Payment System Oversight

Oversight of payment systems is a central bank function whereby the objectives of safety and efficiency are promoted by monitoring existing and planned systems, assessing them against these objectives and, where necessary, inducing change.

Central banks have always had a close interest in safe and efficient functioning of payment systems as this is directly linked to their principal functions – safeguarding trust in the national currency and providing financial stability. Payment system oversight by central banks is aimed at a given system rather than at individual participants.

It is important that central banks be transparent in the performance of their oversight function so that system operators – those overseen should understand the business requirements and standards the overseer expects them to comply with. More generally, transparency provides a basis for others to judge the effectiveness of the central bank’s policy and thus for the accountability of the central bank for the performance of its oversight.

Payment System Oversight Policy

To ensure better understanding and efficient implementation of the Decision on Oversight of Payment, Clearing and Settlement Systems, and in accordance with the principles for effective oversight promoted by the Bank for International Settlements (BIS), the National Bank of Serbia hereby defines its Payment System Oversight Policy. 

This policy regulates in detail the oversight objectives and activities to be taken by the National Bank of Serbia with a view to promoting payment systems and ensuring their smooth operation. 

Core oversight objectives are to ensure safety and efficiency of payment systems and payment instruments initiating the transactions executed in payment systems. 

Safety refers to limiting the risks that may occur in the payment system and threaten or impact adversely on the payment system functioning and the overall financial stability of the country.

Efficiency refers to prompt and economical performance of operations in the payment system, as well as to the level of services that is cost-efficient for the system participants and their customers and tailored to their needs. 

Payment system oversight includes the following activities:

• monitoring and analyzing statistical data, information, reports and other documents relating to the functioning of payment systems and use of payment instruments, available to the National Bank of Serbia;
• assessing the payment system’s compliance with the relevant international standards and principles defined by the Decision on Oversight of Payment, Clearing and Settlement Systems  (hereinafter: compliance assessment);

Monitoring is an ongoing activity that results in the presentation of a number of different reports that help improve our understanding of the functioning of payment systems, as well as their interdependencies and impact on the overall financial stability.  

Compliance assessment is a periodic activity conducted so as to ascertain to what degree the payment systems comply with internationally recognized standards and principles of payment system functioning. The said activity is aimed at a payment system as a whole, not at individual participants, and is performed according to the Methodology for Payment System Compliance Assessment.

Methodology for Payment System Compliance Assessment

The National Bank of Serbia defines guidelines for the application of principles for effective functioning of payment systems to ensure that the standards it shall adhere to when assessing payment system compliance are transparent.

Guidelines for the Application of Principles for Effective Functioning of Payment Systems

Based on the results of payment system monitoring and compliance assessment, the National Bank of Serbia may propose and initiate changes in payment systems: 

• by giving recommendations to the payment system operator regarding changes that need to be introduced so as to ensure safe and efficient functioning of the system (”moral suasion”);
• through intra-organizational cooperation  (within the National Bank of Serbia);
• by amending and supplementing the legal framework for payment transactions in the country, as well as by issuing various guidelines and recommendations that will ensure the achievement of core oversight objectives.  

For transparency purposes, the National Bank of Serbia shall disclose the results of oversight in the annual financial stability report, as well as in different reports posted on its website.     

As a payment system overseer, the National Bank of Serbia protects confidential statistical data, information and other documents relating to the functioning of payment system and shall use them solely for the purposes of performing oversight activities.

To carry out effective oversight and achieve the set objectives, the National Bank of Serbia shall actively cooperate with other central banks and the relevant domestic and foreign institutions.