Scope of Oversight

As outlined in Article 34 of the Central Bank of Malta Act, the Central Bank of Malta (Bank) is responsible for the safety and efficiency of payment systems and securities clearing and settlement systems (collectively referred to as Financial Market Infrastructures - FMIs) mainly through enforcing regulation and conducting oversight. Given that market economies are characterised by a significant number of payment transactions every day, the oversight function plays an important role in safeguarding the stability and efficiency of the financial sector. This is mainly because FMIs provide channels through which funds may be transferred among credit and other institutions to clear payment obligations allowing transactions to be settled securely and efficiently.

To this effect, the oversight function within the Bank is mainly responsible for overseeing national FMIs as well as payment schemes for different payment instruments.

Oversight standards

As part of the European System of Central Banks (ESCBs), the Bank is mandated to follow assessment standards, guidelines and recommendations as adopted and mandated by the European Central Bank (ECB). The list of standards and principles that are utilised to carry out the necessary assessments are in line with internationally established standards issued by the Committee on Payment and Settlement Systems (CPSS) and the International Organisation of Securities Commissions (IOSCO) for FMIs. Such assessment methodology is known as the Principles for FMIs which can be used on various types of infrastructures.

Furthermore, the Bank (as part of the Eurosystem) adopted the recently developed Oversight Framework for electronic payment instruments, schemes and arrangements (PISA). This framework established a set of oversight principles, based on international standards, to assess the safety and efficiency of electronic payment instruments, schemes and arrangements.

Further information relating to the oversight function within the European context can be accessed through the oversight section on the ECB website. The latter also makes reference to the Eurosystem Oversight Policy Framework which is applied by all National Central Banks (NCBs) within the Eurosystem.

Conducting oversight

In conducting its oversight tasks, the Bank follows a three-step process:

  • collecting relevant information from the overseen entity;
  • assessing the information against the oversight objectives and international standards;
  • inducing change and improvement where necessary.

It is important that overseers engage in meaningful discussions with the overseen entities on an ongoing basis mainly to enhance the efficiency of the services being offered and eventually improve the payments landscape.