and many countries have extensive requirements regarding security in payment systems, but without having as detailed legislation as proposed by the Banking Law Commission. However, statutory regulation is more usual in Norway and Norges Bank therefore sees no reason to depart from this.
The authorities currently have little opportunity to influence developments in payment systems. In order to ensure appropriate solutions to structural problems, among other things, Norges Bank is of the view that it would be beneficial if the authorities were permitted to supplement current self- regulation. However, participants should still bear the main responsibility for coordinating the systems. Intervention by the authorities should be restricted to situations which clearly reduce economic efficiency, and if possible, should be carried out in cooperation with the coordinating bodies. Such interventions may also be appropriate in order to ensure that coordination does not take place at the expense of effective competition.
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